Hydrotreated Vegetable Oil Market Size, Share & COVID-19 Impact Analysis, By Type (Pure HVO and Co-processing), By Application (Transportation, Industrial Power Generators, and Others) and Regional Forecasts, 2023-2030

The hydrotreated vegetable oil market size was valued at USD 16.27 billion in 2022. The global market is projected to grow from USD 17.76 billion in 2023 to USD 35.19 billion by 2030, exhibiting a CAGR of 12.95% during the forecast period.

Hydrotreated vegetable oil (HVO) is a renewable diesel produced with various vegetable oils and fats containing triglycerides and fatty acids. The term HVO is used for green diesel fuels derived from hydrogenation & hydrocracking of feedstocks, including tall oil, rapeseed oil, waste cooking oil, and animal fats. HVO is entirely free from sulfur, oxygen as well as aromatic hydrocarbons. It contains a high cetane number and is the second-largest renewable diesel substitute worldwide. HVO is blended in fossil diesel and sold as mixtures at fuel filling stations

Production of HVO is a natural fit for refining activities, as it involves processing renewable feedstock into diesel and other products (LPG, naphtha, and sustainable aviation fuel).

COVID-19 IMPACT

COVID-19 Caused a Decrease in Demand for HVO Due to Reduced Road Transport

An emergency such as the coronavirus or the COVID-19 pandemic has significantly affected commercial operations worldwide. The aftermath of this crisis has also shaken the economies of several fast-growing countries. Almost every nation worldwide has seen a steep increase in affected populations since the beginning of the current year. The unavailability of cures or vaccines against the viral infection has prompted many industry experts and players to continuously adopt multiple countermeasures to mitigate the effects. The staggering inventory surplus built up during the pandemic took time to work off from global oil stocks. Additionally, due to the outbreak of the coronavirus pandemic, the world economy was severely impacted by a significant drop in mobility and reduced road transport. Furthermore, the impact of COVID-19 has also resulted in lower demand for HVO.

LATEST TRENDS

Utilization of HVO in the Aviation Industry Emerges as a Significant Trend

The aviation industry is under high pressure to eliminate its carbon emissions. It seeks technically viable and economic approaches to utilize sustainable alternatives to petroleum-based jet fuel. Hydrotreated vegetable oils can be used as a sustainable aviation fuel, and its widespread adoption is thus emerging as a critical trend for market growth. For instance, the Federal Aviation Administration (FAA) Destination 2025 (FAA 2025) aims to develop cleaner jet fuels, explore innovative ways to fulfill environmental goals, and boost the development towards one billion gallons of renewable jet fuel for aviation use. Alternative jet fuels via Fischer–Tropsch and hydrotreated vegetable oils (HEFA) are approved for jet fuel blends. Utilization of HVO in the aviation industry to shift towards more sustainable practices is anticipated to boon the global HVO market analysis in the upcoming years.

HVO is also approved for utilization as an aviation (jet) fuel based on the standard ASTM D7566-14. The updated version of the standard ASTM D7566-14 offers around 50% bio-based components, including this oil to be added to aviation fuel or conventional jets. Henceforth, HVO, which can be easily upgraded to sustainable aviation fuel, has emerged as an alternative for producing renewable or sustainable aviation fuels. Major initiatives by the refineries to increase the usage of HVO in their jet fuels also contribute to the overall market growth. For instance, AltAir's refinery generates small amounts of hydrotreated vegetable oil jet fuel and a much larger quantity of HVO diesel for the automotive industry. Such noteworthy initiatives by the refineries and the utilization of HVO in the aviation industry will thus contribute to the growth of the global market.

DRIVING FACTORS

Increasing Demand for Renewable Diesel Owing to its Significant Advantages Boost the Market Growth

This oil is emerging as an alternative to biodiesel and is utilized by several organizations across industries for its significant benefits. The rising environmental concerns coupled with the need to decrease carbon emissions have generated demand for renewable diesel, boosting the global hydrotreated vegetable oils market growth. Renewable diesel is compatible with all diesel engines and leads to the clean burning of purer fuels. It offers high quality and delivers over 50% reduction of greenhouse gases than any petroleum-based diesel. It also provides 80% lower lifecycle emissions and advanced solutions which mainly support the environment and efficiencies in fleets. Such factors increase demand for renewable diesel among various industries, thus boosting the global market.

Furthermore, as renewable diesel substantially provides superior performance in cold weather and requires low maintenance compared to petroleum diesel, it is gaining massive traction in various applications, including events and production, agriculture, aviation, and construction. Hydrotreated vegetable oil is 100% sustainable, renewable, and biodegradable, and the rising consumer awareness regarding a sustainable environment also aids in the market growth. Powering engines and vehicles with hydrotreated vegetable oil reduces CO2, PM, and NOX emissions which is critical to improving air quality. It also offers fewer regenerations in diesel particle filters, and no odor, further leading to massive demand from industries. The long-term storability allows storing the renewable diesel for a more extended period with low to zero deterioration in the water accumulation or quality. Henceforth, the increasing demand for renewable diesel, due to its several benefits, drives market growth.

Growing Usage of Hydrotreated Vegetable Oil in the Automotive Industry Enhances the Global Market

This type of oil is a sustainable alternative to petroleum diesel as it has a similar composition as fossil diesel fuels. Renewable diesel significantly impacts the transportation industry as vehicle emissions are highly responsible for many greenhouse gases. The increasing usage of HVO as a renewable fuel in existing diesel engine vehicles (pure or blended) is thus driving the global industry. It can be used in any diesel engine in any concentration with no modifications, and the high cetane number provides year-round performance to the vehicles. The automotive industry highly uses HVO as the hydrotreated production process removes impurities, lowers fuel maintenance, and ensures safer handling. The rapid growth in the global automotive industry contributes to the increasing usage of this oil. The increasing population, advanced vehicle-manufacturing technologies, and microeconomic development have boosted the automotive industry, thus generating demand for this oil.

The global automotive industry is burgeoning, leading to the rapid adoption of hydrotreated vegetable oil compared to traditional fuels. The automotive industry uses HVO on a larger scale as it offers lower maintenance costs due to less risk of degradation and can be easily mixed in all proportions with regular diesel. Renewable diesel is a direct replacement for all diesel and biodiesel fuels in the automotive industry, requiring no compatibility modifications. The fluid without oxygen helps the fleet owners reduce storage, cold weather & water attraction challenges. Renewable diesel is also used highly by the automotive sector as the fuel is combusted with maximum efficiency while eliminating the regenerations in the particulate filters & injector maintenance frequency. The increasing usage of HVO in the automotive industry, owing to the improved mileage, lower carbon and greenhouse gas emissions, and reduced dependence on non-renewable fossil fuels, is projected to drive market growth over the forthcoming years.

RESTRAINING FACTORS

Increasing Usage of Biodiesel and High Costs Associated with HVO Impedes the Market Growth

Biodiesel, also termed FAME diesel (Fatty Acid Methyl Ester), is a first-generation biofuel used by many industries in recent years. An increase in the usage of ethanol & biodiesel is the key factor hampering the global hydrotreated vegetable oil market growth worldwide. The growing usage of biodiesel due to its lower emission benefits than fossil fuels, when burnt, is expected to restrain the market growth over the forecast period. Hydrotreating equipment's capital costs are higher than other equipment required to produce biodiesel ethanol. Renewable diesel costs more than conventional diesel, which may eventually translate to the pump.

Higher costs associated with producing hydrotreated vegetable oil thus hinder market growth worldwide. However, several regions firmly seek to lower greenhouse gas emissions, offering cost-offsetting legislation to reduce the higher production cost. The initiative can thus reduce the negative impact on renewable diesel production and allow fleet managers to purchase it for less than conventional diesel. Furthermore, the various current feedstocks used to make renewable diesel leads to some environmental concerns. For instance, using palm oil feedstock to make renewable diesel caused few land concerns, such as deforestation and destruction of natural habitats, limiting the growth of this market.

SEGMENTATION

By Type Analysis

Pure HVO Segment Holds The Dominant Market Share Due To Its Lesser Environmental Impact Than Traditional Fuel

This market is bifurcated based on type into Pure HVO and Co-processing. The Pure HVO segment holds the dominant market share due to its lesser environmental impact than traditional fuel. Pure HVO is produced from renewable raw materials, which do not release any new carbon dioxide (CO2) into the atmosphere. Many refiners’ biofuel journeys will likely begin with co-processing up to 10% renewable feedstock (such as animal fats, used cooking oil, and vegetable oil) in an existing hydrotreating unit for little or no capital expenditure. This can be a low to no-capital cost response for producing hydrotreated vegetable oil (HVO), potentially bridging the gap and complying with regulations before dedicated units are built for 100% biofeeds.

By Application Analysis

PV Power Station Application Segment Holds the Dominant Market Share Due to the Increasing Power Generation from Solar PV

This market is segmented by application into transportation, industrial power generators, and others. The transportation application holds the dominant market share due to the increasing adoption of emissions-free vehicles. The HVO can reduce a truck’s emissions by up to 90%, promising a more sustainable fuel that can be used right here and right now on Euro 6 standard diesel trucks. As emissions regulations are reportedly set to get more stringent, HVO could become the guiding light toward a greener future for road transport companies.

The industrial power generators segment is propelling due to its higher oxygen stability. HVO is a paraffinic drop-in diesel fuel substitute that provides a cleaner alternative to power diesel generators.

REGIONAL ANALYSIS

This market is studied across the following regions: North America, Europe, Asia Pacific, and the Rest of the World. Europe dominated the market in 2022; implementing RED II, increasing quotas and new capacity additions should see HVO and biodiesel production expanding by 40 kb/d to 320 kb/d.

North America is expected to propel due to government regulations regarding adopting renewable energy sources. HVO production continues to grow strongly in the U.S., supported by several policies that drive HVO investments, including the Renewable Fuel Standard, Renewable Identification Numbers prices, LCFS credits, and biodiesel blender credit.

China, India, Malaysia, and Indonesia are some of the key market contributors to the Asia Pacific. Malaysian biodiesel production is expected to reach 40 kb/d in 2026, supported by a B20 blending mandate delayed until early 2022. Palm oil prices, at their highest in nearly a decade, have widened the price premium over crude for biodiesel.

KEY INDUSTRY PLAYERS

Companies Focus on Mergers & Acquisitions and Partnerships to Gain Competitive Edge

The global market is highly competitive, with prominent key players who account for the majority of the stakes in the market at the global and domestic levels. Further, the key players are enhancing their production capacities by increasing operational enhancement and adopting digital tools, a benchmark factor.

Subsequently, most of the key players operating in the market majorly provide pure HVO, which results in the dominating share of hydrotreated vegetable oil by type.

In parallel, the adoption of hydrotreated vegetable oil is growing because co-processing technology is the best approach to increase efficiency and power output to their highest levels. Increasing the manufacturing capacity and R&D resources for hydrotreated vegetable oil will benefit all downstream customers. It will only help to lower costs, increase efficiency and improve reliability.

List of the Key Companies Profiled:

• Neste (Finland)


• Valero Energy (U.S.)


• World Energy (U.S.)


• Eni (Italy)


• Cepsa (Spain)


• Total (France)


• REG (U.K.)


• Preem (Sweden)


• UPM Biofuels (Finland)


• Repsol (Spain)

KEY INDUSTRY DEVELOPMENTS:

• December 2022 - Cepsa invested around USD 3.15 billion in European green hydrogen projects. The project will produce 300,000 tons of hydrogen/per year, which will be used to power the company's refineries & local heavy shipping and haulage.


• November 2022 - Neste acquired the aggregation business, related assets, and the used cooking oil (UCO) collection from Crimson Renewable Energy Holdings, LLC, in the United States.


• November 2022 - Eni announced that it plans to build a third biorefinery at its Livorno site to produce hydrotreated vegetable oil. The bio-refinery will consist of three biofuel plants: a pre-treatment unit for biogenic raw materials, an eco-fining plant with a capacity of 500,000 tons/year and a plant for producing hydrogen from methane gas.


• August 2022 – World Energy announced the launch of its engineering plans which will convert its assets and launch a new Sustainable Aviation Fuel (SAF) hub. This will also allow the company to produce 250 mn gallons of SAF annually by 2025.


• June 2022 - Chevron Corporation completed its previously announced acquisition of Renewable Energy Group, Inc., following approval by REG stockholders. With the acquisition, both companies have brought together complementary capabilities, assets, and customer relationships to make Chevron one of the leading renewable fuel companies in the United States.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on key aspects such as leading companies, types, and leading applications of the product. Besides, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that contributed to the growth of the market in recent years.

REPORT SCOPE AND SEGMENTATION