Hyper Acceleration: Industry Summit III Recap
The pace of change for the liquid heating fuels industry has increased so greatly so quickly, the answer to “what’s next” is now right before, if not already behind, us
On September 15, 2021, this year’s annual HEAT Show concluded with “Industry Summit III: Beyond Mandates – What’s Next,” a comprehensive update on renewable liquid heating fuels’ latest advancements in terms of carbon scoring, equipment compatibility, feedstock availability, wholesale/retail marketing, and supply.
Before we go any further, let’s acknowledge the criticism that the industry has been deliberating these same topics for over a decade. To start off the summit, NEFI Net-Zero Taskforce Chair Charlie Uglietto checked off a list of new developments that have occurred since the Providence Resolution set the industry on a path to net-zero emissions:
- Equipment manufacturers Beckett and Carlin have certified their products for use with blends of up to 20% biodiesel, and standards for 100% renewable fuels are also in the works.
- Three Northeast states — New York, Connecticut, and Rhode Island — have passed laws calling for heating oil to contain an increasing minimum component of biodiesel or advanced biofuel, and 80 dealers in Massachusetts are participating in that state’s incentive program, which requires a minimum B10 biodiesel blend.
- Star Group L.P., parent company of Petro Home Services, one of the largest liquid heating fuel retailers in the U.S., has committed to selling B20 to all of its heating oil customers, approximately 400,000 in total according to CEO Jeff Hammond.
While taking stock of those developments, consider that many of these things actually came to pass within the current calendar year.
Now consider that since the end of the 2021 HEAT Show — as this article was being drafted — word came down that the Vermont Climate Council was putting forward a proposal for a Clean Heat Standard, which would incentivize sales of renewable liquid heating fuels, and that New York-based Hart Home Comfort had begun offering B50 from its bulk terminal in New Hyde Park, Long Island.
Oil & Energy will return to both of these breaking stories next issue, but for now, suffice it to say that changes are taking place — fast — and whether or not their quickening pace is a testament to years of careful deliberation or other market influences, it’s certainly enough to give pause to the naysayers and give this article its title.
So … what’s happening?
As it happens, the topic that might be hardest to write about might also turn out to be the single most important subject discussed during Industry Summit III.
While it might not sound all that appealing, most liquid heating fuel association leaders in the Northeast will likely concede that carbon scoring and pricing is an economic inevitability for our industry. The goal, then, is to ensure that when this economic inevitability becomes a political reality, the “clean heat standard” or other program doing the scoring does so in a way that is technology neutral. This would demand a full and unbiased accounting of the carbon intensity of renewable liquid heating fuels and electric heat pumps.
To this end, National Oilheat Research Alliance (NORA) President John Huber reports that NORA has already developed a model for comparing cumulative lifecycle emission reductions of renewable liquid heating fuels at various blending rates and electric heat pumps at various conversion rates between now and 2050.
The results, which Huber previewed during the summit, indicate that even “at our worst” renewable liquid heating fuels still provide greater emission reductions than electric heat pumps can “at their best.” That means even if the utilities succeed in convincing a massive amount of homeowners to install heat pumps while the heating oil industry slowly adopts higher biofuel blends, fuel dealers still manage to deliver greater environmental benefits than electric heating.
In response, this year’s summit moderator, Global Companies President and CEO Eric Slifka noted that the story told in the NORA model’s projections demonstrates that the heating oil industry has a real solution that can allow it to stem the tide of electrification, just as coalitions of fuel dealers in the Northeast succeeded in preventing natural gas from completely wiping them off the map.
“We don’t want to go 1 and 1, we want to go 2 and 0,” Huber responded. “We do have the solution, but it’s not seen as the solution, so in that short-term period until everybody else realizes that, you better fight to hold share. The manufacturers need us to hold share. We can’t let the efficiency of the system degrade any more, so hold onto every customer you have and just weather this storm and come out on the other side.”
In other words, if you should find yourself installing an electric heat pump for a homeowner who wishes to convert from heating oil, do not remove their existing fuel burning equipment and storage tank. They’ll thank you for it, eventually.
This brings us to the next topic.
Oilheat Manufacturers Association (OMA) Executive Director Don Farrell conceded that heating oil equipment manufacturers “haven’t moved quickly enough” in terms of adopting lower-carbon fuels. “We’ve had this glacial movement towards using renewable fuel even before the decarbonization issue was so much in the forefront,” he said, recalling that old law of inertia about an object at rest. “At the same time, the last few years, it’s been remarkable how lightning-fast the decarbonization issue hit us.”
This, Farrell said, has helped accelerate the industry’s movement toward lower-carbon fuels, pointing to that other law of inertia about an object in motion. “I know there was a period there when it was probably frustratingly slow how fast manufacturers seemed to be coming out with the products to address this,” Farrell acknowledged. However, he argued, new products must be built on five pillars — “safety, performance, reliability, price, and market acceptance” — the alignment of which takes time. For example, ensuring product safety requires extensive standardized testing, and market acceptance demands market awareness.
“I can tell you that over the last, at least, five years, there has barely been a minute of OMA discussion that wasn’t discussing how we get to the next level of carbon reduction,” Farrell asserted. Pointing to the two aforementioned manufacturing companies that have already certified their burners and accessories for B20, he said that another such certification is expected soon.
Farrell added that all OMA members — equipment, appliance, and additive manufacturers — remain fully committed to helping the industry adopt higher blends of low-carbon fuels. “I started out saying we’re not moving fast enough and the industry has not, but I want to end saying that the pace is accelerating drastically and that the best is yet to come.”
Unforeseen complications prevented Advanced Biofuels Association (ABFA) President Michael McAdams from appearing in-person at the Industry Summit. But they couldn’t keep the longtime biofuels industry advocate from participating in this panel discussion. Wearing an eye patch, McAdams videoconferenced into the summit with an in-depth update on biofuel feedstock availability, including a preview of a never-before-seen study on that topic commissioned by ABFA.
According to McAdams, the study, which is currently underway, seeks to identify a path to enable growth among all feedstock channels in order to produce scalable volumes of low-carbon fuels. That word, “scalable,” is perhaps most critical, as annual U.S. liquid fuel demand prior to COVID-19 included some 27 billion gallons of jet fuel, 52 billion gallons of diesel, and 5 billion gallons of heating oil.
The study analyzes feedstock supply chains relative to demand over the next two to five years as well as between 2040 and 2050, McAdams said. To account for future demands, it used the U.S. Energy Information Administration’s forecast that by 2040 biodiesel and renewable diesel would achieve 25% penetration into the diesel fuel pool and sustainable aviation fuel would see 30% penetration into the jet fuel pool. This would require 20 billion gallons of renewable fuels.
McAdams said meeting this demand would require three tiers of feedstocks: the current base consisting of fats, oils, greases, and tallows; a second tier including wood residues, municipal solid waste, and renewable gasoline and jet fuel produced from ethanol conversion; and a third tier leveraging industrial gases, carbon capture and other next-generation technologies. (For additional details, see our feature interview with McAdams from last issue.)
Though the full feedstock picture is still coming into view, and new supply chains still need to be developed, existing oil refiners and biofuel producers are moving full-steam ahead to bring more low-carbon liquid fuel gallons to market. McAdams’s presentation listed 11 new plants scheduled to begin producing renewable diesel between 2020 and 2024. Their combined capacity: 3.875 billion gallons per year. “I’ve undercut it,” McAdams said, noting that an additional 2 billion gallons of biodiesel are already being produced each year.
Where previous panelists tapped into the technical and logistical aspects of the industry’s lower-carbon future, Sprague Resources President and CEO Dave Glendon took a different route, grounding his remarks in heating fuel marketers’ shared experiences with past product transitions.
“If you think back 10 years or so ago, look at what the sulfur content was of the fuels that we provided to our customers, and what a dramatic improvement we’ve seen in that customer experience by lowering the sulfur quantity,” Glendon said. “In fairness, the refiners carried most of the water in that transition. Now the burden is more on us,” he continued. “We’ve got the product, we know it lowers carbon intensity far better than the alternatives that are being touted, and it’s now in your hands to do something you’re really good at, which is helping the customers appreciate the full experience they get from a friendly service provider that’s there when they need them.”
Looking ahead to the fuel product mix of 2030, Glendon said, “I couldn’t tell you how much is going to be bio or renewable diesel or ethyl levulinate at that point in time, but I do know it will be lower-carbon liquid fuels.” He cited Sprague’s agreement with Biofine Developments Northeast to purchase and market that company’s ethyl levulinate (EL) product as an example of a potentially successful partnership between heating fuel distributors and biofuel producers. “There are things like that, that companies like [ours] can do that can turbo-charge development efforts so that collectively we have a range of products at our disposal to make that consumer experience that much better,” he said.
Transportation & Infrastructure
So, then, if we already have the products ready to go, what are the biggest transportation challenges preventing them from coming to market? Answering this question fell to Buckeye Energy Services Director of Marketing Quincy Longacre, who relayed a statement from his colleagues on the “pipeline side of the business.”
Buckeye cited the oft-lamented contamination challenges fatty acid methyl ester (or FAME, i.e., biodiesel) poses for pipelines that also transport jet fuel. “The potential for contamination in jets creates additional oversight procedures for multi-product pipelines that are very difficult to adhere to, so the solution up to this point was to eliminate biodiesel from the pipeline,” Longacre said. “In my mind, the question becomes when can we stop shipping jet fuel in favor of biofuels in the pipeline, or can we find a way to safely transport both? I know Buckeye is participating with a number of other pipeline companies in an industry working group right now to address this very question.”
In the meantime, Buckeye and other wholesalers continue to invest in biodiesel blending and storage infrastructure across their terminal networks. As Oil & Energy reported last issue, Buckeye Terminals has been awarded $3 million in cost-sharing grants from the U.S. Department of Agriculture for infrastructure improvements projected to increase biodiesel sales by over 163 million gallons per year. Likewise, the other wholesalers represented on the stage, Sprague Operating Resources and Global Companies, were awarded cost-sharing grants earlier in the year (see “Heating Fuel Distributors Awarded Biofuel Grants” from May 2021).
“With regard to renewable diesel and EL, as we’ve heard a lot about this week, there is no FAME content in that so that can be shipped on the pipeline as soon as it’s available, so that’s encouraging,” Longacre added.
Indeed, Industry Summit III attendees came away with plenty to be encouraged about, not least of which was a clearer view of the many opportunities that lie ahead for the liquid heating fuel industry. In this sense, the summit provided a fitting conclusion to the 2021 HEAT Show and an inspiring segue to the 2021-2022 heating season. Oil & Energy’s coverage of the event continues in the November/December issue.