Renewable diesel production ready to surge

CHICAGO — Just blocks from Midway Airport and a few miles from O’Hare International Airport, ag economist Dan Basse, asked the question.

“How many of you want to fly in a battery-powered airplane?” said Basse, looking over the audience of seed industry executives, many of whom had arrived by airplane. “No hands going up.”

The future of biofuels, from ethanol to biodiesel, is sustainable and, at least for ethanol, up in the air, said Basse during his outlook presentation at the American Seed Trade Association’s Corn, Sorghum, Soybean and Seed Expo.

Basse is the president of Chicago-based AgResource, a global ag marketing, research and analysis company.

For ethanol, that means transitioning to a source of sustainable aviation fuel, a future that could be right around the corner.

“Sustainable aviation fuel is going to be the future, made from ethanol or animal fats. I think, as we electrify the U.S. auto fleet, sustainable aviation fuel will be a big deal for ethanol going forward,” Basse said.

In October, Honeywell announced an ethanol to jet fuel processing technology that allows the conversion of corn-based, sugar-based and cellulosic ethanol to sustainable aviation fuel, or SAF.

In September, the U.S. Department of Energy, the U.S. Department of Transportation and the U.S. Department of Agriculture announced the Sustainable Aviation Fuel Grand Challenge.

The Grand Challenge is the product of a memorandum of understanding among the three governmental agencies. That MOU attempts to reduce the cost and increase the production of SAF.

The MOU also sets a goal of supplying enough SAF to meet 100% of domestic aviation fuel demand by 2050.

But ethanol isn’t the only renewable fuel that has a new life.

“Renewable diesel demand has soared in the last year. It’s a big deal. You can see this industry building out very, very quickly and this is going to be important for the years ahead,” Basse said.

According to the U.S. Energy Information Administration, as of Jan. 1, 2022, the U.S. had 11 biorefineries in operation, with a total nameplate capacity of 1.75 billion gallons a year.

“Even though gas prices have come down, petroleum prices have come down, renewable diesel plants are still coming online,” Basse said.

A necessary part of the renewable diesel production are crush facilities.

“We are also building out the soybean crush capacity because you need to take soybeans, process them down to oil and meal, get that oil and then send it to a renewable diesel factory or refiner. In the next two years, we will have 630 million bushels of additional crush capacity coming in this country,” Basse said.

In December, Epitome Energy announced plans to construct a $400 million, 42 million bushel capacity soybean crush facility near Grand Forks, North Dakota.

Also in December, a $300 million, 38.5 million bushel crush facility was announced by the Bartlett Company near Cherryvale, Kansas.

“Crush margins are high. You’re in the crushing business of soybeans today,” Basse said.

One consequence of the domestic production of renewable diesel and increased domestic demand for soybeans is the drop in exports of U.S. soybean oil, something that could have implications for world food supplies.

“Today we are the most expensive vegetable oil in the world because of renewable diesel. We are slowing or stopping U.S. export sales in its tracks,” Basse said.

“So, the U.S. has stopped being an exporter of soybean oil to the world, which is every important to a lot of the impoverished countries. Remember, they get their calories from frying their food in vegetable oils. That’s where calories come from.”

Basse said that the move to renewable fuels is likely to be a major change for U.S. agriculture and farmers.

“These are tremendous changes for agriculture. I see this as very disruptive to U.S. agriculture going longer term,” he said.