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The Engineering Reasons Behind Merchant Refiners' Renewable Diesel Boom

Jun. 08, 2020 10:31 AM ETCVI, DAR, DINO, MPC, PSX, VLO, XOM9 Comments
Tristan R. Brown profile picture
Tristan R. Brown


  • U.S. renewable diesel production capacity is currently experiencing growth of almost an order of magnitude in just a few years.
  • Merchant refiners are playing a critical role in the expansion.
  • This article examines three important engineering/technical factors that have caused merchant refiners to invest in renewable diesel rather than other biofuels.

Last month I discussed the policy reasons for U.S. merchant refiners' heavy investments of late in renewable diesel production capacity. That expansion, which is being largely driven by merchant refiners such as CVR Energy (CVI), HollyFrontier (HFC), Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero Energy (VLO), will see total U.S. capacity increase by almost an order of magnitude through 2023 (see figure). Even giant Exxon Mobil (XOM) has been getting involved, albeit from the feedstock side, with its continued joint venture to produce microalgal lipids at scale. Multiple investors have asked me about the engineering reasons, though. Specifically, why are merchant refiners investing in renewable diesel rather than more established pathways such as corn ethanol or biodiesel? After all, those latter two fuels have been much larger contributors to the two policies, the U.S. revised Renewable Fuel Standard [RFS2] and the California/Oregon Low Carbon Fuel Standard [LCFS], that are driving refiners' investments.

Source: Author calculations (2020).

Three engineering/technical factors explain merchant refiners' single-minded focus on renewable diesel production. When considering them, it is important to keep in mind that "renewable diesel" refers to the lipid-derived hydrocarbon fuel that meets the same ASTM D975 spec as does ULSD, even in unblended form. (Some sources alternatively call it hydrotreated vegetable oil [HVO] or hydroprocessed esters and fatty acids [HEFA] diesel, but the three labels generally apply to the same fuel that is produced from a variety of feedstocks such as used cooking oil, animal processing residue, and distillers' corn oil.) Renewable diesel is distinct from the two other primary forms of biobased diesel fuel that are on the market, "cellulosic diesel" and "biodiesel." Cellulosic diesel is a hydrocarbon, but one that is derived from lignocellulosic rather than lipid feedstocks. Its production is limited due to the challenges of working with lignocellulose. Biodiesel, which is the most-produced biofuel in the U.S. besides ethanol, is not a hydrocarbon, but rather a fatty acid methyl ester [FAME] fuel

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Tristan R. Brown profile picture
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