US renewable diesel supply will exceed biodiesel supply in the near term, according to latest forecasts by the US Energy Information Administration (EIA).

In its Annual Energy Outlook 2022 (AEO2022), the EIA projects renewable diesel supply to increase to 130,000 barrels/day this year and 145,000 barrels/day in 2050, reflecting a “significant increase in renewable diesel production capacity” in the near term.

The EIA projected that the production of renewable diesel would increase due to its compatibility with existing distribution infrastructure and engines, higher state and federal targets for renewable fuel production, incentives from tax credits, and the conversion of existing petroleum refineries into renewable diesel refineries.

Targets and incentives contributing to renewable diesel’s growth include the Renewable Fuel Standard, California’s Low-Carbon Fuel Standard and the US biomass-based diesel blender credit, which allows taxpayers to claim a credit of US$1.00/gallon when the required amount of biodiesel or renewable diesel is blended with petroleum diesel for sale or use in a trade or business, according to the 24 March statement.

“In response to the improved economics of renewable diesel due to these policy actions, domestic production capacity has increased, both in the form of new stand-alone facilities and converted petroleum refineries,” the EIA said.

In the report, the EIA said it assumed that policies, rather than market demand, were driving the adoption of biomass-based diesel fuels.

“As renewable diesel and biodiesel compete for the same feedstocks, some of the projected growth in renewable diesel production displaces biodiesel production. We project these two fuels will remain a relatively small part of the larger diesel market, accounting for less than 8% of US diesel production in 2050,” the organisation said.