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Falling LCFS credit price narrows RNG prospects

  • : Emissions, Natural gas
  • 22/05/20

Sliding prices may narrow development of one of last year's fastest-growing sources of California Low Carbon Fuel Standard (LCFS) credits.

Interlocking incentives led by the state's transportation fuel program spurred a nationwide build-out of projects to harvest methane from dairy cattle and swineherds over the past five years to produce more renewable natural gas (RNG).

But a surge in new credits helped cut LCFS prices by nearly half since January 2021. The drop may refocus investment in the largest, cheapest projects.

"Not every dairy farm is created equal," said Tyler Henn, Clean Energy Fuels vice president of business development and renewable natural gas investment.

California's LCFS program reduces the carbon intensity of transportation fuels through steadily falling annual limits on the amount of CO2 emitted during their production and use. Higher-carbon fuels that exceed the annual maximum incur deficits that suppliers must offset with credits generated by distributing approved lower-carbon fuels.

The lower or higher a fuel's score compared with the annual limit, the more credits or deficits it will generate. Dairy methane harvested and supplied to compressed natural gas vehicles has surged, in part due to scores that can place individual projects hundreds of points below the annual limit, many times lower than the nearest low-carbon competitor.

The gap translates to outsized credit generation. RNG made using dairy and other animal methane generated 2.1mn t of LCFS credits in 2021, or about 11pc of all new credits for the year. But dairy digester or animal waste gas made up just 1.5pc of alternative fuel volume in 2021 — displacing less than 2,800 b/d of equivalent diesel. Renewable diesel, which generated three times the credits of dairy and swine RNG last year, displaced more than 20 times the volume of petroleum diesel.

Spot credits have fallen to nearly $100/metric tonne from about $200/t at the beginning of last year. Supplies of new credits from renewable fuels outpaced the demand for higher-carbon gasoline and other fuel in 2021.

Dairy deluge

Thin margins and economies of scale have helped consolidate especially western US dairies to larger herds, according to the US Department of Agriculture (USDA).

Such concentration can reduce the investments needed to capture, process and connect harvested biomethane to US natural gas pipelines. It takes thousands of cows, either at a single large dairy or clustered across several operations, to produce sufficient gas. Projects need not always build new feeder pipelines — trucks can move compressed gas from some sites for injection.

State regulators need dairies and renewable natural gas infrastructure to capture more. California hosts about 20pc of all US dairies, and the operations produce the largest share of the state's methane emissions. California was on pace to meet just half of a targeted 40pc reduction in dairy methane emissions by 2030, according to California Air Resources Board estimated last year. The agency estimated that at least 160 additional dairies would need to use methane capture and processing to meet state goals.

California utilities also face renewable natural gas requirements. Southern California Gas expects RNG including landfill methane to make up 12pc of the gas it delivers to customers in 2030. Pacific Gas & Electric, California's largest utility, plans for RNG to make up 15pc of its gas by 2030, and already serves 22 CNG stations.

Competition for large or otherwise well-suited dairies soared with the combination of mandates and incentives, said Kevin Dobson, vice president of biomass for DTE Vantage.

"We are part of a big, $10bn company, and we are competing against, literally, people that work off of their kitchen table and drive a pickup truck into the farm," Dobson said.

But some dairies may lack manure management infrastructure, may lack easy access to offtake infrastructure, or need costlier equipment to produce the gas, Henn said.

The falling price environment raises the bar on project selection without halting it, Dobson said.

"You got to sharpen the pencil, you got to be a little bit more efficient," he said.

Reined in

Regulatory action could again curb the RNG boom. California limits methane emissions from landfills via another regulation. To generate LCFS credits, landfills must go beyond the cuts the state already requires. Gas captured from landfills averaged 8,260 b/d of diesel replacement but produced just 624,630 t of credits in 2021.

Regulators could still apply credit-slashing, landfill-style methane reductions to dairies. California's SB 1383, passed in 2016, authorized the state to regulate dairy methane as early as 2024. The state would need to consider dairy prices, the potential for dairies to move to other, less rigorous states, and assure that the regulations were "cost effective."

CARB has focused on incentives in communications about meeting dairy methane goals.

Environmental justice and animal welfare groups insist the incentives perpetuate large-scale agriculture that harms cattle, concentrates odors and wreaks other environmental damage. Some truck operators also question the long-term demand for the fuel.

The industry faces state mandates to electrify its fleets, with requirements that manufacturers making rising numbers of zero-emissions medium- and heavy-duty trucks available beginning in 2024. Major fleets that would otherwise prefer compressed natural gas were wary of heavy spending on those fuel systems, Western States Trucking Association head of regulatory affairs Joe Rajkovacz said.

"Those trucks are not even part of the future of what the California Air Resources Board wants to allow," Rajkovacz said.


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24/12/11

EPA defends 'good neighbor' efficacy

EPA defends 'good neighbor' efficacy

Houston, 11 December (Argus) — The US Environmental Protection Agency (EPA) responded to concerns raised by the US Supreme Court in June by defending the efficacy of the "good neighbor" plan in reducing NOx emissions regardless of the number of participating states. The high court's concerns were over the issue of severability — that is, how effective the good neighbor plan would be in lowering ozone season NOx emissions if only some of the original 23 states participated. In other words, it is the question of whether the emissions limits placed on states as part of the Cross-State Air Pollution Rule (CSAPR) cap-and-trade program under the plan would have changed based on the number of participating states. In a notice published in the Federal Register on Tuesday, EPA rejected the idea that the effectiveness of the good neighbor plan — and as a result, the NOx emissions limits imposed on each state — would wane if the number of participating states changed. Instead, the agency said that its plan is "by design severable by state" because the NOx emissions limits are imposed on individual sources rather than the states themselves. Each participating state's emissions obligations depend on the number of obligated power plants, their emissions and the types of emissions reduction measures they already have in place. As a result, pausing the imposition of tighter NOx limits under the good neighbor plan in certain states does not affect the NOx limits imposed in other participating states, EPA said. In a similar vein, EPA addressed concerns that the larger version of the CSAPR Group 3 seasonal NOx allowance trading program established under the good neighbor plan would become more illiquid if it covered fewer states than planned, which could lead to a smaller supply of allowances and higher prices. Calling those concerns "unjustified", the agency said that states can withdraw their sources from a trading program by submitting their own ozone reduction plans. EPA also cited previous instances from past cross-state ozone programs where the number of participating states has changed, noting that there has been no evidence of allowance shortages. EPA also responded to concerns that it used an inconsistent methodology to determine emissions obligations for each source — including the emissions reduction strategies that could be used and their associated costs. The agency said it used a methodology that was "nearly identical to prior good neighbor rules" and considered NOx reduction technologies that have been in place "for decades throughout the US." The severability issue was raised by the Supreme Court in June, when it paused implementation of the good neighbor plan nationwide. The court majority said that EPA did not provide a sufficient explanation in response to public comments from states that highlighted those concerns — especially because, until the court issued its stay, only 10 states were participating in the good neighbor plan because of lower court stays. But in September, the US Court of Appeals for the DC Circuit allowed EPA to respond to the issue of severability, while it paused related litigation. EPA finalized the "good neighbor" plan last year to help downwind states meet the 2015 federal ozone standards. It imposed more rigorous CSAPR ozone season NOx emissions limits on more than 20 states and called for new NOx limits for industrial sources. Illiquidity has been persistent in the CSAPR market, depressing activity and keeping prices steady for almost a year because of uncertainty surrounding the numerous legal challenges against the plan. The ozone season runs from May-September each year. With plan halted for the time being, EPA has returned to less-stringent seasonal NOx budgets and reshuffled the remaining participating states into the Group 2 and new "expanded" Group 2 markets, leaving the Group 3 market empty. By Ida Balakrishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop 29 grids, storage pledge signatories released


24/12/11
24/12/11

Cop 29 grids, storage pledge signatories released

London, 11 December (Argus) — The final list of signatories for pledges on expanding energy storage and grid capacity taken at the UN Cop 29 climate summit, was released today, almost four weeks after the commitment was first finalised, with 58 countries out of almost 200 Cop parties taking part. Signatories commit to a collective goal of increasing electricity storage capacity to 1500GW by 2030, a sixfold increase from 2022. Another pledge is to add or refurbish 25mn km of grid infrastructure by 2030, and recognise the need for an additional 65mn km by 2040. Lack of firm, clean power generators to back up intermittent renewables is a major barrier to increasing renewable penetration, while distributed resources require large investments in power grids to transport electricity to consumers. The list of 58 signatory countries includes the so-called troika of Cop host countries the UAE, Azerbaijan and Brazil. The US and all other G7 member states are present, with the exception of France. Also absent among major economies are China and Russia, while Saudi Arabia spoke in support of the pledges during Cop but does not appear on the list of signatories. In comparison, almost 120 countries had signed a pledge to triple global renewable capacity double global energy efficiency by 2030 during the Cop 28 summit in Dubai last year. The grids and storage pledges were one of the centrepiece announcements made by the Azeri host, following on from the calls made in Dubai on renewable capacity and energy efficiency, but also on transitioning away from fossil fuels in energy systems. But divergences on mitigation — actions to cut greenhouse gas emissions — during the summit this year, meant that the completed pledge, as well as any other specific mentions of fuels and energy transition technologies, were not included in final outcome texts. By Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US inflation rises to 2.7pc in November


24/12/11
24/12/11

US inflation rises to 2.7pc in November

Houston, 11 December (Argus) — Headline US inflation ticked higher in November, largely on food and shelter costs, suggesting the Federal Reserve still has work to do to reach its inflation target. The consumer price index rose by an annual 2.7pc in November after rising by 2.6pc through October, the Labor Department said. The gain matched expectations in a survey of economists by Trading Economics. So-called core inflation, which strips out more volatile food and energy, rose by 3.3pc, matching the prior month's gains. Services less energy services rose by 4.6pc following a 4.8pc increase the prior period. Today's report is the last consumer price index (CPI) reading before Federal Reserve policymakers meet next week to assess progress in bringing down inflation to their 2pc long term goal and release economic projections. The CME FedWatch tool today gave a 96pc probability the Federal Reserve will cut its target rate by a quarter point at its last meeting of the year, up from nearly 89pc Tuesday. The Fed began cutting its target rate in September after holding it at a 23-year high for more than a year. The energy index contracted by 3.2pc for the 12 months ending in November after falling by 4.9pc through October. Gasoline fell by 8.1pc and the fuel oil index declined by 19.5pc. The food index rose by 2.4pc over the past year, following a 2.1pc gain through the prior month. Transportation services rose by 7.1pc. Shelter slowed to 4.7pc from 4.9pc The CPI rose by 0.3 in November from the prior month, after rising by 0.2pc in each of the prior four months. The shelter index rose by 0.3pc for the month, accounting for nearly 40pc of the total monthly gain in the headline index, Labor said. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Brazil's inflation accelerates to near 5pc in November


24/12/10
24/12/10

Brazil's inflation accelerates to near 5pc in November

Sao Paulo, 10 December (Argus) — Brazil's headline inflation accelerated to a 14-month high in November, led by gains in food and transportation, according to government statistics agency IBGE. The consumer price index (CPI) rose to an annual 4.87pc in November from 4.76pc in the previous month, IBGE said. Food and beverage costs rose by an annual 7.63pc in November, accounting for much of the monthly increase, following a 6.65pc annual gain in October. Beef costs increased by an annual 15.43pc in November following an 8.33pc annual gain for the prior month. Higher beef costs in the domestic market are related to the Brazilian real's depreciation to the US dollar, with the exchange rate falling to a record-low R6.11/$1 at the end of November. The stronger dollar leads producers to prefer exports over domestic sales. Beef prices rose by 8pc for the month alone. Soybean oil prices rose by 27.75pc over the year. Transportation costs, another major contributor to the monthly acceleration, rose by an annual 3.11pc in November after a 2.48pc gain in October. On a monthly basis, transportation costs rose by 0.89pc in November, reversing a contraction of 0.38pc in October. Housing costs rose by 4pc over the 12-month period. Brazil's central bank last month hiked its target rate to 11.25pc, its second increase off a low of 10.5pc between May and September, to try to head off a resurgence in inflation. It was at a cyclical peak of 13.75pc from August 2022 through July 2023 as it sought to tamp down the post-Covid-19 surge in inflation. Fuel prices rose by an annual 8.78pc in November after a 7.22pc gain in October. Motor fuel costs fell by 0.15pc in November compared with a 0.17pc drop in October — thanks to lower ethanol and gasoline prices. Diesel prices contracted by 2.25pc in the 12-month period. Power costs slowed to an annual 3.46pc in November following a 11.58pc gain in October. Electricity prices contracted by a monthly 6.27pc after a decrease in power tariffs on 1 November. Monthly inflation slowed to 0.39pc in November from 0.56pc in October. The central bank's inflation goal for 2024 is 3pc, with a margin of 1.5pc above or below. By Maria Frazatto and Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Meta sites largest data center in Louisiana


24/12/10
24/12/10

Meta sites largest data center in Louisiana

New York, 10 December (Argus) — Facebook-parent Meta will build its largest data center ever in northeast Louisiana, near one of the largest US natural gas fields. Meta plans to invest more than $10bn in the Richland Parish data center, which will "play a vital role" in advancing Meta's ambitions in artificial intelligence software, the company said. Construction of the facility is expected to continue through 2030, Meta said. Richland Parish is "an outstanding location" for Meta to build a data center because of its "access to infrastructure", "reliable grid" and "business-friendly climate", the company said. Meta's siting decision also was driven in part by "the availability of reliable, low-cost energy", according to Grow NELA, the economic development agency of northeast Louisiana. The parish is close to the prolific Haynesville shale of east Texas and northern Louisiana, which last year accounted for about 14pc of US dry gas production, according to US Energy Information Administration data. Securing gas supplies in a major gas-producing state like Louisiana may be easier because of the simpler regulatory process behind the construction of intrastate gas pipelines. Gas pipeline construction across US state lines requires the involvement of federal energy regulators, resulting in longer and more uncertain construction timelines. Meta said it will partner with US gas and power utility Entergy to add "enough clean and renewable energy to the grid to cover 100pc of the electricity use" of the Richland Parish data center, with Entergy adding "clean, efficient power plants to its system" to meet power demand. Meta and Entergy have looked at "options to invest in multiple clean energy options, including nuclear energy," Meta said in a statement to Argus . But it did not respond to an inquiry asking if it had secured supply deals for the facility with electricity generated by any particular fuel source, such as nuclear, gas or coal. Amazon, Google and Microsoft in recent months have said they expect to fuel their own planned data centers with nuclear energy , which could provide baseload, low-emission electricity to the new facilities. But long timelines and large upfront costs for conventional nuclear power plants, alongside the uncertain emergent technology behind nuclear small modular reactors, or SMRs, present obstacles to nuclear-powered data center development. For those reasons, the surge in expected US electricity demand through the end of the decade to fuel new planned data centers could, in the short term, translate largely into increased gas demand, Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus earlier this month. Data center operators "are in such a hurry, they are just wanting the power", Armstrong said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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