Biodiesel, renewable diesel and sustainable aviation fuel (SAF) producers face feedstock supply shortages from 2022-2027 if current trends continue, according to a report by the International Energy Agency (IEA).
Demand for vegetable oil, waste and residue oils and fats was expected to increase by 56% to 79M tonnes during the forecast period, according to the IEA’s December fuel report.
“Fuels made from wastes and residues are in particularly high demand because they satisfy greenhouse gas (GHG) and feedstock policy objectives in the USA and Europe… wastes and residues are expected to be used for 13% of biofuel production in 2027, up from 9% in 2021,” said the report, which forms part of the IEA’s wider publication on renewable energy markets Renewables 2022.
“However, demand is approaching the supply limits of the most-used wastes and residues. Nevertheless, markets are dynamic. High prices are a signal to seek out new supplies, which is prompting the development of government programmes and industry innovation to help avoid the crunch.”
Four regions are driving demand, according to the report, with Brazil, Europe, Indonesia and the USA responsible for the majority of growth in biodiesel, renewable diesel and SAF consumption.
Taken together, demand for these fuels was expected to increase by 44% or 21bn litres in the period.
In the USA, the renewable fuel standard (RFS), state-level low-carbon fuel standards and the Inflation Reduction Act’s tax credits had boosted demand for renewable diesel and SAF, the IEA said. Most requirements are met with domestic production from a mixture of feedstocks, such as soyabean oil, rapeseed oil, corn oil, used cooking oil (UCO) and animal fats, according to the report.
In Europe, renewable diesel and SAF consumption were expected to show the greatest increase.
“Total demand growth is relatively small, but the European Union is phasing out the use of palm oil and has placed limits on other feedstocks, which is boosting production from wastes, residues and rapeseed oil,” the report said.
Meanwhile, Brazil and Indonesia both had biodiesel blending mandates that would become more stringent over the forecast period, with Indonesian biofuel manufacturers primarily using palm oil to produce biodiesel, and Brazilian producers reliant on soyabean oil.
Consumption of vegetable oil for biofuel production was forecast to increase by 46% to 54M tonnes during the period, increasing its share of biofuel demand from 17% to 23%.
In the USA, this increase in demand was already reducing soyabean oil export estimates and supporting higher prices, the report said.
“UCO and animal fats are unlikely to provide relief, as they are in even higher demand because they offer lower GHG emissions intensity and meet EU feedstock requirements,” the report said.
“The use of UCO and animal fats nearly exhausts 100% of estimated supplies over the forecast period. Even when a broader range of wastes (such as palm oil mill effluent, tall oil and other agribusiness waste oils) is considered, demand still swells to nearly 65% of global supply.”
If the current situation continues throughout the forecast period, the potential for biofuels to contribute to global decarbonisation efforts could be undermined, according to the report.
“Bio-based diesel and bio-kerosene are essential components of net zero pathways because they can be used in marine, aviation and heavy trucking applications, for which few other decarbonisation options exist. However, attaining a net zero trajectory would require a more than three times production increase in our main case,” the report said.
In its report, the IEA also looked at how the supply shortage situation could be avoided. While its forecast took a relatively static view of agricultural and waste oil markets, it said that high prices could prompt companies and governments to improve feedstock supply chains, seek out new supplies and develop new techniques.
Policies and programmes in Canada, Europe and the USA would be helpful, the report said. For example, the Sustainable Aviation Grand Challenge Roadmap in the USA aimed to improve understanding of the feedstock challenge, boost supply potential and support new technology development.
