The U.S. Environmental Protection Agency (“EPA”), which administers the federal renewable fuels program known as the Renewable Fuel Standards (“RFS”), has long considered the potential impact of electric vehicles on the RFS. Specifically: how can the RFS (under which transactable credits known as Renewable Identification Numbers (“RINs”) are generated by the creation and use of renewable fuels) be adapted to address renewable fuel converted not into traditional compressed or liquified fuel, but instead into electricity used to power electric vehicles?
As the RFS presently exists, certain fuel industry participants (“Obligated Parties”) are required to blend renewable fuel into transportation fuel in proscribed quantities. Failing that, an Obligated Party must obtain RINs (which are generated by the creation and use of cellulosic biofuel, biomass-based diesel, conventional biofuel, and advanced biofuel) to offset their shortfall.
Now, the EPA has proposed a material addition to the RFS meant to establish a renewable electricity RIN (“eRIN”), which could be created and transacted generally like a traditional RIN; that is, an Obligated Party could obtain eRINs as a means of complying with its RFS obligations. Unlike traditional RINs, however, eRINs would be created by the generation of renewable electricity – not by the generation of various biofuels.
The proposed method of generating eRINs, however, would differ from that used in the generation of traditional RINs. Whereas traditional RINs are generated by fuel producers or purchasers, the EPA proposes that eRINs be generated by electric vehicle manufacturers in proportion to their electric vehicle fleets: manufacturers would quantify renewable electricity used by their new and existing vehicles, purchase an equivalent amount of electricity derived from renewables sources from electricity generators, and thereby generate a corresponding number of eRINs. In this proposal, only electric vehicle manufacturers could generate eRINs.
The EPA has recognized that parties other than electric vehicle makers would be involved in the production and transacting of eRINs, including biogas producers (whose raw product can be used as the fuel for renewable electricity), biogas distributors (who transport biogas to those who would convert it to electricity), and renewable electricity generators. Still, the current proposal focuses on those parties responsible for three essential components of the eRIN process: biogas producers, renewable electricity producers, and electric vehicle makers.
The EPA proposal excludes other parties likely to be involved in eRIN production. Still, those other parties may yet benefit from the EPA’s proposal. For example, electricity generators selling renewable electricity to vehicle manufacturers will be required to produce that electricity from qualifying biogas. Thus, the demand for – and price of – raw biogas feedstock is expected to increase. Further, projects which previously would have proven uneconomical because of the little amount of biogas generated could be aggregated to produce an amount of biogas sufficient for use by renewable electricity generators.
The EPA’s eRIN proposal is unfinalized. It anticipates the generation of eRINs as early as January 1, 2024, but the proposal itself may look much different by that date. Interested parties should monitor public comments and forthcoming proposal revisions closely for opportunities.