Biodiesel Boom to Bust
Biodiesel doesn’t get the attention of ethanol or its bashing in the media. At an EPA hearing in Washington, D.C., last December, environmentalists were still using old data to incorrectly claim that ethanol takes more energy to make than it produces. Biodiesel remains fashionable, with the aging country music icon Willie Nelson still promoting it. It’s undeniably green, reducing greenhouse gas emissions by up to 86% compared with petroleum diesel, according to the EPA.
Maybe biodiesel’s lower profile is due to ethanol’s bigger market – about 13 billion gallons of production in 2013, using 35% of the U.S. corn crop for the fuel and distillers’ grains. Biodiesel last year grew to 1.8 billion gallons and used about 14% of the soybean oil from the U.S. crop – a smaller share partly because about half of the fuel is also made from animal fats, used French fry grease, and even cooking oils washed down the drain, separated by sewage treatment plants and sold as brown grease.
Bigger EPA casualty
Make no mistake, EPA’s announcement last fall that it plans to pull back on mandates for blending biofuels will hit biodiesel much harder than corn ethanol. Economists expect corn ethanol to stall out at roughly last year’s level (instead of expanding to 14.4 billion gallons, as the 2007 energy law envisioned). Biodiesel, however, could crash. University of Illinois economist Scott Irwin and the National Biodiesel Board (who sometimes disagree on outlook for the fuel) both estimate that production will fall to about 1 billion gallons this year if EPA doesn’t increase its blending mandates in the final rule for 2014.
EPA’s proposed rule for meeting the Renewable Fuel Standard (RFS) has the effect of cutting the ethanol mandate by 6% and biodiesel by 50%, says Joe Jobe, CEO of the National Biodiesel Board.
At first glance, it appears that the EPA merely froze the mandate for biodiesel at last year’s 1.28 billion gallons for two more years.
However, as oil companies hit the so-called blend wall for 10% ethanol, they can get credit for more blending by using biodiesel to meet part of the mandate for advanced biofuels (those with at least a 50% reduction in greenhouse gases vs. petroleum). “Biodiesel doesn’t have a blend wall,” Jobe says.
Since 2010, when blending for the advanced category started, targets have been exceeded with biodiesel.
“Not a lot of people know that or realize that, but it’s a tremendous success story for the RFS,” Jobe says.
That’s one of the reasons the industry was able to sell more than the 1.28 billion-gallon biodiesel mandate last year. Biodiesel is just part of the advanced category, but as cellulosic ethanol has fallen short of the original goals, biodiesel can fill in for more of the advanced category.
That advanced category is a big part of the drastic reduction EPA proposes from the 2007 law’s goal of 18.15 billion gallons of total 2014 biofuel use. EPA wanted to cut the 2014 mandate, for corn ethanol and advanced, to 15.2 billion gallons for 2014.