In January 2020, the United States National Biodiesel Board announced it was setting an “ambitious target” of doubling biodiesel/renewable diesel production to 22.7 billion litres by 2030.
Turns out it wasn’t nearly ambitious enough.
The organization thinks the new timeline could be as soon as 2023 due to a plethora of announced expansions and new projects that will add billions of litres of renewable diesel capacity in two years.
“It’s definitely going to be well in advance of 2030,” said Donnell Rehagen, chief executive officer of the NBB.
That is music to the ears of Canada’s canola growers and crushers because canola oil is expected to be a key feedstock used by the industry.
The NBB estimates that half of the country’s existing biodiesel/renewable diesel is made from soybean oil with a small contribution from canola oil.
The other half is made from used cooking oil, animal fats and distillers corn oil, with each commodity contributing about one-third of that pie.
The industry is soon going to require twice as much total feedstock, with soybean oil and canola oil getting a disproportionate amount of that additional business due to the ability to scale up production.
“Nobody is going to raise more cows or pigs because we want to make more renewable diesel out of them,” said Rehagen.
The same goes for distillers corn oil and used cooking oil. There won’t be more ethanol production or people eating french fries in an effort to feed the renewable diesel sector.
Canola oil is used in U.S. biodiesel production but there is no current pathway for it to be used as a feedstock for renewable diesel in the U.S.
That is because the U.S. Environmental Protection Agency has yet to approve canola oil as an eligible feedstock for its Renewable Identification Number (RIN) program.
The EPA is in the process of reviewing a new application from the canola industry to include canola oil in the program.
Rehagen hopes that process will be expedited under U.S. President Joe Biden’s administration, which has made addressing climate change a top priority.
StoneX estimates there will be 6.8 billion litres of biodiesel production and 3.5 billion litres of renewable diesel production in the U.S. in 2021.
It predicts that renewable diesel production will eclipse biodiesel production by 2023.
StoneX is forecasting 7.74 billion litres of renewable diesel production compared to 6.25 billion litres of biodiesel by that time.
By 2028, there will be 9.08 billion litres of renewable diesel and 5.68 billion litres of biodiesel.
Canola oil’s share of the feedstock supply for both fuels is expected to soar to 13.5 percent by 2028 from 4.6 percent in 2021.
Soybean oil’s share will drop to 41.8 percent from 48 percent over that same period, according to estimates.
Fred Ghatala, director of carbon and sustainability with Advanced Biofuels Canada, said it is terrific that the renewable diesel sector is exploding south of the border.
He suspects that directly influenced the recent spate of new canola crush facility announcements in Saskatchewan.
But there is also a big opportunity for renewable diesel plants in Canada if policymakers get it right.
An analysis by World Agriculture Economic and Environmental Services estimates that Canada’s proposed Clean Fuel Standard (CFS) will result in a nine percent biofuel blend rate in diesel by 2030.
An estimated 92 percent of that will come from Canadian canola, creating new demand for 1.5 million tonnes of oil and 3.4 million tonnes of seed.
The estimated price impact of that new demand on canola would be $1.10 per bushel, according to the study.
“We’ve got a decadal policy shift happening in Canada with the CFS,” said Ghatala.
“We want the opportunity and the benefit of that to be realized in Canada.”
But that all hinges on the federal government getting the details right.
If Ottawa gets them wrong then Canadian canola will be shipped to the U.S. and turned into renewable diesel, which will then be transported back to Canada to meet the CFS.
That would result in $10 billion of lost value-added activity for Canada, he said.
Rehagen said the ball is already rolling in the U.S. due to low carbon fuel standards in states like California and Oregon that have created a huge market for renewable diesel.
A number of major oil refiners in the U.S. have announced plans to switch some of their marginal facilities to producing renewable diesel from vegetable oils rather than making gasoline from crude oil.
Refiners have known for some time that gasoline demand will eventually decline with the rise in electric vehicles, so they were already preparing to make that transition.
And then along came COVID-19, which resulted in an immediate real-time reduction in gasoline demand.
“That has accelerated the timeline of those major oil and gas refiners saying, ‘you know what, we’re going to go ahead and jump in and get into this renewable diesel thing sooner rather than later,’” said Rehagen.