Canada furthers investment in GHG reductions
The Canadian government plans to have C$93bn ($67.5bn) in federal incentives up and running by the end of the year to spur developments in clean energy technology, hydrogen production, carbon capture utilization and storage (CCUS) along with a new tax credit for electric vehicle (EV) supply chains.
The Canada Department of Finance, in its 2024 budget released on 16 April, said it expects to have the first planned investment tax credits (ITCs), for CCUS and renewable energy investments, in law before 1 June.
The ITCs would be available for investments made generally within or before 2023 depending on the credit.
The anticipated clean hydrogen ITC is also moving forward. It could provide 15-40pc of related eligible costs, with projects that produce the cleanest hydrogen set to receive the higher levels of support, along with other credits for equipment purchases and power-purchase agreements.
The government is pursuing a new ITC for EV supply chains, meant to bolster in-country manufacturing and consumer adoption of EVs with a 10pc return on the cost of buildings used in vehicle assembly, battery production and related materials. The credit would build on the clean technology manufacturing ITC, which allows businesses to claim 30pc of the cost of new machinery and equipment.
To bolster reductions in transportation-related greenhouse gas (GHG) emissions, the government will also direct up to C$500mn ($363mn) in funding from the country's low-carbon fuel standard to support domestic biofuel production.
Transportation is the second largest source of GHG emissions for the country, at 28pc, or 188mn metric tonnes of CO2 equivalent, in 2021.
But the province of Alberta expressed disappointment at the pace of development of ITC support that could help companies affected by the country's move away from fossil fuels.
"There was nothing around ammonia or hydrogen, and no updates on the CCUS ITCs that would actually spur on investment," Alberta finance minister Nate Horner said.
The incentives are intended to help Canada achieve a 40-45pc reduction in GHG emissions by 2030, relative to 2005 levels. This would require a reduction in GHG emissions to about 439mn t/yr, while Canada's emissions totaled 670mn in 2021, according to the government's most recent inventory.
The budget also details additional plans for the Canada Growth Fund's carbon contracts for a difference, which help decarbonize hard-to-abate industries. The government plans to add off-the-shelf contracts to its current offering of bespoke one-off contracts tailored to a specific enterprise to broaden the reach and GHG reductions of the program.
These contracts incentivize businesses to invest in emissions reducing program or technology, such as CCUS, through the government providing a financial backstop to a project developer. The government and developer establish a "strike price" that carbon allowances would need to reach for a return on the investment, with the government paying the difference if the market price fails to increase.
CGF signed its first contract under this program last year, with Calgary-based carbon capture and sequestration company Entropy and has around $6bn remaining to issue agreements.
To stretch this funding further, the Canadian government intends for Environment and Climate Change Canada to work with provincial and territorial carbon markets to improve performance and potentially send stronger price signals to spur decarbonization.
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Larger EU H2 bank auction could still clear below €1/kg
Larger EU H2 bank auction could still clear below €1/kg
Hamburg, 1 May (Argus) — The EU will launch a second European hydrogen bank auction later this year, ramping up the budget from a pilot for which results were published on 30 April. A bigger budget will allow more projects to win subsidies, but developers might still have to bid at or below €1/kg to stand a chance of being successful. As a result of the pilot, the EU will subsidise seven renewable hydrogen projects in Spain, Portugal, Norway and Finland with a total €720mn ($768mn), to be disbursed as a fixed premium per kg produced over a 10-year period. The European Commission picked the projects that requested the least support and the auction cleared at €0.48/kg, far below the bid ceiling of €4.50/kg . A second auction later this year is slated to have a much larger budget of around €2.2bn. This could open the door for projects with less competitive bids, but developers may still have to bid for less than €1/kg, data released by the commission suggest. If another €2.2bn had been available to the "next best projects" in the pilot, bringing the total budget to nearly €3bn, the auction would have cleared at around €1/kg, the data indicate. Spanish projects would have been the main beneficiaries of the larger budget. But it would have also unlocked subsidies for projects that did not field any winners in the pilot, including Germany, France, Austria and the Netherlands. This suggests that projects in these countries might be able to get subsidies in the second auction. That said, some German projects that participated in the pilot are bound to get funds from a separate €350mn budget set aside by Berlin , meaning they could not take part in the next round. In any case, the second round could clear even far below €1/kg, if developers revise their bidding strategies now they have indications from the pilot on how low they might have to go. Such signposts were not available for the first round, other than from a Danish auction last year with similar parameters — which had indicated that winning bids in the hydrogen bank pilot were likely to stay well below €1/kg . The commission plans to tighten some of the eligibility criteria for the second round , which might prevent some projects from participating again. A draft document suggests winners of the second round would have to commission their plants within three years, down from five in the pilot. And developers would have to provide a completion guarantee equivalent to 10pc of the requested subsidies, up from 4pc. The second auction will also have a lower bid ceiling of €3.50/kg based on the draft, although this is highly unlikely to be tested by the successful submissions. Budget uncertainties While previous commission comments suggested a budget of around €2.2bn for the second round, the draft rules leave the exact funds open. The commission initially earmarked €800mn for the pilot and might top up the second round with the unused €80mn. It plans to set an unspecified slice of the budget aside exclusively for projects targeting offtake for maritime transport, adding a degree of complexity. Austria is planning to top up the second auction with €400mn , while others, such as Belgium , could follow suit. Moving the needle? While bids in the pilot auction came in well below the ceiling — and are bound to do so again in the second round — the funds will only be enough to support a fraction of the EU's 10mn t/yr renewable hydrogen production target by 2030. The pilot auction will subsidise 1.58mn t, or 158,000 t/yr, of production from the seven selected projects — assuming the support they secured will be enough to get them built as planned. If the next best projects from the pilot were to repeat their bids in a €2.2bn second round successfully, the round could support close to 300,000 t/yr. While this would lift subsidised output across both auctions to nearly 460,000 t/yr, it would still be less than 5pc of the 10mn t/yr target. Assuming developers that missed out in the first round shoot lower in the second and the volume-weighted average of successful bids is in line with the pilot's €0.45/kg, 480,000 t/yr could be subsidised. Together with the pilot, this would yield 640,000 t/yr, or just over 6pc of the EU's target, although extra funds from Germany, Austria and potentially others could lift this further. The EU hopes this initial operating support, combined with subsidies for capital expenses, infrastructure developments and demand-side initiatives, will be enough to kickstart the sector and other projects will follow even without hydrogen bank support. By Stefan Krumpelmann Renewable H2 projects selected in hydrogen bank pilot auction Project Coordinator Project location H2 output t/yr Electrolyser capacity MW Bid price €/kg Requested funding mn € eNRG Lahti Nordic Ren-Gas Finland 12,200 90 0.37 45.2 El Alamillo H2 Benbros Energy Spain 6,500 60 0.38 24.6 Grey2Green-II Petrogal Portugal 21,600 200 0.39 84.2 Hysencia Angus Spain 1,700 35 0.48 8.1 Skiga Skiga Norway 16,900 117 0.48 81.3 Catalina Renato PtX Spain 48,000 500 0.48 230.5 MP2X Madoqua Power2X Portugal 51,100 500 0.48 245.2 - European Commission Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Treasury updates SAF tax credit guidelines
US Treasury updates SAF tax credit guidelines
Houston, 30 April (Argus) — The US Treasury Department released long-awaited guidance on tax credit eligibility for ethanol-derived sustainable aviation fuel (SAF) Tuesday, incorporating so-called climate-smart agricultural (CSA) practices. As part of the new guidance, the agencies comprising the SAF Interagency Working Group (IWG) are jointly releasing the 40B SAF-GREET 2024 model, which provides another methodology for SAF producers to determine lifecycle greenhouse gas (GHG) emissions rates of their production for the credit. It also incorporates a pilot program to encourage the usage of CSA practices for SAF feedstocks. In collaboration with the US Department of Agriculture (USDA), the major changes include further guidance on farming practices, including no-till farming, planting cover crops and enhanced efficiency fertilizer. The $1.25/USG 40B SAF credit applies to a qualified fuel mixture containing SAF for certain sales or uses after 31 December 2022, and before 1 January 2025. To qualify for the credit, the SAF must have a minimum lifecycle greenhouse gas emissions reduction of 50pc compared with petroleum-based jet fuel. Additionally, there is a supplemental credit of one cent for each percent that the reduction exceeds 50pc, for a maximum credit of $1.75/USG. The modified version of the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) also incorporates new data, including updated modeling of key feedstocks and processes used in aviation fuel and indirect emissions. The modified GREET model also integrates key GHG emission reduction strategies, such as carbon capture and storage, renewable natural gas, and renewable electricity. The notice provides a safe harbor for use of the USDA Climate Smart Agriculture Pilot Program to further cut the emissions reduction percentage calculated for domestic soybean and domestic corn feedstocks and for certifying the related requirements. For corn ethanol-to-jet, the pilot provides a greenhouse gas reduction credit if a "bundle" of certain CSA practices — no-till farming, cover crop planting, and enhanced efficiency fertilizer — are used. It would also allow a greenhouse gas reduction credit for soybean-to-jet production if the soybean feedstock is produced using similar CSA practices. This is a pilot program specific to the 40B credit under the Inflation Reduction Act (IRA), which is in effect for 2023 and 2024. A new 45Z-GREET will be developed for use with the 45Z tax credit, which starts on 1 Jan 2025. Given the similar language between section 40B and section 45Z of the IRA regarding methods for determining lifecycle greenhouse gas emissions reduction percentages, it is expected that the positions taken by Treasury and the IRS related to the section 40B credit will be similar for the new clean fuel producer credit under section 45Z. Industry reaction mixed Renewable fuels groups welcome the updated pathway for ethanol-to-jet, but the groups expressed concern over the scope of the guidance. "We are encouraged that, for the first time ever, this carbon scoring framework will recognize and credit certain climate-smart agricultural practices," Renewable Fuels Association president and chief executive Geoff Cooper said. "However, RFA believes less prescription on ag practices, more flexibility, and additional low-carbon technologies and practices should be added to the modeling framework to better reflect the innovation occurring throughout the supply chain." Kailee Buller, chief executive of the National Oilseed Processors Association, also said the new guidance has shortcomings. "We are concerned the requirement to implement climate-smart ag practices simultaneously will limit this opportunity, particularly in parts of the country where it may not be possible to plant a cover crop or the cost to implement new practices is too steep," Buller said. Both groups said they would continue to work with the Biden administration to further opportunities for SAF development. By Matthew Cope and Payne Williams Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
New US rule may let some shippers swap railroads
New US rule may let some shippers swap railroads
Washington, 30 April (Argus) — US rail regulators today issued a final rule designed to help customers switch railroads in cases of poor rail service, but it is already drawing mixed reviews. Reciprocal switching, which allows freight shippers or receivers captive to a single railroad to access to an alternate carrier, has been allowed under US Surface Transportation Board (STB) rules. But shippers had not used existing STB rules to petition for reciprocal switching in 35 years, prompting regulators to revise rules to encourage shippers to pursue switching while helping resolve service problems. "The rule adopted today has broken new ground in the effort to provide competitive options in an extraordinarily consolidated rail industry," said outgoing STB chairman Martin Oberman. The five-person board unanimously approved a rule that would allow the board to order a reciprocal switching agreement if a facility's rail service falls below specified levels. Orders would be for 3-5 years. "Given the repeated episodes of severe service deterioration in recent years, and the continuing impediments to robust and consistent rail service despite the recent improvements accomplished by Class I carriers, the board has chosen to focus on making reciprocal switching available to shippers who have suffered service problems over an extended period of time," Oberman said today. STB commissioner Robert Primus voted to approve the rule, but also said it did not go far enough. The rule adopted today is "unlikely to accomplish what the board set out to do" since it does not cover freight moving under contract, he said. "I am voting for the final rule because something is better than nothing," Primus said. But he said the rule also does nothing to address competition in the rail industry. The Association of American Railroads (AAR) is reviewing the 154-page final rule, but carriers have been historically opposed to reciprocal switching proposals. "Railroads have been clear about the risks of expanded switching and the resulting slippery slope toward unjustified market intervention," AAR said. But the trade group was pleased that STB rejected "previous proposals that amounted to open access," which is a broad term for proposals that call for railroads to allow other carriers to operate over their tracks. The American Short Line and Regional Railroad Association declined to comment but has indicated it does not expect the rule to have an appreciable impact on shortline traffic, service or operations. Today's rule has drawn mixed reactions from some shipper groups. The National Industrial Transportation League (NITL), which filed its own reciprocal switching proposal in 2011, said it was encouraged by the collection of service metrics required under the rule. But "it is disheartened by its narrow scope as it does not appear to apply to the vast majority of freight rail traffic that moves under contracts or is subject to commodity exemptions," said NITL executive director Nancy O'Liddy, noting it was a departure from the group's original petition which sought switching as a way to facilitate railroad economic competitiveness. The Chlorine Institute said, in its initial analysis, that it does not "see significant benefit for our shipper members since it excludes contract traffic which covers the vast majority of chlorine and other relevant chemical shipments." By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Marathon Martinez refinery at 50pc capacity
Marathon Martinez refinery at 50pc capacity
Houston, 30 April (Argus) — Marathon Petroleum's California renewable fuels joint venture with Neste is running at half of its 48,000 b/d maximum capacity with plans to hit full rates by the end of the year, the refiner said on an earnings call today. The company expects to continue to operate the plant at 50pc capacity in the second quarter, increase rates to 75pc in the middle of the third quarter and reach full capacity by year-end. The refinery was operating at 46pc of its nameplate capacity early in the first quarter , Marathon said in a January earnings call. The Martinez facility has been undergoing a conversion from a traditional petroleum refinery to a renewable fuels plant since March 2021 and was slated to reach full production of mostly renewable diesel (RD) by the end of this year. But two November fires at the plant led to an investigation by the US Chemical Safety and Hazard Investigation Board (CSB). Marathon is continuing to work with local regulators, president Maryann Mannen said on the earnings call this morning. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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