Renewable Diesel as a Major Transportation Fuel in California: Opportunities, Benefits & Challenges

Renewable diesel (RD) is doing its part to help ensure that heavy-duty vehicles (HDVs) with diesel engines can achieve the level of environmental performance needed to perpetuate their sales well into the 21st century. Any on-road HDV fuel-engine platform that will be sold in California beyond the 2030 timeframe will likely be required by the California Air Resources Board (CARB) to 1) achieve (at a minimum) near-zero-emissions of key air pollutants (especially oxides of nitrogen, or “NOx”), and 2) use a low-carbon-intensity renewable fuel. Although not all RD feedstock and production pathways offer reduced carbon intensity, RD used in California’s transportation sector achieves a volume-weighted carbon intensity rating that is about 66 percent lower than petroleum diesel (mostly ultra-low sulfur diesel, or ULSD). This “drop-in” replacement for ULSD is already delivering major greenhouse gas (GHG) reductions, with RD consumption in California’s transportation sector now exceeding a quarter of a billion gallons per year.

Thus – provided RD is made from environmentally benign feedstocks (as discussed in this report) – the fuel-related need for the diesel engine’s future is being fully achieved today. However, the longer-term viability of heavy-duty diesel engines in California rests on the ability for diesel engine technology itself – possibly in combination with a hybrid-electric drivetrain – to achieve near-zero-emissions status. This is generally defined to be a NOx certification level at, or below, 0.02 g/bhp-hr.

This report describes how RD is enabling a “better side” of heavy-duty diesel engines. Over the last several years, California has become a test-bed for RD use, where it is allowing cities such as San Francisco, Oakland, San Diego and Los Angeles to achieve compelling GHG reductions, while also significantly contributing to much-needed improvements in ambient air quality. The latter is true because RD reduces tailpipe emissions of NOx and particulate matter (PM) when used to replace petroleum-derived diesel in 1) older on-road diesel HDVs, and 2) most diesel off-road HDVs and equipment.

Specific advantages offered by RD as a replacement for petroleum diesel include:

• It can be produced from a wide array of renewable, low-carbon-intensity feedstocks using existing oil refinery capacity; thus, extensive new production facilities will not be required for expanded RD use;
• It is substantially similar to ULSD in its physical and chemical characteristics; this means RD has no “blend wall” and can be directly used in existing diesel-powered vehicles and ULSD infrastructure without need for hardware and materials changes, even when used in its “neat” (100 percent) form (RD100);
• It has a high cetane number and other beneficial qualities that collectively enable HDVs to reduce their engine-out NOx and PM emissions by an average of 13 percent and 29 percent, respectively, while providing equivalent vehicle performance and near-equivalent fuel efficiency;
• It can deliver these benefits in any type of diesel engine application (on- or off-road, medium- or heavy-duty), subject to certain limitations described in the White Paper;
• It appears to significantly improve performance and reduce life-cycle costs of diesel particulate filters (DPFs), which are widely used to control PM emissions on post-2006 on-road HDVs (and some off-road HDVs).

For all these positive attributes, many end users refer to RD as a “wonder fuel.” Clearly, RD does offer important benefits for user fleets and the general population – especially by providing “across-the-board” GHG reductions in all diesel engines that consume it instead of petroleum-derived diesel. However, RD does not constitute a widely impactful or sustainable strategy to improve ambient air quality, in California or the broader U.S. It’s abilities to help reduce ozone-precursor NOx emissions and toxic air contaminants (especially DPM) are limited by the breadth of diesel-engine applications for which it can provide such benefits, and the time frame over which they can be derived. This is because, based on limited but robust data, RD does not significantly reduce NOx emissions from diesel engines equipped with selective catalytic reduction (SCR), nor PM emissions from diesel engines equipped with DPF technology.

However, most off-road diesel HDVs and equipment are not equipped with SCR and DPF technology, and it will take many years for this transition to occur. Thus, RD use in the off-road sector will likely provide the most important air quality benefits in California, especially in the South Coast Air Basin (the greater Los Angeles area). CARB’s proposed “Low-Emission Diesel” (LED) regulation seeks to direct more than a billion gallons of RD per year specifically to fuel heavy-duty off-road vehicles operating in the SCAB. This switch from petroleum-derived diesel to RD in off-road HDVs and equipment will provide major GHG reductions from California’s transportation sector. Localized NOx and PM reductions in the SCAB will be relatively small, but nonetheless important for improving ambient air quality. Gradually (over decades), all in-use diesel engines in the SCAB and throughout California will incorporate advanced emission controls like SCR and DPFs (or, they will be replaced by alternative fuel HDV platforms that achieve near-zero-emission or zero-emissions levels). Thus, based on current knowledge, this will negate any additional benefits RD can contribute to NOx and PM reductions in California.

In effect, the San Francisco Bay Area and southern California are serving today as national testbeds for early RD consumption, with the primary focus being on-road HDVs. It appears that, on a trial basis, use of RD is beginning to expand into certain off-road applications (e.g., ferries, harborcraft, and in-State locomotives). This increasing demand is likely to push RD consumption in California well beyond the current quarter-billion gallons that are currently being transacted under LCFS-covered transportation applications. In particular, CARB’s draft LED regulation seems likely to direct most of the State’s RD supply by 2030 away from on-road HDVs, for use in off-road applications operated in the SCAB.

There is sufficient volume of RD being imported into California today (at least 250 million gallons) to meet near-term demand. However, ability to meet longer-term demand is less certain. Over the next decade, RD demand in California is expected to grow by (roughly) an order of magnitude, possibly approaching two billion gallons per year. In preliminary assessments, CARB has identified multiple feasible pathways that can technically and economically meet such demand. CARB estimates that 2.6 billion gallons of RD supply for California will be possible by 2030. Notably, these types of estimates by CARB are intentionally designed to provide reasonable scenarios, but they are not meant to make hard projections.

California’s Low Carbon Fuel Standard, and a similar program in Oregon, provide strong incentive for the production and use of low-carbon transportation fuels like RD. However, outside these markets, it can be very hard to obtain RD. National demand for RD appears to already be exceeding supply, especially in the eastern U.S. where some major HDV fleets like United Parcel Services and the New York City Department of Sanitation have not been able to purchase enough RD. When it is obtainable in such places, RD can cost much more than petroleum diesel, especially when purchased in small volumes. This can make RD unaffordable to HDV fleets as a GHG-reduction strategy. The challenges that make the RD-supply picture uncertain for California as well as nationwide include 1) the relatively small capacity of current production in the U.S. (particularly within California); 2) competing uses for RD’s major feedstocks, and 3) concerns about non-sustainable and/or environmentally harmful feedstocks such as palm oil.

Given these current and future dynamics, there appears to be an important need for local air districts in both Southern and Northern California to better understand the impacts of RD on emissions of both NOx and PM, in a wide diversity of on- and off-road heavy-duty diesel engines. This can help inform strategies involving RD’s potential role in new regulatory efforts (e.g., indirect source regulations, facility cap requirements, incentives, etc.). From a statewide perspective, it also seems important to conduct further study about the dynamics of RD supply and demand in California (e.g., competing uses for feedstocks, where the supply will most be needed, etc.).

Specific recommendations of this White Paper include (but are not limited to) the following:

Conduct trials of RD in high-horsepower off-road applications and select on-road applications

• Air districts should consider funding trials of RD in high-horsepower off-road applications such as marine vessels and locomotives. In particular, the South Coast Air Quality Management District (SCAQMD) could work with railroads and other local stakeholders (e.g., the San Pedro Bay Ports) to conduct such a trial on one or more locomotives. The Bay Area Air Quality Management District (BAAQMD) and the City of San Francisco could work with ferry operators serving the San Francisco Bay to test RD in one or more ferry vessels. (This process has recently been initiated.)
• The BAAQMD and CARB may want to work with stakeholders associated with the Port of Oakland drayage truck fleet (e.g., licensed motor carriers, port authorities) to sponsor a controlled test on the use of RD in the fleet, specifically to determine if switching the fleet to RD can help improve DPF performance and durability.

Conduct further emissions studies on how RD impacts HDVs with state-of-the-art emissions controls

• CARB should continue working with air districts, academic institutions, the heavy-duty engine industry, and possibly RD producers / suppliers to conduct focused emissions testing programs designed to better characterize the impacts of RD on heavy-duty diesel engines with advanced emissions controls.

Conduct a focused assessment in California of RD supply and demand

• CARB and the California Energy Commission should take the lead to further study the potential future supply and demand dynamics for RD as a major transportation fuel in California.