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Renewable diesel on the rise

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Biodiesel has been around for years, but it’s about to be displaced by the new fuel on the block – renewable diesel. Sometimes known as green diesel, the fuel is made from vegetable oil and animal fat, and it can completely replace conventional diesel in trucks, tractors and trains. On this week’s show, Sean Pratt of the Western Producer, David Bressler of the University of Alberta and Ian Thomson of Advanced Biofuels Canada, discuss the future of renewable diesel and the implications for Canadian farmers. Hosted by Robert Arnason.

Read the full transcript of this episode

Robert Arnason: [00:00:05] Hello and welcome to Between The Rows. I’m Robert Arnason of the Western Producer. Your host for this week’s show. Today, we’re taking a deep dive into an emerging market for canola growers in Canada. Renewable diesel for years a small portion of Canada’s canola crop has been used to make biodiesel. But now, Imperial Oil, Federated Co-op, and other players are planning to build refineries that produce renewable diesel from canola oil, animal fat and other feedstocks. Renewable diesel plants have already been built or will soon be constructed in the U.S., Europe and elsewhere, creating a new market that will require millions of tons of canola every year. This is all happening because governments around the globe are encouraging or mandating the use of low carbon fuels to reduce emissions from planes, trains and automobiles. We will get through renewable diesel in a minute, but first a word from our sponsor.

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Robert Arnason: [00:01:41] Before we dive into the topic of renewable diesel, we should probably explain how it’s different from biodiesel. Earlier this year, I spoke with Doug Cole of True North Renewable Fuels, a company based in Calgary. Doug provided this definition of renewable diesel.

Doug Cole: [00:01:57] Biodiesel was kind of a first generation of a green distillate fuel, and it was made by taking animal fats or canola oil and reacting with methanol, and that made a product called methyl ester. And it’s, think of it as think of methyl ester as being like diesel fuel laced with oxygen. And there’s some limitations when you do that. Limitations in wet in winter use, it tends to degrade pretty quickly, and there’s blending limits with. Renewable, on the other hand, we take the same feedstock, but we reacted with hydrogen, and it produces hydrocarbons just like diesel or jet fuel. But it doesn’t have that same limitation. But because it’s a bio source, then there’s it’s a low carbon fuel. Because the CO2 that gets produced when you combust, the fuel goes back in and gets photosynthesis by the plant into the oil again, into the oil that the plant produces. So the low carbon fuel, but it’s much more like a regular fossil fuel from the engine from your engine’s point of view.

Robert Arnason: [00:03:06] As Doug mentioned, renewable diesel is known as a drop in fuel, meaning it could completely replace conventional diesel that is burned in trucks, tractors, trains and combines, that replacement isn’t going to happen overnight. But renewable diesel could soon become a sizable portion of the fuel market, says Ian Thompson, the president of Advanced Biofuels Canada. Can you sort of give me a sense of how much diesel fuel is used in Canada and perhaps looking ahead where renewable diesel could fit into that? Could it be like 10 percent of the market? Could it be 15 percent or 20 percent? Like what’s possible here?

Doug Cole: [00:03:49] Yeah, so we in Canada, we use about 28 billion litres a year of blended diesel. The western provinces tend to be more heavy diesel because of our agriculture and and extraction industries than we are in central and eastern Canada. The and of that we’re we’re using about 385 million litres a year of renewable diesel and 329 million litres a year of biodiesel. And I’m getting those figures from the Biofuels in Canada report that exists on our website. Navius Research in Vancouver does that every year, and it’s a comprehensive database. And we also just put up on our website, which has advancedbiofuels.ca, a new section of the site called the Canadian Transportation Fuels Dashboard, and that is a great one-stop spot where anybody can go and look at exactly that kind of question. So we use, you know, 28 billion liters. What’s a realistic goal for renewable diesel? Well, we can look at in other places, but we can also look to what environment Canada is. I need be careful not projecting, but they’re suggesting this part of a a compliance scenario for the the clean fuel standard is that by 2030, we would have about 11 percent blending in the Clean Fuel Standard, and that would be across the country. That’s about three to four billion liters, and that’s very realistic.

Robert Arnason: [00:05:34] The market share of renewable diesel should grow in the next decade due to government mandates around low carbon fuels. One mandate is Canada’s Clean Fuel Standard, a national program that is expected to take effect at the end of twenty twenty two. Sean Pratt, a reporter with the Western Producer, has written about the standard and what it could mean for Canada’s coal industry. Sean spoke with me from his home in Saskatoon. Hey, Sean, thanks for coming on. Between the Rows, I appreciate it.

Sean Pratt: [00:06:05] Hey, no worries.

Robert Arnason: [00:06:06] So last winter you wrote a story for the Western Producer, and the headline of the story was Clean Fuel Standard promises canola boom. So obviously, I take that to mean that this new fuel standard that’s supposed to come online, I think at the end of 2022 really could boost demand for canola. Like, what did you hear in the story from some of the experts? How big a demand increase are we talking about?

Sean Pratt: [00:06:37] Well, it’s substantial government modeling under that clean fuel standard shows that that the amount of biofuel content in diesel could increase to 11 percent by 2030. So that’s up from today’s levels of two percent for a national mandate. So that’s a massive increase. And in fact, the Canola Council of Canada has said that it could could represent a market the size of Japan for Canadian canola growers. And Japan has traditionally been one of our largest markets for canola. So, you know, you hear those kind of comments and and those kind of numbers and it’s, you know, this is a substantial potential new market.

Robert Arnason: [00:07:30] Ok, so the number I’m seeing here in your story is something like possibly maybe like two million new tons of demand every year. I mean, that’s that’s about 10 percent of all the canola we normally produce. That’s huge.

Sean Pratt: [00:07:46] It is, and it’s a it’s a backyard market, which a lot of people in the canola industry would appreciate, given all the problems we’ve had in foreign markets like China, where, you know, China basically shut all canola exports from Richardson and Viterra shut those down and due to political spat between the countries. So, you know, that shows how vulnerable you are when when you’re relying on export markets. So there is a lot of keen interest, I guess, in developing a domestic market for canola, especially one that would be this robust.

Robert Arnason: [00:08:31] Ok, so let’s just shift away from Canada and then down to the U.S. for a second. So obviously there are big plans down there to build out renewable diesel capacity or, I guess, maybe shift over some traditional petroleum refineries to canola or soybean oil or whatever it might be and use that as feedstocks. I’m looking at a chart here that you provide to me looking at projections, and the numbers are quite staggering and basically just like a huge increase over the next four or five years. Can you just talk about some of the numbers or project projections down in the U.S.?

Sean Pratt: [00:09:10] Yeah, this is a chart that’s been trotted out by Seth Meyer, who is the chief economist of the US Department of Agriculture. And they’re showing that when you combine sort of existing capacity with capacity that’s currently under construction and then layer on top of that, some further proposed or announced plants, they’re talking about five billion gallons per year of U.S. renewable diesel production capacity by 2024. So that’s not that far away three years down the road, 2021, that that number, that total is about a billion gallons per year. So, you know, they’re quintupling the the production capacity over the next three years. And Meyer was saying that one thing to keep in mind about this is is that these plants are going to be built by the big oil companies. They’re going to put them in, you know, attach them to the existing refineries that they have. And he noted that that changes the whole political dynamic about their their opposition to biodiesel and renewable diesel. So suddenly they they’ll be on board with it rather than opposing it. And that is a big deal south of the border, 

Robert Arnason: right

Robert Arnason: [00:10:43] Yeah. Sorry to have to jump in here for a second point. The point being is that before there was sort of this tension between the traditional petroleum industry and the ethanol biofuel sector that they didn’t really get along. But this what you suggest in terms of that turns out to be a real shift that that’s a big change, as you as you noted.

Sean Pratt: [00:11:04] Yeah. In the past, they’ve seen the industry as sort of cannibalizing their sales. But now they would since, you know, they would own a lot of these plants, they would be, you know, seeing it as an ally and an industry that they would like to support.

Robert Arnason: [00:11:25] That was Sean Pratt, a reporter with the Western Producer in Saskatoon. One massive opportunity for renewable diesel is aviation fuel, a global market worth more than. $400 billion annually. David Bressler, a professor at the University of Alberta, has helped develop technologies to convert animal fat and vegetable oils to jet fuel. He said batteries and electric power may make sense for automobiles, but renewable fuels are a better fit for planes, ships and trains. I spoke with David in late September.

David Bressler: [00:11:59] When you look at road transport, there’s options that people are trying to develop. So you’re looking at things like electrification. Hydrogen cars are always being disgusted and underdevelopment. But really, the primary option for a traditional combustion engine is still going to be the biofuels themselves. So that’s that’s kind of what’s happening in that space. But when you look at some of the other transportation fuels, primarily being marine, aviation, and rail. Electrifying, those on long distance transports is a much bigger obstacle and isn’t seen in the next. While especially aviation that you know when they build or buy a plane, it’s hundreds of millions of dollars. Those engines are expected to run for 35 years to recoup the investment in them. They can’t really drop all the engines off the planes and retrofit them immediately to do something else. So the aviation industry especially is desperately looking for ways to reduce its carbon footprint. And kind of Biogen is one of the key opportunities there.

Robert Arnason: [00:12:59] Ok, so can you just give me the example of how much emission reductions could be achieved with a renewable or sustainable aviation fuel? Like, are we talking 50 percent reductions or higher?

David Bressler: [00:13:14] Well, there’s there’s eight pathways that have been certified so far going through the different regulatory systems globally. And they range on what they reduce. But some of them like the one we’re working on here at UVA. It’s been benchmarked out at about an 85 percent reduction. And then some of the other ones are a little bit higher, a little bit lower than that in terms of percentage reductions. But I I can’t speak to them. Exactly. Ok.

Robert Arnason: [00:13:37] So in terms of feedstocks to produce the renewable fuel, are we talking about mostly animal fat, oilseed crops like canola? Or what are some of the potential feedstocks or major feedstocks for for year process? And the other process is being developed well.

David Bressler: [00:13:58] And really, there’s three options here. There’s there’s the immediate best there’s available in OK, and then there’s long term. So the immediate best, at least for technologies like ours is looking at, you know, their animal rendering greases, et cetera, the more contaminated oils primarily, they’re lower cost. And some of the technologies like ours are pretty robust, converting them. So it’s no problem. So you want cheap and readily available? The issue becomes getting very, very large global scale volumes. There’s a limited amount of that. The next up, the list, which is immediately available in OK, I would say, is things like off grade canola. You don’t want to get into the food ecosystem. You want to avoid food versus fuel, but there’s lots of lipids, traded oils and fats traded in the marketplace that are that are not really in that food grade window if you have a bad year in the piece country here in Alberta. They’re not top grade canola. This gives another opportunity to move down that space and do the volumes. And then the third option that’s out there is underdevelopment is more of the single-cell algal stuff. There’s companies in Canada and the U.S. that are moving this technology forward. It’s a few years out, but you’re looking at large scale fermenters or raceway ponds that convert sunlight into into oils and fats that are up to 70 80 percent of the cell mass. So that gives you, you know, a direct way of using non-productive land to produce a bunch of oils and fats for industrial use.

Robert Arnason: [00:15:21] So just to reiterate what you just said there. So in the shorter term, animal fats oilseed crops that are not really suitable for food grade, but like looking ahead, 40 50 years we’d like to move beyond that.

David Bressler: [00:15:38] That would be the goal. It’s more like 10 years, 10 years. Okay, yeah. Like they’re scaled right now. They’re just trying to reduce the operational costs. There’s some strains out there right now that are commercial, but primarily right now they’re being used to make omega three for for the nutritional supplement space. So that’s a certain volume. But as they get the cost of production down, it opens up these kind of avenues for for application.

Robert Arnason: [00:16:02] Ok, so what goes through my mind then, is that if I’m a farmer in western Canada, growing canola, looking ahead. Twenty five years, the aviation fuel space or renewable aviation fuel space, they may not be a massive market for me as a grower if the technology moves forward.

David Bressler: [00:16:23] No, we’re not. We’re speculating. We’re in a big way. My personal belief is that I don’t think the jet fuel application is going to ever compete with canola one going into the food place for price. So the canola market going into food is very well established and valuable. I think the off grade canola, though, is still probably at least from estimates, is still going to be cost effectively competitive with what they’re talking about in the algae world. So I would just view it as a long term potential hedge market, if that makes any sense.

Robert Arnason: [00:16:57] Ok. So just shifting our conversation to the U.S. for a second. So I’m sure you know this, that the Biden administration has set a goal of 100 percent renewable aviation fuels by 2050. I mean, that’s not that far away. What what goes through your mind when you hear something like that? Do you think that’s reasonable or feasible?

David Bressler: [00:17:23] Well, governments, society, the U.S. can make anything reality if they’re willing to put unlimited resources behind it. It’s to me, it’s an ambitious goal. It’s not enough, but it would take a long term dedication through multiple administrations and a consistency of path. I don’t think history has shown that any government in a democracy has that kind of linear consistency to a path. So technologically, economically, it’s probably feasible politically. I wouldn’t bet one way or the other the way the U.S. politics works.

Robert Arnason: [00:17:56] Fair enough. But from a technological standpoint, if we’re willing to dedicate the resources and time, it is something that’s achievable. We could get away from fossil fuels when it comes to aviation.

David Bressler: [00:18:10] I think so. I think there’s there’s several technologies competing into that space, and in 50 years, you’re opening up some of the window timeframe for some of the other technologies I mentioned earlier. Electrification will be somewhere in a different place by then. And who knows what what power sources will have in 40 years? I wouldn’t want to bet.

Robert Arnason: [00:18:29] This last one here, so obviously, you and others are working on technologies when it comes to renewable aviation fuel in Canada. How was Canada positioned, you know, globally when it comes to like cutting edge technology? Like could we become a major refiner or producer of aviation fuel, say, five, 10, 15 years from now? How are we, how are we looking in terms of our technological advantage?

David Bressler: [00:19:03] Well, the way you’ve asked the question, there’s there’s basically two questions wrapped in there. I think the first question is, you know, our technological capabilities, our universities, on one hand, we’re one tenth at least the size of the U.S. in terms of the infrastructure. But that being said, we have technologies that are emerging, getting tens of millions of dollars of investment and really holding our own more than more than what you’d expect in that space. So technologically, I think our ecosystem supported it very well. In terms of the industry, I think we’re in a wonderful place. The U.S., like we said, is 10 times more people, 10 times more market. But in terms of the ability to produce bio based feedstocks, Alberta is a big country with a lot of agricultural and forestry production capacity. And so as the world starts developing these technologies, I spent the last 20 years working at the interface between AG Forestry and what we would call bio industrial, which is how we convert these things to valuable chemicals, fuels and materials. Canada will always have a role. The question will be, you know, if we’re not, not wise, we may end up as hues of wood and drawers of water. And we’re just really good at exporting raw commodity. If we capture the opportunity, we could get more of the value added upgrading of our feedstocks so that we’re selling more middle or final products to the global marketplace.

Robert Arnason: [00:20:33] You’ve been listening to David Bressler, a University of Alberta professor who studies sustainable aviation fuel. That’s it for this week’s show. I’m Robert Arnason of the Western Producer. Thanks for listening. If you’d like to learn more about renewable diesel, check out our YouTube channel. Just go to YouTube and search for Between the Rows podcast and you’ll find our renewable diesel video.

Commercial: [00:21:05] Part of being a farmer is being an accountant and a mechanic and a chemist. You have lots on the go, so Farm Link makes your grain marketing go further. We help you reach your financial goals with calculated sales decisions. No bias, just solutions and results. Plus, with our new app Grain Fox, we bring every opportunity right to your fingertips. Literally start seeing the returns that will get your family ahead. You’ve earned it Farm Link. Your work is worth more. Get started at FarmLinkSolutions.ca.

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