Renewable Fuels: Overview of market developments in the US and a focus on California

Transcription

1 Renewable Fuels: Overview of market developments in the US and a focus on California Cynthia Obadia Cynthia Obadia Consulting

2 Renewable fuel s growth driven by incentives from RFS and LCFS RFS - Federal Fuels sold in all US Target: 36 billion gals blended into transportation fuels by 2022 Specific fuel targets which are modified annually by EPA Only biogas to CNG/LNG RINS LCFS - California Fuels sold only in California Target: 10% cut in carbon intensity of on-road transportation fuels by 2020 Fuel neutral fuels with lower CI receive more credits Biogas and fossil natgas to CNG/LNG Electric and hydrogen included LCFS CREDITS

3 What RFS and LCFS have in common Obligated Parties are entities that produces or imports transportation fuels they can meet their obligation by: Blending renewable fuel Purchasing RINs/LCFS Renewable fuel producer or importers can: Sell renewable fuels to obligated parties and get paid a premium equivalent to the RIN/LCFS Sell the RIN/LCFS to obligated parties In order to do this, they have to opt into the program

4 2016 Biofuels consumption: US vs. CA US California Source: EPA Source: CARB

5 The RFS Passed by Congress in 2005 and expanded in 2007 under the Energy Independence and Security Act EISA. Objectives: Reduce dependence on foreign oil Reduce GHG emissions Promote jobs in the green sector Imposed renewable volume obligations (RVO) on obligated parties Requires 36 billion gallons to be blended into transportation fuels by 2022 (about 16% of total) EPA can modify the RVO depending on supply availability

6 Compliance to date is below the RFS goal billion gals Year Total Advanced Biodiesel Cellulosic

7 California s Environmental Policy AB 32 (2006): reduce GHG emissions to 1990 by CARB implemented the following programs: Low Carbon Fuel Standard (LCFS) Cap and Trade caps emissions of the power sector and other large emitters as well as transportation fuels and natural gas distribution (Carbon Allowances/Carbon Offsets CCA/CCO) California Renewable Program Standard (RPS) it s the US s most ambitious RPS program as it establishes that 33% of power sales in CA have to come from renewable resources (REC) Other programs: Zero Emission Vehicles, High Speed Rail, etc. SB 32 (2016) extended the term of AB 32: requires reduction to 40% below the 1990 level by 2030 Oregon LCFS similar to California took effect Jan British Columbia LCFS started 2010

8 LCFS Targets and Performance

9 Carbon Intensity: calculated based on the fuel life cycle

10 LCFS encourages diversification of biofuels

11 Source: CARB Carbon intensity of different fuels

12 Clean transportation in California has a cost: gasoline taxes are 58% higher vs. national average

13 Biodiesel vs. Renewable diesel US consumption California consumption Renewable diesel - 100% imported by Neste from Singapore or Finland Million gals Biodiesel needs to be blended because it tends to gel at low temperatures. Renewable diesel same chemical structure than diesel - drop in fuel

14 Trade war vs. US Imports of Argentinean & Indonesian biodiesel Last week, NBB filed a petition against Argentine and Indonesian companies claiming that they are violating trade laws by flooding the U.S. market with dumped and subsidized biodiesel U.S. biodiesel imports rose to a record 916 million gals Argentina represented about two-thirds 491 million gals Almost 3 x more than imports in % of the biodiesel consumed in the US The EPA approved Argentina s registration under the RFS in Jan 2015 Argentina is the world s top exporter of soyoil and Indonesia is the world's top producer of palm oil, both used to make biodiesel.

15 Bio-CNG/LNG (RNG) gas grown exponentially due to RINs and LCFS credits 85%

16 In CA, RNG exceeds natural gas as a feedstock of CNG/LNG transportation RNG is an ultra-low carbon transportation fuel for a new generation of medium-and heavy-duty Natural Gas Vehicles

17 Where is the RNG coming from? WASTE TO ENERGY: RNG is produced from methane emission collected in landfills, waste water treatment plants and anaerobic digesters 57 RNG projects online today 76% to the transportation market 24% to power generation Future of RNG 24 projects under construction Production expected to triple by 2018 to 541 MM gals 87% to the transportation market displace 15%+ of diesel consumption in California

18 Governor Brown s goal is to have 1.5 million EV on the road by 2025 A recent study by NRDC found that this is unlikely CARB has mandated that all transit agency switch to electric buses by 2040 but they are fighting it

19 RINs & LCFS credits are volatile markets Source: Argus

20 In Summary Incentives from RINs and LCFS have been key in promoting growth Expect additional incentives from LCFS programs in Oregon and British Columbia LCFS program has been discussed in Washington and Canada has expressed interest on a federal level RFS political risk: low because ethanol industry has been a big supporter of Trump There s oil industry lobby for revamping RFS

21 For more information EPA RFS & CARB LCFS websites Ethanol: Renewable Fuels Association Biodiesel: National Biodiesel Board RNG: Coalition for Renewable Natural Gas RINs and LCFS market info and prices: - Argus America Biofuels - free 2 week trial Contact me: Cynthia@cobadia.com