Written on: July 8, 2024 by Paul J. Nazzaro
The BTC has been a cornerstone of the renewable fuels market, providing crucial financial support to blenders and facilitating the adoption of biodiesel and renewable diesel. As we move towards 2025, however, the phase-out of the blender’s credit raises concerns about market stability and product valuations. The Clean Fuel Production credit, set to replace the BTC on Jan. 1 2025, offers incentives to fuel producers based on the carbon intensity of their feedstocks. This shift places greater emphasis on the sustainability of the entire production process, from feedstock selection to final fuel output.
While the new credit aims to drive innovation and promote cleaner fuels, the transition is not without challenges. The erosion in the value of renewable identification number (RIN) credits further complicates the scenario. Historically, RINs have provided an additional financial incentive for renewable fuel producers, but fluctuations in their value—particularly in the past year or two—have created uncertainty in the market. As we prepare for 2025, it’s essential to develop strategies that do not solely rely on these government incentives.
The Rise & Implications of Renewable Diesel
The introduction of renewable diesel to the East Coast has added yet another layer of complexity. Previously, the focus was primarily on biodiesel as the transition fuel for cleaner on- and off-road transportation fuel and heating oil. Renewable diesel, though a less complex alternative in terms of storage and handling, was largely confined to markets with robust low-carbon fuel programs, such as those on the West Coast.
Renewable diesel’s acceptance under the ASTM standards (D396 for heating oil and D975 for on-road diesel) makes it a more straightforward option for blending with traditional distillates. Its seamless integration into existing infrastructure presents renewable diesel as a “simpler” solution, alleviating some of the operational challenges associated with biodiesel. This simplicity, however, should not overshadow the importance of maintaining a diverse supply chain.
A Multifaceted Approach to Low-Carbon Fuels
As someone who has represented the low-carbon fuels industry for nearly three decades, I’ve witnessed the evolution of technologies and market dynamics. Our industry now boasts a range of products, including biodiesel, renewable diesel and sustainable aviation fuel, each with its unique benefits and challenges.
Adopting a feedstock-neutral and technology-agnostic approach is vital for long-term success. Relying on a single, low-carbon option could weaken our supply network and compromise our ability to meet consumer demand. The potential disruption of removing approximately 60 domestic biodiesel producers, who collectively supply two billion gallons per year, underscores the importance of a balanced supply strategy. Such a move would likely paralyze the market, making us overly dependent on a single fuel type.
Marketing Strategies for a Diverse Fuel Portfolio
To effectively market our products, we must highlight their unique characteristics and advantages over, not just traditional distillate fuels, but also other alternatives, such as electrification. The current state of the power grid makes the widespread electrification of transportation and space heating infeasible and ill-advised.
Energy stakeholders should focus on educating consumers about the benefits of low-carbon liquid fuels. This includes:
•Performance & reliability: Emphasize the proven performance and reliability of biodiesel and renewable diesel. Both fuels offer significant reductions in carbon emissions without sacrificing efficiency or performance.
•Environmental impact: Highlight the environmental benefits, such as lower greenhouse gas emissions and reduced air pollution. This is particularly important for consumers increasingly concerned about climate change.
•Economic benefits: Stress the economic advantages, including job creation in the renewable fuels sector and energy independence. Diverse fuel sources can protect consumers from price volatility in global oil markets.
•Compatibility: Address concerns about fuel compatibility and infrastructure. Both biodiesel and renewable diesel can be used with existing vehicles, heating systems and storage facilities, minimizing the need for costly upgrades. Check out that trend on the West Coast, where blends of 95% renewable diesel and 5% biodiesel (95/5), as well as 80/20, are the norm.
The Path Forward
As we navigate these changes, collaboration and innovation will be key. Industry stakeholders must work together to develop robust supply chains that can withstand policy shifts and market fluctuations. This includes investing in advanced technologies and diversifying feedstock sources to ensure a steady supply of low-carbon fuels.
Government policies will continue to play a significant role in shaping the market, but we must also prepare to operate successfully without relying solely on incentives. By promoting the unique value propositions of biodiesel and renewable diesel, we can build consumer confidence and drive adoption.
We all have an obligation to learn as much as possible about these fuels. Plenty of educational materials exist and is readily available; if you don’t know something but want to, ask someone who might.
Diversity Means Energy Security
Diversity in supply is not just relevant, it is imperative for ensuring energy security in all fuel-consuming sectors. By embracing a range of low-carbon fuels and developing strategies to market them effectively, we can achieve a sustainable and resilient energy future. This approach will not only meet the immediate needs of consumers, but it will also position the industry for long-term success in a low-carbon economy.
Objects are Closer than they Appear
I have one final thought to leave you with. The mirror on the outside of a car’s passenger side often contain a message that reads, “Objects are closer than they appear.” As we look to the future, it’s clear that the path to decarbonization is closer than it appears, but traveling this road to our final destination will require flexibility, innovation and a commitment to diversity. Those involved up and down the supply chain, from producers to fuel distributors and end-users, must be prepared to adapt to changing market conditions and policy landscapes to get there. By doing so, we can ensure a reliable supply of clean, efficient and affordable energy for all. ICM
