Power & Pipes

FERC, CFTC, and State Energy Law Developments

On December 1, 2022, the Environmental Protection Agency (EPA) published its proposed “set” rule for the Renewable Fuel Standard (RFS) Program. In addition to setting the volume and percentage standards for renewable fuels for 2023 through 2025, EPA proposed several regulatory changes to the RFS Program, the most notable of which was its proposal to create a new program to govern the Renewable Identification Numbers (RINs) for renewable electricity, which are known as “eRINs.”

Although the proposal is thorough and requires careful analysis, as a general matter, eRINs are credits for the electricity used in electric vehicles (EVs) so long as that electricity originates from renewable fuel consistent with the parameters of the EPA’s proposed rule.

While EPA has long recognized the generation of electricity from biogas as a potential pathway for RFS credits, current RFS regulations do not provide a viable system for participants to generate those credits. EPA has struggled with how to implement such a program, citing concerns with the double counting of credits and the inherent impossibility of verifying the source of the electricity transmitted to and from the electric grid.

To solve those difficulties, EPA proposed a credit system that is unique under its RFS regulations. Under the proposal, auto manufacturers would have the sole ability to generate eRINs. They would do so by first determining the electricity consumption of their vehicles then entering into a contract with a renewable energy generator or generators to acquire the exclusive authority to generate RINs to cover their vehicles’ electricity consumption.

The auto manufacturers would then be able to generate eRINs that represent either the quantity of electricity used by their fleet, or the renewable electricity generated under the RIN agreement with the generator, whichever is less. That system is a marked departure from how credits are generated for other fuels under the RFS, for which market participants are generally required to link credits to specific gallons of liquid fuels that are used for transportation purposes.

The rule proposes several other important requirements for RIN generation and program participation, including the following:

  • The renewable electricity must be produced from biogas.
  • Only renewable electricity used in light-duty EVs are eligible to generate eRINs.
  • Two types of EVs are eligible: battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs).
  • The geographic scope of the program includes any EV registered in the conterminous 48 states.
  • The program will begin, and eRINs will be permitted to be generated, starting January 1, 2024.

The proposed eRIN program is likely to provide a significant benefit to EV manufacturers, and it is also anticipated to support those who generate biogas or RNG or convert biogas or RNG to electricity, as the program will create an additional market. However, some industry participants have already expressed their disagreement with EPA’s proposal to designate auto manufacturers as the eRIN generator—parties including biogas producers, EV owners, and owners of public EV charging stations were each hoping to be able to qualify to generate credits. In the preamble to the proposed rule, EPA recognized that there are various alternative ways to structure an eRIN program, but the agency determined that making auto manufacturers the sole point of eRIN generation is the best way to ensure that eRINs accurately represent the renewable electricity used as transportation fuel.

EPA has solicited comment on its proposed rule, with the comment period lasting until February 10, 2023. EPA is then likely to finalize the rule by June 14, 2023—the deadline under a court-approved consent decree with biofuel interests for finalizing the volumes for the next two years. Given the significant interest in the eRIN program, EPA is likely to receive significant public comments, and aspects of the program could be adjusted in the final rule. And there is a strong likelihood that aspects of the eRIN program will be subject to litigation after the rule is finalized.