By Keith Reid
The rush toward a net-zero carbon future has heavily emphasized electric vehicles in the transportation or “mobility” space. Replacing combustion with electric batteries and motors seems simple on the surface. The performance of electric vehicles has come a long way, to where even without a significant regulatory push or subsidy support EVs are viable to a subset of consumers with favorable usage profiles.
However, the report Assessment of Biofuels Policy: Effectiveness of Emissions Reductions, created by Stratas Advisors for the Fuels Institute, illustrates the hindrances to an immediate pathway to EVs and the ability of alternative biofuels to help meet both short-term and long-term emission goals. (The full report is available at www.fuelsinstitute.org.)
Aside from obvious areas like aviation, even as EV technology improves, there will always be applications where EVs will be a square peg trying to fit into round holes. What’s more, there are entire regions, such as Africa, where the electrical gid is underdeveloped.
If the goal really is net-zero carbon, why should bio and renewable liquid fuels that meet these goals be left off the table?
As the report notes, the viability of any solution for a zero-carbon future must consider the carbon intensity of the solution and how that plays out in the entire life cycle. EVs, for example, have no “tailpipe” carbon, but they do have a range of carbon inputs from mining and disposal of battery materials, to the production of the vehicle, to the charging infrastructure and sources of electricity generation.
Life-cycle carbon forms a core metric of CI and is a driving factor of how well the biofuels analyzed in the report perform. It should be noted that life-cycle models are highly subjective. Some of the most notable are centered on the Greenhouse gases, regulated emissions, and energy use in technologies (GREETA) model.
Here is a roundup of some of the more common biofuels, with information from the report and input from marketers and retailers who are successful with various biofuel and renewable fuel products.
Ethanol
Ethanol is a dominant renewable fuel in the U.S. market and is practically universal at 10%, with increasing penetration occurring at 15% in gasoline. E85 is also sold, which provides the greatest CI impact and is the starting point for net-zero with this fuel.
Ethanol has had a split history in the environmental community. It was out of favor for a while in California because of carbon intensity concerns. The report details how California Air Resources Board model adjustments to the life-cycle analysis have caused ethanol’s carbon intensity to drop considerably.
Ethanol production contributes to about 43% of fuel ethanol’s carbon intensity. Ethanol producers are investing heavily in carbon capture and sequestration technologies. Ethanol industry groups are working to get zero carbon intensity or negative carbon intensity ethanol by 2050, though the goal is to have those in place sooner.
The American Coalition for Ethanol (ACE) has introduced a CI calculator to help its members understand the carbon intensity of their farms and ethanol operations, along with a simplified version of the tool to raise awareness about factors impacting the CI of ethanol. These tools help illustrate corn ethanol’s ability to attain net-zero and net-negative greenhouse gas emissions.
A potential ethanol-fueled future is presented in the Next Generation Fuels Act of 2021. The underlying concept has long been discussed as a significant but ultimately conventional solution for carbon reduction. The act would establish a high-octane (95 and 98 Ron) certification test for fuels and support ethanol blends up to 30% by volume, while requiring automakers to design and warranty vehicles for the use of these fuels beginning with model year 2026. The bill would also include a low-carbon requirement specifying that the source of the octane boost must reduce life-cycle GHD emissions by an average of at least 40% compared to a 2021 gasoline baseline. While stalled, the act remains a viable future option.
There are many ethanol success stories in the industry. Bosselman Enterprises, owner of the Nebraska-based Pump & Pantry convenience store chain, was one of the first marketers to sell E15 and E85 in Nebraska and has achieved success and expertise in monetizing RINs. California-based Pearson Fuels, one of the nation’s largest E85 distributors, has seen sales consistently increase despite the distance from Midwest ethanol production by leveraging the state’s Low Carbon Fuel Standard (LCFS) credits.
Meanwhile, Midway Service, an auto service/tire center in Baltic, South Dakota, which still offers fuel, sells higher ethanol blends. Its success has enabled the operation to move to the next level, including acquiring a new location. The company also distributes wholesale gasoline and diesel through its subsidiary Vollan Oil.
The operation has an E10 base stock but will sell E15, E30 and the star of the operation—E85. Ethanol can provide a cost advantage in more normal times, but in today’s market with gasoline typically north of $5 a gallon at retail, the price differential between ethanol and base gasoline is significant.
“We sell a ton of E85—at $2.19 a gallon it sells itself. Even with the BTU loss. And, my loaded cost, excluding RIN, is 1.5681,” said Bruce Vollan, Midway’s owner. “We’ve never sold this much ethanol before, and most of it in E85 form.”
Vollan noted that some competitors can add $1 to his price at retail and still take in good volume.
“We’re making money, the ethanol industry is standing on its own two legs, it’s creating the green product we want and it bolsters our regional agriculture,” Vollan said. “It is an absolute, super success story for us.”
Biodiesel
Biodiesel is the second-most consumed biofuel in the United States with a volume share of about 2.8% of the total diesel pool and a volume of 2.4 billion gallons in 2019. Biodiesel is made from the trans-esterification of vegetable oil and animal fats and, as with ethanol, is sold and blends between B2 (2%) and B20 (20%). Most biodiesel is blended at B5 (5%).
One of the critical applications for biodiesel is to facilitate Bioheat, a blend of biodiesel and ultra-low sulfur heating oil. It provides 80% fewer emissions compared to petroleum diesel.
The Northeast and Northwest have a similar environmental perspective as California, which is reflected at both the governmental and consumer levels. Heating oil was increasingly seen by some in the region as a product whose end was near. Bioheat countered that assertion.
“I’m the fourth generation. So, to pass it over to the fifth you need a cleaner fuel,” said Norman Woolley, president of Woolley Home Solutions. Woolley has been in business since 1924 and offers heating oil, HVAC services, plumbing and propane refilling. It also operates a motor fuels biodiesel pump for consumers/fleets. “We started with coal and wanted to transition the business into a cleaner fuel, which at that time was fuel oil. Now we’re adding biodiesel and reducing the sulfur, and then we’ll keep increasing the blend until we can be carbon neutral.”
Bioheat has been embraced by heating oil distributors and forms the launch pad for the industry’s Providence Resolution, a commitment to a 15% reduction in CO2 emissions by 2023, a 40% reduction by 2030 and net-zero-carbon emissions by 2050. This gives liquid fuels a solid footing to fight electrification and propane in the carbon wars.
There are product benefits beyond the regulatory pressures in the markets Woolley serves.
“When you have that conversation with a consumer who wants to do electric or natural gas, you’re able to tell them about Bioheat. It makes that conversation a lot easier,” Woolley said. “I have young children as well, and in science class you can tell the story of our fuel and how it’s evolved over time.”
Biodiesel in motor fuel applications has also provided some of the advantages seen with ethanol in the current market.
Star Oilco, based in Portland, distributes diesel, biodiesel, renewable diesel, off-road diesel and, to a lesser extent, gasoline. It operates cardlock sites, heating oil delivery, bulk fuel, on-site mobile fueling service and a single Shell retail site which does heavy diesel business. Its wholesale fueling serves the Pacific Northwest centered on Oregon and Washington as a common carrier, while covering both states completely as a mobile on-site fueler.
“Not too long ago diesel went up 70 cents a gallon wholesale in my market, like a rocket,” said Mark Fitz, Star Oilco president. We were working the phones, calling our customers to watch your fuel surcharge. It was crazy. We were able to get B20 at 30 cents below B5 for a week or two. Having that option really took the edge off for our customers when the market went crazy.”
Renewable Synthetic Fuels
Renewable and synthetic fuels include green and blue hydrogen for applications and fuel cells and synthetic road fuels such as renewable gasoline, renewable diesel and methanol-to-gasoline eFuels. The report notes most of these fuels are targeted at aviation and shipping.
Renewable diesel uses the same feedstocks as biodiesel but with a different production process that generates a product almost identical to petroleum diesel. The report notes that in 2019, renewable diesel had a market share of about 1.2% of the total U.S. diesel pool, or roughly 0.73 billion gallons. Most of the demand for renewable diesel comes from California, where its market share of about 16.3% is expected to reach over 40% by 2024 due to incentives and obligations of the low-carbon fuel standard.
A leader on the renewables front, Star Oilco has been into biodiesel for over two decades and moved into renewable under pressure from low-carbon fuel regulations.
“I had to get renewable to maintain my refuse haulers who were being mandated to use 99% renewable diesel (R99). So, you have these mandates that are driving it, and you’re kind of against a rock and a hard place and you have to adapt,” Fitz said. He sees renewable diesel as being the “next generation fuel that is perfectly suited to carbon markets, while providing more direct compatibility with petroleum diesel as a ‘drop-in’ substitute.”
A CARB-friendly formulation with a low CI is R80B20, a mixture of renewable diesel (80%) and biodiesel (20%) which provides the drop in benefits of renewable diesel with the lubricity of diesel.
One challenge is that the renewable mandates rapidly popping up are straining product availability.
“California wants all the harbor tugs to go renewable. That’s millions of gallons more,” Fitz said. “Then you add the [possible] sustainable aviation fuel requirements. So, were going to be even more short than we are now. There is a delusion in government that they’re dictating and mandating anything that looks positive to move is off petroleum, and it just doesn’t work that way.”
A number of refineries are converting to renewable diesel, which itself had some impact on the recent, acute conventional diesel shortages, especially on the East Coast.
Renewable gasoline, also called renewable naphtha, is a byproduct of renewable diesel production. Like renewable diesel, renewable gasoline is a drop in fuel with similar energy content, and it can be blended in higher proportions more easily than ethanol. However, the report notes that low yields from renewable gasoline production make it unlikely to be a significant fuel product for decarbonization of the U.S. gasoline pool.
Keith Reid is editor in chief and editorial director of Fuels Market News. He can be reached at [email protected]
Chevron Talks REG Acquisition
One of the biggest announcements on the biofuels front came with Chevron’s acquisition of Renewable Energy Group in June 2022. REG utilizes a global integrated procurement, distribution and logistics network to operate 11 biorefineries in the U.S. and Europe. In 2020, REG produced 519 million gallons, or 1.7 million metric tons, of cleaner fuel delivering 4.2 million metric tons of carbon reduction. FMN spoke with Kevin Lucke, president of Chevron Renewable Energy Group, for more on the acquisition and Chevron’s low carbon fuels.
What made REG so appealing?
For more than 140 years, Chevron has developed affordable, reliable energy that is essential to our way of life. We believe that the future of energy is lower carbon, and we are working to grow our lower carbon business. By 2030, we intend to have the capacity to produce 100,000 barrels/day of renewable fuels.
What do you see as being the future of liquid fuels in the industry?
We believe liquid fuels—in high demand today—will continue to be an important part of the transportation sector for decades to come.
What liquid/gaseous fuels will Chevron be concentrating on for the future?
Chevron is developing an exciting portfolio of alternative fuels to complement our offering of high-quality motor gasoline, diesel and jet fuel. With our acquisition of Renewable Energy Group and new joint venture with Bunge, we are growing our ability to secure renewable feedstocks, manufacture renewable diesel and biodiesel, and market those fuels to our customers. We have also produced a test batch of sustainable aviation fuel at our El Segundo Refinery and see greater opportunity to produce and market SAF in the coming years.
In terms of gaseous fuels, Chevron is producing renewable natural gas made from dairy biomethane through ventures with CalBio Energy and Brightmark. This work complements the growth of our CNG retail network, primarily through the Beyond6 retail brand. We also recently announced a new business venture with Iwatani and Toyota in which we will build 30 hydrogen fueling stations at select retail locations in California by 2026.
What do you see with the roles of biodiesel and renewable diesel specifically?
Renewable diesel and biodiesel can be used by customers who want lower life-cycle carbon intensity fuels for their operations, especially in hard-to-abate sectors such as heavy-duty vehicles, rail, marine and more.
How does this work with an EV strategy within the brand?
Chevron believes that several types of fuels will be needed as lower carbon solutions for the transportation sector. Renewable liquid fuels, renewable natural gas and hydrogen are fuels that should be allowed to compete for policy incentives alongside EV technologies.
