Readiness of Producing and Deploying Liquid Drop-In Fuels in Canada
Renewable biofuels generally appear to be promising options to help meet the goal of the Clean Fuel Standard, reducing Canada’s GHG emissions by 30 megatonnes annually by 2030. Moreover, some of these prospective fuels can be described as ‘drop-ins’, compatible with existing infrastructure and engines. As well, some drop-in renewable fuels are either being deployed in Canada already or are ready for production and deployment in Canada in the relatively near-term (2018-2025). Two drop-in candidates in particular could be deployed in Canada in the near term: renewable hydrocarbon diesel (RHD), and renewable jet fuel (biojet).
The other two fuels considered in this analysis, renewable gasoline and biocrude, are more difficult to assess, owing to a lack of available information, which reflects a much lower degree of technical development of these technologies. However, in the renewable gasoline case, the processes that drive production of RHD and biojet also do produce by-products of naphtha and “green” light elements, which could be components for renewable gasoline.
Renewable Hydrocarbon Diesel
All drop-in RHD or renewable diesel is currently produced at relatively large commercial scale using the oleochemical processing route.
It should be noted that, although renewable diesel and biodiesel (not considered a drop-in) can be produced using similar feedstocks, the reactions, production processes, and fuel properties are distinctly different. One disadvantage of renewable diesel production (as compared to biodiesel) includes in most cases the need for additional hydrogen within the refinery, and the high capital cost of hydroprocessing equipment. The mass yield of renewable diesel is also at least 15% lower than the yield of biodiesel from the same feedstock, which adversely impacts the economics of renewable diesel production. On the other hand, while feedstock properties impact the cloud point properties of renewable diesel, they do not do so to the same extent that they impact the cloud point of biodiesel.
One disadvantage of hydroprocessed biodistillates is their relatively poor lubricity characteristics. In this regard, they are similar to Ultra-Low Sulphur Diesel (ULSD), or to paraffinic blendstocks produced by Fischer-Tropsch (FT) or other Gas-To-Liquids (GTL) processes. All these materials generally require additive treatment, or mixing with higher lubricity blendstocks, to achieve satisfactory performance. This, however, is not a limiting factor, as ULSD requires a lubricity additive.
Owing to the limited number of RHD suppliers, there is limited pricing information available. Analyses from publications and discussions within the industry indicate that costs for RHD are greater than the current wholesale price for petroleum-derived diesel. This is of course dependent upon the price of oil; RHD fuels will be more cost-competitive at higher prices, e.g. exceeding $100 - $150/bbl. Feedstock costs represent a high percentage of the overall production costs. Consequently, fuels that are produced from lower cost renewable oils such as used cooking oil, tallow, and palm oil will tend to have a lower production cost than fuels produced from vegetable oils. However, fuel properties, especially cold-flow properties, may be affected by available feedstocks, and additional pre-treatment may be required for used cooking oils and other feedstocks with impurities and/or a high free fatty acid content. This adds to both capital and operational costs.
RHD is a ’drop-in’ fuel and is fully compatible with existing fuel infrastructure, distribution systems, and engines. Renewable diesel can be treated exactly like fossil diesel; blending can take place where it is most cost-effective: at refineries or terminals. Consequently, the existing transportation and storage infrastructure would be used for renewable diesel, including pipelines, rail, trucks, and terminals. Owing to the compatibility of renewable diesel with conventional diesel, the fuel is blended prior to delivery to the retail stations. Thus, the existing retail infrastructure may be used without modification.
Accordingly, this is a drop-in fuel that is comparatively well-known, and is already being produced and is already being used in Canada. However, it is not commercially competitive in the absence of some sort of supporting public policy.
Biojet is aviation fuel made from renewable, biomass-derived raw materials. The International Civil Aviation Organization’s (ICAO) commitment to reduce carbon emissions by 50% by 2050 compared to the 2005 level, and the inclusion of aviation in the European Union Emissions Trading Scheme has created interest in biomass-derived jet fuel. This has been further encouraged by ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Biomass-derived jet fuel from feedstocks grown in an environmentally sustainable manner while minimizing the use of arable land holds long-term promise to help reduce aviation sector greenhouse gas (GHG) emissions and dependence on fossil fuels.
The principal near-term renewable jet fuel production process is the Hydroprocessed Esters and Fatty Acids (HEFA) process, already practiced at commercial scale, particularly for systems focused on production of renewable diesel, with renewable jet fuel as a co-product. However, the production volume of biomass-derived jet fuel is still comparatively small and requires further expansion and development to be considered as a near-term partial replacement for conventional jet fuel.
Other pathways are also under active development. While all of these pathways/options are technically possible, their commercial deployment is at different stages, due to economic factors, regulatory approval (or lack thereof), or scale of validation. Having a given pathway receive American Society for Testing and Materials International (ASTM) approval is essential for commercial deployment, which inherently requires the production of a large volume of “on-spec” fuel to conduct engine tests and flight tests. Jet fuel is comprised of a pool of molecules that satisfy several critical criteria, including cold flow characteristics, energy density, viscosity, sulfur and aromatics content, distillation characteristics, acidity, fuel conductivity, flash point, generation of deposits, and engine wear. ASTM Specification D7566 lists the fuel properties and criteria applicable to alternative jet fuel. Inherently, jet fuels require a high flash point (for safety), and a low freeze point to ensure that the fuel can flow at high altitudes.
The nature of the fuels and the stringent requirements for safe operation of jet aircraft may limit the deployment of fuels from certain pathways or feedstocks. For example, a standard HEFA pathway that uses vegetable oils or used cooking oils produces fuels that are essentially devoid of aromatics; consequently, ASTM approval is limited to a 50% blend of these typical HEFA fuels with conventional jet fuel, the latter of which supplies the necessary aromatic content.
There are currently no operating facilities based on biomass gasification and Fischer-Tropsch (FT) synthesis, a thermochemical pathway. Advanced technologies (using other feedstocks, such as forest, agricultural or other lignocellulosic biomass, waste streams and algae) have the potential to meet future demand but are some five to ten years from widespread commercial deployment.
Various cost projections have been developed for renewable jet fuel produced with different feedstocks and technologies. These results are highly sensitive to feedstock cost, yields, and capital costs. Current large scale commercial processes are mainly based upon the HEFA-Synthetic Parafinnic Kerosene (HEFA-SPK) pathway, and some cost projections are available for that pathway. In most other cases, there is demonstrated large scale production of a key intermediate, such as ethanol or butanol in the Alcohol-To-Jet (ATJ) pathway, but downstream costs for conversion to alkanes are typically not available. A key challenge is that jet fuel will be among the most costly renewable fuels to produce, due to the additional process steps required, which add to capital and operating costs. In virtually all cases, cost-competitiveness with petroleum-derived jet fuel is based upon high oil prices, above $100/bbl.
Accordingly, biojet is well-known and there have been numerous demonstration flights using biojet, including in Canada, and although there is no production in Canada currently, biojet could be deployed in Canada. In the long term, more technology options are likely to emerge for commercial consideration. However, no pathway is likely to be commercially competitive unless prevailing oil prices rise or there is deliberate support from public policy.
Finding a suitable renewable gasoline alternative is more challenging than renewable diesel. Compared to diesel, gasoline is a more diverse blend or mixture of different chemical components to achieve the desired gasoline specification, which changes throughout the calendar year.
There are renewable fuel technologies that produce green gasoline components but by themselves do not meet gasoline specifications. Some of these second generation “gasoline-like” fuels are bio-butanol, bio-isooctane, and the renewable gasoline byproducts of the RHD process. None of these fuels can currently be used in an existing gasoline engine as a “drop-in” fuel.
As well, there are few technologies that meet the TRL7 (Technology Readiness Level) or higher qualification for renewable gasoline. In the near term, the best opportunity may be green components such as green naphtha that are coproducts from the RHD technologies, as mentioned. However, that is dependent upon policy recognizing this as either a green gasoline component or by lowering the Carbon Intensity (CI) of the finished gasoline.
The Holdor Topsoe Ti-gas technology converts methanol into renewable gasoline. The demonstration facility is a 22 barrel per day facility that uses wood chips for feedstock. In this process, there is no FT needed. It combines H2 and carbon monoxide (CO) from a gasifier to form methanol, and then uses a proprietary catalyst to make gasoline. In this respect, the front-end steps are similar to those used by Enerkem, which produces methanol as an intermediate, using Municipal Solid Waste (MSW) as the feedstock.
There is a methanol-to-gasoline (MTG) technology that first converts syngas to methanol, which the MTG process converts to a hydrocarbon mixture close to final fuel specification, requiring minimal end processing. It has been demonstrated in several locations. However, this has not been commercialized in North America.
Accordingly, it seems fair to say that renewable gasoline is not ready for production or deployment in Canada. There is not enough available information and data to indicate whether or not this could change in the future.
There is also only limited information on biocrude technology. The only technology that could be considered to meet the TRL7 criterion for this study would be the Ensyn rapid thermal processing (RTP) technology, which is the only technology that was found to be at the commercial stage of readiness. The first Canadian customer will come online in 2018. Ensyn has an offtake agreement with a major oil refiner and has additional production under development in Canada, U.S., and Brazil. This technology has some limitations in the sense that it is similar in water and oxygen content to pyrolysis oil, used in industrial burners, and thus is immiscible with conventional crude.
Ensyn converts forest residues and other nonfood biomass to a biocrude known as Renewable Fuel Oil (RFO) through the application of its proprietary RTP technology. RTP has been in commercial use for more than 25 years for production of food products, chemicals, and heating fuels. The Renfrew RFO production facility produces heating fuel for boilers that is not drop-in. The RFO production is shipped entirely to the U.S. as it qualifies for D7 RINs. The company is now increasing production capacity for a broader commercialization of its fuels business, including refinery co-processing. In refinery co-processing, RFO is processed with fossil crude oil in Fluid Catalytic Cracking (FCC), which Ensyn says it has demonstrated in a number of trials, some at operating commercial refineries. Removal of water and acids is a significant technical challenge.
An alternate route to biocrude, Hydrothermal Liquefaction (HTL), is being developed internationally through some near-commercial scale projects, and some Canadian demonstration-scale projects are also now in prospect. However, information is limited at this point.
Accordingly, it does not seem possible to describe biocrude technology as ready for production or deployment beyond small-scale at the moment, although the RTP route may be a promising option for the medium term providing the significant technical issues associated with the oxygen content and acidity can be overcome. Some HTL technologies also look promising in the near to mid-term.
Critical Issues – Feedstocks and Product Trade-Offs
A critical issue with the near-term drop-ins of RHD and biojet is feedstocks. Many of the same feedstocks can be suitable for various drop-in fuels, depending on the technology pathway. To illustrate, many of the technologies that produce RHD are equally capable of producing biojet. (In addition, most technologies that produce RHD similarly also have green naphtha and green Liquefied Petroleum Gas (LPG) byproducts as part of the process, and these can be renewable gasoline components.) For RHD specifically, many of the pathway technologies can utilize a variety of feedstocks, e.g., a variety of vegetable oils and animal fats can be used as feedstocks.
Feedstock options for renewable jet fuel production include vegetable oils from oilseeds such as canola, soybeans, camelina, and carinata, used cooking oil (UCO), yellow grease, and tallow. Canola and soybean oils are in high demand for food applications, and thus, only a small percentage of current production would be available for biofuel production of renewable diesel or renewable biojet (or non-drop-in biodiesel).
Critical Issue – Technology and Costs
As described throughout this report, while several different pathways are under investigation for most of these drop-in fuels, it is noteworthy that many of them are still not developed technically for large-scale production or deployment.
Consistently, a major barrier to production and deployment is a lack of cost-competitiveness with existing fossil fuels. Several examples given above suggest that oil prices exceeding USD $100/barrel would be needed to justify investment in commercial facilities with technologies at current state-of-the-art. This is approximately 50% more than current oil price benchmarks (e.g., West Texas Intermediate). The currently-available technologies are not yet competitive.
In several other cases, there is simply a lack of information about the technology effectiveness and related cost profiles. However, cost-competitiveness is likely to remain a problem for the production and deployment of drop-in renewable fuels, in the absence of supporting public policy.
Critical Issue – Supporting Public Policy
Even rising oil prices may not be sufficient to encourage investment in drop-in fuels in Canada. While the price gap has the potential to be resolved by an increase in oil prices alone, specifics of the feedstock and pathway may, or may not, mean that this is a solution on its own. For example, with gasification-FT, feedstock prices will remain relatively stable, and a high oil price alone could close the gap. However, pathways that rely on commodity crops will have a more complex set of circumstances; historically, high oil prices have on occasion also dragged up prices for farm products such as canola oil, soy oil, and corn, even though there has been no fundamental change in the supply-demand balance for the agricultural commodities. Fuel producers reliant on such feedstock inputs may still not be able to obtain adequate returns. Accordingly, while higher oil prices alone might resolve the price disparity, such increases may not be enough.
Another major issue is that oil prices fluctuate unreliably, and this deters investors from commitment to alternative fuels. For example, in 2012-2013, rising oil prices encouraged a large number of investments by oil companies in renewable fuels facilities, particularly lignocellulosic biofuels. The subsequent fall in oil prices has hurt those investments. Higher oil prices may help but cannot be certain to work in the absence of supporting public policy.
An example of such a policy would be mandates, which have had some application in Canada already. Fuel production mandates provide the volumetric certainty and access to market demanded by investors. As well, in terms of incentives, a reasonable approach may be an income-contingent incentive scheme - providing some certainty with respect to financial returns, but not needlessly subsidizing the industry in years when oil prices (and their fuel product prices) are high and feedstock prices are low. This sort of approach was the basis for a number of federal and provincial assistance programs for renewable fuels production in the past.
In sum, high oil prices will help bring drop-in fuels to a competitive position, but they are likely to be insufficient to trigger investment owing to their volatility, and hence must be supplemented by policies that both ensure long term market access and provide financial support when feedstock and fuel prices are adverse.
RHD is ready for production and deployment in Canada at the present time, and in fact is already being blended into the diesel pool. However, the RHD that is currently being blended is imported into Canada.
Biojet could be produced in Canada and is ready for deployment from certain selected approved pathways. However, its production often involves the same feedstocks that would be used for renewable road transport fuels; the fuel producer will make an economic/financial decision regarding allocation of feedstocks to a particular fuel pathway, and the corresponding product distribution, based upon markets, incentives, and policies. Moreover, diesel is generally valued higher than jet fuel, which would encourage RHD production rather than biojet.
Renewable gasoline is not ready for production or deployment in Canada at the present time, although useful elements of renewable gasoline are a by-product of the RHD/biojet production process. There is only limited available information about this drop-in option.
Biocrude may be a promising medium- and long-term option, but there is not enough information to make any assessment at the present time.
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