By Matt Reese
Biofuels are the subject of complex politics, controversy and confusion, but have, without a doubt, forever left their mark on crop markets and rural America. In this constantly evolving sector, what is next for biofuels?
Paul Bertels is an Illinois-based agricultural leader and consultant at FarmGate Insights who closely follows ever-changing developments with biofuels.
“We’ve seen a number of advances in the last couple of years. We’ve largely hit a blend wall in ethanol with E10 blends, so the way around that is E15 or to work with the auto industry to where they’re designing engines that need a higher ethanol blend,” he said. “On the bio-based diesel side, most people think of biodiesel, which is a blend. What we’ve seen in the last few years is really a ramp up in renewable diesel. With renewable diesel, you’re actually making the exact equivalent of diesel fuel, you’re just doing it with biomass — soybean oil, used cooking oil, things like that. It would be considered a drop-in, so you can run it neat without any kind of modifications to engines.”
Agriculture still plays a major role in ethanol and biodiesel, but renewable diesel operates on a larger scale than existing ethanol and biodiesel plants.
“What you see when you transition over to renewable diesel is it’s more of the way an oil refinery operates, but instead of crude oil you’re using some other kind of oil-base like tallow, soybean oil, things like that,” Bertels said. “What you’re seeing is that market is largely driven by California or the European Union and most of that is being provided by the big oil companies, so Marathon, Phillips or Chevron are the ones that are making renewable diesel right now.”
With the growth of renewable diesel, feedstocks considered to have a low carbon score are in high demand.
“There is a pretty big competition for feedstock. You’re seeing globally the feedstocks that have a lower carbon score and are considered better for the environment — things like used cooking oil — those markets are rapidly getting bought up, so now you’re seeing more soybean oil go in. That’s what’s really driving the expansion in the soybean crushing industry,” Bertels said. “Every feedstock has a carbon score with it. Soybean oil has a higher carbon score then used cooking oil, because they consider that to be a waste product. When you look at the impact of used cooking oil on changing bean acreage in Brazil, for instance, it gets a zero. That helps lower the score and therefore increases its value. The problem is that the used cooking oil market is rapidly getting tapped out. It is the same thing with the tallow markets getting tapped out. At some point you’ll see more bean oil come in, but it’s going to have a higher carbon score. So, from a farming standpoint, from the crushing standpoint, they need to find ways to improve the process so soybean oil has a lower greenhouse gas score to ultimately increase the value.”
Looking forward with biofuels, sustainable aviation fuel (SAF) is a huge and developing market.
“Aviation fuel really is one of those markets for the future. There are numerous steps between here and there, but one of the problems with the internal combustion engines burning gasoline and ethanol is the electrification of the fleet. We know the current administration is really pushing electric vehicles. When you look at something like aviation, electrification of the aviation industry really is not a viable solution. For the foreseeable future, for our lifetimes, that is going to be a liquid fuel market. So, creating SAF through ethanol or soybean oil to jet fuel, that really is a huge market that’s potentially growing,” he said. “Right now, just to give you a number, by 2030 the White House has set a goal of 3 billion gallons of SAF. By 2050, they want that to be 100%, which would be around 35 billion gallons. That is potentially the biggest market we’ve ever seen if we can capture it.”
As it stands, though, the ethanol plant type setup that has been successful in small town America will likely not have much potential in the SAF or renewable diesel markets.
“With the current process and industry, agriculture will just produce the feedstock, ship it to the Gulf Coast to make renewable diesel or SAF. Is there a way that we can manufacture more of that fuel in the Midwest? I think that’s really going to be one of the questions moving forward,” Bertels said. “When you’re making renewable diesel or SAF, you’re looking at the capital expenses of basically building what’s the equivalent of an oil refinery — really high. Are there ways that you can either overcome that to where farmers can invest in it? Or can farmers find some intermediate step in that chemical process so you’re not sending ethanol, but you’re sending them maybe the next step in the process, something like ethylene?”
Other challenges to agricultural feedstocks in the future will be similar to those faced in the past. The food versus fuel discussions, while generally inaccurate, will likely continue.
“I never saw this as a viable or a real problem, but the perception was there and our opponents were very skillful in raising that concern and made it stick. I don’t think it’s going to go away. Just because it isn’t necessarily real, doesn’t mean it’s not a problem. It’s always going to be a factor,” Bertels said. “And one of the biggest mistakes we made is we didn’t talk enough with the livestock industry. We kind of charged ahead into ethanol and, while it’s been great for corn, agriculture and rural America, and it hasn’t been that detrimental to livestock, if we could turn back the clock, I would say, ‘Hey let’s go talk to livestock groups and let them know what’s going on.’ Let’s have that conversation first because it’s always easier to smooth out a lot of problems with conversations. But with ethanol we kind of charged ahead and then had this unnecessary confrontation brew that took us a long time to work through. Don’t make that mistake again.”
State and federal policies will also play roles in the future of agriculture and biofuels.
“With anything with fuels in America, there’s always a policy component to it. Don’t always assume that the people making policies fully understand what they’re doing,” Bertels said. “It’s important for farmers throughout the country to make sure you’re engaged with legislators and regulators because they will make decisions that really don’t have any basis in reality. With SAF, you know we’re kind at the beginning of this. Let’s try and direct this conversation and these rules early as opposed to letting them get put in place and then trying to fix them down the line. That’s a key role for farmers, not just in Ohio but all over. You need to stay engaged in this because expecting legislators to understand this, I think would be a false expectation.”