New state-level low-carbon fuel standard (LCFS) programs and Canada's proposed Clean Fuel Standard will grow the market for renewable diesel and create demand centers out of California, biofuel producers said during Argus Biofuels Live virtual conference yesterday.
California's LCFS, combined with federal incentives, has boosted the competitiveness of renewable diesel, a fuel that can blend seamlessly with petroleum diesel and move in existing pipelines, terminals and other infrastructure built for oil-based fuels. This has made the state a lucrative market for producers.
But with new clean fuels programs coming to fruition in the coming years, it will diversify sales and support California LCFS credit prices, producers said.
"If every RD gallon announced was built and came to California, that would put downward pressure [on LCFS prices], but I do not think that is a valid assumption," Crimson Renewable Energy chief executive Harry Simpson said.
The onset of Canada's Clean Fuel Standard — scheduled to begin in 2022 — will substantially grow the market for renewable fuels, producers said.
Draft regulations for the program are due out by next month, said Paola Mellow, executive director of the clean fuel standards team at Canada's environment ministry.
"We are working to design a technology-neutral program that will give an incentive for all fuels," Mellow said.
California's LCFS has received criticism in recent years for tilting too heavily toward electric vehicles, as the program allows charging stations to receive LCFS credits based on their capacity, not just fuel sold. The CFS will be a credit trading program similar to the LCFS programs in British Columbia, California and Oregon and will aim to cut Canada's greenhouse gas emissions by 30mn metric tonnes/yr by 2030.
"We will see an exponential growth curve [for renewable diesel] in Canada," World Energy chief executive Gene Gebolys said. "The emergence of Canada on the global stage is going to be very important."
Clean fuel programs that are proposed in Washington state and New York state also will grow the market for renewable fuels if they come to fruition, producers said.
Prospects for a clean-fuel standard in Washington state appear to have brightened following the 3 November election, said Washington state representative Joe Fitzgibbon (D), the sponsor of LCFS legislation.
"State level LCFS policies are driving demand. States will move regardless of what happens on the federal level," Neste US president Jeremy Baines said. "Refiners looking to convert on the US west coast will want to encourage different programs. This makes the picture different than it was a few months ago."
US refiners have turned to renewable diesel production to extend the life of crude refineries that are unlikely to remain competitive in petroleum-based transportation fuels markets. This summer, Marathon announced that its 166,000 b/d petroleum refinery in Martinez, California, may produce 48,000 b/d of renewable diesel beginning in 2022. Phillips 66 also announced plans to idle crude processing at its 120,000 b/d San Francisco, California, complex within three years and shift to renewable diesel, naphtha and jet fuel by 2024.
Producers may process renewable diesel from soybean oil, used cooking oil, animal fats and other feedstocks.
Renewable diesel was the top source of credits in the California LCFS program last quarter, generating about 1.14mn t, the most recent data from the state Air Resources Board (ARB) showed.
The California LCFS requires a 20pc cut in the carbon intensity of transportation fuels by 2030. Fuels with carbon intensity scores higher than the targets generate deficits, while fuels with lower scores generate credits.
