Later this year, California regulators will vote whether to extend the state’s Low Carbon Fuel Standard(LCFS) from its current expiration in 2020 to 2030. If it passes, renewable diesel would be the biggest winner among biofuels. A shortage of renewable diesel in California would create a strong incentive for producers to build new capacity in the next decade, particularly in feedstock-rich Asia.
Proposed RFS targets for 2019 are circulating, though they are not yet official. The use of a cellulosic waiver limits any reduction in the overall advanced biofuels volume requirement. The result is a more than 400 million gallon increase in the requirement for “other” advanced biofuels. This advanced deficit will provide additional support for D4 and D5 RIN prices in 2019 and will widen D5 – D6 price differentials during the second half of 2018 and into 2019.
Proposed 2018 RFS volume targets were announced yesterday. With only a small reduction in target volumes for advanced biofuels, ESAI Energy continues to project higher D6 RIN prices later in 2017 and in 2018. Without increased sales of higher ethanol blends, obligated parties will need to turn to banked RINs to satisfy obligations.