EVs unlikely to derail growth in renewable diesel demand

Government policies that promote the adoption of electric vehicles (EVs) are unlikely to make a major dent in future demand for renewable diesel, says an author of a recent report on the future of the renewable diesel market.

Unlike biodiesel, renewable diesel can be directly substituted in diesel engines. Production capacity in the U.S. is projected to more than double from 2.6 billion gallons in 2022 to 5.4 billion gallons by the end of 2024, driven by government policies aimed at reducing carbon emissions from transportation.

The anticipated demand has driven hundreds of millions of dollars in investment in new soybean and canola crush capacity over the past few years, with the two oilseeds serving as the main feedstocks for renewable diesel production.

There are several reasons why the push to go electric likely won’t derail expectations of major growth in renewable diesel demand in the coming years, says Jenna Lansing, director of the Agri-Food WatchDesk at the strategic intelligence firm Aimpoint Research.

That’s largely because EV adoption is happening in the passenger vehicle space, replacing gasoline-powered automobiles.

Demand data from the pandemic in 2020-21 showed the role diesel still plays in moving essential products, notes Lansing.

“Our gasoline consumption really dropped, but diesel actually stayed steady or even grew because everything’s got to move. You have supply chains, products, whether it’s a load of soybeans, or a load of canola that’s going from the farm to the grain processor and then out for export that has to move, or consumer goods getting to Walmart’s warehouses, and then Walmart getting that to consumers. So things have to move. That’s why I don’t think EVs will necessarily have an impact, especially in the large motor space,” she explains.

The weight of batteries is another major obstacle for the electrification of large engines, as trucks and trains carrying heavy batteries have reduced capacity and energy left over for moving actual cargo.

Since sustainable aviation fuel (SAF) can be made from the same feedstocks as renewable diesel, a shift toward SAF, with battery-powered planes still a long way away, would also support the economics for processing, she notes.

“Overall, I don’t think renewable diesel is a transition fuel. It’s not going to get replaced by electric vehicles. It is here and here to stay,” says Lansing.

Watch/listen to Jenna Lansing discuss Aimpoint’s outlook for the renewable diesel market, what it means for canola and soybean demand, challenges related to RVOs, RINs and U.S. renewable fuel policy, and more:

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