A ‘grand challenge’ launched by Joe Biden’s government in late 2021 is intended to encourage production of 3 billion gallons of SAF by 2030, and then increasing production tenfold to 35 billion gallons over the next two decades.

However, the research suggests that the country only has feedstock capacity to produce 21.7 billion gallons of theoretical SAF production, but only 12.2 billion gallons would come from biomass sources deemed to be sustainable.

The report defined sustainable biomass as any feedstock “without adverse market and environmental consequences.”

Examining the 2030 target of 3 billion gallons through four low-risk to high-risk feedstock and technology scenarios, the report determined that under all four scenarios the target was feasible.

At the lowest risk end – where technology already exists and supply is already being produced – ICCT estimated that production is likely to reach just over 3 billion gallons by 2030.

Around 40% of that output would reflect waste-based hydroprocessed esters and fatty acids (HEFA) with the balance coming from second-generation cellulosic production that typically uses non-food parts of plants or municipal city waste.

A high-risk production scenario, using waste and crop-based HEFA, second generation cellulosic fuels and conventional alcohol-to-jet (AtJ) technologies could see production ramp up to just short of 7 billion gallons by 2030, according to the report.

However, the dramatic ramp up in mandates to 35 billion gallons would likely be out of the reach of all forms of US feedstocks and would fall significantly short of target when non-sustainable feedstocks are exclusively deployed.

“In total, we find that the United States has approximately 21.7 billion gallons of theoretical SAF production from available biomass, but only 12.2 billion gallons of that is from sustainably available biomass,” the report said.

The report also noted that the current tax incentives, also introduced by the Biden administration to encourage investment in SAF production, only run out to 2027.

“Without a long-term price signal, SAF developers will lack sufficient incentive to invest in projects from less-tested, advanced fuel pathways,” the report warned, concluding that technology delays will likely blunt early production potential.

Pathways reliant upon HEFA production – an advanced form of renewable diesel – will be highly resource constrained, while AtJ pathways are likely to be expensively prohibitive in the near term.

Available resources and sustainability

In feedstock terms, the two biggest available resources – corn grain and soybean oil – will both largely fall short of the threshold required to be deemed sustainable, with both failing to meet the 50% life cycle GHG reductions that are required under the main compliance scheme, CORSIA.

When pushing on from the 2030 target, the report calculated the biggest single contributor to the SAF production pool stood to be corn grain ethanol, with 43.9 million tonneds of feedstock likely to be able to deliver around 6.9 billion gallons of SAF, at a conversion factor of just under 50%.

However, that would equate to virtually the entire supply of US corn ethanol currently heading into the road fuel mix, while the second place feedstock – soy oil – likely to be able to contribute a maximum 15.3 million tonnes at a 100% crush rate

That would yield 2.67 billion gallons of SAF, but both would find it difficult to contribute under current GHG reduction compliance requirements.

Of the feedstocks that are deemed to be sustainable, agricultural residues could contribute 161.1 million tonnes of feedstock and 4.88 billion gallons of SAF, while next best option was energy crops, that could produce 2.72 billion gallons of SAF from 89.7 million tonnes of feedstock.

Animal fats were identified as the most productive feedstock, with 500,000 tonnes of feedstock resulting in 420 million gallons of SAF, followed by corn oil where 700,000 tonnes of feedstock could produce 370 million gallons.

“Approaching the long-term SAF target would require substantial diversion of feedstock from other economic sectors,” the report notes, and called for incentives to be “extended and expanded” post-2030.

“There is insufficient biomass to meet the long-term 2050 target… the current set of policies in place are insufficient to expand SAF deployment beyond 3 billion gallons,” the ICCT said.

The report tap into the mounting concerns around the ambitious SAF mandates that both the US and the European Union have set out as they attempt to decarbonise the hard-to-abate aviation section.

With other parts of the world also looking at their waste-based and vegetable oil feedstock slate, and competition for feedstocks intensifying, meeting these targets will require significant investment and securing of relevant feedstocks.

The EU is looking to ensure 70% of its entire aviation supply uses SAF by 2050, up from 0.03% as of 2020.

View our feedstock prices

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In a busy morning for EU-policy makers, the European Council also confirmed it would be adopting an expansion in sustainable aviation fuel (SAF) mandates, the Council committed EU member states to decarbonising transport, buildings, industry and both heating and cooling.

The ambitious reworking of the mainstay policy that has underpinned European energy transition since 2009 ran into controversy during discussions, as the mounting cost of energy in general – and sustainable energy in particular – brought challenges.

The final agreement represented a slight watering down of earlier proposals, with the European Union’s twin legislative chambers the Parliament and the Council cooperating to reach the 42.5% renewable contribution by 2030.

However, the slightly more ambitious 45% target that had been sought prior to discussions was agreed as a 2.5% “indicative top up.”

Spain’s minister for ecological transition, Teresa Ribera, described the adoption as “a great achievement” under the broader ´Fit for 55´package – a proposal to ensure a 55% reduction in emissions by 2030.

While the target will encompass every element of EU energy use, the transport sector is expected to shoulder the brunt of the legislative changes, with member states having to choose between two key policies governing transport emissions.

States have the option to either set a binding minimum target of reducing greenhouse gas (GHG) intensity by 14.5%, or a binding share of at least 29% renewables within the final consumption of energy in the transport sector.

Alongside those options, the new rules also set out a binding sub-target of 5.5% spanning use of both advanced biofuels and largely hydrogen-based renewable fuels of non-biological origin (RFNBOs).

Under industry, the legislation prompts an expectation that 42% of all hydrogen in use should be produced from RFNBOs by 2030, rising to 60% by 2035.

Domestic heating and cooling will be subject to an increased renewable target that mandates year-on-year increases of 0.8 percentage points through to 2026, and then rises to 1.1 point through to 2030, and all new buildings are expected to set a target of 49% renewable energy share.

The legislation also makes allowances for the fast-tracking of approvals around construction of renewable energy-related projects and the creation of ‘acceleration areas’.

Following formal adoption by the Council, the legislation will now be published in the EU’s official journal in the next few weeks.

From there, the legislation passes into law 20 days after publication, and member states must transpose the targets into national legislation within 18 months.

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The USDA, in its Biofuels Annual Report, published on September 1, claims that Neste received virgin palm oil volumes from Indonesia, which it said were exported fraudulently as UCO via China.

Neste’s reaction

“Neste’s recent analyses of UCO received from China do not support the USDA’s assertions, hence the company believes that the reference to Neste in the USDA report is either a mistake or based on a misunderstanding,” Neste said in a statement on Friday, adding that the claims were “unsubstantiated.”

The biofuels producer added that it takes suspected fraud cases “seriously and investigates them accordingly.”

“In addition, the company continuously evaluates the quality and authenticity of the raw material volumes it receives, conducting thorough laboratory analyses of the samples of UCO volumes it receives to its terminals from China,” Neste said.

The producer said it would subsequently contact the appropriate authorities at the USDA to discuss and learn more about the assertions in the report.

UCO imports from China

The hit back from Neste comes several months after the European Commission said it was investigating a complaint from a member state about possible fraud relating to biofuel imports from China.

The Commission’s acknowledgment of the complaint and call for cooperation fully with the investigation follows the influx of Chinese-sourced waste-based biodiesel through the early part of this year that has swamped key European markets and was accused of harming domestic production of both waste-based and conventional biofuels – physical prices collapsed across the EU.

Trade sources in June told Fastmarkets Agriculture that domestic biodiesel production had “pumped up in China,” this year, splitting Chinese UCO flows between the export market and new domestic processing capacity.

A similar ramp-up in sophisticated renewable diesel (RD) capacity across the US means the country has been pulling more and more of China’s UCO flows in as a feedstock, cutting flows of the feedstock to the EU – but the US has limited use for the finished grade UCOME.

“The US doesn’t want it [UCOME], so half China’s UCO is heading to the US and the other half to Chinese production which is then being exported [as finished product],” the source said.

Neste meanwhile restarted RD production at the expanded part of its Singapore plant in early August.

The production line initially started up in April, increasing annual production capacity to 2.6 million tons (mt), of which up to 1 million mt was intended to be sustainable aviation fuel (SAF).

However, the facility was shut down in June due to unexpected equipment repairs, which the company said in July would affect RD and sustainable aviation fuel (SAF) sales volumes in the second half of 2023.

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The agency was working to confirm final figures ahead of a July 14 deadline, but the decision has now been pushed to July 21, according to a statement issued on Tuesday by ethanol lobby Growth Energy.

Industry reaction has focused on what they see as an imbalance between biomass-based diesel proposals and the ramp-up in renewable diesel production capacity across the US.

A key assumption is also coming from the news – first reported by Reuters – that a proposal to roll electric vehicles into the biofuel blending program will be dropped, and with it, the loss of potentially billions of credits that the commentators have dubbed eRINs.

The so-called eRINS may only temporarily be dropped, however, while the EPA deals with complaints over their legality, although no real time frame exists for their possible return, and Fastmarkets Agriculture understands it could take an act of Congress to have them properly installed into the RVO, which is likely to be no earlier than 2025 or 2030.

While this has maybe raised hopes that an increase to the biomass-based diesel or the advanced biofuel categories could be on the cards, with the initially proposed volumes revealed back in December 2022 dividing the market, experts previously told Fastmarkets that the removal of eRINs does not actually open the door for additional biomass-based diesel volumes.

Industry groups focusing on ethanol welcomed the proposed volumes, while biomass-based diesel groups were dismayed at the relatively modest proposals.

Detail

Typically, EPA reveals its thinking ahead of a final deadline in a call for feedback, and the agency proposed the following figures for the 2023, 2024, and 2025 years:

The bedrock of the total figures is a 15 billion gallon conventional biofuel allowance for 2023, topped up with a 250 million gallon additional award, following an earlier court case.

From 2024 and 2025, that additional allowance is rolled into a 15.25 billion gallon baseline that is typically filled by corn-based ethanol.

However, the relatively modest figures for biomass-based diesel of 2.82 billion gallons rising to 2.95 billion gallons in 2025 has caused angst, with industry bodies, senators and members of Congress from big agriculture states writing to the EPA’s administrator government to raise the volumes.

Their argument has been rooted in the increase in production capacity – both current and still expected – which they argue has not been taken fully into account.

“Projections from the Energy Information Administration (EIA) anticipate renewable diesel capacity doubling to 5.9 billion gallons by the end of 2025,” a letter signed by 37 members of Congress and addressed to EPA administrator Michael Regan.

“EPA’s proposed blending targets for biomass-based diesel account for less than 10 percent of the volume increases estimated by EIA, reaching only 2.95 billion gallons in the final year.

Industry reaction

Trade sources spoken to by Fastmarkets expect some modest movement on the advanced biofuel category – which would include renewable diesel or sustainable aviation fuel volumes, the crux of the upcoming expansion – but there is a wide range of estimates.

Prices for refined, bleached, and deodorized (RBD) soybean oil in Illinois – a major feedstock into the production process – have already responded to the potential for an increased mandate, with cash prices published by Fastmarkets service showing a steady increase since May 31.

RBD soybean oil prices in central Illinois are up more than 10 cents, or about 17 percent, since the end of May to the highest level in three months, above 70 cents per pound, according to Fastmarkets’ data.

RBD soybean oil is a preferred feedstock for many US producers, particularly ones that do not have pre-treatment on-site at their renewable diesel (RD) facilities.

Rising demand from both the food and fuels sectors has led to tight interior supply, with capacity generally sold out through the third quarter of this year.

A decision by the EPA to raise the RVO targets would require more soybean oil for domestic use.

The EPA is expected to confirm the 2023, 2024, and 2025 volumes by July 14, although speculation is mounting that the decision may be pushed back to next week.

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The plant, which had previously been announced by Cepsa, is intended to produce so-called ‘second generation’ (2G) biofuels from waste-based feedstocks and was expected to be able to produce 500,000 tonnes of sustainable aviation fuel (SAF) and renewable diesel (RD) every year.

Cepsa will be partnered in the venture by Bio-Oils, the Huelva-based arm of Apical Group – one of Indonesia’s biggest palm oil exporters.

The announcement that the plant will now be a joint venture comes as the industry increasingly worries about the supply of feedstocks into the new high-tech production capacity, with the press release explicitly referencing the strategic nature of the tie-in.

“The new plant will secure the majority of the feedstock supply from organic waste such as agricultural residue or used cooking oils through a global, long-term agreement with Apical, Bio-Oils’ parent company,” the press release said.

That would enable it to “address one of the key challenges facing the industry: access to feedstock.”

Addressing the challenges

Such is the scale of the ambitious plans for new biofuel mandates – particularly those relating to aviation – that vegetable oil and oilseed producers and traders are starting to push back amid fears that there won’t be enough feedstock to go around.

Earlier in March, the UK government set out proposals for plans to expand sustainable aviation fuels but capped its proposals at 2040 – citing concerns over the state of feedstock supply.

The European Union, meanwhile, has set out proposals to ensure 63% of the fuel used on outbound flights leaving the bloc will be sustainable fuels by 2050, while the USDA expects US aviation to require 36 billion gallons of SAF a year to meet decarbonization plans.

The new facility is expected to host two pre-treatment units and is expected to start operating from the first half of 2026.

The joint venture builds on the existing relationship between the two companies, with the CEO of Bio-Oils, Oscar Garcia, describing Cepsa as the company’s “largest customer” with Cepsa expecting to have a nameplate capacity of 2.5 million tonnes of biofuels by 2030.

Of that total volume, around 800,000 tonnes is expected to be SAF – enough, the press statement says, to power a plane around the world 2,000 times.

Data from flight tracking software providers Flightradar24 shows on average over the last seven days, there are just under 115,000 flights per day currently operating, hinting at the scale of the challenge ahead.

Closing that gap between expected demand and likely supply represents a significant investment opportunity,

“This alliance is in line with the European Green Deal and the European Commission’s Fit for 55 package… The agreement will serve to position Spain as a benchmark in the supply of SAF to airlines,” the press statement said.

The post Cepsa partners with Indonesian palm giant Apical’s Bio-Oils on Huelva JV appeared first on Fastmarkets.

However, feedstock and biofuel traders have raised fears over the sheer ambition of the targets, with the expectation that huge volumes of SAF will be needed to meet the aggressive and substantial increases in mandates.

That is likely to substantially impact the supply of key biodiesel feedstocks like used cooking oil (UCO).

“[If released, new mandates] will suck up every single drop of used cooking oil in the entire world,” one UK-based trade source said regarding US, EU, and UK mandate proposals.

While the document accompanying the UK’s SAF consultation acknowledged the challenges around feedstocks, the proposals are augmented by a hugely ambitious European Union scheme that intends to raise the SAF blend mandate across the bloc to 63% by 2050.

International supply

According to figures from the European Union Aviation Safety Agency (EASA), SAF currently amounts to less than 0.05% of total EU aviation fuel supply and estimates that to meet such a mandate, the EU would need to procure supply of 28.6 million tonnes of SAF by 2050.

Meanwhile, figures from the US Department of Agriculture expect SAF supply would have to reach 36 billion gallons – around 164 million tonnes – in the coming decades, representing a potentially huge strain on feedstocks drawn largely from the oilseed sector.

The UK’s scheme anticipates some of the supply challenges, proposing to commit the UK to increased mandates out as far as 2040 but to review supply balances as part of a regular commitment to building the supply sustainably.

“There are large uncertainties on feedstock availability and how much will be available to UK aviation… we are consulting based on the use of feedstock availability ranges,” the UK document states.

“We want to show sufficient ambition so that we drive investment in SAF and are not left behind by international competitors. However, if we are too ambitious and set targets that cannot be met, we… risk undermining the industry should the ambitious targets need to be reduced in the future.”

The UK approach sets out three scenarios – high, low, and medium – for consultation and contemplates a push to attain 10% SAF blending by 2030 across all scenarios, and then kicking on to a 32% blend rate by 2040 under the most ambitious scenario.

The UK consumed just over 6 million tonnes of jet fuel in 2020 – the latest year for which data from the Office of National Statistics is available, but the figures are markedly down on the back of Covid-related shutdowns.

Before that, the UK averaged consumption of 15.1 million tonnes in the five preceding years – giving an approximate need for 4.8 million mt of SAF by 2040.

The UK’s consultation document lists 2022 SAF supply at 26 million litres, amounting to around 21,000 tonnes – illustrating the scale of the ramp-up needed in the space of just 15 years.

HVO implications

While SAF holds a relatively small place in the UK fuel supply, the supply of biodiesels has been a great success, with the latest available government data showing 1.3 million liters of conventional biodiesel supplied up to November 2022.

Alongside that, 197 million liters of hydrotreated vegetable oil (HVO) – high-quality renewable diesel – was also delivered, with both grades heavily dependent upon waste-based feeds like UCO for their production.

Again, provisional UK data shows that 92% of feedstocks used to produce biodiesel in the UK in 2022 came from waste-based sources, with Chinese used cooking oil the biggest single contributor, accounting for 12% of the total fuel supply.

Both HVO and UCO are key elements helping the UK meet its current road fuel decarbonisation targets, but as the pressure to increase SAF production intensifies, trade sources feared that the dash for SAF could see existing HVO producers switch to SAF.

“Given the tax credits and the mandates, no one is going to be making HVO,” a second UK-based trade source told Fastmarkets Agriculture, in a dynamic that could leave heavy haulage firms struggling to meet their decarbonisation goals.

That could drive trucks towards the adoption of biomethane powertrains, as heavy goods vehicles are unlikely to move to electrification.

Aviation response

Nonetheless, for UK-based SAF start-up Velocys, the consultation was met positively with the measures offering a guaranteed level of demand and creating a long-term requirement to supply SAF.

Velocys is currently developing its Altalto plant at Immingham on the north-east coast of the UK, with a nameplate capacity to produce 20 million gallons (91 million liters) of sustainable fuel production every year.

The plant is expected to consume half a million tonnes of commercial, industrial, and municipal solid waste and was awarded £27 million ($33.4 million) in funding from the UK’s Department for Transport in December 2022.

The post Trade divided as ambitious SAF proposals stoke feedstock fears appeared first on Fastmarkets.

The report from the UK’s oldest scientific academy concluded that supplies of wastes, such as household rubbish or unrecyclable plastics, and green hydrogen, such as e-fuels, are likely to be insufficient to yield the volumes of biofuels required to meet net-zero targets.

Because of this, the UK will be heavily reliant on imports from countries that will likely have biojet mandates in place and similar challenges in securing sufficient supplies of affordable or genuinely sustainable feedstocks.

“Despite best endeavors at developing and rolling out alternative fuels, a scenario may arise where the reliance is predominantly on hydrocarbon fuels if the alternatives can’t be manufactured and safely deployed at the scale needed,” said the report, which has been published at a crucial juncture for the UK’s renewable fuels sector.

Governmental policy

Within the next few months, the government is expected to provide responses on a biojet mandate and clearer rules on some waste-based feedstocks.

The government, in the past few years, has said that the UK’s aviation sector can achieve “net-zero” carbon by 2050 through the development of domestic SAF plants using a range of technologies that can deliver “guilt-free” flying and put the country at the vanguard of technologies to produce alternatives to fossil-based kerosene.

That viewpoint – and broad policy considerations that biofuels and aircraft powered by batteries and hydrogen fuel cells can solve the UK’s aviation emissions conundrum – has prompted considerable skepticism already. Many green groups and some transport analysts have pointed out that only a drastic reduction in air travel volume can help the UK meet its carbon targets.

Individual feedstocks

In its analysis on individual feedstocks, the Royal Society report said that the UK’s domestic supply of used cooking oil – the main feedstock for available supplies of SAF – would yield 50 to 100 million liters of biojet fuel, which is equivalent to 0.3-0.6% of the total jet fuel used every year in the UK.

However, this conclusion does not fully acknowledge the current dynamics of waste feedstock markets for road-based biodiesel, where Britain already sources the vast majority of its UCO from countries such as China and Malaysia.

Meanwhile, the UK’s lack of forested areas means that wood-based advanced biofuels for use in SAF would require large volumes of imports of biomass or finished biojet fuel – and at high cost, the report pointed out.

In terms of municipal solid waste, a feedstock that is key to some of the SAF projects that are on the drawing board for the UK, the report concluded that 12 million tonnes per year is potentially available for domestic output but that just 1.2 million metric tonnes per year will be available for SAF, which is 10% of the total amount of fuel required.

In terms of other technologies that have been trumpeted as solutions by the UK government, the report highlighted the large volumes of renewable electricity that would be required to produce hydrogen (207-290 TerraWatt (TWh) hours, ammonia (217-332 TWh), or e-fuels (468-660 TWh) in the quantities required to replace current jet fuel use in the UK.

The report also highlighted the huge cost multiples that would be a major obstacle to mass production of SAF in the UK.

View our data analysis on US feedstock price trends

Huge energy costs

“The cost of energy of these alternative fuels is much higher (£34.4-£41.3/Gigajoule [GJ] for hydrogen, £32-£62.2/GJ for ammonia and £72.7- 94.5£/GJ for e-fuels) than that of conventional jet fuel (£11-£27/GJ),” the report said.

Lobby groups were not immediately available to respond to the Royal Society’s conclusions, which were widely reported by UK print and broadcast media on Tuesday.

Proponents of SAF in the UK have underlined that, as a new sector, biojet requires the delivery of several major conditions before it can reach mass production, such as stronger financial incentives, greater urgency on legislation required for a dedicated SAF mandate by 2025, and swift progress in getting several projects off the drawing board and into the construction phase.

Competition

The availability of many types of feedstocks will likely rise sharply once mandates and stronger price signals are in place, biojet’s backers say, but a UK SAF mandate is needed very soon in view of the EU’s own binding targets – also earmarked for 2025 – and the fiscal incentives offered by the recently enacted Inflation Reduction Act in the US.

The Royal Society’s report also made reference to crop-based feedstocks, which it said would require half of the UK’s farmland to be given over to the production of oilseeds and other commodities required to meet a net-zero target.

But UK policy – and that of the EU, where the majority of flights taking off in Britain end up – has for the last few years proposed that crop-based biofuels be excluded from future mandates, a key consideration that does not appear to have informed the Royal Society’s report.

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However, the company said it posted a 9% increase in comparable (unadjusted) earnings from its renewables division in the third quarter, as lower sales volumes offset the benefits of higher sales margins and a stronger US dollar because of logistical delays and a maintenance turnaround at its Singapore refinery.

Neste is one of the world’s biggest producers of renewable diesel (RD) and sustainable aviation fuel (SAF) and is also a major buyer of waste-based feedstock such as used cooking oil (UCO) and tallow, so the company’s comments on fundamentals are closely watched in the renewable fuels sector.

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Renewable Products posted comparable (unadjusted) earnings (EBITDA) of €389 million in the third quarter, compared with €357 million for the July-September quarter in 2021 but down 28% from €538 million in the second quarter of 2022.

“Due to challenges in outbound logistics, part of the planned end-September product deliveries were postponed to October,” the company’s chief executive Matti Lehmus said in an earnings statement.

“Sales volumes were 698,000 metric tonnes (mt), impacted by the logistical delays and the scheduled maintenance turnaround at the Singapore refinery,” Lehmus added.

Q3 sales volumes were down almost 10% from 772,000 tonnes in the third quarter of last year, as shipping delays late in the third quarter for high-margin products meant this volume will be booked in the fourth quarter instead, executive vice president Carl Nyborg told an earnings call.

The company said that big drops in feedstock costs, such as UCO, and crop-based vegetable oils, had contributed to much bigger margins.

Prices for animal fat fell from almost $1,800 per tonne to just above $1,400 per tonne during the quarter, while prices for soybean oil fell from nearly $2,300 per tonne to below $1,400 per tonne during the July-September period, according to a slide in Neste’s earnings presentation.

“Comparable sales margin averaged $756 per tonne [up from $679 per tonne in Q3 2021], which was a good achievement considering the volatile product and feedstock markets, the negative impact of our margin hedging, and the delayed sales,” Lehmus added.

Compliance credits

The company also cited a big drop in compliance credit prices in California as a distinct negative trend in terms of revenue, with the LCFS credits sliding to $60 per tonne by the end of the third quarter, compared with almost $100 per tonne in early July and $176 pert tonne on average in the third quarter of 2021.

This impact was offset to some extent by rising prices for biomass-based diesel compliance credits (D4 RINs) in the US federal Renewable Fuel Standard, which gained from around 160 to 175 cents per gallon by the end of the third quarter.

As has become customary in Neste’s recent earnings reports, the company said it expects volatility in the oil products and renewable feedstock markets to remain high.

“Renewable Products’ fourth-quarter sales volumes are expected to be higher than in the previous quarter,” it said, adding that waste and residue markets are anticipated to remain tight and volatile as demand continues to be robust.

The Finnish company said its Q4 sales margin is currently expected to be within the $700-800 pet tonne range but that forecasting the quarterly margin would remain challenging due to high market volatility.

Risks

It added: “The segment’s fourth-quarter fixed costs are expected to be approximately EUR 55 million higher than in the previous quarter, reflecting the costs related to its Martinez Renewables joint operation [in the US] and the build-up of capabilities in anticipation of the Singapore expansion start-up.”

It also cited “regulatory changes on the European Union or individual member state level,” as a potential risk to growth.

The company also provided an update on the production schedule for the Martinez JV in California with Marathon Petroleum, adding that the company had finalized the transaction on the project that is expected to start production in early 2023, with pretreatment capabilities expected to come online in the second half of 2023. The facility itself is expected to be capable of producing 2.1 million tonnes per year by the end of 2023.

Shares tumble

Shares in Helsinki-listed Neste fell over 8% to €44.6 each on Thursday following the publication of the earnings report.

For the company as a whole, which includes fossil fuel refining, distribution, and retail, EBITDA in Q3 totaled €456 million, down from €735 million a year ago, as the company took a €400 million hit from write-offs and hedging losses.

Neste’s operating profit of €289 million was down from €579 million a year ago, lagging a €692 million forecast by nine analysts polled by Refinitiv, according to Reuters.

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US blending and domestic consumption

September Biomass-based diesel (D4) blending of 313.8. million gallons approached its highest level of the year.

April is the high point for the year at 313.85 million gallons. September blending was 9.5 percent above August and 28 percent higher year on year. Within the D4 category, biodiesel production fell four percent to 160.3 million gallons, coming off the four-month high reached in August. D4 Renewable diesel blending of 153 million gallons was 34 percent above August and 69 percent higher than a year ago.

Renewable jet fuel blending fell 80 percent to 393,571 gallons but was still 31 percent above a year ago levels.

Advanced biofuel (D5) blending climbed 10 percent, rising to 26 million gallons. Imports of sugar cane ethanol have been spotty this year but continued in September, helping to lift production higher.

D5 renewable diesel, also known as co-processed renewable diesel, increased two million gallons to 8.8 million; a high point for the year and up 30 percent from last month. LPG, also known as propane, was up 264 percent from last month to 644,107 gallons.

The D6 conventional renewable fuel category, widely referred to as ethanol, fell 11.3 percent to 1.12 billion gallons in September.

The D6 category houses both ethanol production and certain renewable diesel production that does not meet other D code requirements, September Ethanol production of 1.11 million gallons was 11.8 percent below August but was tempered by a 294 percent increase in renewable diesel blending (7.7 million gallons).

The cellulosic (D3) category saw overall blending fall six percent to 57.7 million gallons in September. This was 16 percent over September of 2021. RNG blending of 57.6 million gallons was 6.2 percent below August, while cellulosic ethanol blending of 143,328 gallons was fractionally higher.

Total biodiesel and renewable diesel consumption during September, which includes blending within the D5 and D6 fuel codes as well as the D4 code, was 330 million gallons; 12.5 percent above August and 28 percent over September of 2021.

Biodiesel blending was 160.3 million gallons vs 169.6 million gallons of renewable diesel.

Domestic production and imports

Domestic biodiesel production totaled 160.3 million gallons in September, four percent below August.

Biodiesel imports of 19.1 million gallons were seven percent below August.

Domestic renewable diesel production hit 127.5 million gallons, 34 percent above July and reaching the second-highest monthly total on record.

Renewable diesel imports jumped 151 percent to 42.1 million gallons.

Total September renewable fuel blending was seven percent below August but three percent higher year on year. RIN generation was five percent below August but six percent higher year on year.

Nine months into the year, 14 billion gallons of renewable fuel have been consumed, generating 15.6 billion RFS credits. The EPA made prior month adjustments to May, June, and August production.

These adjustments added three million gallons of renewable fuel and 3.4 million RINs.

The post Renewable diesel blending hits monthly all-time high of 169.6 million gallons appeared first on Fastmarkets.

Eni said its decision to commission a feasibility study to build a 500,000 tonnes-per-year biorefinery to produce renewable diesel, and a facility to make hydrogen from methane gas, is part of the company’s wider decarbonization strategy.

The company has previously committed to transforming most of its oil refineries in its home country into biofuels and alternative fuels – and at the same time, shun crude palm oil.

“The construction of the new bio-refinery – located in an industrial area which houses fuel and lubricant production facilities – would maximize synergies from the infrastructure already available and secure the site’s future as an employment and production hub,” the company said in a press release

The Livorno refinery currently produces lubricants, fuel oil, gasoline and ‘special products’, and since earlier this year, has included a module to produce 10,000 tonnes per year of aviation biofuel.

Eni says it is currently the second-largest renewable diesel (hydrotreated vegetable oil) producer in Europe, with a 1.1 million tonnes per year capacity at its refineries in Gela and Venice, which it intends to raise to 2 million tonnes by 2025 and to 6 million tonnes within the next ten years.

The company said a year ago that it aimed to produce 150,000 tonnes of hydro-processed sustainable aviation fuel (SAF) and raise this to at least 500,000 tonnes per year of biojet by 2030.

“The design of the three new plants in Livorno will be completed by 2023, and construction could take place by 2025,” the company said, adding that its plan for the Livorno refinery will be discussed with local authorities and trade unions.

Sourcing new feedstock

The shift away from crude palm oil from 2023 onwards has already prompted Eni to source alternative ‘advanced’ feedstocks that qualify for double-counting under the current version of the Renewable Energy Directive.

Last week, the company said the first cargo of vegetable oil for biorefining produced by Eni in Kenya had been shipped from Mombasa, on its way to the Gela biorefinery, with exports scaling up to 20,000 tonnes in 2023.

The company has signed several offtake deals for feedstock in Europe and Africa. Yet – as well as the renewable diesel sector in general – it faces a major challenge in sourcing sufficient feedstock supplies for expansions and replacing palm oil and other single counted crop-based biofuels that are capped at 7% of total fuel consumption by 2030.

Eni is also considering whether to build renewable diesel and SAF refineries in the US. However, if it went ahead with the plans, the Italian energy major would be a relatively late entrant into the crowded North American biodiesel/renewable sector, where competition for feedstock such as used cooking oil and animal fats is already fierce.

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