Valero adjusts renewable energy portfolio

August 31, 2013 by  
Filed under Green Energy News

Valero Energy Corp. has been making adjustments to its investments in renewable energy.

This year the San Antonio refiner quietly pulled out of a partnership to build a cellulosic ethanol plant while a second plant in which it’s a partner started producing renewable diesel this summer.

In recent years, even as Valero remains focused on its core refining business, it has taken stakes in renewables that run the gamut from established to experimental technologies.

Its renewable portfolio includes 10 ethanol plants and a wind farm at its McKee refinery in the Panhandle. But the company historically has said little about its smaller investments in more experimental ventures, often leaving its partners to comment.

In 2011, Mascoma Corp. of New Hampshire announced that Valero would invest as much as $50 million to build one of the nation’s first commercial-scale cellulosic ethanol plants.

Earlier this year, however, Valero quietly pulled out of its nonbinding agreement with Mascoma.

Plans had called for the plant, which was to cost $350 million and open this year, to use hardwood pulp as a feedstock to produce ethanol. When the deal was announced, Valero agreed to purchase all of the ethanol the plant would produce, estimated at about 40 million gallons a year.

Valero spokesman Bill Day declined to say specifically why Valero bowed out of the Mascoma deal, but he noted: “I can say in general that cellulosic ethanol hasn’t emerged as a mass-produced fuel as quickly as a lot of people expected.”

Mascoma did not respond to a request for comment.

Valero’s shifts likely reflect the struggles of the cellulosic fuel industry, which is stumbling even as federal rules calls for 6 million gallons of cellulosic ethanol to be blended into the nation’s fuel supply this year.

Cellulosic ethanol — made from such materials as wood waste and corn shucks — remains more expensive than corn-based ethanol.

“My expectation,” said Wallace Tyner, a professor of agricultural economics at Purdue University in Indiana, “is that corn ethanol will be less expensive than cellulosic ethanol for the foreseeable future.”

Now Valero’s attention is focused on its joint-venture Diamond Green Diesel plant that’s adjacent to its St. Charles refinery near New Orleans.

The $413 million facility, which uses fats to produce diesel fuel, reached full production this summer, pumping out about 9,300 barrels a day of biomass-based diesel fuel.Valero’s partner in the venture is Darling International Inc. of Irving, which collects and recycles beef, poultry and pork byproducts, as well as cooking oil and restaurant grease.

Valero’s Day said the Diamond Green Diesel plant was relatively easy to ramp up because it uses a refining process that’s easily adaptable for use with animal fats.

“Plus, those feedstocks are really inexpensive,” Day said. “The plant uses waste grease from restaurants, rendering plants and some corn oil.”

Valero is marketing the biodiesel produced at the plant. It’s a premium product, Day said, because unlike some other types of biodiesel, “it is identical to petroleum-based diesel and can be shipped by pipeline.”

Valero also “still has some investments with small companies that are working on emerging energy technologies,” Day said.

That includes stakes in a biorefinery with ZeaChem Inc. of Colorado and an investment with a company that is working to produce ethanol from algae.

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