Sustainable aviation fuel and hydrotreated vegetable oil are poised for a breakout 2022 amid new production capacity coming online and fresh policy support.
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Register NowS&P Global Platts Analytics expects global renewable diesel production to reach 225,000 b/d in 2022, while SAF volumes will remain minimal until 2023. Biomass-based diesel (including biodiesel and RD) will make up a record 5.5% of the total diesel pool globally.
Feedstock rallies across the globe pushed renewables prices to fresh highs through 2021, though feedstock values may retreat from 2021 highs in early 2022 as additional soybean crush capacity pushes more soybean oil into the market.
HVO/RD poised for growth
After several years of investment and announced capacity additions, the first half of 2022 should see significant volumes of HVO, also called RD, hit the market.
US producers are on track to bring just over half a billion gallons of annual capacity online in the first half of 2022, with another several hundred million scheduled for commissioning in the latter half of the year.
US refiner HollyFrontier plans to bring two converted oil refineries, one in New Mexico and one in Wyoming, online while Seaboard Energy looks to start up its converted cellulosic ethanol plant in Hugoton, Kansas.
Refining giant Marathon is slated to bring its Martinez, California, plant with around 720 million gallons of annual capacity online later in 2022.
European market participants expect HVO to play an increasing and key role in decarbonizing the road sector in 2022, in line with decreasing reliance on crop-based biodiesel grades.
More European refiners are bringing co-processing or dedicated HVO units online to add to the existing 5 million mt of nameplate capacity for HVO in Europe today.
HVO production, scalability and prices may be determined by the used cooking oil market in 2022, a key feedstock for HVO and SAF output. Market participants expect strong demand for UCO to keep UCO prices above the $1,000/mt mark, while increasing production capacity for HVO could see margins fall.
"More supply of HVO will come online, more supplies of finished products [biodiesel], which should push prices," said one market participant. "With current HVO prices, producers could lose $300/mt on their margin and the price stays the same – it's more likely for the margin to fall than UCO."
SAF eyes policy support with production on the horizon
European sustainable aviation fuel (SAF) is expected to be one of the fastest growing segments in biofuels in 2022 after HVO.
SAF is expected to have an increasing share of the jet fuel market as mandates in EU member states stimulate demand while new production facilities come online.
Norway and Sweden are currently the only European countries with a SAF mandate, both at 1%. France is imposing a 1% blending mandate in 2022, which could set a precedent for other countries to follow ahead of meeting carbon reduction goals set for the aviation industry by the European Commission.
The ReFuelEU Aviation package proposes a 2% blending mandate for EU fuel suppliers by 2025, 5% by 2030 and 63% by 2050 to target net-zero emissions in the aviation sector by 2050.
Market participants expect supplies to increase with the addition of new facilities in Europe, but not sufficiently to converge SAF prices with conventional A1 jet fuel prices as current SAF price levels hover four times higher than their fossil fuel alternative.
SkyNRG's plant in Delfzil, Netherlands, aims to come online in 2022 as the first SAF-only plant in Europe. OMV is expected to bring online 1,500 mt of SAF in Austria in 2022 and Eni is to bring online 10,000 mt at its Livorno refinery in Italy. Phillips 66 in the UK and Repsol in Italy are also expected to bring new production online in 2022, although volumes are undisclosed.
SAF produced from Phillips 66's Humber refinery in the UK is expected to supply British Airways with SAF in early 2022, while Australia's Qantas Airways will purchase blended SAF from January 2022 for regular flights from London.
US SAF growth is expected to lag RD as policy discussions eye 2030 as a target for 3 billion gallons/year of blending. Production reaching those lofty levels would rely on diverting some hydrotreating capacity toward SAF and thus away from RD, but also on the successful commercialization of newer SAF production pathways like alcohol to jet.
LanzaTech subsidiary LanzaJet plans to start up its Soperton, Georgia, plant in 2022 while alcohol-to-jet producer Gevo has secured long-term deals with plans to bring production online closer to 2025.