The Potential – and Challenges – of Renewable Diesel Fuel for Heavy-Duty Vehicles
By Jon Leonard and Patrick Couch
What is Renewable Diesel?
Renewable diesel (RD) is an emerging replacement fuel for today’s heavy-duty diesel engines. It is chemically identical to conventional (fossil) diesel fuel, but RD is produced from 100 percent renewable feedstock and contains no fossil carbon. This makes RD a potentially low greenhouse gas (GHG) alternative to conventional diesel. Moreover, RD is a “drop-in” diesel substitute. It can be produced in the same facilities as conventional diesel; transported, stored and dispensed in the same existing network; and combusted in the same engines.
It is important to note that RD is not “biodiesel.” While these two biofuels use similar feedstock, they differ in production and use characteristics. RD can be produced through multiple processes; the predominant pathway is to hydrotreat fats, oils and esters. Biodiesel is solely produced through esterification of fats and oils. RD is free of the ester compounds found in biodiesel, and it has a much lower aromatic content. An important advantage of RD is that it has no “blend wall.” Unlike biodiesel, high-level blends of RD (including 100 percent) are approved for use in diesel engines by most heavy-duty engine manufacturers. And, as further described below, the use of RD in diesel engines provides important environmental benefits compared to both conventional diesel and biodiesel.
Production of RD for U.S. Transportation Markets
RD is produced using various renewable feedstock that include palm oil, palm fatty acid distillate (PFAD; a byproduct from the physical refining of palm oil), tallow (i.e., rendered animal fat), and used cooking oil. Neste (formerly Neste Oil) is currently the world’s largest RD producer. Neste makes approximately 680 million RD gallons per year at its worldwide facilities (Finland, the Netherlands and Singapore). Approximately half of this is exported to U.S. markets. Currently, U.S. production of RD is about 200 million gallons per year.
One of the largest U.S. markets for RD is California’s vast heavy-duty transportation sector, where it is used as a lower-carbon alternative to conventional diesel. RD displaces only a small fraction of California’s annual fossil diesel consumption, which totals approximately 3.6 billion gallons per year. However, the use of RD to power HDVs is growing in California and nationwide, and demand is beginning to exceed the available supply. Several domestic RD producers have initiated efforts to produce and sell RD in California. California state funds are being allocated to build local production facilities, and/or transform existing diesel or biodiesel production facilities over to RD production. By 2020, such facilities are expected to provide several hundred million additional gallons of in-state RD production for consumption in California’s heavy-duty diesel vehicle and equipment markets.
What Are the Environmental Benefits?
RD’s most-compelling environmental benefit is its ability to provide major reductions in greenhouse gas (GHG) emissions when combusted in diesel engines, as a replacement for conventional diesel. According to the California Air Resources Board (CARB), the “carbon intensity” of RD ranges from 50 to 85 percent lower than baseline diesel fuel. Carbon intensity is a measure of the weighted potency of GHG emissions that are emitted when a diesel engine combusts RD instead of the baseline fuel choice (fossil diesel). However, the choice of feedstocks used to produce RD can have a significant impact on the carbon intensity and GHG emissions benefits of RD. Palm oil feedstocks are of particular concern, having been linked to significant land use impacts including deforestation to provide land to grow and farm the palm oil.
RD can also help improve local air quality. Based on limited data, CARB has determined that 100 percent RD can decrease oxides of nitrogen (“NOx”) by roughly 10 percent when replacing conventional diesel fuel in existing, older heavy-duty engines (i.e., those that don’t have state-of-the-art emission controls). NOx emissions are the primary precursor of ground-level ozone (photochemical smog). NOx also forms secondary particulate matter (“PM2.5”) in the atmosphere after its release. Thus, NOx control is the key to restoring healthy air quality in smog-impacted urban areas. In addition, preliminary data indicate RD can reduce the mass of particulate emissions directly emitted from older diesel engines, by about 30 percent. However, when used in newer engines/vehicles (e.g., 2010 compliant diesel engines), the NOx-and PM-reduction benefits of combusting RD in a diesel engine are likely to be reduced significantly.
Ultimately, RD’s big-picture benefit is its potential to help manufacturers develop “next-generation” ultra-clean heavy-duty diesel engines. To achieve NOx-reduction goals in Southern California and other regions of the U.S. —as needed to attain National Ambient Air Quality Standards for ozone — it will be necessary to rapidly phase-in HDVs powered by engines emitting at “near-zero” NOx levels, while also providing very low GHG emissions. No heavy-duty diesel engine (using conventional or renewable diesel) has yet been certified to achieve near-zero NOx levels. This will be challenging, as engine manufacturers have noted that significant “NOx-GHG” tradeoff issues must be resolved before heavy-duty diesel engines can achieve this important objective. Notably, heavy-duty natural gas engine technology using renewable natural gas has already been certified by CARB and EPA, and heavy-duty NGVs using this fuel-engine technology are being commercially launched in 2016.
Do Heavy-Duty Engine and Vehicle OEMs Support RD for Their Products?
The fact that pure (100%) RD is a drop-in, market-ready replacement for petroleum-based diesel has been formally corroborated by at least two major manufacturers of heavy-duty engines and trucks. Volvo Trucks North America conducted truck and engine testing on RD, and announced in 2015 that it has approved use of RD in all of its proprietary engines. Volvo indicated there is “no risk” that end users will lose their warranty coverage on any of their heavy-duty truck and engine combinations as the result of using RD. Mack Trucks (owned by Volvo) has also “signed off” on the use of renewable diesel fuel in all its diesel engines, after conducting extensive truck and engine testing.
Other heavy-duty engine manufacturers are likely to fully embrace the use of RD in their diesel engines, but to date they have not formally approved its use. Cummins Engine Company is reportedly conducting extensive testing on RD, and intends to soon announce its findings.
Higher Current Costs, but Comparable Price
Like most renewable fuels, RD costs more to produce than the fossil diesel it replaces. However, production of RD and its use as a transportation fuel generates cost offsets under the California Low Carbon Fuel Standard (LCFS) and the federal Renewable Fuel Standard (RFS). In part, this has helped numerous heavy-duty fleets purchase RD at, or below, the price of conventional diesel. It is also likely that RD is currently being sold at “loss-leader pricing” by suppliers that seek to build market momentum. This may be the case, for example, with Propel Fuels selling its “Diesel HPR” (High Performance Renewable) for a price that is slightly less than conventional diesel, at 31 retail stations in northern and southern California.
Longer term, it’s unclear if the higher production costs of RD will translate to higher prices at the pump, and hinder its broad-scale market acceptance. This in part depends on the sustainability of programs like the LCFS and RFS, which monetize RD’s benefits as an alternative to conventional diesel. It also depends on whether conventional diesel is phased out in favor of RD, in states like California that are aggressively seeking large and rapid GHG reductions.
Which HDV Fleets Are Using RD?
There are numerous examples of major HDV fleets making the switch over to RD. For example:
In July 2015, United Parcel Services (UPS) announced that it will buy as much as 46 million gallons of RD over the next three years. UPS has set a goal to displace 12 percent of its petroleum-based fuels in its ground fleet by the end of 2017. However, UPS executives have expressed strong concern that they “can’t get enough” RD to meet their fleet’s needs.
The City of San Francisco will use 4.9M gallons of RD each year at all 53 of its fueling sites to fill 2,000 HDVS. Oakland and Walnut Creek are doing the same. Oakland plans to start with 230,000 gallons of RD to fuel 250 vehicles.
The Eugene Water & Electric Board in Oregon has switched to RD from biodiesel, and now uses about 6,100 gallons of RD per month. Fleet managers note that the use of RD has resulted in less-frequent need to undergo regeneration of the diesel particulate filters on their HDV fleet.
What is the Prognosis for RD Use in America’s Transportation Sector?
The state of California has adopted very aggressive goals to displace conventional diesel with RD and other low-carbon-intensity renewable fuels. By 2031 it’s expected that approximately one billion RD gallons per year could be needed in California alone. The major impediment to meeting this growing demand is the lack of current, cost-competitive domestic RD production using environmentally benign feedstock. There are concerns about the ability of RD producers to ramp-up production to meet additional demand, while continuing to overly rely on certain feedstock.
In addition to supply issues, further research is needed to fully characterize how RD affects emissions in HDVs. Currently, insufficient data and information exist on RD’s effects on emissions as a function vehicle age and of the type of emissions control equipment included. Notably, the HDV and diesel engine industries have not yet fully embraced use of RD in their products, although it appears that unanimous “buy off” on RD is imminent, given that RD is chemically and structurally identical to conventional diesel.
The bottom line is this: RD is an environmentally benign, highly promising alternative to fossil diesel. It shows great potential for expanded use in California and nationally as a means to deliver major reductions in both smog-precursor and GHG emissions. Consumption of RD by on-road HDV fleets is growing, and its viability for off-road applications such as marine vessels and locomotives is now being demonstrated. However, numerous supply and engine technology issues will need to be successfully addressed before RD is likely to significantly dent America’s huge diesel market, which annually consumes about 40 billion gallons for on-road HDVs alone.
Jon Leonard is the Senior Vice President at Gladstein, Neandross & Associates (GNA). Patrick Couch is the Vice President of Technical Services at GNA. Jon and Patrick are now initiating a new government-funded white paper about Renewable Diesel.
[Updated Jan. 2017: Article was revised to reflect the concern of using palm oil feedstocks, which have significant land use impacts.]
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