Understanding HVO Fuel and its Benefits for the Logistics Industry - Girteka - Responsible Logistics

Understanding HVO Fuel and its Benefits for the Logistics Industry

2024-10-15
2024-10-15

The logistics industry is under increasing pressure to reduce its environmental impact and meet global decarbonization goals. Companies will soon have to report on their Scope 3 emissions that includes logistics, and it is known to be in some cases up to 90%[1] of the company’s total emissions.

 

One of the solutions for immediate reduction of greenhouse gas (GHG) emissions in the transport sector is Hydrotreated Vegetable Oil (HVO) fuel. This renewable diesel alternative is gaining popularity due to its ability to reduce emissions while being compatible with today’s modern trucks (EURO 6 standard).

 

What is HVO Fuel and How is it Made?

 

Hydrotreated Vegetable Oil (HVO) is a second-generation biofuel, meaning it is made from renewable raw materials like waste fats, vegetable oils, and animal fats. Unlike traditional biodiesel, HVO is produced through a hydrogenation process, which involves treating feedstocks with hydrogen at high temperature and pressure in the presence of a metal catalyst. This process removes oxygen and produces hydrocarbons that closely resemble those in fossil diesel source.

 

The hydrogenation process gives HVO its clean-burning properties. By removing oxygen, sulfur, nitrogen, and aromatics, HVO burns more cleanly than traditional diesel, resulting in fewer emissions. Moreover, HVO is a “drop-in” fuel, meaning it can be used as a direct replacement for conventional diesel without modifications to modern engines.

Feedstocks Used in HVO Production

 

HVO can be produced from a wide range of renewable raw materials, offering significant flexibility in sourcing. Common feedstocks include:

Vegetable oils: Rapeseed oil, palm oil, and sunflower oil are among the most frequently used.

Animal fats: By-products from the meat industry, such as tallow, can also be converted into HVO.

Waste products: Used cooking oils (UCO) and other waste materials provide sustainable feedstock options, supporting circular economy principles[2].

 

This flexibility allows producers to optimize the environmental benefits of HVO by using locally available and sustainable raw materials.

 

Advantages of HVO in the Logistics Sector

 

HVO offers several key benefits that make it particularly attractive to the logistics industry. As companies seek ways to reduce their environmental impact without major disruptions to their operations, HVO’s characteristics provide an efficient and effective solution.

 

Compatibility with Existing Infrastructure

 

One of the most significant advantages of HVO is its compatibility with modern diesel engines, especially those compliant with Euro 6 emissions standards. Unlike other alternative fuels that may require costly engine modifications or infrastructure changes, HVO is ready to use solution. It can be used directly in existing diesel engines without the need for modifications, making it easier for logistics companies and their customers to transition their fleets to more sustainable operations source.

 

This integration reduces the upfront costs and complexity of adopting HVO, allowing companies to meet sustainability goals while maintaining operational efficiency.

 

Reduction in Greenhouse Gas Emissions

 

The primary reason for the growing interest in HVO is its ability to significantly reduce carbon dioxide (CO₂) and other harmful emissions. Studies have shown that HVO can reduce lifecycle CO₂ emissions by up to 90% compared to fossil diesel, depending on the feedstock used and production methods source.

 

In addition to cutting CO₂ emissions, HVO also reduces particulate matter (PM) and nitrogen oxide (NOₓ) emissions. HVO can lower particulate emissions by up to 80% and NOₓ emissions by approximately 8%, making it a cleaner-burning fuel that helps improve air quality, particularly in urban areas source[3].

 

Improved Engine Performance and Lower Maintenance Costs

 

Because HVO is sulfur- and aromatic-free, it burns more cleanly than conventional diesel. This results in less engine buildup, reducing wear and tear on components like fuel injectors and exhaust systems. Cleaner combustion also leads to extended maintenance intervals, reduced engine wear, and longer engine oil life, which can help logistics companies reduce overall maintenance costs[4].

 

High Cetane Number

 

HVO has a higher cetane number compared to traditional fossil diesel, meaning it ignites more easily and burns more efficiently in an engine. This leads to better combustion quality, particularly in colder climates, where traditional biodiesel may face issues with fuel gelling. HVO’s performance in cold weather makes it a viable option for logistics companies operating in regions with harsh winters.

 

HVO fuel presents a compelling case for logistics companies looking to reduce their customers’ Scope 3 emissions without significant operational disruptions. Its ability to serve as a direct replacement for conventional diesel, along with its lower emissions and better engine performance, make it an attractive option for fleets. So is the HVO an ideal solution?

 

Challenges and Disadvantages of HVO

 

While Hydrotreated Vegetable Oil (HVO) offers numerous benefits, its adoption in the logistics industry is not without challenges. Companies considering HVO as a solution must be aware of the hurdles that come with integrating this renewable fuel into their operations.

 

High Production Costs

 

One of the primary challenges facing HVO is its high production cost. The hydrogenation process used to produce HVO is energy-intensive and requires advanced infrastructure, which makes it more expensive than other biofuels like first-generation biodiesel. According to market analysis, HVO production costs are about 10-15% higher than fossil diesel, depending on the feedstock and production facility source[5].

 

In addition, the capital expenditure (CAPEX) for hydrogenation equipment is significantly higher compared to conventional biodiesel plants. This is due to the complexity of the process and the need for specialized equipment that can handle high-pressure hydrogenation. As a result, logistics companies considering large-scale adoption of HVO may need to balance these higher costs with the long-term sustainability and operational benefits it offers[6].

 

Volatility in Feedstock Prices and Availability

 

HVO’s production relies heavily on specific feedstocks, such as vegetable oils, animal fats, and used cooking oils. However, the availability of these raw materials is subject to market fluctuations, which can lead to price volatility. For example, palm oil – a commonly used feedstock – has been the subject of environmental and ethical concerns, with some regions banning its use due to its association with deforestation[7].

 

In response to these challenges, HVO producers are increasingly turning to waste products, like used cooking oil, to create more sustainable and resilient supply chains. However, the overall availability of these waste products is limited, raising concerns about whether HVO can scale up production to meet rising global demand, especially as other sectors, such as aviation or maritime, also look to decarbonize using similar biofuels.

 

Regulatory and Supply Chain Challenges

 

The regulatory environment for HVO, particularly in Europe, is complex and evolving. The European Union’s Renewable Energy Directive II (RED II) emphasizes the use of second-generation biofuels like HVO, but the directive also places restrictions on the use of certain feedstocks, such as palm oil, due to their indirect land-use change (ILUC) risks. This presents a challenge for HVO producers who may need to adapt their supply chains to comply with these evolving regulations[8].

 

In addition, feedstock competition with other industries, such as the cosmetics and oleochemicals sectors, may further constrain the availability of certain materials, impacting HVO production volumes and market growth.

 

Market Dynamics and Regulatory Overview

 

The HVO market is on a growth trajectory, with production capacity projected to double by 2030, expected to reach $44.3 billion, up from $14.5 billion in 2022, representing a compound annual growth rate (CAGR) of over 15%[9].

 

This growth is fueled by increasing environmental regulations and government incentives, especially in regions like Europe and North America. For instance, the EU’s RED II directive mandates a 14% renewable energy target for transport by 2030, providing a strong policy framework for biofuels like HVO.

 

Regulatory Considerations

 

The regulatory landscape plays a critical role in shaping the future of HVO. In Europe, the RED II directive mandates the gradual elimination of biofuels linked to high indirect land-use change (ILUC), such as palm oil, by 2030. This shift toward second-generation biofuels like HVO is expected to drive further market growth but may also present challenges for producers that rely on controversial feedstocks[10].

 

While HVO offers substantial environmental and operational benefits, its higher production costs and regulatory challenges must be carefully managed. However, the rapidly growing market and supportive regulatory environment present significant opportunities for logistics companies to adopt HVO and reduce their carbon footprint.

 

Hydrotreated Vegetable Oil (HVO) is a promising renewable fuel that offers significant environmental benefits and is already being used successfully by companies. By integrating HVO into their decarbonization strategies, monitoring technological advancements, and aligning with regulatory changes, companies can position themselves for long-term success in a sustainable future. HVO’s role as a transitional fuel ensures its continued relevance as the industry evolves, making it a critical part of the logistics industry’s journey toward reducing emissions.

 

Sources
[1] https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-are-scope-1-2-and-3-emissions
[2] https://www.neste.be/en/neste-my-renewable-diesel-be/product-information/renewable-raw-materialshttps://www.eni.com/en-IT/media/press-release/2023/03/eni-sustainable-mobility-diesel-renewable-raw-material.html
[3] https://www.mtu-solutions.com/eu/en/pressreleases/2022/milestone-towards-net-zero–mtu-gensets-from-rolls-royce-approve.html
[4] https://www.crownoil.co.uk/faq/hvo-fuel-faq/
[5] https://www.crownoil.co.uk/news/the-true-cost-of-hvo-fuel-should-you-switch/
[6] https://greenea.com/en/publication/is-hvo-the-holy-grail-of-the-world-biodiesel-market/
[7] https://www.greenmatch.co.uk/is-palm-oil-harming-the-environment
[8] https://joint-research-centre.ec.europa.eu/welcome-jec-website/reference-regulatory-framework/renewable-energy-recast-2030-red-ii_en
[9] https://www.zionmarketresearch.com/report/hydrotreated-vegetable-oil-hvo-market
[10] https://joint-research-centre.ec.europa.eu/welcome-jec-website/reference-regulatory-framework/renewable-energy-recast-2030-red-ii_en