Carbon Intensity Is Important for Renewable Fuels Investments

December 21, 2020

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by Dave Collings (1898 & Co./Burns & McDonnell) As developers, investors and plant operators explore options to increase production and market share of renewable fuels, the concept of carbon intensity (CI) must be well-understood. It might be the deciding factor that determines economic viability of your biofuels project.

In California and an increasing number of other states, CI is the metric that will directly impact investment returns for renewable fuels production facilities. California’s Low Carbon Fuel Standard (LCFS) uses CI as a tool to measure the estimated life-cycle carbon emissions of a given fuel, relative to the energy it produces during combustion. This measurement is based on the Argonne National Laboratory Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET model).

Understanding the CI of a renewable fuel is important because it is directly proportional to the monetary incentive provided by the LCFS program. Failure to accurately analyze and understand the CI methodology can unfortunately result in millions of dollars in lost revenue.

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Because advanced biofuels have lower CI, they are assigned more value in the RINS and LCFS programs compared to first generation and current generation biofuels. However, advanced biofuels tend to be produced in smaller volumes and carry more technical and commercial risk.

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As the California LCFS program approaches 2030, these first-generation biofuels will become even less valuable as the annual target decreases.

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Current generation biofuels are considerably more attractive in the LCFS market. These fuels include fatty acid methyl ester (FAME) biodiesel and renewable diesel that obtain their feedstock from animal fats, used cooking oil and other low carbon intensity pathway feedstocks. ... While the facilities to convert this material to diesel tend to be more capital-intensive to construct, the ROI associated with lower CI fuels often justifies the incremental investment.

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These so-called advanced biofuels include processes such as cellulosic biomass-to-ethanol, cellulosic biomass-to-diesel, jet fuel, and gasoline. Feedstocks may include wheat straw, corn stover, dairy manure or municipal solid waste and result in CI scores that are near zero or negative.

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For example, the CI score for the corn ethanol process and renewable diesel process can be lowered via carbon capture. With federal incentives in Code §45Q for carbon capture in the range of $35-$50 per ton, U.S. biofuel producers can also “double dip” on incentives. Separately, providing electricity from a solar, wind or other low-CI source is a choice that many renewable fuel producers are considering for current or future plants.

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While West Coast (California and Oregon) policy is largely driving investment in the United States, it is important to note that there are incentives already available for biofuel plants in Brazil, Europe and some Canadian provinces, where LCFS policies continue to emerge and evolve. Other programs are likely to be put in place soon in Washington state as well as several northeastern U.S. states.

Europe is one of the more mature markets for renewable fuels, and the Nordic countries are widely acknowledged as one of the more attractive markets. READ MORE

Tags

GREET Greenhouse Gases Regulated Emissions and Energy Use in Transportation Model carbon/CO2 sequestration Carbon Intensity (CI)/Carbon Footprint California Oregon Washington BioRefineries/Renewable Fuel Production oil refineries LCFS (Low Carbon Fuel Standard) RINs (Renewable Identification Numbers) Renewable Fuel Standard (RFS and RFS2) Regulations-Federal Regulations-State 2nd generation biofuels 3rd generation biofuels markets/sales market forces biodiesel Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel animal fat used cooking oil (UCO) cellulosic biofuel wheat straw corn stover dairy waste manure MSW (Municipal Solid Waste) carbon capture and storage (CCS) 45Q Carbon Oxide Sequestration Tax Credit Sustainability Brazil European Union (EU) Canada EPA (Environmental Protection Agency) Investing

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