But its chief executive, David Lamp, said the government’s role in subsidizing renewable diesel made it an inherently unstable business. Federal and state incentives could encourage the industry to produce more fuel than is needed. On the flip side, he worries that Congress or California could abruptly pull the plug on incentives.
“Take one of those subsidies away and you are at break-even,” Mr. Lamp said. “With the deficit situation of the federal government, some of these things are going to have to be looked at pretty hard.”
Another concern is that as more refineries get into this business, it could become harder for them to find enough kitchen grease and animal fat.
“The real limit on renewable diesel is the availability of feedstock,” said Kurt Barrow, a vice president at the energy research and consulting firm IHS Markit.
But Jeremy Baines, president of Neste U.S., the American unit of a Finnish energy company, is more optimistic. He expects large companies like Amazon, Walmart and UPS to increase their use of the fuel as they look to reduce the carbon emissions of their truck fleets.
“Even if you want to go 100 percent electric, renewable diesel is the only thing deployable and scalable today,” he said.
Neste Oyj supplies its two biggest markets, Europe and North America, from refineries in Singapore, the Netherlands and Finland, and is looking to find or build another plant. The company collects grease from tens of thousands of restaurants worldwide, including in the United States, then mixes it with waste from around the world at its refineries. Once processed into renewable diesel, the fuel is sent around the world, including to California and Oregon. One of its customers is Oakland, which uses the fuel in city vehicles.