The growth of biofuels production capacity in the United States slowed significantly in 2024, rising by only 3% year-on-year. This deceleration, noted in the latest published production reports, stems mainly from a slowdown in renewable diesel and emerging biofuels projects. The industry is facing the combined effects of declining biofuel credit margins and the recovery of petroleum refining margins.
Renewable diesel capacity sees modest gains
The renewable diesel and other biofuels category, which includes sustainable aviation fuel (SAF), recorded an increase of only 391 million gallons per year in 2024. This volume represents less than one-third of the growth seen in 2022 and 2023. Two projects were completed, both in California: the conversion of Phillips 66’s Rodeo refinery, bringing its capacity to 767 million gallons per year, and the commissioning of Renewable Fuels LLC’s plant in Bakersfield, with a capacity of 138 million gallons.
These additions were partially offset by the shutdown or cessation of co-processing at four facilities. Monroe Energy and Chevron halted operations at Trainer, Pennsylvania, and El Segundo, California, respectively. Vertex Energy and Jaxon Energy closed plants in Mobile, Alabama, and Jackson, Mississippi.
Investment shifts reflect changes in margins and credits
The capacity loss linked to these shutdowns reflects the evolving economic context of the sector. In 2020 and 2021, weak refining margins and rising biofuel credit values triggered a wave of project announcements. However, as these plants gradually came online, overproduction began, lowering credit values from 2023 onward. Simultaneously, petroleum refining margins rebounded, shifting the economic interest away from renewable diesel investments.
SAF, an alternative fuel to petroleum-based jet fuel, gained importance in 2024 in industrial decision-making. Phillips 66’s Rodeo plant can now reallocate around 150 million gallons per year of its output to SAF, while Diamond Green Diesel can redirect up to 235 million gallons.
Biodiesel contracts, ethanol holds steady
The biodiesel sector saw a marked contraction with eight plant closures, resulting in a capacity loss of around 100 million gallons per year. This decline is attributed to insufficient profitability amid changing costs and competition from other renewable fuels.
In contrast, ethanol production increased, reaching nearly 18.5 billion gallons per year. This rise accounts for 73% of the country’s total biofuels production capacity. Although domestic consumption remains stable, the additional capacity is primarily supporting growing export volumes, benefiting from the competitiveness of Midwestern agricultural feedstocks.
