Refinery capacity for producing renewable diesel fuel will plateau at 5.2 billion gallons a year, punctuating a five-year sprint into production, said four analysts writing at the farmdoc daily blog. “The bloom is off the renewable diesel boom that began in 2021,” they said. Their estimate of plant capacity in 2025 is nearly a billion gallons lower than the 6 billion gallons they projected two years ago.
“However, the profitability of renewable diesel production has taken a major hit in the last year, as the industry began to produce at a level greater than the demand ceiling set by the annual renewable volume obligations [RVOs] under the U.S. Renewable Fuel Standard [RFS] program,” wrote Maria Gerveni and Scott of the University of Illinois and Todd Hubbs and Steven Ramsey of USDA’s Economic Research Service. They likened the situation to the biomass-based diesel industry going over the “RIN cliff.” RINs are credits for producing renewable fuels.
“The experience of going over the ‘RIN cliff’ has essentially capped the nameplate capacity of renewable diesel plants in the United States at a little above five billion gallons,” they wrote.
Some 22 renewable diesel plants were expected to be in operation by the end of 2026, said the blog. An additional dozen plants with a capacity of 2.9 billion gallons have been proposed but construction has not begun. “If policy incentives and/or market conditions turn in a more positive direction, renewable diesel projects can regain forward momentum.”