The United States (US) biodiesel import and export market has a lot of moving parts impacting today’s producers and raw material providers. The Renewable Fuel Standard (RFS2) is the number one market driver for American biodiesel and a growth opportunity for US renderers. Renderers and their biodiesel partners should monitor a variety of global policies that have the potential to impact supply and demand under the RFS2.
Based on the 2013 RFS2 requirements of 1.28 billion gallons, the US biodiesel industry is slated to consume nearly 10 billion pounds of raw materials. According to the Energy Information Administration, about 50 percent of that total is expected to be from sources beyond soybean oil and other virgin vegetables oils. Whether its biodiesel producers or renewable diesel producers, the biomass-based diesel category is primed for growth. Supporting the advocacy efforts of the US biodiesel industry to grow the volume requirements for biomass-based diesel is an important position for renderers, slaughter companies, and used cooking oil collectors that are looking to maintain and grow value.
Biodiesel RINs Meet Advanced Biofuels Category
Biodiesel can meet the requirements of every RFS2 category except cellulosic biofuels. Biodiesel and renewable diesel manufacturers are expected to exceed the 1.28 billion gallon requirement for the 2013 biomass-based diesel category.
Biomass-based diesel can meet the undifferentiated advanced biofuel category (D5 renewable identification numbers, or RINs), creating additional demand for biodiesel gallons domestically. Today, petroleum refiners are using biodiesel RINs to meet their advanced biofuel renewable volume obligations. In addition, cellulosic biofuel production struggles to ramp up domestically while imports of Brazilian sugar cane ethanol are up. Although the pace has increased, the US biodiesel industry still has an opportunity to meet advanced biofuels requirements as the demand for locally-produced ethanol continues to grow in Brazil.
Monitoring Palm Oil Biodiesel’s Role
Renderers also need to pay attention to the 15 percent ethanol (E15) battle and palm oil biodiesel imports. Several palm oil biodiesel facilities have been grandfathered into the RFS2 as a registered plant. As a result, imported palm oil methyl ester is eligible for D6 (corn ethanol) RINs, enabling them to meet the corn ethanol volume requirements. As the ethanol industry battles against its perceived 10 percent ethanol blend wall, grandfathered palm biodiesel can help meet the demand as the market requirement grows from 13.8 billion gallons in 2013 to 15 billion gallons in 2015. However, no imported palm biodiesel can generate D4 RINs for biomass-based diesel.
It is important for US renderers to monitor policy surrounding the RFS2 and the Environmental Protection Agency (EPA’s) approach to adding newly approved feedstock pathways to the biomass-based diesel category.
Global Feedstock Issues Impact Trade
Inedible corn oil is the fastest growing raw material category for US biodiesel. In recent months, inedible corn oil exports have shifted back to domestic uses, primarily biodiesel. Used cooking oil, beef tallow, and fat exports in general are down as the biodiesel industry proves itself as a sustainable demand source.
Much like the RFS2, Europe’s Renewable Energy Directive requires biodiesel raw materials to meet specific life cycle greenhouse gas emission levels. European rapeseed oil producers continue to battle for biodiesel market share as shifts in policy are creating additional incentives for lower carbon recycled fats and greases to be converted into biodiesel. As regulations and identity preservation programs were put in place, used cooking oil exports from the United States decreased as it became harder for US collectors to meet European Union rules.
Questions remain on the roles to be played by 2014 European biodiesel and renewable diesel imports as well as whether Argentine biodiesel plants can obtain an EPA-approved pathway. Today, Argentinean biodiesel cannot generate RINs. While there are several options for Argentina to gain access to the US market, soybean identity preservation will be extremely challenging and could limit EPA approval opportunities.
Opportunities Outweigh Complications, Challenges
Overall, if the EPA increases the biomass-based diesel obligation, US producers will need to remain aggressive to grow domestic share within the RFS2. To date, the US biodiesel industry has demonstrated its price competiveness in the fats, oils, and greases market versus other demands. Seven years ago, biodiesel consumed almost no rendered fats and oils. This year the US biodiesel industry is poised to purchase more than five billion pounds.
As US biodiesel producers have advocated for higher blends and increased national requirement levels, rendered fat exports have decreased significantly. Yet, fat, oil, and grease valuations have grown. While policy influencers remain optimistic about growth in the category, the RFS2 has many complicated challenges. Fat, oil, and grease suppliers can play a critical role in advancing their own opportunities by supporting the biodiesel industry.
August 2013 RENDER | back