Is the Renewable Diesel Boom Done?

A recent Tidbits article took note of the sizable growth in Nebraska’s soybean processing capacity in progress. The driving factor in the growth is the explosive demand for soybean oil for producing renewable diesel. Renewable diesel can replace petroleum diesel gallon-for-gallon and is less carbon intensive than petroleum diesel. With state and federal policies mandating and incenting low carbon fuels, the demand for renewable diesel has boomed. At the federal level, the renewable fuel standard (RFS), blender tax credit of $1.00/gallon, and tariffs on imports of biodiesel have sparked demand. And low carbon fuel standards (LCFS) adopted by California, Oregon, and Washington mandating the use of low carbon fuels have added fuel to the demand fire. The LCFS in California is especially key. Scott Gerit, chief economist for the American Soybean Association, says 97 percent of the country’s renewable diesel consumption occurs in California.

As a result, renewable diesel refining capacity has grown phenomenally since 2020 (Figure 1). Refining capacity amounted to 800 million gallons in 2020 and grew to in excess of 4 billion gallons last year. It is expected to surpass 7 billion gallons later this decade. Consequently, soybean crush capacity has also grown (Figure 2). Capacity last year had grown to 2.1 billion bushels, and it is expected to expand an additional 600 million bushels by 2026.  

FIGURE 1. RENEWABLE DIESEL NAMEPLATE PRODUCTION CAPACITY

FIGURE 2. CURRENT & EXPECTED SOYBEAN CRUSH CAPACITY