January 9, 2023
Charging the conversation around the 2023-2025 Set rule is EPA’s proposal on the development and implementation of the eRIN program. While not new, this proposal is really the first time EPA has addressed the eRIN program since 2014 and it’s outlining a new approach within the Renewable Fuel Standard (RFS), including the makeup of participants.
As early as 2010, EPA determined that renewable electricity would meet the definition of renewable fuel and therefore, be eligible to generate RINs, so long as the renewable electricity is made from renewable biomass and is used as a transportation fuel[1]. However, until now, EPA did not provide a regulatory mechanism for instituting eRINs within the RFS and really, within the transportation industry.
A shocking twist to the eRIN program might be the makeup of RFS participants. Instituting an eRIN program means new players for the RFS. For example, Electric Vehicle (EV) manufacturers are going to take on a bigger role. Landfills and utility companies are going to take on more prominent positions as biogas producers and renewable electricity generators.
Before we really get grounded in the conversation, we should probably go over a few terms so I don’t use something you don’t recognize. A RIN generated from the production and use of renewable electricity is called an eRIN. While there are many provisions addressing how and when to generate an eRIN and how to separate an eRIN, for all intents and purposes, the buying and selling of a separated eRIN remains identical to all other types of separated RINs. eRINs generally fall into the D3 or D7 class and are generated as a result of biogas being used to generate renewable electricity which is then used by an Electric Vehicle (EV).
So, how are all the wires connecting to make this program work? Before I explain further, keep in mind, everything I’m explaining is part of an EPA proposal. This means that while I’m explaining how this works, really I’m explaining what the EPA is proposing and nothing is final. In general, EPA is proposing Original Equipment Manufacturers (OEMs) generate eRINs based on the energy usage of Light-Duty EVs. An OEM is an entity that has manufactured an EV. While EPA does not provide a concrete definition for what qualifies as light-duty EV, in general, a light-duty EV is not a pickup truck, SUV, or other larger vehicle.
How do you get that to that point? There is a chain of events, similar to the way liquid fuel is manufactured for this to work. First, a renewable biogas producer (such as a landfill or wastewater treatment plant) produces biogas, such as RNG or CNG. Next, the biogas producer supplies biogas to a renewable electricity generator. It is possible that the biogas producer and the renewable electricity generator are the same entity, but it doesn’t have to be that way. Then, the renewable electricity generator does what a generator does best and generates renewable electricity. In the final step, the renewable electricity is used by light-duty EVs manufactured by the OEM. The OEM uses a formula to determine how much electricity has been used by its vehicles. Based on that calculation, the OEM can generate eRINs. However, an OEM has to be able to prove to EPA that renewable electricity was used to charge the manufactured EVs and it cannot generate more RINs than the amount of electricity consumed by an EV.
How likely is it that EPA will finalize the proposal as it currently exists? I could speculate, but my boss doesn’t like it very much when I do that. In all honesty, I don’t have a good answer. Typically, what EPA proposes tends to look a lot like the final product. However, this rule is currently open for public comment and based on some feedback, it is possible that many of those types of details change.
Another thing to consider is that regulating electricity is a little bit more difficult because the product being regulated is far less tangible. Once electricity flows into the electrical grid, it becomes nearly impossible to track, which part of the reason EPA has to work backwards to make sure eRINs are generated from renewable biomass. In EPA’s own words, the agency is taking a “learning by doing” approach to the application of the eRIN program and specifically, the ability of only light-duty EVs to generate eRINs.[2] EPA is learning as it goes, which means as time goes on, EPA’s ability to regulate the industry will become better and more informed.
Putting together a rule of this magnitude is no small thing. Clearly, the promulgation of the eRIN program is EPA’s lightbulb moment.
[1] Renewable Fuel Standard (RFS) Program: Standards for 2023-2025, and Other Changes¸ EPA-HQ-OAR-2021-0427, FRL-8514-01-OAR, pg. 181 (December 2022); see also, 75 FR 14670, 14686 (March 26, 2010).
[2] Renewable Fuel Standard (RFS) Program: Standards for 2023-2025, and Other Changes¸ EPA-HQ-OAR-2021-0427, FRL-8514-01-OAR, pg. 224 (December 2022).