What does the recent decline in LCFS credit prices mean for the longer term?

October 19, 2021 By , , ,

October 19, 2021

Recent volatility in the LCFS credit market has left many investors scratching their heads. What does this mean for the future of the program? How should we think about credit prices going forward? Stillwater Associates’ LCFS Team answers these questions and many more in our LCFS Credit Balance and Credit Price Outlook.

Stillwater’s LCFS Outlook includes historical LCFS credit balances and prices as a foundation for understanding forward-looking curves. Our team of experts also present three credit balance and credit price curves through 2031 – our “most likely” curves for both credit balances and credit prices in addition to high and low curves which serve to bound the outlook. Our price projections are based on our analysis of the supply of low-CI fuels in California, the demand for fossil gasoline and diesel, our outlook on carbon intensities of each fuel pool, the evolution of the vehicle fleet, and the ongoing development of the LCFS regulation.

Overlaying the numerical analysis is Stillwater’s deep understanding of regulatory actions and the evolution in California, the commercial fuels market, fuels logistics, market structure and players.

Contact us to learn more about Stillwater’s LCFS Outlook!

Stillwater’s Ten-Year LCFS Credit Balance and Credit Price Outlook includes:

  1. A table of our annual projected values for LCFS credits.
  2. Graphs of the supply, demand, and carbon intensity trends that inform our view of the LCFS credit price curve.
  3. Commentary around CARB’s historic and expected actions to regulate LCFS credit pricing.
  4. Qualitative descriptions of all key variables and how the data and factors mentioned above influence the forecast.
  5. All told: More than 40 pages of Stillwater’s deep knowledge and expertise, broken down for those looking to better understand the likely trajectory of the LCFS credit bank and credit prices.

This outlook is invaluable for any business impacted by LCFS credit values, such as:

  1. West Coast refiners
  2. Fuel importers
  3. Traders
  4. Low-carbon and renewable fuel producers
  5. Investors in ESG projects
  6. Low-carbon fuel technology suppliers, and
  7. Any company that could be involved in project credits – CCS, solar, RNG, Renewable Hydrogen, Fuel Cell Vehicles

Stillwater’s LCFS Outlook is updated on a quarterly basis, following each release of quarterly LCFS data. Our latest outlook incorporates 1Q2021 LCFS data (released July 30, 2021) and LCFS credit price data through September 30, 2021. Our previous outlook incorporated 4Q2020 LCFS data (published April 30, 2021) and pricing data through June 30, 2021. Interestingly, our latest outlook for credit prices is significantly lower than the previous quarterly report. Chief contributors are the rapid pace at which new RD capacity has come online, increased competition between RD suppliers, and, to a smaller degree, a growth in electricity credit generation due to a projected lower grid average CI. Last quarter, we assumed that RD projects would slow if prices dropped; our outlook this quarter reflects the fact that we have yet to see that behavior take hold.

Our team of experts can also run additional scenario investigations utilizing the above-described proprietary model to test client-specific assumptions and produce unique credit balance and price curves based on these assumptions.

Contact us to learn more about Stillwater’s LCFS Outlook!


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