Renewable Fuels: Overview of market developments in the US and a focus on California Cynthia Obadia Cynthia Obadia Consulting
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
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
2016 Biofuels consumption: US vs. CA US California Source: EPA Source: CARB
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
Compliance to date is below the RFS goal billion gals Year Total Advanced Biodiesel Cellulosic 2008 9.0 2009 11.1 0.6 0.5 2010 12.95 0.95 0.65 0.1 2011 13.95 1.35 0.8 0.25 2012 15.2 2 1 0.5 2013 16.55 2.75 1 1 2014 18.15 3.75 1 1.75 2015 20.5 5.5 1 3 2016 22.25 7.25 1 4.25 2017 24 9 1 5.5 2018 26 11 1 7 2019 28 13 1 8.5 2020 30 15 1 10.5 2021 33 18 1 13.5 2022 36 21 1 16
California s Environmental Policy AB 32 (2006): reduce GHG emissions to 1990 by 2020. 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 2017. British Columbia LCFS started 2010
LCFS Targets and Performance
Carbon Intensity: calculated based on the fuel life cycle
LCFS encourages diversification of biofuels
Source: CARB Carbon intensity of different fuels
Clean transportation in California has a cost: gasoline taxes are 58% higher vs. national average
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
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. 2016 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 2015 21% 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.
Bio-CNG/LNG (RNG) gas grown exponentially due to RINs and LCFS credits 85%
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
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
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
RINs & LCFS credits are volatile markets Source: Argus
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
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