FLASH REPORT: EPA Issues Proposed RFS Standards for 2023-2025 plus Requirements for eRINs

Link to article: https://stillwaterassociates.com/flash-report-epa-issues-proposed-rfs-standards-for-2023-2025-plus-requirements-for-erins/

December 1, 2022
by Adam Schubert

EPA today announced their proposed RFS standards (“Set Rule”) for 2023, 2024, and 2025. This proposed rule also contains substantial new provisions enabling the generation of eRINs. This proposal is the first rule concerning RFS years past 2022, the last year for which the statute contained specific annual volume requirements. As a result, EPA was required to do additional analyses, specified by statute, to assure that advanced biofuels were at least the same percentage of the renewable fuel volume as the final 2022 standards (5.63/20.63 = 27.3%), and continue to require greater than one billion gallons of biomass-based diesel (BBD) per year.

The following table lists the proposed annual volume requirements alongside the final volume standard for 2022. The Supplemental standard of 0.25 billion gallons in 2022 and 2023 satisfies the court remand concerning EPA’s setting of the 2016 volume standards.

Table 1. Volume Targets (billion RINs)

*BBD volumes are in physical gallons (rather than RINs)

Notable is the rapid growth of the cellulosic biofuel standard. This reflects expectations for continued growth in the generation of D3 RINs from renewable natural gas (RNG) and, starting in 2024, D3 RINs from electricity (eRINs) which we will discuss further below.

As always, the compliance requirements of individual obligated parties are set by the percentage standards. These are listed below in Table 2. Historically, EPA has used the EIA Short-Term Energy Outlook (STEO) for the estimated fuel volumes used in calculating the percentage standard. As the STEO extends out one year, and EPA is now looking to set standards for three years, EPA has chosen to use projected volumes from EIA’s 2022 Annual Energy Outlook (AEO).

Table 2. Percentage Standards

eRIN Proposal Breaks New Ground
EPA has been under increasing pressure to implement provisions for generation of RFS credits (known as renewable identification numbers or RINs) for electricity used to charge electric vehicles (EVs), commonly referred to as eRINs. As had been signaled, these provisions were included in today’s proposal. The statute requires that these new eRINs only be granted for electricity generated from renewable biomass (e.g., combustion of RNG) and used for transportation fuel.

A few key elements of the proposal include:

1. Initially, eRIN generation will only be permitted for light-duty EVs and PHEVs in the 48 contiguous states.
2. eRINs will be generated by the party producing electricity from biogas or RNG, and the RINs can only be separated by automotive original equipment manufacturers (OEMs) who can separate a quantity of eRINs each quarter based on the population of their registered vehicles in the 48 states and their estimated electricity demand.
3. To assure compliance and reduce risk of double counting, participating OEMs will need to enter into contracts with the biogas or RNG producer and the electricity generator.
4. EPA proposes adjusting the equivalence value for electricity from 22.6 kilowatt hour per RIN (kWh/RIN) to 6.5 kWh/RIN. With this adjustment in value, electricity delivered to a vehicle from a quantity of RNG will earn the same number of RINs as if that same RNG was used to fuel a natural gas vehicle.
5. This new protocol for generation of eRINs is planned to take effect in 2024, giving participants time to become familiar with the new regulations and register with EPA.

EPA will open a public comment period on all elements of today’s proposal once it is formally published in the Federal Register, likely in the next couple of weeks. This proposal can be expected to receive numerous comments from the broad range of impacted stakeholders.

More questions on how today’s proposal or other RFS provisions may impact your business? Contact us!

Categories: Economics, Policy, Uncategorized