Propane Decarbonization Possible But Barriers Need To Be Cleared: New Report

While large-scale production of renewable propane is possible in Canada, there are certain barriers to overcome, including costs and other risks, according to a new report.

The Canadian Propane Association (CPA) commissioned a report released today titled Technical Feasibility of Decarbonising Propane in Canada. It was authored by Christopher Bataille and Seton Stiebert.

“Any first-of-kind renewable propane production plant in Canada faces large investment risks from securing financing, planning and regulatory permitting, to new and unreliable technologies and processes, changing carbon policies and uncertain future markets,” reads the report.

“These risks are not unique to renewable propane, many other industrial decarbonization strategies face similar barriers, so there is an opportunity to align with other industry organizations on common issues.”

For the CPA’s part, the report needed to reveal whether or not renewable propane can be produced in Canada, Katie Kachur, the CPA’s vice-president, government relations, west told the DOB.

“The answer is ‘yes, but …’” she added, emphasizing the conditions. “We will dive in with governments, depending on who we’re talking to and what it’s about, on [that] part. How do we remove those blockades?”

“If we want to play in the emissions reduction space, we needed solid, quantifiable evidence in my opinion,” she added, noting other jurisdictions that have done this, naming the U.S., Europe, Australia and New Zealand.

Kachur said that, in her opinion, a few of the so-called barriers could be easily removed.

“We need to establish clear, competitive incentives to get marketable propane in Canada,” she added. “The first answer is … level the playing field for all biofuels.”

“If biofuels are part of the future, folks say they are, … then we need to get in the game now and we need to be producing it now to lower our emissions.”

According to the report, initial research suggests renewable propane production pathways are likely to be less expensive than many other biofuel routes.

“Considering that liquid biofuel incentives in the U.S. have been successful in building the first-of-kind plants and ramping up production, similar incentives per unit of energy delivered could also produce renewable propane,” it continued.

Canada does not currently possess favourable conditions for building first-of-kind renewable propane production facilities necessary for decarbonization, according to the report.

In contrast, it says the U.S. Inflation Reduction Act (IRA) and the European Green Deal Investment Plan look to accelerate investment in near-zero industrial production through process subsidies.

These subsidies, it adds, create a competitive disadvantage for Canada. As such, the report urges the CPA to support “matching government subsidies and financial instruments that can enable first-of-kind facilities with a good chance of success.”

The report points out that biofuel production in most jurisdictions needs stacking of different financial incentives. It cites California, for example, where biofuel production is supported by the state low carbon fuel standard, the federal RFS and blenders tax credits, which will be replaced by production tax credits under the IRA.

“Ensuring that these incentives stack up to a level that provides a minimum level of support for at least 10 years, a typical period for core capital amortization, is critical for investment in first-of-kind plants,” it reads.

There are eight potential pathways identified that could potentially emerge to produce propane in Canada. This includes some that appear more viable and likely in the near term than others, wrote Stiebert in an email to the DOB. Among them are hydrotreated vegetable oil or animal fats, biomass gasification, and pyrolysis hydrotreating.

While pathways based on green hydrogen and CO2 are technologically viable, they are currently expensive, the report found.

“While these are unlikely to be economically viable in the near-term, it is worth following these efforts.”

Biopropane is a byproduct of the renewable diesel process. Kachur said she knows of facilities that keep this byproduct within the facility, which they then use as a cleaner feedstock, because incentives do not exist to get it to market.

Canada should be in this space   

With some policy changes, she added, “you could have renewable propane on market as a byproduct.”

Taking a guess, Kachur expects by the end of 2024 every state in the U.S. will likely have renewable propane.

“They’re doing it, Europe’s doing it,” she added. “Different markets, for sure, but we think because of our resources, technology, and the feedstocks we’ve got, we should be in this space.”

The report recommends that CPA highlight Canada’s strategic advantages for renewable propane production globally. This includes low-cost, abundant bio feedstocks for renewable propane production, and biogas utilization for propane production, helping to reduce and manage current emissions from biowastes.

It also suggests shining a light on its low cost and extensive regional networks, and demand for versatile low-carbon fuels.

This message needs to be broadly disseminated, said Stiebert, singling out propane retailers, propane producers, different levels of government who are navigating energy policy, investors, and technology providers.

“Not many people know that [decarbonization] of propane is even possible as little attention has been paid to this opportunity to date.”

Large consumers of propane that have clear goals for decarbonization are potentially good candidates for the purchase of contracts or offtake agreements, the report states.

“For first-of-kind renewable propane production it may be essential for contracts and offtake agreements to flow all the way from production to final end-use to ensure that long-term market support is guaranteed for all participants,” it adds.

It’s necessary to know where the renewable propane will be produced, who it will be sold to and where it will be used so that it can be successfully marketed, said Stiebert.

“The idea of offtake agreements is that they can provide a premium price to guarantee a secure long-term supply.