Renewable Fuels

What are Renewable Fuels?

Renewable fuels are fossil fuel replacements that aim to allow for the continued use of existing equipment (tractors, airplanes, fueling stations, etc.), while maintaining a reduced carbon intensity compared to traditional fossil fuels (diesel, jet A, natural gas, gasoline). The basic concept is to generate a circular carbon cycle by allowing plants to naturally absorb carbon dioxide from the atmosphere that then when converted into a fuel and burned has roughly a carbon-neutral impact on the environment. Ideally they can be used as direct fuel replacements, often called “drop-in ready”, but certain forms are limited to a maximum blend ratio for reliability and to maximize use in existing infrastructure.

Types of Renewable Fuels

Corn Ethanol

• Produced from the fermentation of milled corn.
• Fermentation releases a significant amount of carbon dioxide.
• Land use change is considered one of the major hurdles for corn ethanol as increasing production reduces the capacity to grow other crops.
• Corn farming is also fertilizer intensive and associated carbon emissions from fertilizer further increase the final ethanol carbon intensity.
• Qualifies for D6 RINs.

Sugarcane Ethanol

• Produced from the fermentation of sugarcane sugar.
• Sugarcane takes significantly less fertilizer to grow than corn.
• A much larger part of the produced crop can be fermented to alcohol.
• Qualifies for D5 RINs.

Biodiesel

• Produced mainly from vegetable oil (Soybeans, Corn).
• Simple chemical treatment produces stable diesel replacement fuel that can be mixed up to 20% (B20) with petroleum diesel in modern engines.
• Pure biodiesel (B100) requires modification to existing diesel equipment for transportation and use.
• Newer engines targeting B100 biodiesel compatibility, but still need modification when switching fuels.
• Qualifies for D4 RINs.

Renewable Diesel (RD)

• Produced mainly from used cooking oil and animal fat.
• More complex refining process similar to petroleum diesel.
• “Drop-in Ready” renewable diesel is nearly identical to petroleum diesel, and is mixed into diesel supply chains with no issues.
• Process similar enough to fossil fuel diesel that refineries are considering renewable diesel conversion to utilize existing refinery equipment.
• Qualifies for D4 RINs.

Sustainable Aviation Fuels (SAFs)

• Production similar to renewable diesel.
• Growing demand from airlines may cause shift in renewable diesel production to SAFs.
• Approved fuel paths from the FAA require SAFs to be drop-in ready, but can only be used in mix ratios up to 50% for aviation safety.
• 100% SAF should already be feasible, but is currently limited by regulations.
• Three major pathways currently considered:
• Used cooking oil and animal fat refining similar to RD.
• Fischer-Tropsche synthesis with biomass feedstocks.
• Alcohol-to-jet in which ethanol producers could see a major uplift in product demand for ethanol.

Biogas and Renewable Natural Gas (RNG)

• Landfills, animal manure, and wastewater treatment plants are considered large sources of biogas.
• RNG is produced from processing of biogas to remove impurities and produce gas that is a majority methane with a similar heating value to natural gas.
• Landfills are mandated to flare produced gas by the EPA, and carry a carbon intensity reduction based on avoided CO₂
• Farms do not have a similar flare mandate, and are based on avoided methane emissions (25x Global Warming Potential (GWP) of CO₂).
• Wastewater treatment plant biogas production still in early stage development.

Renewable Gasoline

• Originally slated to be a gasoline replacement similar to renewable diesel.
• Due to rise in personal vehicle electrification (EVs) and potential hydrogen fuel cell vehicles, not really considered a viable market as production cost will be significantly higher than other options.

Power-to-Fuels

• Conversion of carbon dioxide and hydrogen into fuel hydrocarbons.
• Processes typically revolve around the reverse water gas shift reaction (RWGS) or Sabatier Methanation.
• Direct Air Capture (DAC) of carbon dioxide removes CO₂ from the atmosphere and closes carbon cycle from eventual burning of produced fuel.
• DAC is one of the most difficult processes in capturing carbon dioxide.
• Hydrogen from electrolysis powered by renewable energy is needed to keep carbon intensity low.
• Methanation fuel cells could be promising in reducing process complexity.

Electricity

• Proposal by EPA to consider EVs charged with RNG generated electricity could qualify for Renewable Fuel Standard (RFS) credits (RINs)
• Landfills have been installing electricity generation facilities for generate power from biogas for decades.
• RFS RIN revenue from RNG made electricity generation less favorable, even with installed equipment.
• Proposed eRIN would offset RNG advantage and reduce wasteful landfill conversions.

Renewable Fuels Credit Systems

EPA Managed Renewable Fuels Standard (RFS) Renewable Identification Numbers (RINs)

The Energy Policy Act (EPAct) and the Energy Independence and Security Act (EISA) created and expanded the Renewable Fuel Standard (RFS) program managed by the EPA. The RFS program allows the EPA to place renewable volume obligations (RVOs) on producers or importers of transportation fuels. The Renewable Identification Numbers (RINs) credit system was developed to allow for non-renewable fuel facilities to meet their RVOs and for renewable fuel producers to receive additional revenue from the production of a renewable fuel.

RFS RIN Credit D-Codes

The RIN credit system is designed to account for the different amounts of greenhouse gas emissions reduced from the production of a given fuel and it’s final use. A RIN is set to represent the equivalent biomass content and lower heating value of a gallon of corn ethanol, and an equivalence value can be calculated that allows for higher value fuels to generate more RINs than lower value fuels. Credits with more greenhouse gas reduction can be used to offset RVOs for lower credits, but typically are priced higher due to higher production costs for cleaner fuels. The compressed natural gas (CNG) engines and the conversion of diesel engines to CNG allows for renewable natural gas to be considered for transportation fuel RIN credit generation which wasn’t approved until 2014.

Figure 3 – Nesting Structure of RFS RIN Credits

RIN Credits Market

Companies that are unable to meet the EPA RVOs look to the RIN credit market to avoid significant fines during annual compliance reviews. A renewable fuel company that produces excess RIN credits for it’s own obligation can either sell renewable fuel with the RIN credit attached or separate the RIN from the renewable fuel once blended with a fossil fuel to be sold. As each D-code RIN has separate obligations placed on it each year, the value of a given fuel RIN fluctuates with the availability of a given renewable fuel.

Figure 4 – Fluctuation of RIN credit prices cleared in EPA credit tracking system

Monthly RIN Credit Prices

Summary of Renewable Fuel RFS RIN Credits and RIN Market Size

Table 1 – Summary of Renewable Fuels RFS RIN Credits and Future Market Size

California Low Carbon Fuel Standard (CA-LCFS) credits

Further economic support for renewable fuel production comes from the California Air Resources Board (CARB) cap-and-trade program for GHG emissions reductions. Under this program, large greenhouse gas emission sources that emit over 25,000 metric tons of carbon dioxide equivalent per year (t-CO₂e/yr) are awarded emissions credits equal to 1 t-CO₂e at a steadily decreasing amount per year. Once a company has used all of it’s allowances at the cap, it must then purchase credits from other companies with excess allowances or from offset sources. Renewable fuels are allowed to generate these offsets from the reduction of CO₂e emissions as determined by the fuel life cycle. As of February 2023, a 1 ton LCFS credit is priced at $110/t-CO₂e.
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Global Warming Potential and Carbon Intensity

Emissions associated with climate change come in many forms and CO₂ is only one of the numerous gasses that have an effect on climate. CO₂ is used as the reference standard for these other gasses and their global warming potential is calculated as the equivalent amount of carbon dioxide (CO₂e) that would cause the same amount of climate change over a certain period of time; typically 100 years. The lifecycle carbon emissions analysis of animal manure RNG and landfill RNG takes into account the associated emissions avoided from producing the RNG. The main difference however is that the EPA also mandates that all landfill gases need to be collected for flaring at a typical landfill. This allows animal manure RNG to claim avoided methane released at a 25x multiple of CO_2, whereas landfills can only count avoided CO₂ released from the flared methane. This has a significant influence on the amount of LCFS credits that can be generated from a landfill RNG plant versus an animal manure RNG facility.

Table 2 – Global Warming Potential of Emissions