US biodiesel industry set to produce more than 1.28 billion gallons in 2013 -----Biodiesel making a ‘significant contribution' to RFS-mandated 16.55 billion gallons of renewable fuel, says analyst

LONDON, UK (GlobalData), 16 October 2013 - The US biodiesel industry is on pace to produce more than the 1.28 billion gallons set under the Renewable Fuels Standard (RFS) for this year, says a new report from research and consulting firm GlobalData.

According to the report*, biodiesel is the first Environmental Protection Agency (EPA)-designated ‘advanced biofuel' — a category that lists alternative fuels possessing at least 50% fewer emissions than gasoline — to reach 1 billion gallons of annual production. This growth is driven in large part by a $1-per-gallon production tax credit extended through the end of 2013 by the US Congress.

Jeffrey C. Kerr, GlobalData's Managing Analyst for Downstream Oil & Gas, says: "The RFS aims to reduce oil imports and cut back auto emissions with cleaner-burning fuels such as cellulosic ethanol, biomass-based diesel, and sugar-cane-based ethanol. However, cellulosic ethanol has yet to achieve a production level significant enough to seriously contribute to an RFS-mandated 16.55 billion gallons of renewable fuel. That's where biodiesel makes a significant contribution."

This year, the EPA set a cellulosic requirement of just 6 million gallons, a mere fraction of the 1 billion gallons originally agreed for 2013. However, it is forecast that cellulosic producers will not even meet the smaller volume requirement, since few commercial scale production plants have been built.

Still, some cities in the US have been making strides to institutionalize the use of biodiesel. In September, New York City Mayor Mike Bloomberg signed a law that requires all city diesel vehicles to use a fuel blend of 5% biodiesel (B5) by 2014, and of 20% (B20) by 2016 during the warm weather months. The law also calls for the city to conduct a pilot program that studies the feasibility of using B20 throughout the whole year.

"Home to nearly 8,000 diesel vehicles, the city already uses biodiesel blends in almost all vehicles for key services such as Central Park management, snow removal and garbage collection. A move to B20 would add up to 2 million gallons of biodiesel use annually," says Kerr.

In addition, the Port Authority of New York and New Jersey has been operating on B20 since 2000. Their case studies of using B20 year-round in airport emergency and snow removal equipment show biodiesel's performance capabilities.

*Downstream Regulatory Quarterly Outlook