The U.S. Environmental Protection Agency (“EPA”), which administers the federal renewable fuels program known as the Renewable Fuel Standards (“RFS”), has been grappling with the best approach to incorporating electric vehicles (“EVs”) into the RFS. Specifically, the EPA has been evaluating ways to adapt the RFS (under which renewable energy developers can generate marketable credits known as Renewable Identification Numbers (“RINs”) through the creation and use of renewable transportation fuels, including cellulosic biofuel, biomass-based diesel fuel, conventional biofuel, and advanced biofuel) to account for renewable fuels used in the generation of electricity to power EVs.
Under the RFS, certain fuel industry participants (“Obligated Parties”) are required to blend transportation fuel with renewable fuels in prescribed quantities. Obligated Parties who fail to meet the RFS blending requirement (called a renewable volume obligation, or “RVO”) may purchase RINs to offset the compliance failure.
In December of 2022, the EPA proposed a rule to govern the creation and transaction of a new type of marketable credit, the electric RIN (“e-RIN”), which would be produced by biofuels used in the generation of renewable electricity used to charge EVs. The EPA’s proposed rule would have expanded the Renewable Fuel Standards to allow EV manufacturers to generate e-RINs by matching their EV fleets’ average recharging requirements with purchases of renewable biofuels used in the generation of recharging electricity. For example, biogas producers would sell fuel to renewable energy generators, who would either use it directly to produce electricity or procure renewable natural gas from commercial pipelines. An EV manufacturer would then enter into commercial contracts for the purchase of biogas or energy derived from biogas commensurate with the average energy consumption of EVs in its national fleet.
For the most part, renewable biogas is derived from the anaerobic digestion of organic waste materials, resulting in development synergies with industrial agriculture. Anaerobic digestion projects are an integral piece of the circular economy and can generate significant supplies of renewable energy. They are, however, capital and land intensive.
In June of this year, however, the EPA decided to abandon the proposed system, citing potential litigation regarding the creation and transaction of e-RINs.
Tabling the e-RIN proposal will impact the future development of renewable biogas infrastructure, including by removing (for now) the possibility of a new, potentially lucrative credit that otherwise might have attracted the investment necessary to energy project development. By scrapping the eRIN program, an additional source of project revenue that could lighten the bankability load and increase commercial viability of these projects has been proscribed. Moreover, biogas is left to compete with other electricity sources in terms of price and quality, without an economic bonus derived from its environmental benefit. Furthermore, eRINs would have increased the demand for biogas, and in better pricing for gas itself.
Scrapping the proposed program is a missed opportunity to facilitate growth in a promising sector of the circular economy.