EPA could link EV automakers to RFS: Update

Adds detail on credits.

US regulators could link electric vehicle (EV) makers to incentives to increase power generated from renewable natural gas in an expansion of federal renewable fuel mandates proposed today.

The US Environmental Protection Agency (EPA) proposed to expand the Renewable Fuel Standard (RFS) to generate credits needed to comply with the annual renewable fuel consumption mandates to include renewable natural gas-derived electricity contracted to meet light-duty electric vehicle charging demand beginning 1 January 2024.

The proposal would for the first time directly connect auto manufacturers to the annual renewable fuel mandates that have reshaped the US liquid fuels market and roiled refining strategies for more than a decade. Biogas-to-electricity incentives would fit with administration efforts to both spur electric vehicle adoption and address methane, a potent greenhouse gas emitted by landfills, wastewater systems and large animal feeding operations.

But the proposal may face legal challenges over whether the agency has authority to expand the program in this manner. It may also undermine existing EV incentives in state-level low carbon fuel programs.

A new RIN pathway

EPA currently measures compliance with the RFS with renewable identification numbers (RINs) associated with each ethanol-equivalent gallon of renewable fuel blending into the US fuel supply. The agency today proposed allowing RIN generation from battery electric and plug-in hybrid light duty vehicles. Medium- and heavy-duty vehicles would be included at some point, but regulators currently lack the information needed to determine appropriate RINs, the agency said. Non-road electric vehicles and equipment would be excluded.

Auto manufacturers would use data on appropriate new and legacy vehicles to determine the electricity use of their active fleet. Manufacturers could then contract with renewable electricity generators for power derived from the qualifying renewable gas sources. The manufacturers could receive RINs each quarter for up to the amount of power needed to power their active fleet from qualifying renewable natural gas.

Qualifying biogas-derived power may come from Canada or Mexico for use in an electric transportation vehicle in the US contiguous 48 states.

EPA would classify these RINs as satisfying cellulosic, or D3, requirements that obligated parties including refiners or fuel importers must meet each year. The agency would triple the requirements for these fuels to 2.13bn USG in 2026, with eRINs estimated to make up more than half of that.

Low-carbon fuel standard (LCFS) markets and federal programs today encourage medium- and heavy-duty vehicle systems powered by compressed renewable gas from such sources.

Shifting biogas to the electric market allows for a wider, longer-term array of transportation options, the EPA wrote in its proposal.

"By tapping into the greater market for that biogas that is and can be converted to renewable electricity, the impending constraints on the use of biogas as a feedstock for renewable fuel production can be mitigated," the agency said.

Placing credit generation with auto manufacturers was a bid to quickly establish a manageable, nation-wide crediting system less susceptible to fraud, the agency said.

A different approach from states

But the proposed "top-down" approach inverts electric vehicle charging incentives used in west coast LCFS markets. California and Oregon use data from vehicle chargers and utilities to determine credits under their LCFS programs.

All forms of electric vehicle charging made up about 23pc of all new credits generated in the first half of this year in California, the largest and oldest North American LCFS market. Renewable natural gas that is treated, injected into commercial natural gas systems and delivered for use in compressed natural gas vehicle systems has also increased, as California offers outsized incentives for transportation fuel captured from dairy methane.

Rising credit generation and sluggish gasoline demand have helped sink California LCFS prices this year to six-year lows. California plans to update its LCFS program with tougher targets in a year-long process beginning in early 2023. The agency has sought comment on whether to rethink credits generated from renewable natural gas or biofuels derived from agricultural feedstocks.

By Elliott Blackburn