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Feedstock Price vs Biofuel Price – Where to Invest your Project Capital

In renewable fuel markets worldwide, there is a clear difference in pricing for biofuels produced from sustainably sourced waste oil and animal fat feedstocks compared to biofuels produced from virgin oil crop feeds such as soybean and rapeseed.  In Europe, renewable diesel produced from sustainable feeds eligible for double counting capture $400-$600/MT higher value than renewable diesel produced with crop oil feeds.  In the California market, renewable diesel produced with used cooking oil captures an additional $0.75-$0.90 per gallon ($250-$300/MT) of incentives compared to using virgin soybean oil. 

With these huge differences in product prices, refiners need to ask if their capital investment is properly deployed to capture this additional value.  Answers need to be confirmed for payback of higher capital investment for processing sustainable feeds and to prevent from being shut-out of future mandated markets.

Processing waste oils and animal fats face challenges from high levels of contaminants such as nitrogen, metals and polyethylene compared to virgin oil feeds.  In order to maximize product yields and catalyst cycle length, these contaminants need to be removed.  This means feedstock pretreatment and a renewable fuel process technology capable of operating with contaminants.  So how much investment can you justify to process waste feeds instead of virgin oils?

Let’s assume $300 per MT (about $0.90/gallon) premium for renewable diesel produced from sustainable feeds like used cooking oil.  Today, used cooking is priced about $775/MT ($0.35/lb) while crude degummed soybean oil is about $730/MT ($0.33/lb).  After accounting for operating costs and renewable diesel conversion efficiency, the finished fuel cost of production difference is about $55/MT ($0.16/gal).  If renewable diesel produced using used cooking oil captures a $300/MT premium and only costs $55/MT more to produce, there is $245/MT ($0.72/gal) available for any capital investment.

For a UOP Ecofining project processing 500,000 MTA feed rate (~10,000 BPD) into renewable diesel, an extra $245/MT ($0.72/gal) of margin is an additional $100 million per year.  The project capital costs to process sustainable waste oil and animal fats are a small fraction of $100 million.  The payback period is months, not years.

Come talk to UOP about our industry leading Ecofining technology for producing renewable diesel and jet fuel.  Our customers today are processing sustainable feeds with high levels of contaminants to capture the large margins in the market.  Let UOP demonstrate the modest additional costs to obtain high biofuel premiums both today and in the future.