by Geoff Cooper (Renewable Fuels Association/Ethanol Producer Magazine) Biodiesel produced from corn distillers oil (CDO) is assigned an extremely low carbon intensity (CI) score under the California Low Carbon Fuel Standard, making it a tremendously attractive compliance option for regulated parties. In fact, at just 4.0 grams of CO2-equivalent per mega joule (g/MJ), CDO biodiesel has the lowest CI score of any approved LCFS fuel pathway listed in Table 6 in the CI lookup tables. As an illustration of the high compliance value of CDO biodiesel, consider that blending just 1 gallon generates the same amount of LCFS credit in 2014 as blending nearly 13 gallons of ethanol with a CI score of 85 g/MJ. For these reasons, CDO biodiesel has earned the nickname of “the golden gallon” in the California market.
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For example, if the market price for one LCFS credit is $50 (the average price during Q1), regulated parties should be willing to pay a 59-cent-per-gallon premium for CDO biodiesel over forms of diesel that exactly meet the 2014 diesel CI requirement of 97.05 g/MJ. Average credit values peaked at $79 in December 2013, meaning regulated parties should have, in theory, been willing to pay a 94-cent-per-gallon premium for CDO biodiesel at that time.
It does not, however, appear that price premiums for CDO biodiesel are being shared with the upstream supply chain. There is no evidence that suppliers of the CDO feedstock (i.e., corn ethanol plants) are receiving any premium value for oil that is processed into biodiesel and delivered to the California market.
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As long as the primary use of CDO is as an animal feed ingredient, its market value will be largely determined by feed market dynamics and competing fats and oils. Thus, it will be difficult for corn ethanol facilities to capture the LCFS premium value for their CDO until demand for CDO-derived biodiesel in California is substantial enough to reorganize the CDO market structure.
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Finally, it should be noted that the life-cycle analysis behind CARB’s CI value for CDO biodiesel has been the subject of heated debate. Some have argued that CARB essentially treated CDO as a waste product from an ethanol dry mill, and thus the bulk of corn germ (oil) production and processing emissions (including prescribed indirect land use change emissions) were improperly allocated to the other products manufactured by the ethanol plant (i.e., fuel ethanol and distillers grains). Given the debate over CARB’s life-cycle analysis of CDO biodiesel, it is possible that the fuel’s CI score may be revised in the future to reflect potential changes to CARB’s calculations. READ MORE