Archive for September, 2020

Understanding the Watts and Volts of the CA LCFS Program

Posted September 11th, 2020 by SRECTrade.

As part of the California Global Warming Solutions Act (AB32), which aims to drastically reduce greenhouse gas emissions in the state, the California Air Resources Board (CARB) established the Low Carbon Fuel Standard (LCFS) program in 2009. The current goal of the program is to reduce the carbon intensity of transportation fuels in the state of California by 20% by 2030. Let’s take a closer look at the nuances of the program:

Regulator and Market Participants

  • Regulator: California Air Resources Board (CARB)
  • Credit Producers: Low carbon-intensive fuel producers & fleet operators (electricity, hydrogen, biofuel, etc.)
  • Deficit Producers: High carbon-intensive fuel producers & importers (diesel & gasoline)

With most low carbon liquid fuels, LCFS credits accrue to the fuel producer. However, for electricity and gaseous fuels, such as hydrogen, the LCFS credits accrue to the charging or fueling station owner. Fuel producers and fleet owners utilizing fuel that falls below the carbon intensity benchmark in that year generate LCFS credits. The volume of credits issued is based on the quantity of fuel produced or consumed and its carbon intensity. Conversely, participants that produce or import fuel above the carbon intensity standard are required to purchase LCFS credits to make up for their deficit. 

1 LCFS Credit = 1 MT (metric ton) of CO2 equivalent reduced

Eligible Vehicle Types

California vehicles that run on clean fuel (electricity, hydrogen, CNG) are eligible. This includes cars, buses, trucks, forklifts, rail, and more. For electricity as a fuel, in order to generate credits, fleet owners must own the charging infrastructure for their electric vehicles. 

Reporting Requirements – Electricity

For electricity as a fuel, fleet owners must have one of the following* to report energy consumption to CARB:

  1. Dedicated meters (separate utility bill)
  2. Submeters (with kWh readout)
  3. EV charger data monitoring

*Electric forklifts utilize a different methodology for reporting, and are able to utilize kWh calculations based on certain parameters.

Estimated Values per Vehicle Type

* Gross value before costs and fees. Assumes annual consumption of 50 MWh for Class 4-8 EVs and Buses and 10 MWh for Light Duty EVs and Forklifts. Also assumes Zero-CI electricity and a $200 LCFS credit price.

Generate Additional Value with RECs

The overall California energy mix has some carbon intensity associated with it, as the electricity is generated from a variety of resources. By virtually pairing your LCFS credits with Renewable Energy Credits (RECs), participants can demonstrate to CARB that the energy utilized to power their electric fleet is renewable. This mechanism can be utilized even if the owner of the charging equipment does not have renewable energy on-site.

This sounds too good to be true. What’s the catch?

The program is intended to act as an ongoing revenue stream that helps offset fueling costs and encourage further investment in clean fuel vehicles. For electricity, certain vehicle types have general spending requirements. 

How much are the credits worth?

The LCFS market is robust and growing, with plans to continue beyond 2030. Since the program is a market-based mechanism, LCFS credit prices fluctuate, but due to CARB’s compliance requirements and strong regulatory oversight, recent prices have remained relatively stable. Over the past year, LCFS credits have been valued between $190 – $200. There is a price cap set for LCFS credits and it is set at $200 (in 2016 dollars) and adjusted annually for inflation. The 2020 cap is $217.97 per credit.

How can SRECTrade help my business?

No matter your fleet size, we can help you generate additional value from your clean fleet. SRECTrade manages the entire administrative process on your behalf, from asset registration and reporting, to credit issuance and sales. We also provide an easy-to-use technology platform for you to easily view and keep track of your assets, credits, and transactions. Our strong understanding of the complexities of the market and ability to leverage our experience in the clean commodities space help you maximize your credit volume and price

Ready to start generating credits? Reach out to us at cleanfuels@srectrade.com or call us at (415) 763-7732 Ext 4.