The US Environmental Protection Agency (EPA) recently proposed a significant addition to its Renewable Fuel Standards (RFS) program—the renewable electricity RIN (eRIN). The eRIN is a new kind of renewable identification number (RIN) obligated parties could obtain to meet their renewable volume obligations and comply with the RFS program.
Under the current RFS program, obligated parties must blend renewable fuels into transportation fuel or obtain RINs to achieve compliance. Renewable fuels eligible for RIN generation include cellulosic biofuel, biomass-based diesel, advanced biofuel, and non-advanced/conventional biofuels. RINs are generated when a producer makes an eligible biofuel and may be traded between parties depending on compliance needs.
The eRIN proposal adds a new RIN to the menu of eligible renewable fuels, but the generation pathway for eRINs would be notably different from traditional biofuels. In short, EPA’s proposal provides that electric vehicle manufacturers (identified as OEMs in the proposed rule) would generate eRINs based on their electric vehicle fleets. OEMs would quantify the renewable electricity used by their electric vehicle fleets (new and existing electric vehicles). OEMS would then contract with renewable electricity generators to purchase the amount of renewable electricity needed to power their fleet, which would result in the generation of eRINS. Notably, only OEMs would be eligible to generate eRINs.
EPA recognizes in the proposal that a variety of parties may be involved in the eRIN generation and disposition chain including biogas producers, biogas distributors, the renewable electricity generator, and OEMs among others. Based on the variety of parties involved, EPA considered various options for structuring the eRINS program. Ultimately, however, EPA concluded that regulation of just three core parties—OEMs, renewable electricity producers, and biogas generators—is needed to ensure that the eRIN program results in the production of renewable electricity from biogas and used as transportation fuel in a manner consistent with the Clean Air Act.
This arrangement leaves the other parties involved in the eRIN generation and disposition chain outside the scope of regulation. While such parties are not eligible to generate eRINs under EPAs proposal, there are still opportunities for a windfall. For example, electricity generators contracting OEMs must produce renewable electricity from qualifying biogas (i.e. biogas made from renewable biomass under an EPA-approved pathway). As a result, the eRIN proposal may result in greater demand for qualifying biogas and may result in new business opportunities for generators of qualifying biogas and their business partners, including third-party aggregators. The applicability of the proposed regulation with regard to these business opportunities is complex and in some cases unclear even if the regulations are finalized as proposed.
We note that EPA’s eRIN proposal is not yet final. Although eRIN generation is set to begin January 1, 2024, the eRIN program may look markedly different from EPA’s current proposal based on EPA’s solicitation for feedback. Interested parties should therefore continue to closely track developments with this rulemaking and consult with counsel regarding the likely form of the final regulations.