Low Carbon Revenue Opportunities

As fleets consider investment in electric vehicles, there is an opportunity for fleet operators to generate new revenue streams through the California Low Carbon Fuel Standard (LCFS) program. These new annual revenues can lower the total cost of ownership of electric trucks, helping support the financial decision to “go electric” as commercially-available vehicle offerings are expanding for many medium- and heavy-duty applications.

LCFS: Generate Revenue with Electric Vehicles

The graphic above illustrates the annual revenue opportunity from LCFS credit generation associated with a fleet charging a typical class 6 and class 8 electric truck using both grid electricity and renewable electricity.*

The LCFS program is a market-based compliance measure that creates economic value from low-carbon fuel technologies. Credits are generated by using clean technology. Fleets and equipment operators can generate revenue opportunities by selling their credits to regulated entities, such as importers, producers, and refiners of petroleum fuels. By generating and selling these credits, credit owners can reduce their total-cost-of-ownership for the deployment and operation of zero emission technologies.

RFS: Save on Renewable Fuel Costs

The Renewable Fuel Standard (RFS) program is a federal program that is similar to the LCFS in that it is a market-based compliance measure that creates economic value from renewable fuel technologies. Renewable fuel providers can generate credits, called Renewable Identification Numbers (RINs), and sell these credits to regulated entities. Fleet managers that are interested in procuring renewable fuels, such as renewable natural gas (RNG), can negotiate the best possible price for their contracts by staying informed of LCFS and RFS credit market dynamics.

LCFS and RIN: Credit Trends

By displacing your fleet’s diesel consumption using electricity or renewable fuels, you can generate revenue by selling LCFS and RIN credits.

Last Updated: 5/5/2020

Figure 1

Figure 1 shows the relative value of LCFS and RIN credit prices in terms of dollar per diesel gallon equivalent displaced ($/DGE).**

Understanding both long-term and short-term market dynamics are important consideration when making revenue generation estimates. Figure 2 shows the effective values of LCFS and RIN credits over time in apples-to-apples terms of $/diesel gallon equivalent displaced.

Figure 2

Figure 2 shows the long-term market trends for LCFS and RIN credit values in $/DGE terms per month.***

Figure 3 shows the LCFS credit generation over time by fuel source. In Q3 of 2019, ethanol has taken the lead over renewable diesel (again) for the fuel type with most LCFS credits generated. Ethanol, electricity, and RNG have recently increased their total number of credits, with the notable exception of a significant 2019 Q3 reduction in renewable diesel credits. Within the same quarter, the largest increase in credit generation was electricity. The vast majority of credit generation continues to be in five categories: ethanol, renewable diesel, electricity, biodiesel, and RNG.

Figure 3

Figure 3 shows the LCFS credit generation by fuel type in terms of metric tons of carbon dioxide equivalent (MT CO₂) per quarter.****

 

GNA provides a wide range of advisory, marketing, and technical services for low carbon and renewable fuels. Whether your organization is procuring, producing, marketing, investing in, or developing products using renewable and low carbon fuels, GNA has the experience and expertise to help. As this market landscape is constantly evolving, please contact us at funding@act-news.com or visit the GNA website for more information on GNA’s Low Carbon and Renewable Fuels Services.

* LCFS values assume $196/metric ton CO2e average credit price for 2019. $/DGE values are directly proportional to LCFS credit price. Calculation assumptions: 3.6 MJ/kWh energy density, 82.92 g/MJ grid electricity carbon intensity, EER of 5, 92.92 g/MJ 2020 LCFS diesel benchmark carbon intensity. Vehicle assumptions: class 6 truck with 9 mi/gal diesel fuel economy, 20,000 annual miles, and 1.3 kWh/mi electric vehicle energy economy; class 8 truck with 7.5 mi/gal diesel fuel economy, 60,000 annual miles, and 2.1 kWh/mi electric vehicle energy economy.

** Calculation assumptions: 3.6 MJ/kWh energy density, 82.92 g/MJ grid electricity carbon intensity, EER of 5, 92.92 g/MJ 2020 LCFS diesel benchmark carbon intensity. Vehicle assumptions: class 6 truck with 9 mi/gal diesel fuel economy, 20,000 annual miles, and 1.3 kWh/mi electric vehicle energy economy. Prices are based on most recent weekly average transaction price for LCFS and RIN credits. $/DGE values are directly proportional to credit prices. Calculation assumptions: Renewable CNG, Renewable LNG, and Renewable Diesel calculated on LCFS average basis. RIN values assume equivalency of 77000 BTU per RIN, and 127500 BTU per DGE, on a lower heating value basis.

*** Calculation assumptions: 3.6 MJ/kWh energy density, 82.92 g/MJ grid electricity carbon intensity, EER of 5, 92.92 g/MJ 2020 LCFS diesel benchmark carbon intensity. Vehicle assumptions: class 6 truck with 9 mi/gal diesel fuel economy, 20,000 annual miles, and 1.3 kWh/mi electric vehicle energy economy. Prices are based on monthly average transaction price for LCFS and RIN credits. $/DGE values are directly proportional to credit prices.

**** Data from the California Air Resources Board (CARB)