In 2023, high interest rates, biofuel mandate cuts, and supply chain issues dampened sentiment on the renewables sector. However, an increase in sustainable aviation fuel (SAF) deals is expected in 2024 ahead of EU mandates in 2025. The US election could impact bipartisan biofuel tax credit programs, and Biden's SAF grand challenge and other policies may be at risk in a Trump win scenario.
Cautious stance on the sector
2023 has been a challenging year for the renewables space as high interest rates, biofuel mandate cuts and supply chain issues in renewables dampened sentiment on the sector. Looking into 2024, policy may be under increased focus as over 3 billion people head to the polls and high cost of living puts pressure on biofuels policies.
Feedstock strategies
Securing feedstock is a major challenge inherent to the renewable fuels industry and is expected to become a growing area of focus as more producers get in the space and announce multi-year supply agreements. In the area of sustainable aviation fuel (SAF), there may be an acceleration of offtake deals in 2024 ahead of EU SAF mandates beginning in 2025.
There may also be growing pressure on producers to clearly outline feedstock acquisition strategies, such as inorganically via the acquisition of feedstock aggregators and traders or internally, leveraging extensive geographical presence to set up vegetable waste supply chains.
Top of the policy agenda: US elections and legislative rush in Europe
Revised carbon intensity rules in California and renewable volume obligations (RVOs) at the federal level are updates to watch for in 2024, potentially impacting biofuel tax credit levels in the US. The US election is a major event; while some biofuel tax credit programs are traditionally bipartisan, Biden’s SAF grand challenge and other biofuel policies may be at risk in a Trump win scenario. During the latter’s first tenure this has been illustrated by a multitude of waivers granted to refiners, exempting them from compliance to the renewable fuel standard (RFS).
In Europe, legislators are in a rush to pass as many proposals as possible (including EU Green Deal) ahead of the June 2024 European elections, which will mark the end of Ursula Von der Leyen’s five-year term, and the six-month Spanish presidency of the European Council.
Policy and increased competition
As illustrated with Sweden’s decision to cut future biofuel mandates earlier this year, anti-inflationary policies and the rise of nationalist parties remain major risk signals to watch out for in 2024 and 2025. Increased competition is also a risk, which could impact margins in the renewable diesel sector.
