Thursday, May 28, 2015

RFS2 Set to Ramp up Biodiesel Usage

RFS2 Set to Ramp up Biodiesel Usage
Scott Irwin, Ag Economist – University of Illinois

U.S. EPA has stalled the release of the annual usage mandates for bio fuels in the United States. These are due out each November, but neither the 2014 or 2015 figures have been released. EPA is scheduled to put forth new numbers next week (today June 1). In the meantime, it might be important to consider just how using the default numbers would play out for the production of ethanol and biodiesel. Todd Gleason explores the issue…

The United States congress set renewable fuels mandates… 3:26 radio
3:50 self contained

The United States congress set renewable fuels mandates a few years ago. It also gave U.S. EPA the power to adjust those mandates. EPA hasn’t done so for the 2014 calendar year, or for 2015. We’ll dispose of the political baggage and simply focus on the results of using the default statutes written into the law.

It says the nation must use 14.4 billion gallons of ethanol in 2014, but at the rate of no more than 10 percent of the gasoline consumed. This ten percent is actually 1.1 billion gallons less than the 14.4 billion gallon mandate. This is what University of Illinois Ag Economist Scott Irwin calls the renewable gap and the only way to fill it, really, is with biodiesel – usually processed from soybean oil.

Irwin :25 …something is most likely to be biodiesel

Quote Summary - That number gets much bigger in 2015 because the ethanol mandate jumps to 15 billion gallons. So, if the E10 blend wall is 13.5 billion gallons, then there is an additional 1.5 billion gallons in 2015 that has to be filled with something. We argue that something is most likely to be biodiesel.

This sounds like biodiesel usage would need to top 2.6 billion gallons in 2015, but that’s not quite the case says Irwin.

Irwin :67 …gallons a year each of the next four years.

Quote Summary - Well, the arithmetic is quite interesting because of the growth in obscure component of the advanced RFS2 mandate, ‘undifferentiated advanced’. That component was 2 billion gallons for 2014 and the arithmetic works this way. 1.28 billion gallons of biodiesel gets a multiplier, into equivalent gallons of ethanol, of one and one half, which is almost exactly 2 billion gallons. So, biodiesel met that undifferentiated number in 2014. But now, that component in the statutes, is going to jump 500 million gallons a year each of the next four years.

Topping out at five billion gallons in 2022.

Irwin :25 …million gallons easily for 2015.

Quote Summary - The bottom line is it doesn’t take us very long to get a scenario where, either through domestic production or imports of biomass based diesel in its forms, where we need 2 to 2.5 million gallons easily for 2015.

This is only if the statutes are ultimately fully enforced. Admittedly this is a big wildcard, but it is the law and until U.S. EPA acts it is the mandate says the U of I ag economist.

Irwin :07 …we are going to have a big biodiesel boom.

Quote Summary - If they are going that direction we are going to have a big biodiesel boom.

Scott Irwin follows the Renewable Fuels Standard at the University of Illinois. You may read more from him on the farm doc daily website.