As the SAF industry is attempting to rise to the Grand Challenge set forth by the government to reach three billion gallons of SAF by 2030, one of the major obstacles in is the need for a large feedstock volume. Multiple panels at the first annual North American Sustainable Aviation Fuel Conference held in Minneapolis, Minnesota, in late August explored the biomass feedstock landscape. Trip Jobe, vice president of sales with ResourceWise’s Forest Value Chain, explained the importance of doing a feedstock availability assessment to better understand the market dynamics around feedstocks SAF producers may be interested in utilizing. The company’s resource studies evaluate risk by examining a feedstock’s availability, market dynamics, government regulations and incentives, and sustainability impacts. Jobe discussed risk dynamics within SAF projects and explained how feedstock resource assessments help mitigate risk for both investors and developers, contributing to the site’s long-term success.&nbsp; According to ResourceWise, an estimated 1 billion dry tons of biomass can be collected sustainably each year in the U.S., enough to produce 50 to 60 billion gallons of low-carbon biofuels. These resources include corn grain, oil seeds, algae and other fats, oils and greases, ag and forestry residues, wood mill waste, municipal solid waste streams, wet wastes like manure and wastewater treatment sludge, and dedicated energy crops. The largest, Jobe said, is forestry resources, as there are approximately 1.4 trillion live trees on more than 635 million acres of forestland in the continental U.S.&nbsp; Feedstock availability is an important consideration for developers who are exploring a SAF project. No singular feedstock is going to be able to supply the entire volume of SAF needed, Jobe emphasized. Understanding the location, trade flows and market for that particular feedstock are all part of the assessment. One factor that can limit availability is the presence of other entities that utilize the same feedstock and could compete for usage. “If you’re using woody forest residues, what are other markets out there? How is that going to impact your potential either from a consumption perspective or a pricing perspective as other biomass markets or other feedstocks … come into your area or location,” Jobe said.&nbsp; Looking for disruptions or additions to the market and at how those elements could impact the future of the project is key to the long-term viability of these projects, according to Jobe. “It’s really incredibly important if we think about these developments that take two to three years from shovel in the ground to operating,” he says. “How are we looking at the markets today, and how are we looking at them in three years when you’re starting to operate, and 10 years into the future? What would be the implications for those markets?”&nbsp; Regulations around various feedstocks also need to be considered, Jobe explained. He referenced the EU’s restrictions on food crops as feedstocks for SAF, and discussed how that type of regulation will make the use of these feedstocks a battle in some parts of the world. Sustainability is the another element of feedstock risk Jobe discussed. Many companies are pursuing decarbonization but have started to move away from using carbon credits and offsets to meet their net zero goals, and are instead developing their own projects. “Will carbon credits go away? Absolutely not,” he says. “We know that there are still going to be markets for them, there are still going to be companies that are out there, but what’s the value of it? Jobe explained that though carbon markets may be a potential value stream for some SAF projects, it is important to consider that these markets may not be an attractive revenue source due to market uncertainty.&nbsp; Biomass Case Study Jobe shared a case study of USA BioEnergy in Bon Weir, Texas, in which Forest2Market assessed the availability and sustainability of feedstock supply both currently and in the future. The $1.7 billion biorefinery is planned to convert 1 million green tons of biomass into 34 million gallons of renewable fuel per year including SAF, renewable naphtha and renewable diesel. The study examined market supply and demand, considering local landowners and suppliers, timberland characteristics, forest supply characteristics and pine pulpwood consumers. “We have to make sure we meet RFS2 standards, but what’s the livelihood of the land owners, is it state-owned, is it plantation, is it private-owned, corporately owned?” Jobe said. “All of those factor into the supply and demand, the pricing, and the ability to set up long-term contracts for this type of development.” Other aspects considered include feedstock availability, price forecast and related projections. Studying inventory in light of harvest timing, which would take place every 15 years for soft pine feedstock, is an important part of understanding the ongoing sustainability of these markets, Jobe explained. Potential competition is also important to consider—knowing the likelihood of a mill starting up nearby helps developers become aware of potential future reductions in woody residues when making long-term investments. “Ultimately, develop a forecast—what does that forecast look like for 20 years? How does that, in the normal case, in the best case, and potentially the worst case, with the impacts across all these different categories, [impact] the project market?” Jobe said.&nbsp; Feedstock supply studies are a good tool for reducing the risk of these expensive development projects, he added. With so many feedstock options—an estimated one billion dry tons of biomass total—a lot of innovation is occurring, and a new market brings risk. “The potential reward of producing 50 to 60 billion gallons of low-carbon biofuel has a lot of people interested.”Lipids Markets Lipids of a variety of types are currently being used for SAF production. Ryan Standard, managing editor of Americas with Fastmarkets, provided a snapshot of current lipids markets in the U.S. and outlined the limitations of various lipids as feedstocks for SAF. The feedstocks discussed included tallow, used cooking oil (UCO), yellow grease, distillers corn oil (DCO) and soybean oil.&nbsp; The total lipid feedstock capacity is not capable of meeting SAF production goals on its own. One factor is competition with the renewable diesel and biodiesel industries, which both need a significant volume of these feedstocks and are growing rapidly. According to Standard, the renewable diesel industry alone needs 28 billion pounds (14 million tons) of feedstock each year, while biodiesel industry needs around 16.3 billion pounds of feedstock. Total U.S. production of low-carbon lipid feedstocks grew 3.4% in 2023, reaching 18.1 billion pounds. There are 28 billion pounds of soybean oil on the market as well; however, the two combined are not able to meet the 43.5 billion-pound capacity demand found in the biodiesel, renewable diesel and early-stage SAF industries. “If you take every single pound of rendered fat, used cooking oil and distillers corn oil, it’s not even &nbsp;close enough to fuel the current capacity in the market,” Standard said.&nbsp; Domestic supply is unable to satisfy market demand for low-carbon feedstocks, so producers have begun looking abroad, importing the needed capacity from around the world. Standard explained the trade balance has shifted in the U.S. for feedstocks such as tallow and UCO, to the point that the U.S. is importing more than it exports. “We’ve seen a lot of imports start to come into the U.S.—tallow, used cooking oil, all of the products that have been covered for the past several years—historically, they were not imported, they were exported; there [was] more material in the U.S. than the U.S. market could use,” he said.Shifting Trade Balance Seven or eight years ago, producers of UCO and tallow were excited to export volume to new markets such as China, prior to the renewable diesel and biodiesel markets’ significant growth. Now, producers are importing the equivalent of seven million heads of cattle worth of tallow, primarily from Australia and New Zealand, along with volume from Canada, Brazil, Uruguay and Sweden. The U.S. is also importing large volumes of UCO from China, Australia, New Zealand, South America and Canada. Most of that imported volume, around 500,000 metric tons of it, is coming from China, Standard explained. Part of the import market growth is due to arbitrage opportunities, where renewable fuel producers are able to buy feedstock from other countries at a cheaper rate than U.S. feedstock.&nbsp; Low-carbon lipids such as tallow and UCO are waste products; therefore, the supply of them is unable to drastically increase. “Because they are considered waste-based, no meat packer is going to start slaughtering cattle for tallow—it’s steaks, it’s hamburgers, it’s meat,” Standard explained. “It’s the same thing with pork, it’s the same thing with poultry, and that may seem obvious to some of you, but I’ve been asked that question many, many, many times over the years, ‘Why don’t these guys just kill more cattle and pump their tallow out?’ Well, you look at the price of a T-bone and you look at the price of a pound of tallow, and the answer’s pretty obvious.” Soybean oil prices increased this year due to drought throughout parts of the Midwest, according to Standard. He said that higher RBD (refined, bleached and deodorized) soybean oil prices could possibly lead to lower UCO availability, as restaurants may slow down turnover on their fryers to save money. However, UCO volumes have gone up in recent years due to the post-COVID-19 rebound in the restaurant business. Higher DCO volumes also contributed to the 2023 increase in low-carbon lipids volume in the U.S., he said. Increased ethanol production and improved oil extraction technology have contributed to the increase in volume. “That’s not enough to fuel the growth, and I think things are just going to continue to get more competitive in these markets, as the carbon credits are there, the tax credits are there, and the RIN values should be there,” he said. Alternative feedstocks such as corn stover and camelina, alongside ethanol, are the path forward for expanding the industry, Standard said. Author: Katie Schroeder Katie.schroeder@bbiinternational.com&nbsp;

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At the inaugural North American SAF Conference & Expo, panelists discussed opportunities, risks and challenges regarding feedstock for the momentous SAF industry.

Exploring SAF Feedstock Markets

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