Biofuels and Feedstocks 2022 - What we’ve learned

Key lessons from our latest Chicago event

Our Biofuels and Feedstocks conference took place in Chicago from May 18 to May 20.

As the biofuels and feedstocks industry continues to gain global interest, our experts discussed the latest on supply availability, gave insights into the legislative and geopolitical changes affecting the US and global market, and offered guidance on how to assess and manage risk when trading on feedstocks.

Here are some of the key takeaways

Biofuels and Feedstocks: Supply and demand

The US renewable diesel production is expected to more than double over the next six months, with capacity set to grow from 1.25 billion gallons per year at present to 2.6 billion gallons by October 2022 and to 4 billion gallons by 2025. The growth in capacity means that roughly 11 billion pounds of additional feedstock will be needed, and demand will outpace the total supply of fats, waste oils, and greases in the US domestic market.

Buyers are going to have to expand their reach, both geographically and in materials used, to find feedstocks to fuel the growth in the renewable diesel and sustainable aviation fuel markets.

Regulation

In the US, small refinery exemptions (SREs) and frequent updates in renewable volumetric obligations (RVOs) have created an uncertain trading environment in the past. Today, the threat of soaring grain and oilseed prices and political pressure related to food insecurity are generating concern over global biofuel mandates.

US and EU policy updates

The EPA is yet to decide on petitions for reducing biofuels blending mandates from 2019, 2020, and 2021.

As it stands, small refineries will face harder tests for obtaining exemptions, and they will be required to:

• Prove that financial hardship is directly caused by RFS

• Prove that financial hardship is of “significant magnitude”

• Overcome assumption of RIN cost recovery

In Europe, most countries have raised renewable obligation standards from the beginning of 2022. However, some administrations, most notably Germany, are proposing to cap crop-based biofuel blending by weakening, freezing, or not enforcing mandates.

Policymakers are currently working on the “Fit for 55” (Europe’s plan for a green transition) legislation with a push to promote EVs and non-HEFA SAF.

Asked to comment on new regulatory developments in the US, here’s what Greg Staiti, Partner at Weaver (Energy Compliance Services), told us:

SAF: New development opportunities

Countries worldwide are raising targets and updating policies for SAF usage, such as the RFS and LCFS in the US and other SAF blending mandates in the EU.

Technology will play a vital role in increasing SAF supply and usage. The aviation industry is leading the way by investing in new and more sustainable processes like Power-to-Liquid (PtL), which offers great opportunities for reducing emissions thanks to its improved combustion properties.

If you’d like to gain more insights into the latest SAF developments, watch the full panel discussion with industry experts Michael McAdams, President of the Advanced Biofuels Association; John Cusick, President of Ash Creek Renewables, Scott Lewis; President of SAF Supply World Energy, hosted by our own Robert Lane.

Click here to watch the panel discussion.

Biofuel feedstocks trading: Risk management

For those trading in the biofuels feedstock market, it is challenging to track all movements and developments that will affect prices; therefore, financial risk is always a threat.

Here are three valuable tips from our risk solutions director David Becker.

• In order to manage risk, traders, buyers, and sellers must firstly understand the scope of the risk

• Hedging decisions can be made to minimize or maximize risk during specific periods

• Fastmarkets risk solutions describe in detail the settlement and valuation of financial derivative products

These are only a few of the many things we’ve learned at the conference, as much more was explored during the conversations with our guests, panelists, and speakers, whom we thank very much for their participation!

Here’s something to remember the event by:

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