Diesel engines are in many ways the backbone of American industry. Most of the transportation models used to move goods across the country and around the globe utilize diesel-powered engines, including trains, boats, barges, heavy- and medium-duty trucks. They also power a large portion of the equipment used in farming, construction, the military, and public transportation. As the world moves toward a low-carbon, sustainable energy future, replacing petroleum diesel is considered a critical step. Numerous “clean” and low-carbon alternatives have been explored but the top two contenders are biodiesel and renewable diesel. While both are made from biomass and their names often get used interchangeably, the two are distinctly different.
Biodiesel, sometimes referred to as fatty acid methyl ester (or FAME), is typically produced by reacting vegetable oils or animal fats with a catalyst like methanol or ethanol causing a chemical reaction known as transesterification. Biodiesel contains oxygen atoms, which makes it chemically distinct from regular ultra-low sulfur diesel (ULSD). Like ethanol blending limits in gasoline engines, most diesel engine manufacturers only support diesel blends up to certain levels (typically B20), with higher blends requiring fuel system modifications.
Renewable diesel is a broad term used to describe a variety of biomass-derived fuels made from a wide range of different chemical processes. Most renewable diesel processes use hydrogenation where hydrogen mainly replaces oxygen but also other atoms such as sulfur and nitrogen using heat and pressure with the assistance of catalysts. The process produces renewable diesel and other co-products such as propane, depending on the formulation. Renewable diesel is chemically identical to ULSD, meaning it can be used as a direct replacement for all current diesel engines, no blending required. Participants and stakeholders in greenhouse gas reduction programs, such as the federal Renewable Fuel Standard and the California Low Carbon Fuel Standard, are increasingly using renewable diesel to meet renewable fuel targets
Renewable diesel has rapidly grown in popularity because it’s a drop-in replacement of petroleum diesel. Some blenders have also started to mix biodiesel and renewable diesel in order to take advantage of the most desirable attributes of both fuel types. Renewable Energy Group (REG), for example, has created a blend of biodiesel and renewable diesel, coined “REG Ultra Clean Diesel,” which the company says “delivers biodiesel’s excellent lubricity and renewable diesel’s high Cetane and low Cloud Point.”
While biodiesel and renewable diesel are increasing in production capacity, they still have a long way to go before replacing ULSD. In 2019, the U.S. consumed about 47.2 billion gallons of diesel fuel, compared to renewable diesel’s production capacity of 0.6 billion gallons per year and biodiesel’s 2.514 billion gallons per year. While biodiesel has clearly been leading in current production capacity, the U.S. Energy Information Administration (EIA) recently forecast renewable diesel production capacity to increase to 5.1 billion gallons per year in 2024 compared to biodiesel’s rather low production capacity growth projections.
However, some insiders question whether all the planned projects will actually get off the ground. A recent study from consultancy Cerulogy estimates the projects are more likely to yield approximately 2 billion gallons of total renewable diesel production capacity in 2025, while at least 2 billion gallons of the announced capacity additions will likely be delayed, canceled, or downsized.
There’s certainly a lot of “buzz” in our industry about renewable diesel and renewable aviation fuel. There’s also a ton of interest and money pushing into new crush facilities. Trying to forecast total demand for US soybean oil over the next several years will be extremely tricky considering the anticipated growth in the US processing industry. There are a ton of unknowns… What happens to meal prices if we truly amp up crushing to get the bean oil? Does a glut of meal mean much cheaper prices and how does sub-$200 meal impact DDGs and or other livestock feedings? Does China change its policy and start importing US meal in a big way? Will the “food vs fuel” debate reemerge and create a major obstacle? This is a very intriguing space right now and looks to be offering up huge opportunities for soybeans in the years ahead, unfortunately, for many of us, we have more longer-term questions than answers. Do your homework, recognize what is happening, and try to best position for the changes ahead. (Sources: EIA, JDSupra, Reuters, Biofuels Digest)