It seems ‘Brown’ has become green when UPS recently announced its plans to use up to 46 million gallons of renewable fuels over the next three years, a 15-fold increase over prior contracts, and making UPS one of the largest users of renewable diesel in the world.  The agreement includes companies such as Neste, Renewable Energy Group (REG) and Solazyme which will supply advanced renewable fuel that will enable UPS to increase its alternative fuels consumption to more than 12% of its purchased ground fuel from conventional diesel and gasoline by the end of 2017.

UPS said it has been using renewable fuels for more than a year in trucks operating in Texas and Louisiana. The new agreements will also pave the way for UPS to expand use across the US and potentially in parts of Europe.

Neste, based in Espoo, Finland, is the world’s largest producer of renewable diesel using hydrotreated fats and oils. Renewable diesel is different from the traditional biodiesel production (transesterification of fats and oil) as it goes through a different process with different byproducts. For one thing, it does not produce glycerine as a co-product but it does produce a small quantity of bio-based naphtha. I have been following and reporting about the growing renewable diesel industry worldwide on Tecnon OrbiChem, and how it is impacting both the oleochemicals and bio-based chemicals markets.

REG also produces renewable diesel at its Geismar, Louisiana, biorefinery as well as transesterified biodiesel at nine locations in the US.  With Solazyme, my personal opinion is that the company will probably just supply the algae oil feedstock (maybe to a biofuel partner?) instead of producing renewable diesel itself. From what I’ve heard, the company is more interested in using its algae oil production to higher value, lower-volume applications such as food, cosmetics/personal care and specialty chemicals. It will probably take a big volume of Solazyme’s capacity (in Moema, Brazil) to produce algae oils for fuel use.

And renewable diesel producers such as Neste and REG can use waste cooking oil, grease and other cheap feedstock so unless algae oils can compete, it will be difficult long term for UPS to pay a more expensive renewable diesel from algae oil. Neste has been dabbling on using algae oil for feedstock but announced last year that it has put this plan on the shelf for the moment.