Programs like the U.S. Renewable Fuel Standard (RFS), California Low Carbon Fuel Standard (LCFS) and other state low carbon fuel (LCF) programs drive demand for the growing supply of low-carbon fuels in the U.S. Likewise, renewable fuel regulations analogous European and UK regulations – notably the Renewable Energy Directive (RED III), the ReFuelEU Aviation regulation, and their equivalents in the UK – drive the demand for renewable fuels across the pond.
Ultimately, however, the supply of all low-carbon fuels is limited by the availability of suitable feedstocks and potentially conflicting demands for these feedstocks in food and feed markets. The most critical feedstock availability issue concerns fats, oils, and greases (collectively, FOG or lipids) utilized for nearly all existing commercial production of biodiesel (BD), renewable diesel (RD), sustainable aviation fuel (SAF), and other lipid-based biofuels. While each of these feedstocks have unique attributes, biofuel plants equipped with appropriate pre-treatment capabilities have a wide degree of freedom in substituting or switching between these feedstocks in line with available supply and economics.
In this article, we describe the current and emerging sources of these lipid feedstocks and look toward the future of feedstock availability.
Major Lipid Feedstocks
Soybean Oil (SBO) is a vegetable oil extracted from the seeds of the soybean. It is one of the most widely consumed cooking oils globally. It is also the largest single source of lipid feedstocks used in the U.S. market for biofuel production, representing 40% to 45% of the mix in recent years. Due to its relatively high availability, SBO is the marginal feedstock used in the U.S. Soybean acreage primarily competes with corn in the U.S., with both crops supplying key components into animal feed rations.
Canola/Rapeseed Oil1 is a vegetable oil extracted from the canola or rapeseed plant. It is used both as an edible cooking oil and as a feedstock for biofuel production. With the recent U.S. Environmental Protection Agency (EPA) approval of an RFS pathway for RD production from canola oil and growing demand for all lipid feedstocks in the U.S. market, we expect RD producers to begin incorporating canola oil in their feed slate as production becomes available. In recent years, U.S. canola plantings have averaged about 2 million acres per year. The growing demand for lipid feedstocks, coupled with canola’s high oil yield (vs SBO), is expected to allow canola to command additional acreage going forward.
Distillers Corn Oil (DCO) is a non-edible oil co-produced with ethanol at dry mill plants.2 For the purposes of this discussion, DCO also includes sorghum oil (which is treated similarly to corn oil under the RFS and LCF programs.) As DCO is not suitable for food use, DCO not used for biofuels production is primarily utilized as a component of animal feed.
Tallow and Used Cooking Oil (UCO) – This category of feedstocks is comprised of several products with U.S. production tracked by the U.S. Department of Agriculture (USDA). Quantities of these products not used for biofuels feedstocks may be used as food, animal feed, or inputs for some oleochemicals. Otherwise, the products are typically discarded. Specific product categories include:
- Choice White Grease – fat derived from swine rendering which meets certain specifications.
- Yellow Grease – UCO collected from restaurants and other food processing facilities.
- Brown Grease – recovered oils from grease traps and dissolved air flotation skimmings.
- Other Greases – animal fats which do not fall into any other category.
- Lard – a semi-solid white fat product rendered from the fatty tissues of pigs; primarily used as a substitute for butter or margarine in baking and in the production of soap. Surplus lard can be used as a biofuel feedstock.
- Inedible Tallow – a type of fat, primarily derived from rendering beef, which is not suitable as food.
- Technical Tallow – a type of fat, primarily derived from rendering beef and sheep, which is not suitable as food.
Europe has tallow categories 1, 2, and 3. Category 1 is derived from diseased livestock and can be used for biofuels. Category 2 can be used for technical purposes such as specialty chemicals and oleochemical products. Category 3 is fit for human consumption, animal and aqua feed, and cosmetics; it is excluded from biofuel production.
Emerging Lipid Feedstocks
Cover crops (also called catch or intermediate crops) are grown in the fallow period between the main or primary crop (e.g., corn or soybean). Cover crops produce seeds which can be crushed for production of inedible oils which are suitable for use in production of biofuels. Interest in these crops is currently growing due to both their ability to reduce the environmental footprint of commodity crop agriculture and to produce additional non-food biofuel feedstocks on existing agricultural lands. To encourage this development, USDA has recently announced a pilot program of crop insurance for camelina.
In the context of biofuels, these oilseed crops provide an additional source of lipids as a bio-feedstock that does not incur indirect land use change, nor result in the diversion of oil from food or feed, while providing additional soil benefits of cover crops. Typically, but not exclusively the oil from cover crops is non-edible.
Currently the use of cover crops is limited. In 2022 in the U.S., 18 million acres of cover crops were planted, or ~5% of the U.S.’s total arable land area. However, the trend to use cover crops is growing in both the U.S. and Europe as an additional source of lipid supply for biofuels. The main cover crops currently being developed for biofuel feedstocks are camelina, carinata, pennycress, and winter canola.
Camelina was an oilseed crop grown in Europe before being superseded by rapeseed/canola. Its oil was historically used for food and as a lamp oil, but now outside of biofuel use it is typically used as an animal feed supplement. Camelina benefits from a short growing season (85-100 days); as such, in the Northern Hemisphere it can be planted in early spring with harvest in late spring before the planting of the summer crop. It is ideally suited to the U.S. Midwest and Pacific Northwest as well as northern Europe. However, camelina’s yields are lower than other oilseed crops, with a typical oil yield of 0.5-0.6 tonnes/hectare (450-550 pounds/acre). Camelina is also an open pollinator, not a hybrid, so from a germplasm developer perspective difficult to protect intellectual property. Some key companies developing Camelina are Yield10, Sustainable Oils (with Global Clean Energy Holdings), Camelina Company, S&W Seed Company (via a joint venture with Shell), Smart Earth.
Carinata is a non-edible oil crop with a longer cultivation period than camelina, with planting occurring in the autumn and harvest occurring in spring. As such, carinata’s oil yields are higher – about 1-1.2 tonnes per hectare (900-1100 pounds/acre). While more frost tolerant varieties are being developed, the cultivation length currently limits carinata’s planting to areas of more temperate winters (e.g., U.S. southeast, southern Europe, northern Argentina). Carinata’s key proponent is Nuseed who, in conjunction with an exclusive off-take arrangement with bp, is deploying carinata in Argentina and the U.S.
Pennycress is a non-edible oil crop which is native to Eurasia and a common weed throughout much of North America. Oil yields are in the range of 0.7-0.8 tonnes per hectare (600-700 pounds/acre), and its growing zone is similar to camelina (e.g., U.S. Midwest) with planting occurring in the autumn and harvest in early spring. Bayer is the key developer of pennycress via its Covercress joint venture with Bunge.
Winter Canola is a conventional crop in Europe, and both Bayer and Corteva are seeking to introduce winter canola in some parts of the U.S. (Southern great plains, and Tennessee and Kentucky) as either a cover or break crop to improve soil conditions in areas suffering from over cultivation of single crops (e.g., wheat) with the promise of both boosting the yields of the primary crop as well as providing an additional source of lipid production. Winter canola benefits from being a mature crop, with all the technical knowhow and backing from the world’s leading germplasm providers, as well as many decades of agronomy; as such, it offers a good yield potential, ~1 tonnes per hectare (900 pounds/acre). However, its ability to qualify as a cover crop under biofuel legislation depends on the specifics of its cultivation.
Oilseed Hemp – Hemp comes in fiber-rich varieties and oilseed-rich varieties, and it may prove promising as an emerging feedstock source. Oil yields are in the range of 0.5 – 1 tonnes per hectare (450-900 pounds/acre). Companies like New West Genetics are working to develop oilseed hemp as a cover crop to provide a lipid feedstock.
Lipid Feedstock Availability
So, will there be enough of these feedstocks to produce the level of renewable fuels the U.S. market will demand in the coming years? There are four key issues which complicate assessment of the potential long-term supply of lipid feedstocks:
- The primary lipid feedstocks are all by-products – Soybeans are primarily grown for their meal, not their oil; cattle are raised primarily to supply beef, not tallow; ethanol plants operate to produce ethanol, not corn oil. As a result, estimating the supply of lipids requires an assessment of the primary products for each feedstock type. Note: One exception is palm oil which is excluded from use as a feedstock in the U.S. and regarded as a high indirect land use change (ILUC) risk feedstock in Europe where it will be phased out by 2030.
- Most lipid feedstocks have important uses other than biofuels production – it is necessary to estimate demand trends for these other uses in order to properly assess the supply potentially available for biofuels use.
- These feedstocks are traded internationally – important shares of the major lipid feedstocks, including vegetable oils (i.e., soybean oil and canola oil), tallow, and UCO move internationally, so U.S. biofuel feedstock supplies are dependent upon competing needs in global food and biofuel markets (primarily in Europe where there is growing demand for selected feedstocks to supply BD, RD, and SAF markets.)
- Cover crop oils are yet to be commercially material – these crops are often cited as having substantial potential but are currently only in the early stages of commercialization. We have initiated inclusion of these crops in recognition of their significant potential, but it is important to recognize that, for material growth to occur, individual farmers must be persuaded of the economic benefits, optimal agronomic practices must be researched, communicated and successfully implemented, and the value chain from seed production through crushing and marketing of the oil needs to be built out.
Bottom line
Stillwater’s analysis shows that even with all of the current and emerging avenues to produce feedstocks for use in biofuel production, the increase in demand for low-carbon fuels suggests significant tightness in the market, especially for waste oils like UCO and tallow. These feedstocks are particularly attractive on both sides of the Atlantic, due to their typically lower carbon intensity (which generates additional value from the various state and federal regulatory incentives in the U.S.) and their favorable classification within the European regulations.
When will feedstock constraints begin to impact renewable fuels markets?
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