The mood was optimistic during Advance: 2011 Biodiesel Conference & Expo last week. Why? Because all signs are pointing to the industry growing by leaps and bounds this year. I spoke with Donald Nelson, Director, National Sales with REG (Renewable Energy Group), the largest biodiesel company in the U.S. about RINS and how, if at all, they can signal positive things in the marketplace.
To begin, I asked Nelson to explain what a RIN was. It’s a Renewable Identification Number (RIN). “To make it simple,” said Nelson, “RINS really is the currency of the RFS2. That’s how the EPA measures the compliance of an obligated party.” He continued by explaining that for each gallon of biodiesel produced, 1.5 RINs are generated that travel with that gallon to the blender and then the blender or obligated party separate that RIN from the “wet gallon” and at this point, the RIN can travel separately from the fuel.
Last year was a tough year for the biodiesel industry. The $1 per gallon tax credit had expired and several obligated parties sued the EPA over the RFS2 biodiesel mandate numbers (under the RFS2 biodiesel qualifies as biomass based diesel). Fortunately, by the end of the year, the EPA won the suit and the credit came back, but by this time there weren’t enough RINS in the marketplace to meet demand to the uncertainty caused by the aforementioned issues.
Nelson said there were 1.15 billion gallons of material that needed to be consumed when you add 2009 and 2010 together but it appears that the marketplace will be short 95 million gallons. Yet he’s not worried and is very confident that the industry can not only make up for the shortfall this year, but also meet the RFS2 numbers. Combined this will be a total of approximately 925 million gallons of biodiesel needed to be produced this year. To put it in perspective, last year the industry produced 310 million gallons. Nelson said this is a 300 percent increase in production but there are 2.2 billion gallons of biodiesel production registered with the EPA, although much of it is not online.
So what’s next for the industry? Explosive growth. Plants are coming back online although Nelson said some still need additional investment dollars to get back up and running. In addition, the obligated parties are creating plans to build out the much needed infrastructure so the fuel can get where it needs to go.
Nelson concluded that he thinks the industry is going to see tremendous growth over the next couple of years and “It’s very exciting.”
You can listen to my full interview with Don here: Interview with REG's Donald Nelson