Biofuels Trends: A 2024 Outlook

SAF production growth, which is supported by new mandates in the EU and Japan (more Asian countries are also likely issue mandates over the coming period), is the strongest trend we note for 2024. The SAF market is readying for takeoff, and we are beginning to witness significant global expansion with numerous projects being announced and implemented, though the pace and maturity varies across regions. 

There's an increasing interest in co-processing as a production method to provide the required short-term ramp up in SAF production. Co-processing allows refineries to convert renewable feedstocks into drop-in, biojet fuel at economically competitive prices, meaning it can swiftly boost the availability of SAF in the short run. Existing refining, transport, and storage facilities can be used, so co-processing is cost-effective (CAPEX and OPEX), delivers carbon footprint reduction, and eliminates the need to construct new specialized processing units. This will be more prevalent outside the US, mainly as IRA production tax credits (45Z) for SAF are not granted when it is pre-processed with fossil fuels in the US (RFS and LCFS credits are available).

Achieving the necessary production capacities and adoption of SAF long-term will require a mix of feedstocks and diversification of process pathways. Over the next 12 months, we are likely to see further growth in non-edible oils as feedstocks (rotational/winter crops) due to limitations on feedstocks accepted for SAF in Europe and partially in the US.

Upgrading, diversifying and reconstructing

In addition to co-processing mentioned above, another continuing trend in 2024 for existing refineries will be the upgrading, diversifying, or reconstructing their operations to produce SAF from HEFA or FT-SPK pathways. More companies are evaluating ways to repurpose existing resources and leverage locally accessible raw materials. The practical points to consider when thinking about a plant conversion, include feedstock proximity and availability, scale of the project and the complexity involved. 

More customers are looking at SAF production and we are now discussing with a number of them how to efficiently revamp a number of HydroFlex™ units, which are currently making renewable diesel, so they also make renewable jet fuel as well. By the end of 2022, eight refineries in the United States had completed conversions to produce Renewable Diesel (RD) or Sustainable Aviation Fuel (SAF), or a combination. A year later, an additional six sustainable fuels plants joined their ranks in the US. This trend will continue in 2024.

Solid waste is a solid opportunity

In 2024, we also anticipate more investment heading toward pathways like Alcohol-to-Jet (ATJ) and gasification combined with the Fischer-Tropsch process, which uses feedstock such as agricultural and forest residues, as well as municipal solid waste. Solid waste (third generation feedstocks) is a much more abundant resource than first and second generation and will remain so for years. It is estimated that annual worldwide municipal solid waste, a source of biomass material, will reach approximately 3.4 billion tonnes by 2050, in part due to rapid urbanization and rising global populations. Although in its earlier stages of development, it is clear that maximizing utilization of solid waste feedstock will be key to decarbonizing aviation. 

If we look at the Americas, we also see a number of new renewable jet and diesel projects in Canada and South America during 2024. There are some headwinds in the US due to the availability of additional feedstock, so we are interested in seeing how this plays out over the next 12 months and beyond and what kind of diversification we will see. 

Shipping sets sail

Finally, there is growing momentum in the decarbonization of Maritime and we expect this will continue in 2024. In July 2023, the 175 member states of the International Maritime Organization (IMO) committed to reach net-zero in 2050 and adopted a new GHG strategy. International mandatory measures to enforce this strategy will come into play in 2027. To achieve the targets set out in the Strategy, the average ship’s GHG intensity will need to be reduced by 86% by 2040. This can only be achieved with the massive uptake of alternative marine fuels, such as hydrogen, ammonia, biofuels and e-methanol.

Obviously, methanol and ammonia will play an important role in decarbonization of shipping, but just as many feedstocks and pathways will be needed in aviation, so will there be a need for many fuel types in Maritime’s decarbonization journey. It is unlikely that there will be one silver bullet for Maritime in the short-, medium- and even long-term. 

In short, we need to move the needle on decarbonization now for shipping and this will require a fuel mix. Will we see a growth in demand for processing and co-processing biocrudes/biooils derived from solid biogenic waste to marine fuels in 2024? It’s a wish, and perhaps it’s possible!