Any way you look at the US 2016 presidential elections or the turmoil within the European Union (e.g Brexit, or Italy’s referendum on membership), you can conclude that we are entering into in anti-federal cycle, and the most innovative public-private policies are likely for some time to proceed out of regions, provinces and states.
In some ways, in the United States the forces arrayed against the Renewable Fuel Standard will end up with something far worse — a patchwork of state-by-state mandates and low-carbon standards to contend with, that will make traditional refining operations more complicated and expensive, and make renewable fuels more competitive on price.
Or, we may well see a voluntary network of states deploying regional low-carbon standards that are relatively well-synchronized, so that compliant fuels can be produced on a regional rather than a state-by-state basis. We’ll see about that.
Meanwhile, a number of states are showing the way on energy standards, production incentives, and integrated innovation efforts. Let’s look at the Fantastic Five.
It’s the land of the Low Carbon Fuel Standard, which is driving real change in the fuel mix, broad innovation in low-carbon vehicles and fuels, and recently was renewed and extended by California’s state legislature.
We look at the LCFS in “Views from Napa Valley: A Peek at California’s Low Carbon Fuels Program” by Michele Rubino not long ago, here. He wrote:
It all started with AB 32, the Global Warming Solutions Act of 2006. AB 32 is now implemented covering the entire economy in California. Markets for carbon allowances and offsets are established and in full swing. The law is unmistakably driving change and investment in the private sector, creating and shifting revenues, profits and wealth, redefining winners and losers across multiple industries. It is also generating billions of dollars in cap-and-trade auction proceeds into the Greenhouse Gas Reduction Fund (GGRF).
The excitement [over LCFS] in the advanced biofuels and low carbon fuels community attending was palpable. The price of LCFS Carbon Intensity (CI) credits (the Program’s compliance currency) is steadily increasing. It currently stands at $75/ton of CO2; for sake of example, this price point results in a premium of approximately $0.40/gallon for cellulosic or cane ethanol with a CI of 20 gCO2e/MJ and $0.65/gallon for renewable diesel with a similar CI.
And Rubino referenced ICF’s Phillip Sheehy’s predictions in terms of the CI and timeline for participation in the LCFS marketplace of different technologies / feedstock, here below.
Iowa is home to the largest single ethanol fleet and is one of the largest biodiesel producers, but they’re not resting on their laurels. Last year, a renewable chemicalsproduction incentive was authorized by the state legislatrure, and is expected to drive a number of cheical projects to Iowa, where they already will enjoy abudant feedstock, infrastructure and skilled workforce.
But that’s not all. After a year of planning, hard work and collaboration with stakeholders from around the state, including working group members, state agencies, industry organizations, and members of the public, the Iowa Energy Plan is final and available for review, here.
A total of 15 objectives and 45 strategies make up the Iowa Energy Plan. Together, these objectives and strategies propose a balanced approach to encourage growth in all of Iowa’s energy sectors while emphasizing sustainable practices, economic development throughout the state, and supporting the research and development required to keep Iowa on the leading edge of energy innovation.
The renewable industry is purty darn happy. Iowa Renewable Fuels Association Executive Director Monte Shaw said: “IRFA appreciates Lt. Governor Reynolds’ recognition of the role biofuels have played in powering Iowa’s economy. And we commend the Iowa Energy Plan for seeking to build on this foundation, as there is much more biofuels and biomass can do for Iowa in the future. Optimizing vehicles for biofuels and empowering consumers to choose higher blends of ethanol and biodiesel will be keys to unlocking this potential. We look forward to working with Lt. Governor Reynolds to put this plan in action for the betterment of Iowa farmers, consumers, and workers.”
You can read all about rh new plan in ful or summry versions, here.
Something new in state-based innovation? For sure, there’s nothing quite like what we called a “shiny, almost unheard of process for developing biobased projects: the Maine Born Global Challenge.”
Maine came to the realization that the “same-old” approach to project formation was going to result in the “same-old” result in terms of project creation: only old-line projects can be financed by old-line project financing, since that financing structure, at its heart, avoids the very technology risk that fuels the economic transformation.
The founders sum up the goal, thus:
To commercialize “innovative technologies by providing physical locations and real projects for market expansion and value creation. Companies of complementary technologies will be grouped into project teams, assigned to specific power plant locations, given funding for business/implementation plans and provided with investment/project financing for project execution.”
Which is to say, a soup-to-nuts development and financing system — designed to address the capital inefficiencies that have plagued the sector (capital allocated to sketchy projects that fail, capital not allocated to strong projects that starve).
It is something more interesting than the theme of the past five years: capital light. For as Cellana CEO Martin Sabarsky once observed to The Digest, “capital light is a misnomer, because at the end of the day, to achieve anything at all for investors there has to be scale and someone has to put in a lot of capital.” And meanwhile, there’s heft. The State of Maine has committed resources from the Department of Economic & Community Development, the Department of Agriculture and Forestry and the Department of Environmental Protection to support the full implementation of these projects in a timely and efficient manner.
The Challenge covers a wide range of sectors, among them: Waste Collection, Biomass Handling & Storage, Algae/Other Unused Resources, Boiler Efficiency, Pyrolysis, Hydro-Processing Fermentation, Gasification, Methane Collection or conversion, Hydro-Thermal Carbonization, Biochar/Fertilizers, Greenhouses, Aquaculture, Sustainable Farming — and more.
You can read all about the Challenge, here.
Practical incentives? Well, that renewable chemicals production incentive we highlighted in Iowa is an example of matching state aspiration with an incentive that will shift market share of projects and facilitate the invesntion of techyniologies that could not have flourished without a hand up. Incentives, in the end, do make it happen. Look at how airmail contracts fostered the aviation industry, for one.
As far as the hottest area in biobased projects in recent years, Minnesota was the first on board with a renewable chemicals investive. Chemicals must have content that is at least 51% biobased to be eligible for the production incentive. Production facilities must be located in Minnesota. Facilities must begin production before June 30, 2025 and facilities must produce at least 750,000 pounds per quarter to enter the program and for each quarter for which a reimbursement claim is made. And generally speaking, facilities must source 80% of the raw materials from Minnesota (there are some exceptions for facilities near state lines). The incentive is up to $0.06 per pound of production from cellulosic biomass — if you;’re more familiar with gallon-based incentives for liquid fuels, think of an incentive in the $0.40-$0.50 ramge.
Who else has a Low Carbon Fuel Standard? Canada’s developing one, British Columbia has one, a group of northeastern states are talking about one, and so is Washington state. But south of the Canadian border, only Oregon has been able to follow thre California vision and put one in place.
The 2009 Oregon Legislature passed HB 2186 authorizing the Oregon Environmental Quality Commission to adopt rules to reduce the average carbon intensity of Oregon’s transportation fuels by 10 percent over a 10-year period. The 2015 Oregon Legislature passed SB 324 allowing DEQ to fully implement the Clean Fuels Program beginning in 2016.
The clean fuel standards are the annual average carbon intensity that a regulated party must comply with. There is a standard for gasoline and gasoline substitutes and one for diesel and diesel substitutes. The baseline year for the program is 2015 and represents 10 percent ethanol blended with gasoline and 5 percent biodiesel blended with diesel. The rule requires a 10 percent reduction in average carbon intensity from 2015 levels by 2025.
As with California, deficits are generated when the carbon intensity of a specific fuel exceeds the clean fuel standard in a given year. Credits are generated when the carbon intensity of a specific fuel is lower than the clean fuel standard in a given year.
Bottom line, the implementaiyon has been slow compared to California, but the pieces are in place now and the program can be expected to be generating impressive results in 2017 and 2018..