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renewable diesel capacity could increase due to upcoming projects

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U.S. renewable diesel capacity could

increase due to upcoming projects
7/29/2021
U.S. production capacity for renewable diesel could increase significantly through 2024, based on several announcements for projects that
either are currently under construction or could be in development soon. This growth is driven by higher state and federal targets for
renewable fuel, favorable tax credits, and the conversion of existing petroleum refineries into renewable diesel refineries.

As of the end of 2020, U.S. renewable diesel production capacity totaled nearly 0.6 billion gallons per year (gal/y), or 38,000 barrels per
day (b/d). Several projects currently under construction could increase this capacity by 2.4 billion gal/y; proposed and announced projects
would add another 1.8 billion gal/y by 2024. If all projects come online as intended, U.S. renewable diesel production would total 5.1 billion
gal/y (330,000 b/d) by the end of 2024.

Despite growth in renewable diesel production, renewable diesel will make up about 5% of current U.S. diesel production capacity by 2024
if all estimates of proposed renewable diesel capacity expansions occur as planned and petroleum diesel refinery capacity remains largely
unchanged.

Renewable diesel is a renewable fuel (https://www.eia.gov/energyexplained/biofuels/biodiesel-in-depth.php) that is chemically the same

as petroleum diesel and nearly identical in its performance characteristics. Renewable diesel can be blended into petroleum diesel at any
level, making it different from biodiesel, which can only be blended at rates between 2% and 20% of diesel fuel by volume.

Renewable diesel receives some of the most favorable greenhouse gas (GHG) reduction scores among existing programs, such as the
federal Renewable Fuel Standard (https://www.epa.gov/renewable-fuel-standard-program) (RFS) and the California Low-Carbon Fuel
Standard (https://ww2.arb.ca.gov/our-work/programs/low-carbon-fuel-standard) (LCFS). As a result, participants in those programs are
increasingly using renewable diesel to meet rising renewable fuel targets.

Although most new capacity for renewable diesel will be on the West Coast, some announced projects are on the Gulf Coast. California and
other western states such as Oregon (https://www.oregon.gov/deq/ghgp/cfp/Pages/Quarterly-Data-Summaries.aspx) and Washington
(https://www.natlawreview.com/article/fourth-time-s-charm-washington-enacts-clean-fuels-program-creating-west-coast-market) will
likely consume the majority of renewable diesel produced on the Gulf Coast to meet future LCFS program targets in those states.

Several former petroleum refineries plan to begin producing renewable biodiesel. Marathon Petroleum’s refinery in Martinez,
California, plans to start producing renewable diesel in 2022 (http://biomassmagazine.com/articles/17790/marathon-proceeds-with-
renewables-conversion-at-martinez-refinery) and could reach its full production capacity of 730 million gal/y (48,000 b/d) in 2023. Phillips
66’s Rodeo Renewed project (https://www.phillips66.com/newsroom/rodeo-renewed) in San Francisco, California, plans to produce 800
million gal/y (52,000 b/d) of renewable fuels when completely converted in 2024. If realized, this project would be the world’s largest
facility of its kind.

One of the primary risks to the expansion in renewable diesel production capacity is the availability of fat, oil, and grease feedstocks. Prices
for most renewable diesel feedstocks have increased as renewable diesel production has increased. Biodiesel and renewable diesel
producers have been relying on incentives such as the biomass-based diesel tax credit (https://www.eia.gov/todayinenergy/detail.php?
id=42616) and tradeable credit prices for renewable diesel in the RFS and LCFS to make a profit. Feedstock availability and government
incentives will likely continue to play a role in the financial viability of new renewable diesel production capacity in the near term.

Principal contributors: Sean Hill, Estella Shi, Peter Colletti

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