Fuel For The Edges: Five Biofuel Companies Built To Last In The Energy Transition

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I’ve been rebalancing my portfolio lately. It’s something I do every couple of years—trim what’s run ahead, add where conviction has deepened, and adjust based on what I now believe to be real, durable value. I’m not a trader. I buy and hold for years, sometimes decades, and while my portfolio leans heavily toward the digital and electrification of everything, hence my recent battery EFT assessment, I keep an eye on the corners of the energy transition where electrons alone won’t cut it. That brings me, inevitably, to biofuels. And to be clear, this is not investment advice. I’m sharing my reasoning, not offering you a target allocation or price point. Do your own diligence, or ignore the sector entirely. That said, here’s what I found worth considering and why.

As I noted in the battery assessment, I was finally shoved out of my procrastination by Pearl Jam. Well, at least by Stone Gossard, the guitarist for the grunge band. A mutual contact connected us as the band puts a carbon price of $200 per ton on its concerts and invests the resulting pool of cash in fixing the climate. Now they realize, like a lot of other people, that doing good and making money are synonymous. We talked climate investing a couple of weeks ago, and that triggered me to finally put my own pool of cash—smaller—into action again.

Biofuels have never been the center of the energy transition, and they never will be. That role belongs to renewably-generated electricity and the batteries and grids that move it. But liquid fuels will persist—particularly in the parts of transport and industry that resist electrification. Long-haul aviation is the most obvious example. You’re not going to fly a narrow-body across the Pacific on battery power, not this decade and not the next. Likewise, in maritime shipping, even with battery-electric coastal operations gaining ground, ocean-crossing vessels will still need dense, combustible energy carriers. Hydrogen and e-fuels continue to attract headlines, but their economics and thermodynamics remain unfavorable for most use cases. Biofuels—when derived from waste biomass and deployed in sectors that truly need them—offer a more grounded, scalable solution.

Still, as an investor, this is a hard space. A lot of early biofuel bets imploded: poor margins, poor feedstock strategies, poor timing. Some leaned too heavily on food crops, drawing justified criticism and volatility when commodity prices spiked. Others burned through cash chasing futuristic pathways that were years too early. The question, for someone building a portfolio for the long haul, is not which firm has the most exciting press release. It’s who is already operating at scale, with real customers, real revenue, and a defensible moat. And among the pure-play firms with little to no fossil fuel exposure, four companies emerged as worth my time: Neste, Darling Ingredients, UPM Kymmene, and Aemetis.

Let’s start where the conversation always should—with feedstock. Biofuels don’t begin in the lab or at the pump. They begin at the fryer, the field, the forest floor. And whoever controls or integrates feedstock supply is already playing a different game than those reliant on spot markets. Neste, the Finnish leader in renewable diesel and sustainable aviation fuel (SAF), operates a global supply chain that spans three continents. It sources used cooking oil, animal fats, and other residues, pre-treats them at scale, and converts them into high-quality drop-in fuels using proprietary hydroprocessing tech. It’s the biggest producer of SAF in the world today. What it lacks in fossil scale, it more than makes up for in logistics, policy fluency, and execution.

Darling Ingredients, a less famous name, is arguably even more secure on feedstock. It collects and renders about 10% of the world’s inedible animal by-products—literally the fat and bone left after livestock are processed—and turns a significant portion into low-carbon fuels via its 50-50 joint venture with Valero, Diamond Green Diesel. That JV is now the second-largest renewable diesel producer on the planet, with capacity nearing 1.2 billion gallons per year. The synergy is textbook: Darling supplies the feedstock, Valero supplies the refining and distribution infrastructure, and the fuel flows into markets like California, where LCFS credits stack on top of federal subsidies. The cash flow from the JV shows up consistently in Darling’s books, offsetting volatility elsewhere in its animal feed and fertilizer business.

UPM Kymmene, a Finnish forest products firm, has a very different profile—more industrial conglomerate than energy company. But it’s been quietly converting tall oil, a by-product of its pulp mills, into renewable diesel at its Lappeenranta biorefinery for nearly a decade. This isn’t speculative. It’s operational, integrated, and compliant with Europe’s most stringent advanced biofuel criteria. The volume is small—about 100,000 tonnes per year—but the margins are healthy, and the feedstock is fully captive. UPM is currently deciding whether to build a new 500,000-tonne biorefinery that would include SAF, and if it does, it’ll bring the same integration logic with it: using its own forestry residue streams, located adjacent to its existing industrial clusters, to create fuels where there’s already logistics and energy available. It’s moving slowly, but with capital discipline and a clear view of the regulatory landscape.

Aemetis rounds out the list as the highest-risk, highest-potential candidate. Based in California, it operates an ethanol plant today and is building out both a renewable diesel and SAF refinery as well as a dairy manure biogas network. The assets are real, the offtake agreements are impressive—Delta, Japan Airlines, and ten others have signed multi-year SAF supply contracts—and the LCFS and federal incentive stack in California makes the revenue projections look attractive. But this is not yet a consistently profitable business. It’s a capital-intensive transition play that depends on execution. If they build their projects on time and on budget, they could become a major SAF player. If not, it could be a cautionary tale. For now, I treat it as a speculative growth position—a small piece of the portfolio with a long time horizon.

From a pure investment ranking perspective, Neste is in a league of its own. It combines scale, diversification, and policy fluency with a high-integrity ESG story and continued margin strength, even in a turbulent year. Its downside for me is that it’s still running a legacy oil and gas refinery, but like Orsted, it’s exiting the fossil fuel industry rapidly and I believe its commitment. Darling is close behind, thanks to its unparalleled feedstock integration and the reliable cash flow from Diamond Green Diesel. UPM is the low-beta, high-discipline pick—less upside, but strong integration and balance sheet. As I’m bullish on engineered mass timber and hydroelectric, that it has plywood and hydro in its assets is something I’m comfortable with. Aemetis is the call option on SAF growth—too early to tell, but too well-positioned to ignore.

All of them are well off the 2021 clean investment bubble prices, so they are value priced now. And Trump’s tariffs have depressed all stocks. I exited the last of my Tesla—bought for an average of $19 at the current split level and long before the current craze for “I bought this car before Elon went crazy” bumper stickers—after the election and have been sitting on a pot of cash since, waiting until I figured out what I was going to do with it and what the right timing is. Well, biofuels and batteries for the what, and now for the when. Somebody online was stunned that I had divested TSLA and was considering biofuels, but I think it’s the right call. And my batteries ETFs include BYD among a lot of other Chinese battery and EV firms.

This portfolio shift doesn’t replace my investments in wind, solar, or grid infrastructure EFTs, my China digital economy investments or the Apple stock I bought at some much lower price lost to the mists of history. It complements them. Biofuels aren’t going to replace electrons, and they’re not the universal answer to decarbonization. But for the segments of global energy where combustion isn’t optional, and where electrification will be slow or partial, these firms offer a viable path to sustainable energy. They’re not making hydrogen hype. They’re not pretending every flight can run on batteries. They’re grinding biomass into something useful and low-carbon, with customers who need it and policies that support it.

With the International Maritime Organization’s recent passing of hard net zero requirements for 2050 with up to $380 per ton fines for missing reduction targets, biofuels are going to be getting hotter again.

I won’t buy all five. I might not even be able to buy the three I want due to arcane rules about Canadian RSPs, although I have other cash on hand outside of that part of my portfolio, so may invest regardless. But I came away from the analysis with a clearer view of who’s likely to be producing real molecules for hard-to-abate sectors five years from now. If the world still needs liquid fuels—and it will—I want to hold shares in the companies making the cleanest, cheapest, and most scalable ones. That’s what this sector offers: not fantasy, but functional climate solutions. And in a portfolio designed for the long transition, that’s worth owning.