BIODIESEL: 2016 A RECORD YEAR?
2016 is shaping into an unusually active year for biodiesel. Both domestic production and imports are flourishing.
For the full month of June Biodiesel Imports tracked to 1,460,000 barrels (61 million gallons) of biodiesel imports into the U.S according to Genscape. To this number you need to add the additional imports from Canada shipped via rail. That brings the total for the first six months of the year to a record 4,500,000 barrels (189 million gallons).
Typically, the majority of biodiesel import activity occurs in the later months of the year. If this pattern holds in 2016, there is a very good chance that this year will surpass 2013 to have the highest volume of biodiesel shipments on record.
Interesting enough is to look at the origins of these imports. Argentina is the largest supplier followed by Indonesia, Canada and Korea. While Argentina continues to be the largest importer, shipments from Asia are becoming increasingly significant. The 443,000 barrels of June imports originated in Indonesia. In Indonesia Biodiesel is primarily Palm based.
D6 RIN prices are only a few cents below D4 prices, which makes it increasing attractive for Indonesian producers to ship their palm-based biodiesel to the U.S. At current prices, their RIN premium is an incredible $1.84/gallon. On top of this, producers usually share in the $1/gal blender’s tax credit that was renewed earlier this year.
Interestingly, the drivers for increased imports seem to be almost entirely related to tax incentives either at the Federal level or by State such as California but of the 26 biodiesel shipments, only two were destined for California. Renewable diesel imports continue to play a much larger role in the LCFS market.
Adopted in 2007, California’s Low Carbon Fuel Standard (Ca LCFS) requires a 10 percent reduction in the carbon intensity of transportation fuels by 2020, as measured on a lifecycle basis. The goals of the program are to reduce greenhouse gas emissions from the transportation sector, diversify the transportation fuels sector, and to spur investment and innovation in lower carbon fuels.
The LCFS is designed as a performance-based standard using flexible market-based mechanisms that allow regulated parties to select the most cost-effective pathways to achieve compliance. Fuels that have a lower carbon intensity than gasoline or diesel generate LCFS credits. Regulated parties, such as refiners, have the option of producing or blending low carbon fuels, or purchasing credits from other fuel providers, including, but not limited to biofuel producers, natural gas infrastructure providers, electric utilities, and hydrogen producers.
Interesting enough, Palm-based Indonesian biodiesel cannot generate credits in the LCFS market, and Argentine soy-based biodiesel has a carbon intensity score that makes it uncompetitive with other diesel substitutes.
Meanwhile, the U.S. EPA rule containing 2014, 2015 and 2016 renewable volume requirements (RVOs) under the renewable fuel standard (RFS), along with a proposed 2017 RVO for biomass-based diesel do increase over time, but fall short of statutory requirements. RFS RVOs for 2016 and 2017 require significant increases in biodiesel consumption. If this trend continues to keep RIN prices high, it’s unlikely that imports will slow down any time soon.
“Biodiesel and renewable diesel are the unsung heroes of the RFS Advanced Biofuel program,” said Anne Steckel, NBB Vice President of Federal Affairs told a House of Representatives panel in late June 2016.
“If you take away one thing from my testimony today, I hope it is the following – while there are certainly areas that could be improved, the RFS has made tremendous progress in developing Advanced Biofuels and delivering them to American consumers. Biodiesel and renewable diesel have made up the vast majority of Advanced Biofuels in the RFS, including filling more than 90 percent of the category in the last two years.”
Steckel’s testimony was delivered to the House Energy and Commerce Committee’s Subcommittee on Energy and Power at a hearing titled, “The Renewable Fuel Standard – Implementation Issues.
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*To learn more visit: www.genscape.com and www.biodiesel.org
