Category: Insights

Washington Cap-and-Invest and Clean Fuel Standard Programs

Washington Cap-and-Invest and Clean Fuel Standard Programs

By Stephanie Gee, Verification Engineer

In January 2023, the Washington Department of Ecology (DoE) began implementing the cap-and-invest program to achieve the greenhouse gas (GHG) limits set in state law. At the same time this was passed, Washington also created the Clean Fuel Standard (CFS) to specifically curb transportation emissions. Navigating these two market-based policies may be challenging, especially for fuel suppliers that are required to participate in both, but these programs may also be an opportunity for low-carbon technologies and clean fuel suppliers. 

Washington’s Cap-and-Invest Program: What is It?

Under the cap-and-invest program, most businesses that emit more than 25,000 metric tons of carbon dioxide (CO2) equivalent (MT CO2e) annually must obtain allowances equal to their covered GHG emissions. The covered emissions are determined from businesses’ GHG reports to the Washington DoE, which are due by March 31 for the previous calendar year. Businesses can purchase allowances at quarterly DoE-hosted auctions, with the first auction held on February 28, 2023.

 

cap-and-invest
Washington’s cap-and-invest program sets a limit, or cap, on overall carbon emissions in the state and requires businesses to obtain allowances equal to their covered GHG emissions. (Source: Washington Department of Ecology)

 

These allowances can then be purchased or sold on secondary markets. In addition, some businesses will be issued no-cost allowances: emissions-intensive, trade-exposed industries (EITEs), natural gas utilities, and electric utilities. The first deadline for businesses to submit their emissions allowances and/or offset credits is November 1, 2024, to cover 30% of their 2023 emissions. Any business that can rapidly decarbonize its technology during the four-year compliance period would then be able to sell excess allowances that are not needed for compliance.

Inside Washington’s Clean Fuel Standard

The Washington CFS is designed to work in tandem with the cap-and-invest program and the design structure is similar to California’s Low-Carbon Fuel Standard (LCFS) program. The Washington CFS requires fuel suppliers to reduce the carbon intensity (CI) of transportation fuels to 20% below 2017 levels by 2034. Some of the major exemptions from this program are aviation, marine, railroad locomotives, and military.

 

Washington Clean Fuel Standard
Under Washington’s Clean Fuel Standard, fuels will be assessed to determine their carbon intensity. Cleaner fuels – those with a carbon intensity below the standard – will generate credits that can be kept or sold to producers of high-carbon fuels. Fuels with a carbon intensity above the standard will generate deficits. (Source: Washington Department of Ecology)

 

Fuel suppliers may apply for a CI that is already approved by California’s Air Resources Board (CARB) or Oregon’s Department of Environmental Quality (DEQ), but it must be adjusted using Washington’s Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model. Clean fuels with CI scores below the standard will generate credits that can be sold and fuels with CI scores above the standard will generate deficits that will need to be covered by purchasing credits.

EcoEngineers Is Here to Help

EcoEngineers is a consulting, auditing, and advisory firm with an exclusive focus on the energy transition. From innovation to impact, Eco helps its clients navigate the disruption caused by carbon emissions and climate change. Eco helps organizations stay informed, measure emissions, make investment decisions, maintain compliance, and manage data through the lens of carbon accounting. Its team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. Eco was established in 2009 to steer low-carbon fuel producers through the complexities of emerging energy regulations in the United States. Today, Eco’s global team is shaping the response to climate change by advising businesses across the energy transition.

For more information about the State of Washington’s cap-and-invest and Clean Fuel Standard programs, please contact us at clientservices@ecoengineers.us.

Asset Development — Stepping Into the Future

Asset DevelopmentAsset Development — Stepping Into the Future

A typical clean energy project development life-cycle is a complex process that requires a wide array of knowledge of technologies, markets, risk, implementation, construction, startup, and optimization.

This is where EcoEngineers can help. We understand that you are the pioneers who are risking capital and reaching for a better tomorrow. Our role is to be your trusted advisor on this journey to guide you through all phases of your project.

Our ready-made team of experts includes engineers, market analysts, and industry leaders who seamlessly complement your team’s expertise across all industries and project types — including biofuels and renewable energy, voluntary carbon markets, carbon removals, and sequestration, harnessing the new hydrogen economy, integrating electric vehicles (EVs) into your fleet, or evaluating global markets for your fuel or energy.

Our Services Across the Design, Build, and Operation Phases:

  • Feedstock Compliance
  • Technology Selection
  • Life-Cycle Analysis (LCA)
  • Techno-Economic Analysis (TEA)
  • Feasibility Studies
  • Regulatory Interpretations
  • Credit Market Analysis and Projections
  • Emerging Carbon Market Analysis
  • Investor Due Diligence
  • Compliance Reporting
  • Project Optimization

We bring expertise in global climate regulations, emerging incentive programs, new technologies, evolving carbon markets, data standards, energy credit markets, commodity markets, feedstocks, and carbon accounting rules. Our technical knowledge, industry connections, and market intelligence help you identify investment opportunities, conduct project feasibility and market studies, assess risk and propose risk mitigation strategies, techno-economic analysis, assess project partners, secure financing, and project due diligence, feedstock and offtake agreements, apply for incentive programs, and oversee construction and commissioning. We are a third-party consultant and do not take equity or a percentage of credits.

Eco has supported more than 200 asset development engagements and $4 billion of investments for projects across decarbonization projects and technologies.

Contact us to learn how we can help you analyze, develop, and implement renewable energy and sustainability projects to achieve your sustainability goals at clientservices@ecoengineers.us.

Inflation Reduction Act: Reflecting on One Year of Clean Energy Transformation

Inflation Reduction Act: Reflecting on One Year of Clean Energy Transformation

We’ve seen significant change since the passage of the Inflation Reduction Act (IRA) just one year ago. Focused on tackling the pressing challenges of climate change and soaring inflation, the IRA has mobilized unprecedented investments in clean energy across various sectors, including renewable fuels, electric vehicles, carbon capture, and energy efficiency initiatives. This article outlines the impact of the IRA, its potential for the future, how you can take advantage of the various incentives, and how EcoEngineers can help you navigate this change.

Driving the Clean Energy Revolution

The IRA was signed into law on August 16, 2022, signaling a new era for energy and environmental investments in the US. Since then, the U.S. Treasury Department has been releasing guidance in response to a barrage of questions from applicants keen to tap into the myriad of opportunities the IRA presents.

The energy-related tax credits in the IRA include:

  • 45Q – Provides a tax credit to qualified facilities of $85 per metric ton (/metric ton) of carbon dioxide (CO2) stored or $60/metric ton of CO2 used for enhanced oil recovery or other use. Plants built to capture CO2 from the air can get $180/metric ton. Projects have until January 2033 to begin construction.
  • 45Z – Provides a tax credit of up to $1 per gallon (/gal) for domestic production of clean transportation fuels between Dec. 31, 2024, and Dec. 31, 2027. Ethanol plants claiming credits under 45Z don’t have to sequester CO2; they can use it for other purposes.
  • 45V – Provides up to $3 per kilogram (/kg) of hydrogen produced with reduced greenhouse gas (GHG) emissions. The tax credits may be claimed for 10 years on hydrogen sold or used. Hydrogen is an ingredient in fertilizer and has other industrial uses.
  • 40B – Provides a credit of $1.25/gal of sustainable aviation fuel (SAF) in a qualified fuel mixture. SAF must have a baseline lifecycle GHG emissions reduction percentage of 50% compared to petroleum jet fuel. The regulation further incentivizes carbon intensity (CI) reduction by including an additional $0.01/gal tax credit for each percentage point above the 50% reduction for a maximum of $1.75/gal. (Note: The tax credit will not apply to fuel derived from co-processing with non-biomass feedstocks, palm fatty acid distillates, or petroleum.)
  • 48C – Provides $10 billion in credit for qualifying advanced energy products – $4 billion of which must go to projects in designated energy communities. To qualify for the credit, a project must re-equip an industrial or manufacturing facility for the production or recycling of numerous energy types, among other criteria. The first round of funding opens May 31, 2023, and initial concept papers are due July 31, 2023.
  • 48X – Provides tax credits for the production and sale of components related to solar PV modules, battery and energy storage components, and critical mineral sourcing and processing. The 45X credit will begin to phase out in 2030 and be completely phased out after 2033. Manufacturers cannot claim 45X credits for any facility that has claimed a 48C credit.

A Decade-Long Commitment with Lifelong Benefits

While the IRA extends and modifies various energy-related provisions and incentives for 10 years, the law’s true power lies in its ability to plant seeds of a low-carbon future that will grow for the next 30 to 40 years. By spurring investments in clean and renewable energies, the IRA is set to dramatically change how we produce and consume energy, reducing emissions from carbon-intensive and hard-to-abate processes such as cement, steel, and fertilizer production, to name a few.

Direct Pay and Transferability 

Under the IRA, certain taxpayers may elect for a direct payment in lieu of a tax credit or make an election to transfer all or a portion of an eligible credit to an unrelated taxpayer. This allows non-profits, state and local or tribal governments, and rural cooperatives that don’t have an income tax to be eligible to claim clean energy tax credits. For-profit entities like smaller developers who don’t have a large income tax obligation can transfer or sell the tax credits to an unrelated entity. This rule solves the inefficiencies of traditional tax equity financing and is anticipated to bring more liquidity to clean energy projects. 

Decarbonization Potential Unleashed

By incentivizing clean energy initiatives across a host of industries, the passage of the IRA, in combination with the Bipartisan Infrastructure Law signed into law in November 2021, could achieve a 35%-41% reduction in economy-wide GHG emissions below 2005 levels by 2030 over its lifetime, according to the U.S. Department of Energy (DOE). The Biden administration estimates that the clean energy provisions of the IRA and the Bipartisan Infrastructure Law together could reduce emissions by more than 1 billion tons of CO2e in 2030, equivalent to the combined annual emissions released from every home in the United States.

Taking Advantage of the Incentives

The tax code can be a challenge to read. Below are just a few resources to help you unravel the IRA:

  • Visit IRAtracker.org and look at it through the lens of your existing business and GHG reduction goals. The tracker, which is linked to the IRA database, lays out details about the types of projects eligible for incentives to help you determine whether the opportunities meet your needs.
  • Check out the “Understanding the IRA hub” developed by the Environmental Defense Fund (EDF) in partnership with Deloitte to see if any of the use cases fit your company’s needs.
  • Visit Invest.gov, which lists businesses making investments supported by the IRA, Bipartisan Infrastructure Law, and CHIPS and Science Act.

About EcoEngineers

EcoEngineers is a consulting, auditing, and advisory firm with an exclusive focus on the energy transition. From innovation to impact, Eco helps its clients navigate the disruption caused by carbon emissions and climate change. Eco helps organizations stay informed, measure emissions, make investment decisions, maintain compliance, and manage data through the lens of carbon accounting. Its team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. Eco was established in 2009 to steer low-carbon fuel producers through the complexities of emerging energy regulations in the United States. Today, Eco’s global team is shaping the response to climate change by advising businesses across the energy transition.

For more information about EcoEngineers’ role in helping interested parties participate in the IRA, contact us at clientservices@ecoengineers.us.

Three Things Hydrogen Project Developers Can Do Now Ahead of Treasury Department Guidance

45V Hydrogen Tax Credit Rules Delayed: Three Things Project Developers Need to Know Ahead of Anticipated Treasury Department Guidance

Find out what steps project developers can take now amid the Treasury Department’s anticipated delay in issuing guidance on the 45V hydrogen tax credit.

By Tanya Peacock, Managing Director, California and Hydrogen

Clean hydrogen is key to reducing emissions, particularly from hard-to-abate sectors like the steel, cement, fertilizer, and chemicals industries, as well as transportation. Signed into law last year, the Inflation Reduction Act (IRA) includes potentially more than $100 billion of tax incentives over its lifetime for project developers to seize on and set in motion the nascent clean hydrogen economy on a path for rapid growth.

The IRA requires emissions from hydrogen production to be less than 0.45 kg CO2e/kg to qualify for the full ($3.0/kg) 45V clean hydrogen production tax credit and must be 4 kg CO2e/kg or lower on a well-to-gate life-cycle basis to quality for partial credit. This 10-year tax credit is extremely valuable and represents a substantial share of the economic proposition for clean hydrogen production.

READ MORE: Clean Hydrogen Fuel Has Important Potential for Decarbonization Goals

The IRA requires the U.S. Treasury Department to publish guidance for calculating the lifecycle greenhouse gas (GHG) emissions of hydrogen projects within one year of its enactment. Because the law was signed on August 16, 2022, that deadline is unlikely to be met. According to media reports, Treasury Department guidance for the 45V hydrogen tax credit is not expected to come out until October and may be as late as December, potentially missing the deadline by as much as four months.

What Can Hydrogen Project Developers Do Now?

So, what can project developers do now to keep their hydrogen projects on track amid the anticipated delayed guidance from the Treasury Department on the 45V hydrogen tax credit? Below are recommendations on what hydrogen project developers can do now to be prepared and how EcoEngineers can help you gain full benefit and monetization of the 45V hydrogen tax credit.

  1. Know the Base Case Carbon Intensity (CI) Score of Your Planned Project
    A CI score is the aggregated GHG emissions during the life cycle of a fuel divided by the quantity of the fuel. To qualify for the 45V hydrogen tax credit under the IRA, developers will need a Life-Cycle Assessment (LCA) to determine if the hydrogen has a CI score of 4 kg CO2e/kg of hydrogen or lower on a well-to-gate basis. An LCA should be conducted by experts as early as possible in the project development cycle using the correct model(s) with the correct inputs. Sensitivity analyses can be run based on various 45V scenarios to help manage risk and guide investment decisions. If your actual CI is higher than originally expected, millions of dollars could be lost.

  2. Understand All Regulatory and Permitting Requirements (And Value Streams)
    While waiting for 45V guidance, project developers should consult with appropriate experts for a thorough review of all regulatory and permitting application and compliance requirements. Understanding and potentially lining up required approvals, inspections, and reviews will help ensure the product can be sold to the intended parties and facilitates claiming essential credits. Additionally, a regulatory plan can include an evaluation of credits and incentives available for the project.

  3. Conduct a Due Diligence Study on Selected Technology
    Take the time to review the process performance demonstration run data provided by your technology vendor. Are the claims of the product quality, process operability (days on stream/year), emissions levels, and operating costs accurate? Having a third-party expert review your process performance guarantee now could save you millions of dollars in the future.

EcoEngineers has performed more than 500 LCAs since 2015. We have experience in all the regulations that require LCAs, including the U.S. Renewable Fuel Standard (RFS), California Low-Carbon Fuel Standard (LCFS), Oregon Clean Fuels Program (CFP), Canada Clean Fuel Regulations (CFR), British Columbia Renewable and Low-Carbon Fuel Requirements (RLCFR), Brazil RenovaBio, EU Renewable Energy Directive (RED) and impending directives, along with emerging Voluntary Carbon Markets.

READ MORE: Life-Cycle Analysis and Clean Hydrogen Consulting

With more than 200 asset development engagements and $4 billion of investments for projects across decarbonization projects and technologies, Eco’s team of experts can provide individualized guidance throughout the entire project development lifecycle of your hydrogen project. From design, build, and operational phases to regulatory and permitting guidance, technology and market risk assessments, startup optimization, and capital raising evaluations – we have you covered.

For more information about our clean hydrogen services, contact:

Tanya Peacock
Tanya Peacock

 

Tanya Peacock, Managing Director, California and Hydrogen | tpeacock@ecoengineers.us

The Importance of Carbon Intensity and Compliance to Meet Decarbonization Goals

The following is an article originally published in July 2023, by CEP.

The Importance of Carbon Intensity and Compliance to Meet Decarbonization Goals

The road to net-zero for companies and society is long and requires a collaborative effort between policymakers, industry experts, and consumers. Incremental progress has been made in policy and the carbon markets through California’s Low-Carbon Fuel Standard (LCFS) and the Renewable Fuel Standard (RFS) but there’s plenty more that can and should be done. In her most recent article published in Chemical Engineering Progress (CEP), an American Institute of Chemical Engineers (AiChe) publication, Kristine Klavers details how the global supply chain can achieve this broad and ambitious goal of net-zero emissions by leveraging carbon markets, establishing credible carbon reduction, knowing your carbon intensity (CI) score, and monetizing carbon-reduction efforts.

Click the thumbnail above to read the full article.

 

 

For more information about our oil and gas services, contact: Kristine Klavers, Managing Director, Houston, Petroleum and Refining| kklavers@ecoengineers.us

A Renewable Fuels Entrepreneur Checklist: 10 Critical Factors for Project Success

A Renewable Fuels Entrepreneur Checklist: 10 Critical Factors for Project Success

Find out what early-stage renewable fuel, biochemicals, hydrogen, and CCUS project developers need to know to avoid pitfalls on their path to commercialization.

By Ed Arnold, Director, Asset Development

Far too many entrepreneurial renewable fuels, clean hydrogen, biochemical, and carbon capture, utilization, and sequestration (CCUS) firms never pass the finish line. Shifting markets, recessions, evolving and complex regulations, hiring managers with the appropriate experience, finding patient investors, and the difficulties associated with developing projects based on cutting-edge, unproven process technology present significant challenges.

Looking back upon the renewable fuels projects I have reviewed over the last 20 years, I see considerable repetition regarding issues that are often the cause of stumbles. My summary of the top 10 reasons for failure or lengthy delays, along with some suggestions for risk mitigation, are summarized below.

  1. Underestimating Capital Cost (CapEx) and Operating Cost (OpEx)
    • Poor CapEx estimations are a common error for renewable fuel entrepreneurs. Some will start with a maximum project cost target that will still allow them to achieve an attractive return on investment (ROI) and assume that innovation, hard bargaining, excellent project management, and hard work will get them to that number. In addition, I have seen absolute faith in project capital cost estimates delivered by process technology providers or engineering firms delivering early-stage work — both of which have the incentive to lowball total installed cost estimates for projects.
    • This issue can usually be avoided by comparing the planned project to reasonable estimates of actual final costs for similar projects and using established total installed cost curves for all major project items, something that independent, experienced consultants can help entrepreneurs develop. Although they have downsides, asking for lump sum turnkey (LSTK) bids is another approach that can be used to firm up realistic total installed cost estimates.
    • Additionally, underestimating OpEx occurs frequently with new plants and novel processes. Common culprits are underestimating catalyst costs, operational labor requirements, or facility maintenance costs.
    • The solution: Engage experts early in the feasibility stage who have run similar facilities to get a dose of reality injected into the cost estimates.
  2. Skipping Process Demonstration
    • For a new process technology, it’s essential to move from the pilot stage to an intermediate process demonstration stage before scaling to a commercial-scale facility. Otherwise, your first commercial run usually becomes a costly process development run. All established renewable fuel process development firms know this.
    • The record of entrepreneurial renewable fuels business development history is littered with the memories of firms that thought they could go directly from pilot plant runs to successful commercial design and then complete a quick start-up. This behavior is sometimes reinforced by their engineering, procurement, and construction (EPC) firm. Every entrepreneur should review the long history of successful and unsuccessful new process technology development for renewable fuel production. They also need to understand that process development and process scale-up are two different subjects.
  3. Early-Stage Vetting of Carbon Intensity (CI)
  4. Supply and Offtake Agreements
    • I often see gaps between feedstock supply and offtake agreements that predict declining margins in the future. This can be and should be avoided. Entrepreneurs should engage experts who understand the intricacies of price basis indexes and who can provide defendable, scenario-based feedstock cost and product value price forecasts, as well as suggestions for hedging against margin shrinkage.
    • In addition, I have seen offtake agreements with durations of two to five years, when the payback for the investment will be much longer. Their ultimate lenders will not find that attractive.
  5. Underestimating Project and Process Timelines
    • Full project schedules are often underestimated, sometimes by years. Get advice from a knowledgeable expert at an early stage in the project. Understanding the time requirements for permitting, environmental studies, geotechnical work, site preparation, and the local availability of all required construction skill sets is essential for developing a realistic estimate.
    • A seasoned project development professional will also be able to help entrepreneurs de-risk their project schedules.
  6. Underestimating Production Volumes
    • Project developers often use optimistic projections of production volumes in their financial models and promotional materials. These volumes often never come to fruition.
    • The solution is to confer with process design and development experts and to base process yield expectations based on longer-term demonstration plant runs and rigorous heat and material balances.
  7. Long-Duration Testing for Corrosion and Fouling
    • One of the typical problems for renewable fuels projects is that the project developers may not understand that high-impact fouling and corrosion issues may not show up for many weeks or even months after a first commercial demonstration test run has begun.
    • A demonstration run that lasts a week or two will usually not answer all the outstanding questions. Have an expert help set up and monitor your run. This will pay dividends in the long run.
  8. Process Development, Project Management, Facility Management, and Operations Management
    • Owners should select process, project, facility, and operations managers that have proven, hands-on experience in the field of work. Proven experience with the core process technologies that will be used in the current project is a plus. Proven ability to select successful operations, maintenance, health, safety, environmental (HS&E), compliance, and planning supervisors is a necessity. If first-of-a-kind process technology is to be used, experience with going through a first-of-a-kind process start-up is a plus.
  9. Understanding All Regulatory and Permitting Requirements
    • Too often, I have seen an owner get very close to a start-up and then suddenly realize that they could not sell their product to the intended parties or claim essential credits because of a lack of required approvals, inspections, reviews, etc. These planning oversights are sometimes the result of bad advice and sometimes it is simply an error of omission. Owners should consult with appropriate experts at an early stage in the project planning process to ensure a thorough review of all regulatory and permitting requirements is vetted and completed.
  10. Material Balance Issues
    • A material balance is a quantitative accounting for all mass entering and leaving a process system, showing that the total weight entering a plant comes very close to the total weight going out. Building this balance is a method for ensuring that all products produced from a process system are accounted for.
    • I too often encounter or hear of a process development entrepreneur who, sometime during their first long-term demonstration run or first commercial-scale process run, is surprised by the behavior of a previously unaccounted-for-byproduct in their process.
    • The consequences are often significant. Some examples are (a) the discovery of significant fouling in or after a reactor or a process heat exchanger, (b) the underestimation of solvent, adsorbent, or catalyst consumption rates, or (c) the discovery that a compound, previously unaccounted for and eventually determined to be toxic, explosive, or a long-duration greenhouse gas (GHG), is off-gassing from a collected major liquid product, or a solid-phase reaction byproduct.
    • Many of these issues resulted in unfortunate consequences for the entrepreneurs. Nearly all could have been avoided if the process/project developers had invested in the proper measurement-enabling equipment and had taken the time to perform rigorous material balances during their pilot plant or process demonstration runs. However, for some entrepreneurs, this level of detail is often viewed as optional, too expensive, or simply unnecessary. For experienced process developers, closing material balances is a must.

EcoEngineers: Your End-to-End Guide

In summary, setting project costs, schedules, and performance expectations and making decisions based on the knowledge of individuals who have proven experience in the renewable fuels industry will prevent costly mistakes and delays. Choosing experienced personnel who know how to manage your entire EPC project phase, selecting and training your operations staff, and then starting up and operating your facility, will also be a wise investment.

This is why engaging proven regulatory and permitting experts like those at EcoEngineers early in the project cycle, to help guide you through the regulatory and permitting jungle, can save you millions in lost revenue.

We provide valuable services and capabilities to renewable fuels start-up companies with experience-based guidance to help them navigate the challenges of the industry. Whether it’s comparing project costs to realistic estimates or evaluating the feasibility of novel process technology and communicating that to your investors, we can help.

For more information about our Asset Development services, please contact:

renewable fuels

 

Ed Arnold, Director, Asset Development | earnold@ecoengineers.us

Six Things Renewable Natural Gas Producers Need to Know About the Renewable Fuel Standard Set Rule

Six Things Renewable Natural Gas Producers Need to Know About the Renewable Fuel Standard Set Rule

Want a more technical dive into the renewable natural gas (RNG) changes from the recently adopted Renewable Fuel Standard (RFS) Set Rule (“the Rule”)? For RNG producers, here is a summary of the changes and impacts on existing, in-construction, and planned RNG facilities for participation in the RFS to generate Renewable Identification Numbers (RINs). This latest RFS ruling will impact all RNG facilities participating in the RFS program.

READ MORE: Insights From the New Federal Renewable Fuel Standard Set Rule

All existing pathways will need to be amended and comply with the new RFS rule by Jan 1, 2025. For new pathways registered after July 1, 2024, they will need to immediately comply with the Rule. The major changes that will impact most RNG and biogas facilities include:

  1. Registration Changes – The Rule requires the addition of the biogas producer to the RFS pathway. Now landfills and digesters will need to register with the U.S. Environmental Protection Agency (USEPA).

  2. Reporting Changes – Biogas producers (digester or landfill) must begin regular reporting of raw biogas quantities and quality and compressed natural gas (CNG) dispense/RIN separator will also have new reporting requirements.

  3. Virtual Gas Storage is Eliminated – Any gas storage must be done on-site. This will require very careful coordination between our RFS registration team, Quality Assurance Program (QAP) team, and the RNG producer. There is the potential to lose Renewable Identification Numbers (RINs) and revenue without this close coordination.

  4. RIN Generation Process is Changing – RINs will now be generated upon pipeline injection and separated by the CNG dispenser instead of the current practice of generation and immediate separation. This may necessitate contractual changes between the RNG producer and the offtake partner.

  5. Significant Measurement and Testing Requirement Additions – Facilities must now continuously measure flow and gas quality with a gas chromatograph (GC) for raw biogas and finished RNG. The Rule is very detailed about which American Petroleum Institute (API), American Society for Testing and Materials (ASTM), and USEPA standards must be used to collect this information. Many RNG producers do not have full GCs on raw biogas streams and this change will require them to add equipment. This is the most time-sensitive concern with the new Rule given lead times on meters/GC equipment.

  6. D3/D5 RIN Split Methodology for Digesters – If digesters are co-digesting D3 and D5 materials, they can now likely get some D3 RIN value from the cellulosic feedstocks.

Weighing the Good with the Bad

The good news is that D3 RIN prices are up 50% since the Rule was released. The bad news? Existing, under-construction, and proposed biogas and RNG facilities will need to understand and comply with the new processes to register, generate RINs, report, and comply with RFS regulations.

READ MORE: Renewable Natural Gas and Asset Development Consulting

There is much more detail and nuance to evaluate changes required for each facility and pathway, and this is a summary of several hundred pages of the Rule into six bullet points to get you started. Bottom line: if you have or are working on RNG projects that will generate RINs, these Rule changes will impact biogas and RNG projects and their development cycles going forward — and Eco is here to help you navigate these changes.

For more information about the RFS Set Rule or RNG services, please contact:

Brad Pleima
Dave Lindenmuth

 

Brad Pleima, President | bpleima@ecoengineers.us

Dave Lindenmuth, Managing Director, RNG | dlindenmuth@ecoengineers.us

EcoUniversity — Answering Your Most Complex Carbon Questions

The transition to a clean energy future requires a solid grasp of global policies, technologies, and carbon markets. Our comprehensive training workshops, which include market outlooks and executive modules, help you effectively evaluate the impacts of climate-related risks on your business and maintain control over your environmental, social, and governance (ESG) goals. Understanding global policies, technologies, and carbon markets is critical to taking control of your environmental, social, and governance (ESG) goals. EcoUniversity provides comprehensive training workshops, market outlooks, and educational webinars that can be taken individually or bundled together to create a bespoke training program for your entire organization.

Training Workshops

EcoUniversity’s workshops are immersive and interactive, and led by our industry experts, both in-person and virtually. Our training modules can be tailored to meet the needs of your team, with focused discussion of your specific goals and challenges spanning low-carbon and zero-emission fuels, emerging mitigation and carbon removal technologies, policies and best practices for robust carbon markets, and carbon literacy.

Sample Workshops:

  • Low-Carbon Fuel Regulations
  • Low-Carbon Fuel Markets
  • Compliance Training
  • Life-Cycle Analysis with GREET
  • Fuel Market Project Development
  • Carbon Literacy Training
  • Custom Program Development

Market Outlooks

Our team has worked in the regulatory landscape for decades, analyzing data from two of the most influential low carbon fuels programs in the United States — the U.S. federal Renewable Fuel Standard (RFS) and the California Low Carbon Fuel Standard (LCFS). Our two annual outlooks and periodic updates give your business an advantage regarding regulatory changes occurring in your markets.

Educational Webinars

EcoUniversity’s webinars are attended by hundreds of industry experts and clean energy workers each month. We cover a wide range of topics, including carbon literacy, next frontiers for a renewable fuel, deep dives into new regulations, and more.

Lyndsey Nielsen

 

For more information about our EcoUniversity services, contact: Lyndsey Nielsen, EcoUniversity Director | lnielsen@ecoengineers.us

Insights From the New Federal Renewable Fuel Standard Set Rule

Insights From the New Federal Renewable Fuel Standard Set Rule

Our team at EcoEngineers has thoroughly reviewed the U.S. Environmental Protection Agency (USEPA) Renewable Fuel Standard (RFS) Set Rule Summary that was released on June 21, 2023. The Set Rule contains some good news for the renewable natural gas (RNG) industry, for biofuels markets and for project developers. Below are the key takeaways:

  • D3 RINs – 33% RVO increase and $0.60 price jump. The Cellulosic (D3) volumes were up 120 million renewable identification numbers (RINs) against the December proposal. This is a 33% increase over the 2022 mandate and is reflective of the enormous growth in RNG seen in this year’s RIN data, as many new RNG projects come online. D3 RINs prices surged 60 cents on the news.
  • No eRINs. The rule did not contain the option for biogas-based electric fuel (eRINs). EPA does state, “Given strong stakeholder interest in the proposed eRIN program and the range of potential benefits that the program could provide, EPA will continue to work on potential paths forward for the eRIN program. To that end, EPA will continue to assess the comments received.”
  • Biogas reform but greater expansion. Much of the biogas reform was in the final rule, and this does pave the way for biogas to be a feedstock for possible future eRIN implementation or other creative biofuels use. Biogas reform impacts RFS registration, ongoing compliance, RIN generation procedures, RIN separation processes, biogas/RNG storage, and other mechanics of how RINs are generated and reported.
  • Advanced biofuel and renewable fuel RVOs flat. Significantly, much of the proposed Renewable Volume Obligation (RVOs) stayed the same, but that is not a positive outcome for the biodiesel and renewable diesel market.
  • No growth for biomass-based diesel. Both the proposal and the final rule had very little room for growth in biomass-based diesel consumption. Many new renewable diesel plants have come online and more than 3 billion gallons of new capacity has been announced for startup by the end of 2025.
  • D4 RINs and soy oil prices fall. The market had been expecting a final rule to account for much higher annual growth, especially as demonstrated by the recent data. But with this final ruling, D4 RINs prices fell, and soy oil prices had a limit-down price drop.
  • Cellulosic waiver is out. Cellulosic waiver credits will not be available as a compliance mechanism for obligated parties during the years covered by this RVO (2023-2025) unless there is a future action to exercise the cellulosic waiver authority. If, for example, EPA reduces cellulosic volumes under the cellulosic waiver authority, than EPA also is required to make cellulosic waiver credits (CWCs) available. This will essentially remove the D3 market-driven price cap (CWC + D5 RIN) and the market will have to adjust.
  • D3/D5 split.EPA finalized, as proposed, specific equations to determine feedstock energy for when predominantly cellulosic and non-predominantly cellulosic feedstocks are simultaneously converted in anaerobic digesters. EcoEngineers can help calculate this split.
  • Bumpy road ahead. The new multiple year rule is designed to provide some medium-term policy stability to encourage investment and growth, but there are some catches and the roll-out may not be smooth.

As always, feel free to reach out to your contact at EcoEngineers to help you navigate the twists and turns of the growing low carbon economy, or email us at clientservices@ecoengineers.us.

The Numbers in the EPA’s Federal Renewable Fuel Standards Set Rule


*BBD volumes are given in billion gallons

More specifics:

  • The EPA’s rule has established volume requirements for future years, while retaining the authority to waive volumes if necessary.
  • The regulatory provisions for eRINs have not been finalized due to stakeholder comments and the complexity of the topics raised. However, the EPA will continue to work on potential paths forward for the eRIN program based on stakeholder interest.
  • Biogas reform includes provisions for using biogas as a biointermediate and RNG as a feedstock to produce biogas-derived renewable fuels. Biointermediate producers and renewable fuel producers must associate with each other to generate RINs for renewable fuels produced from biointermediates.
  • To enhance program simplicity and RIN integrity, the EPA is finalizing revisions to track the flow of RNG in the EPA moderated transaction system (EMTS). RNG producers will be the sole RIN generators for RNG injected into a natural gas commercial pipeline system. RIN separation will be allowed only for parties that demonstrate RNG use as transportation fuel.
  • Before the EPA accepts a registration submission, any biogas or RNG that is produced and stored must be stored on-site, under certain conditions.
  • Registration and reporting requirements have been updated, including the elimination of the need to submit contracts at registration. Real-time data in EMTS will reduce the reporting of affidavits and additional documentation.
  • The EPA has specified testing and measurement requirements for biogas and RNG production facilities, including measurement standards and certificates of analysis. QAP requirements have been revised for RNG producers, and third-party oversight enhancements have been implemented to ensure independence and impartiality.
  • The deadline for third-party engineering reviews for three-year updates will start after the 2023 update deadline, and RIN apportionment in anaerobic digesters will follow specific equations. The biomass-based diesel (BBD) conversion factor has been increased and separated food waste recordkeeping requirements have been modified to allow feedstock aggregators to hold records.
  • A bond requirement has been established for foreign RIN-generating renewable fuel producers and owners, and a definition of “produced from renewable biomass” is not being finalized at this time.

Life-Cycle Analysis – The Praxis of Carbon Accounting

Adapting to the new energy paradigm requires action. For businesses, this means measuring emissions footprint, making the right investment decisions, and filing reports and managing data through the lens of carbon accounting. EcoEngineers has helped hundreds of businesses gain control of this journey, guiding them through the energy transition without disrupting their core activities. 

Clean energy regulations, investment opportunities in voluntary carbon markets, and incentive programs such as the U.S. Inflation Reduction Act (IRA) all have product Life-Cycle Analysis (LCA) as their foundation. Therefore, in addition to measuring Scope 1, 2, 3 emissions, measuring product life-cycle carbon intensity (CI) of your inputs-outputs or a more comprehensive environmental product declaration of your inputs-outputs is one of the first steps in a successful transition to net-zero. 

Life-Cycle Analysis (LCA) is the praxis and application of carbon accounting. It is a systematic and comprehensive method for evaluating the environmental impact of a product, service, or system, from its inception to its end-of-life (cradle-to-grave). It assesses the environmental aspects and impacts throughout the entire life cycle of a product, including the extraction of raw materials, production, transportation, use, and disposal.

 Regulations that provide incentives to using low-carbon fuels based on an LCA: 

  • U.S. Renewable Fuel Standard (RFS) 
  • California Low Carbon Fuel Standard (LCFS) 
  • Oregon Clean Fuels Program (CFP) 
  • Canada Clean Fuel Regulations (CFR) 
  • British Columbia Low Carbon Fuel Standard (LCFS) 
  • EU Renewable Energy Directive (RED) and its implementing measures 
  • Brazil RenovaBio 
  • Emerging Voluntary 

LCAs are used by regulators to create a performance-based standard for incentives or to identify compliance issues. LCAs are also increasingly popular for environmental product declarations or labeling a product’s environmental footprint. EcoConsulting performs LCAs to support regulatory compliance and to inform decision-makers on priority areas to focus by identifying emissions hot spots associated with a product and their potential for improvement. 

Eco’s team of industry-renowned scientists, led by Dr. Zhichao Wang, has performed more than 500 carbon LCAs since 2015, on a variety of products including grains, oils, fuels, plastics, farm products, supplements, lubricants, metals, and more. Our team is fully adept at utilizing all available LCA tools such as the Argonne GREET (Greenhouse gases, Regulated Emissions, and Energy use in Technologies) model and its derivative CA-GREET, GHGenius, SimaPro, and OpenLCA. We advocate for establishing an international LCA standard and database for the global good. 

 For more information about our RIN Management System, contact: Client Services | clientservices@ecoengineers.us

Eco Engineers

909 Locust St. Ste. 202

Des Moines, IA 50309

  +1 515.985.1260

  clientservices@ecoengineers.us

   

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