By Susan Olson, BioCycle Magazine.
Since 2009, the U.S. Environmental Protection Agency has mandated the blending of renewable fuels into the motor vehicle transportation supply under the Renewable Fuel Standard (RFS). Renewable natural gas to compressed natural gas (CNG) or liquefied natural gas (LNG) is playing a growing role in satisfying the fuels mandate. This article explores how renewable natural gas (RNG) works within the RFS from a demand and economic viewpoint.
The RFS is a part of the Clean Air Act, specifically the Energy Independence and Security Act (EISA), which was congressionally enacted under the Bush administration in 2007. Refiners and importers of petroleum-based fuels are obligated parties under RFS, which requires a percentage of refined transportation fuels to be blended with renewable fuels. These obligated parties are regulated entities that must demonstrate compliance with the blending requirements.
Each year, the EPA sets the renewable volume obligations (RVOs) for specific types of renewable fuels for obligated parties to meet. There is an overall renewable fuel RVO, and nested within that is a specific carve out for advanced biofuels as shown in Figure 1. Within that advanced biofuel RVO are further sub-requirements for volumes of biomass-based diesel and cellulosic-based biofuels.
Corn ethanol qualifies for D6 RIN generation, which may be used for the total renewable fuel mandate but not the advanced categories. Some refiners comply with the total renewable fuel mandate by blending ethanol with gasoline and retaining the RIN while others comply by purchasing separated RINs rather than blending. Some refiners use a mix of those activities.
The currency of RFS compliance is the Renewable Identification Number (RIN), which is a credit generated for one ethanol equivalent gallon of renewable fuel. RINs are generated by renewable fuel producers and importers based on production, import or sale of renewable fuels. RINs travel with the physical fuel until it is blended into the transportation supply. A RIN may then be retired by its obligated party owner, or separated and sold as its own environmental credit commodity, ultimately being purchased by an obligated party who needs it to prove that it is meeting its mandate. For 2017, the mandate for total renewable fuel is 15 billion gallons more than the advanced mandate. The 15 billion gallons will be fulfilled mostly by ethanol. There is a daily RIN trade although some days are more active than others.