Written on: April 6, 2026 by Joe Uglietto
The Winter of 2026 was a throwback in the Northeast and Mid-Atlantic. We experienced one of the coldest Winters in years and heating companies were selling a record number of gallons. However, it wasn’t all sunshine and roses for our fuel dealers—is it ever?
Dealers that have actively transitioned their company towards biodiesel blends, or operate in States with biodiesel mandates, have struggled given the high prices of biodiesel. When the Federal Blenders Tax Credit (BTC) expired at the end of 2024, the industry lost the $1.00 per gallon credit from the supply chain. This resulted in high biodiesel prices and a substantial difference in the biodiesel price compared to ultra-low-sulfur diesel (ULSD). The outcome has resulted in many heating oil companies that have historically blended within programs like the Massachusetts Alternative Energy Portfolio Standard—and even companies outside of those kinds of programs—have ceased all blending activities. If the loss of the BTC wasn’t challenging enough, the program to replace it (the Section 45Z Clean Fuel Production Credit) has faced many delays in its implementation. However, we just might be getting close to an implementation date of this important regulation.
On Feb. 4, 2026, the U.S. Dept. of the Treasury finally released the proposed regulations in a 170-page guidance document that states that 45Z will provide a Federal Tax Credit at the producer level from 2025–2029. In 2026, qualified product must derive from U.S., Mexican or Canadian feedstock. 45Z will cover renewable fuels for the transportation, heating and aviation sectors. Unlike the BTC, which was a flat $1.00 per gallon tax credit, the value of 45Z will be based on the carbon intensity of the renewable fuel produced—the lower the carbon intensity, the higher the value of the credit. For heating fuels, the value of the 45Z credit is roughly estimated to be between $0.27 and $1.00 per gallon, depending on the carbon intensity score that the renewable fuel receives.
Final guidance on 45Z and the final regulations will be released by the U.S. Environmental Protection Agency (EPA) in the upcoming months. This is great news for both the renewable fuels industry and the heating oil industry in the Northeast and Mid-Atlantic. It is expected that 45Z will reduce the price of biodiesel and we should see a reduction in the differential between biodiesel and heating oil pricing. This should lead to lower prices in the mandated heating oil markets and an increase in blending in the incentivized markets.
Guidance around biodiesel credits and its impact on pricing is a strong move in the right direction for our industry. The high cost of energy, combined with a cold Winter, have squeezed voters, creating an untenable environment for most elected officials to support aggressive action that would increase prices. This is another bit of wind at our backs. How long the favorable conditions will last is a major question, and securing certainty around 45Z will stabilize at least one issue affecting the industry right now.
As for how long the freeze on State-driven decarbon-ization programs will last, that’s the million-dollar question. In Vermont, the Public Utilities Commission officially declared “case closed” when it comes to the development of the Vermont Clean Heat Standard. The alternative might be worse for us, but there won’t be a Clean Heat Standard in the Green Mountain State. The Massachusetts Dept. of Environmental Protection has delayed its Clean Heat Standard until 2028, but we expect to see movement towards decarbonization programs in Maryland and Pennsylvania. It’s anyone’s guess which State will launch first.
In the meantime, we should all be glad for movement towards 45Z guidance and the stability that it will bring to our industry and to the prices our customers are paying for heating oil blended with biodiesel. ICM
Renewable Energy Insights is a regular column by Joe Uglietto, President of Diversified Energy Specialists; with a focus on emissions, reductions & renewable energy innovation. DiversifiedEnergySpecialists.com.
