Developing Profitable Biogas Projects: Key Policy Drivers

Transcription

1 Developing Profitable Biogas Projects: Key Policy Drivers Presented by: Graham Noyes Keyes, Fox & Wiedman LLP American Biogas Council May 27, 2014

2 Overview of Presentation Renewable Fuel Standard (RFS) Low Carbon Fuel Standard (LCFS) AB 32 (comments) Renewable Energy Credits (RECs) and Renewable Portfolio Standards (RPS) (comments) 2

3 Bioenergy Practice Sacramento Based Regulatory: RFS, LCFS, SB 1122, AB 32 Transactional: Feedstock, Offtakes, Gas Upgrading, JV s Project Development: Incentives, Financing, EPC s 3

4 Renewable Fuel Standard (RFS2) BG in 2013; 36 BG in 2022 Corn starch ethanol now at 13.8 BG capped at 15 BGY beginning in 2015 Advanced Biofuel increases to 21 BGY by 2022 Beyond 2022, EPA has discretion with boundaries EPA Indicates 2014 Ethanol Blend Wall Final 2013 Volume Standards a Cellulosic biofuel 6 mill gal Biomass-based diesel 1.28 bill gal = 1.92 EEG Advanced biofuel 2.75 bill gal Renewable fuel bill gal 4

5 RFS2 Categories 5

6 Policy Context: Crude vs. Natural Gas $20.00 $ $18.00 $16.00 $ Price ($USD per million BTUs) $14.00 $12.00 $10.00 $8.00 $6.00 $80.00 $60.00 $40.00 Price ($USD per barrel) $4.00 $20.00 $2.00 $0.00 $0.00 Natural Gas Crude Oil Source: BP Statistical Review of World Energy, June

7 Fleets Moving to Natural Gas 2011: Waste Management, Inc. states 80% of trucks purchased in next 5 years will be NG-fueled 2012: AT&T orders 1,200 CNGfueled cargo vans GM s largest-ever CNG vehicle order 2013: UPS announces plan to expand LNG-fueled fleet from 112 to 800. Source: Trucking Industry Is Set to Expand Its Use of Natural Gas, New York Times Will Truckers Ditch Diesel? Wall Street Journal

8 Other Key RFS2 Developments Hot Political Topic in DC Rule Pending Development of Quality Assurance Program ( QAP ) Increased Reliability, Liquidity, Future Value RINs listed on ICE, CME Group Increased Monitoring and Enforcement 8

9 Pending RFS Pathways New Fuels Company Fuel Feedstock Process 11 Good Energy, Inc. New (G2 Diesel) Soy bean oil, Oil from annual cover crops, Algal oil, Biogenic waste oils/fats/greases, and Canola oil Diamond Green Diesel, LLC DriveGreen, LLC New (renewable naphtha) New (renewable electricity) Biogenic waste oils/fats/greases, non-food grade corn oil, soybean oil, canola oil Landfill biogas Element Markets, LLC CNG Biogas from anaerobic digesters Any Esterification Hydrotreating New (proprietary) Emerald Biofuels LLC, Global Clean Energy Holdings, and UOP LLC Renewable diesel, jet fuel, and naphtha New (jatropha) Hydrotreating Gevo Isobutanol Corn New (proprietary) Golden Renewable Energy, LLC Renewable diesel New (municipal sewage sludge), Biogenic waste oils/fats/greases N/A Cellulosic biofuel New (pulp wood) Any POP Diesel, Inc. New (un-transesterified plant oil) New (jatropha oil) WM GTL, Inc. Cellulosic Diesel New (landfill biogas) Any New (proprietary) New (proprietary) 9

10 Pending RFS Pathways - Biodiesel Company Fuel Feedstock Process Agrisoma Biosciences Inc. Biodiesel, renewable diesel, jet fuel, heating oil, naphtha, LPG New (Brassica carinata oil) Transesterification, Hydrotreating Arvens Technology, Inc. Biodiesel New (pennycress) Transesterification Emerald Biofuels LLC and Global Clean Energy Holdings National Cottonseed Products Association Biodiesel New (jatropha) Transesterification Biodiesel, renewable diesel New (cottonseed oil) Transesterification N/A Biodiesel, renewable diesel New (palm oil) Trans-Esterification; Hydrotreating Rothsay Biodiesel New (biodiesel) Biogenic waste oils/fats/greases Transesterification Solazyme Biodiesel, renewable diesel, jet fuel Carbohydrate, Algae Transesterification Hydrotreating 10

11 Low Carbon Fuel Standard (LCFS) Foundation is AB 32, Global Warming Solutions Act of 2006 Goal of AB 32 is to reduce greenhouse gas emissions ( GHGs ) to 1990 levels by 2020 California Air Resources Board ( CARB ) tasked to develop and implement regulations 11

12 Fundamental Structure of LCFS Can stack credits with RINs LCFS requires 10% drop in Carbon Intensity ( CI ) of transportation fuels Establishes CI Baseline for Program Use Imposes Declining CI requirements Sets CI levels for various fuels Regulated party must meet CI standards Complicated system for assigning responsibility as Regulated Party Includes gasoline, diesel fuel, alternative fuels, CNG, LNG, electricity, hydrogen 12

13 Diesel Carbon Intensity Table Year Average Carbon Intensity (gco2e/mj) 2010 Reporting Only % % Reduction Δ % Reduction % 0.25% % 0.50% % 0.50% % 1.00% % 1.00% % 1.50% % 1.50% % 1.50% 2020 and subsequent years % 2.00% 13

14 Diesel Carbon Intensity Diesel Biodiesel Fuel Virgin Soy Biodiesel Pathway Description ULSD based on the average crude oil delivered to California refineries and average California refinery efficiencies Conversion of waste oils (Used Cooking Oil) to biodiesel (fatty acid methyl esters FAME) where cooking is required Conversion of Midwest soybeans to biodiesel (fatty acid methyl esters FAME) Carbon Intensity Values (gco2e/mj) Direct Emissions Land Use or Other Indirect Effect Total Compressed Natural Gas Dairy Digester Biogas to CNG Renewable Diesel Liquefied Natural Gas Conversion of tallow to renewable diesel using higher energy use for rendering Overseas sourced LNG delivered as LNG to Baja; re gasified then re liquefied in CA using liquefaction with 80% efficiency

15 LCFS Economics- Rule of Thumb Each 10g of reduction is worth.0125 per gallon when the carbon market price is $10 per ton. Thus, dairy digester CNG would provide about a 10 cent credit per gallon in a $10/ton market Recent market range = $30 to $40 per ton Dairy CNG in $35 market =.35 /Diesel Gallon Equivalent 15

16 LCFS 2014 Updates Legal Challenges to LCFS decided in 2013 Poet, LLC v. California Air Resources Board (Cal. Ct. of Appeal, July 15, 2013) Rocky Mountain Farmers Union v. Corey (Ninth Circuit, Sept. 18, 2013) LCFS upheld in both cases. But remand to District Court in Rocky Mountain to apply balancing test. Poet resulted in flattening of CI Curve 16

17 LCFS 2014 Updates New LCFS Pathways 16 new applications for Method 2 Fuel Pathways submitted in Includes pathways for biodiesel, biomethane, ethanol, renewable diesel, and LNG. 50 total applications pending for Method 2 Fuel Pathways. 1 Fuel Pathway proposed by ARB in 2013 for North American landfill gas. 17

18 LCFS 2014 Updates LCFS Amendments Significant revisions of program occurring this year for Board Approval. Potential amendments include: Cost containment Indirect land use change values Credits for electric rail and forklifts Flexible compliance mechanisms LCFS reporting tool Enforcement Sustainability 18

19 LCFS EXPANSION LCFS Expansion Oregon Washington British Columbia Eastward 19

20 AB 32 Umbrella Program for LCFS Comprehensive Cap and Trade System Approximately $1.3 B Auction Proceeds in 2013 $800M Utilities- to offset cost increases $500M to the State Projected total of $15B to state by 2020 Clean Energy Programs- Sacramento Lower Carbon Value per ton- Off-sets and internal reductions 20

21 Renewable Energy Credits (REC) Driven by State Renewable Portfolio Standards Supply as eligible renewable power Sell into Power Purchase Agreement RECs represent the premium value of the qualifying power. 21

22 Questions and Discussion Graham Noyes