Renewable Diesel Takes the Lead as More Alternatives Enter Market

US: Over the past few weeks, U.S. renewable Diesel production has made significant progress, with two new facilities coming online and another one ramping up. This development comes as refiners strive to compete in the growing market for alternative fuels in the trucking industry. Although many of the latest alternative fuel options come with high costs and require additional infrastructure, there is space for all clean energy options.

This sentiment is shared by a major producer of renewable Diesel in the U.S. With a product that requires no modifications to engines or extra purchases, there is immense potential for their established product. Considering that there is a significant market for on- and off-highway vehicles in the U.S. and globally, all available and upcoming options are essential to meeting the world's decarbonization goals.

The joint venture of Darling Ingredients and Valero Energy, Diamond Green Diesel, has achieved the status of the largest producer of renewable Diesel in the United States. The annual production capacity of the joint venture's plant near Valero's Port Arthur refinery in Texas is 470 million gallons (equivalent to 33,500 barrels per day). With this addition, the joint venture now has a total production capacity of almost 1.2 billion gallons per year (equivalent to 78,000 barrels per day).

The company's first production site was in Norco, Louisiana, situated next to Valero's St. Charles refinery. Oleo-X's Pascagoula plant, located on the US Gulf Coast, is now producing renewable Diesel in addition to sustainable aviation fuel. This facility's ability to manufacture sustainable aviation fuel is a significant achievement in the transportation industry's efforts to reduce its difficult-to-tackle emission footprint and move towards decarbonization.

The Oleo-X plant in Pascagoula now has the capacity to produce up to 300 million gallons per year of renewable Diesel and SAF, after converting its refining units that were previously used to manufacture chemicals for tires, dyes, and building materials. However, Oleo-X is not alone in the production of both renewable Diesel and SAF. Following Diamond Green Diesel's partnership decision, half of the Port Arthur project's output is slated to be SAF. Additionally, Vertex Energy Inc. recently opened a 75,000 barrels-per-day renewable Diesel facility in Mobile, Ala., just a week prior to Oleo-X's operations starting up.

Vertex has invested $115 million in converting a part of a traditional refinery purchased from Shell plc to produce renewable Diesel. The facility is currently using Soybean oil as the primary feedstock for renewable Diesel production, but it has been designed to cater to other organic waste oils.

According to the Energy Information Administration, the latest wave of projects is only the beginning of many more to come online. 11 domestic plants across six states with a combined capacity of 1.75 billion gallons per year were reported at the start of January 2022. However, it is expected that production may exceed 5 billion gallons per year by 2025, which is equivalent to 10% of current Diesel demand.

Furthermore, Marathon Petroleum Corp.'s refinery located in Martinez, California, began producing renewable Diesel early this year and is expected to reach its complete production capacity of 730 million gallons per year (48,000 b/d) within the year. Currently, production runs at 260 million gallons per year, with phase one of the project complete. Pre-treatment facilities are also expected to come online in phase two during the second half of this year.

According to the EIA, Phillips 66's Rodeo Renewed project in San Francisco is on track to become the largest facility of its kind, producing 800 million gallons per year (52,000 b/d) of renewable fuels. This massive operation is set to reach full conversion in 2024 with commercial operations kicking off in Q1 2022.

However, the steep rise in US interest rates is hindering the ambitions of proposed projects listed by EIA due to less available funding. Despite this, there is a growing demand for renewable Diesel, especially in California where the Low Carbon Fuel Standard has offered credits to producers of lower carbon intensity fuels for more than 10 years.

Renewable Diesel results in a significant reduction in tailpipe emissions - up to 65%, as compared to Diesel obtained from hydrocarbons. Furthermore, the use of renewable Diesel can reduce life cycle emissions by up to 80% as compared to conventional barrels. This is crucial as per the Environmental Protection Agency's data, as of 2020, medium- and heavy-duty trucks represented only 5% of U.S. vehicles on the road but accounted for 26% of greenhouse gas emissions in the transportation sector.