Feature 2 — Renewable Propane

The Path to a Viable Renewable Propane Market

Renewable propane’s success requires

capitalizing on heating & power demand

By Gokul Vishwanathan

Renewable propane has become one of the propane industry’s most talked-about, low-carbon opportunities, but its growth remains closely tied to renewable diesel production and low-carbon fuel credits. The debate for many in the industry is whether low-carbon fuel credit incentives are serving as a launchpad for a self-sustaining market or as a long-term requirement for growth.

Today, the renewable propane produced in the United States that is not exported is distributed primarily to three states that have adopted clean fuel standards or low-carbon fuel standards (LCFS): California, Oregon and Washington. In addition, New Mexico and Hawaii have recently approved their own clean fuel standards. These standards are supporting renewable propane adoption for transportation applications (on-road and forklifts). For example, Kitsap Transit in Washington will save $600,000 on fuel costs in 2026 by switching from diesel shuttles to 100% renewable propane autogas Ford E-450s. Stories like this are only possible today because the state’s incentive structure makes renewable propane sales economical for refineries.

Take California, where, depending on the carbon intensity of the product, refineries receive about $3.19 to $3.87 in value from credits for every gallon of renewable propane sold. (Note: Trading prices are from Q2 2026.) Without any fuel credits, refineries would only make the energy price of $0.70 for every gallon of renewable propane sold, while the product cost of renewable propane would be several times higher than that.

With the current dynamic, expanding renewable propane sales outside of the five states that have adopted clean fuel standards is not economical for refineries unless a customer is willing to pay a green premium. On the supply side, renewable propane production costs are driven up by expensive feedstocks, as the price is indexed using soybean oil price.

Renewable Propane Production Economics & Opportunities

The good news is that production is not the industry’s biggest obstacle. Renewable propane output is currently about 4 to 5 million gallons annually, but we expect production could reach 50 million gallons within a few years and potentially expand to nearly 1 billion gallons over the next decade, if demand rises. One reason for this is the growth of renewable diesel and sustainable aviation fuel production. Every 100 million gallons of renewable diesel using triglyceride feedstocks can generate roughly 5 to 7 million gallons of renewable liquefied petroleum gas, creating a significant production opportunity.

With the production positioned for growth, many industry leaders and biorefiners point to the current policy structure (or lack thereof) as a primary limitation on renewable propane adoption. One issue with the current Environmental Protection Agency (EPA) Renewable Fuel Standard (RFS), Renewable Identification Number (RIN) and state-based LCFS structure is that incentives are confined to transportation, i.e., on-road vehicle fleets and off-road vehicles including forklifts. Markets like residential and commercial heating and power generation, despite representing substantially larger fuel demand, generally do not qualify for the same credits.

Unlocking Renewable Propane Demand Beyond Transportation

Industry stakeholders argue that expanding clean fuel programs to include heating, power generation (including electric vehicle charging) and other energy applications could help unlock additional demand and accelerate adoption. In short, there will be significant market demand if renewable propane is given the same footing as bio heating oil, which qualifies for RIN credits under EPA’s RFS program.

Incentivizing renewable propane for heating applications could grow demand in regions where the industry has already established a foothold. For instance, renewable propane autogas has been distributed to Maine, North Carolina and Virginia in recent years as school districts, commercial entities and universities are testing new ways to reduce their carbon footprint. Because renewable propane has a substantially lower carbon intensity than conventional diesel, gasoline and propane — and less than half the carbon intensity of electricity in some comparisons — fleets limited to federal RIN credits are already seeing value in the fuel without state-based incentives.

All these considerations lead to the central question: What will it take for the renewable propane market to grow?

Several factors would need to align. Incentives like LCFS and federal RIN credits are designed to facilitate innovation and establish supply chains until such a time that production costs become low enough that the market no longer requires them. To this end, renewable propane production costs must continue to decline as more feedstocks are unlocked and more refiners market the energy source instead of using it internally for process-heating or hydrogen production. Feedstock costs must also decline as supply chains mature. Most importantly, demand must grow in high-volume markets such as heating and power generation applications.

Using the current credit stacking as a surrogate for renewable propane production costs, it is expected that renewable propane delivered to a home today would cost roughly over $6-7 per gallon in the absence of credits. Bridging the price gap between renewable and conventional propane is achievable over time with durable incentive structures, more feedstock availability for fuel production and increased production volumes satisfying increased market demand. We have already heard that a California refinery is planning to sell renewable propane, and Montana Renewables has announced it will begin selling renewable propane in 2028 and beyond. To increase demand, it will be essential to create opportunities outside of off-road equipment and on-road vehicles, as this sector only accounts for less than 1 billion gallons of conventional propane sold today.

Next Steps for Marketers: Prepare for the Tipping Point

For propane retailers, the market has advanced enough that the industry should begin preparing now rather than waiting for renewable propane to reach full maturity. We should be preparing for it to reach a tipping point.

The Propane Education & Research Council (PERC) encourages marketers to begin conversations now with refiners and suppliers and to consider how renewable propane could fit into their long-term strategies. Stronger demand signals could support significantly greater production volumes.

Renewable propane’s long-term success may begin with low-carbon fuel standards, but growing market demand and evolving policy frameworks can ultimately position the industry to thrive on its own.