In late 2022, the Environmental Protection Agency (EPA) drafted a rule allowing the generation of RINs from some forms of renewable electricity production. Under this ruling, electric vehicle (EV) original equipment manufacturers (OEMs) will be the RIN generator. With a final rule expected to be released in the middle of June, what do EV OEMs need to know? We’ve answered the top six questions, below.
1. What is an e-RIN?
Under the federal Renewable Fuel Standard (RFS), qualifying renewable fuel produced and used as a transportation fuel is assigned a renewable identification number (RIN). RINs serve to track RFS program compliance and are sold to obligated parties (i.e., refiners or gasoline/diesel importers). The same is true for eRINs. OEMS will generate eRINs based on the amount of renewable electricity that their brand’s new and legacy light-duty electric vehicles have consumed. Specifically, for each 6.5kWh of renewable electricity used by an EV, one D3 or D5 RIN can be generated, depending on feedstock.
From a credit standpoint, eRINs share the same D-codes as RNG: D3 being used for cellulosic feedstocks (ex. landfill, dairy, or wastewater) and D5 for advanced feedstocks (ex. food waste). Similarly, from a value perspective, eRINs will be worth the same as any D3 or D5 RIN. The below graph highlights the historical D3 and D5 RIN pricing—dating back to January 2020.
2. How is an OEMs “EV Fleet” Defined, and What Vehicles Qualify for e-RINs?
Under the drafted regulation, an OEM’s “EV fleet” is defined as the number of EV vehicles that have been manufactured, sold, and registered within the contiguous 48 states.
Currently, only light-duty electric passenger vehicles will qualify for eRIN credits. It’s anticipated that electric school buses will be the next eligible vehicle type—likely followed by other medium- and heavy-duty applications upon further commercialization.
3. Does All Renewable Electricity Count Toward e-RINs?
The short answer is no. The only sources that meet the requirements are electricity produced from qualifying renewable biomass feedstocks under existing Q and T pathways. This can include electricity produced from biogas or RNG at dairies, landfills, food waste facilities, or wastewater treatment plants. Conversely, electricity from sources such as solar, wind, hydropower, and nuclear energy do not currently qualify as renewable electricity under the RFS.
So how can OEMs secure enough renewable electricity to meet demand? Well, there are two ways. They can either contract with multiple providers and project owners to try and fulfill their electricity demand on their own, or they can work with a specialized aggregator like U.S. Gain. As an aggregator, we work with the various providers and project owners to find the volumes needed of renewable electricity and handle the compliance registrations, tracking, quarterly and annual reporting, and eRIN generation for OEMs. Since each electricity generating facility can only be associated with one OEM, the second option provides an easier pathway to meet their volumetric needs.
4. When Does This Program Begin?
This program is set to begin on January 1, 2024, pending any unforeseen delays. So what steps need to be taken in the meantime? To generate RINs, each party in the value chain must register with the EPA or work with a third-party to guide them through the registration process. They should aim to have at least submitted their new engineering and pathway reviews before the end of the calendar year 2023 if they plan to participate in this segment of the RFS in 2024.
A key consideration during this process is alignment with one of two quality assurance plan (QAP) providers to generate Q-RINs which are deemed to be of higher quality in the marketplace than traditional RINs. When OEMs partner with organizations like U.S. Gain that have established relationships with QAP providers, the likelihood of successfully getting their project accepted (faster) increases.
5. How Do OEMs Get Started with the RFS Program?
There are two options that ultimately come down to determining an OEM’s compliance expertise. If they plan to try and manage this relationship in-house, it’s essential they build out a compliance team with RFS expertise. The EPA has expressed concerns over fraud and the double counting of eRINs, which if done incorrectly, can disqualify an organization from program participation and lead to litigation.
A second option if an OEM doesn’t have that expertise in-house is to align with a third-party provider like U.S. Gain who can not only provide the renewable electricity supply, but manage all the compliance registration, reporting, and data governance. When an OEM outsources this component of the eRIN process, not only do they limit their project risk, but can maximize their return.
6. How Do OEMs Monetize e-RIN Credits?
Once registered with the EPA, OEMs are eligible to begin generating credits under the RFS. If their team plans to manage this process in-house, it’s essential to have trading and compliance experts. Depending on the volume of credits an OEM is transacting, they may not be able to benefit from economies of scale that parties who are transacting larger amounts can.
Organizations like U.S. Gain already generate and monetize large volumes of credits on customers’ behalf—enabling organizations like yours to benefit from our portfolio size, trading expertise, and tenure in the RFS market.
Determining where to begin with this new program doesn’t have to be challenging. As a long-time RFS market participant with key relationships in the biogas-to-electricity space, an in-house compliance team with 35 years of combined RFS experience, and nearly 40 projects currently participating in the RFS and generating RINs, we’re here to help. To stay current on eRIN program updates and learn more about how U.S. Gain can assist you in procuring renewable electricity and benefiting from eRIN credits, contact Ashley at [email protected].