monetizing greenhouse gas (ghg) reductions€¦ · intensity and lifecycle ghg emissions of...

If You Go Green, You Should Get Some Green

Zero-emission hydrogen vehicles, Heavy-duty and Light-duty; plus Monetizing your carbon reductions

Monetizing Greenhouse Gas (GHG) ReductionsMarket-based Low Carbon Incentives

“Cashback for your alternative fuels”

Presented by:John ThorntonCleanFuture, Inc.May 9, 2019

© 2019 CleanFuture, Inc.

About

• CleanFuture’s core business is fleet efficiency and transportation emissions reduction including management of the generation, marketing and sale of the associated environmental credits.

• CleanFuture helps fleets save money while reducing emissions.


About• Sustainable energy consulting practice, founded 2009,

practicing in these areas:– Industrial energy efficiency– Strategic Energy Management– Alternative fuel vehicles / energy storage– Refrigerated Fleet Efficiency– Transportation Carbon Credits

• Low Carbon Fuels Standard (LCFS)• Clean Fuels Program (CFP)

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Transportation is the biggest source of Greenhouse Gas (GHG) emissions in California

Data available from: https://www.arb.ca.gov/cc/inventory/inventory.htm

Low Carbon Fuel Standard (LCFS)overview

• Innovative regulation to incentivize the production and sale of alternative transportation fuels and reduce the carbon intensity and lifecycle GHG emissions of transportation fuels– Mandates reduction in carbon intensity of gasoline and

diesel• Producers or importers of gas & diesel must reduce carbon in fuel

– Compliance achieved through:• Blending• Buying credits

– Fuel & technology agnostic • All alternative fuels/technologies participate• Performance-based

– Fuels with lower lifecycle GHG emission reduction get rewarded with higher value

6© 2019 CleanFuture, Inc.

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TOG ROG CO NOX SOX PM PM10 PM2.5 NH3 DieselPM

% o

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ide

Emis

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On-Road Motor VehiclesOther Sectors

Transportation also accounts for a considerable portion of criteria emissions

Data available from: https://www.arb.ca.gov/ei/emissiondata.htm

LCFS is a Performance Standard

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• Low Carbon Fuel Standard (LCFS) is a performance standard requiring reduced carbon intensity of California’s fuels over time

– Each fuel’s carbon intensity (CI) is calculated based on GHG emissions per unit of fuel energy over the fuel’s lifecycle.

Fuels above standard generate deficits

Fuels below standard generate credits

= deficit

= creditsx

x

Eligible Transportation Applications in LCFS

• Vehicle/fuel combinations– Ethanol– Biodiesel & Renewable Diesel– Natural Gas– Electricity– Hydrogen

• Infrastructure– Fast Charge Infrastructure (DCFC)– Hydrogen Refueling Stations


Fuel Type

• Drop-in Fuels– No change to engine, fuel system, or distribution

network

• Non-Drop-in Fuels– Changes

• Technology– Changes to engine, fuel system, distribution, infrastructure,

etc.• Behavior


Fuel Categories in the LCFS

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Category Type Fuel Reporting Entity Generation

Liquid Fuels

fossil (gasoline or diesel) producer or importer deficits

Third-party / service provider / aggregator

biofuels producer or importer creditsjet fuel exempt exemptalternative jet fuel producer or importer credits

Gaseous Fuels

natural gas fuels

bio (CNG or LNG) producer or importer credits

fossil (CNG or LNG) owner of refueling equipment credits

propanerenewable propane producer or importer credits

fossil propane owner of refueling equipment credits

hydrogen owner of refueling equipment credits

Electricity

residential EV charging (base) electric utility credits

residential EV charging (incremental)

LSE with meter creditsOEM creditsother credits

non-residential EV charging

owner of refueling equipment credits


Fuel Universe in the Clean Fuels Program

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Category Type Fuel Type Generation

Liquid Fuels

fossil (gasoline or diesel)

Drop-in Fuel

deficits


ethanol creditsbiodiesel creditsrenewable diesel creditsjet fuel exemptalternative jet fuel credits

Gaseous Fuels

natural gas fuelsbio (CNG or LNG)

Non-drop-in Alternative Fuel

credits

fossil (CNG or LNG) credits

propanerenewable propane credits

fossil propane credits

hydrogen credits

Electricityresidential EV charging credits

non-residential EV charging credits

Drop-in Fuels = no change to engine, fuel system, or distribution network


Fuel Universe in the Low Carbon Fuel Standard (LCFS)

13

Category Type Fuel Type Generation

Liquid Fuels

fossil (gasoline or diesel)

Drop-in Fuel

deficits


ethanol creditsbiodiesel creditsrenewable diesel creditsjet fuel exemptalternative jet fuel credits

Gaseous Fuels

natural gas fuelsbio (CNG or LNG)

Non-drop-in Alternative Fuel

credits

fossil (CNG or LNG) credits

propanerenewable propane credits

fossil propane credits

hydrogen credits

Electricityresidential EV charging credits

non-residential EV charging credits

Non-Drop-in Fuels = Change (technology and/or behavior)


Driving Adoption of Alt. Fuels & Clean Transportation Technologies

• Fleet end-users’ perspective on barriers– Cost effective transportation services, people or goods, is

job #1– Cost effective transportation services, people or goods, is

job #1, but will Alternative Fuels work for me?– Perceived barriers

– Higher vehicle acquisition cost– Fueling infrastructure cost– Fuel availability (i.e., range)– etc.


Driving Adoption of Alt. Fuels & Clean Transportation Technologies (solutions)

• Consulting tools– Total Cost of Ownership (TCO)

• Lifecycle cost analyses– Acquisition cost– Operations & maintenance cost (includes fuel)– Downtime, opportunity costs– Other costs

• Grants & Incentives (acquisition)• Low Carbon Fuels Standard revenue (ongoing)


Traditional vs. Market-based Incentives

Grants (traditional) Incentives• Grants, vouchers, etc.• Federal, state,

local/regional• One-time• Acquisition

Market-Based Incentives• Carbon credits (LCFS)• Market participants in

California• Ongoing• Operations (usage-

based)

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Complementary to each other


Total Cost of Ownership

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Clean Fleet Metrics

• Outcomes– Emission Reduction

• Criteria pollutants– NOx, Particulate Matter, ROG, CO, etc.

• Greenhouse Gas (GHG)– CO2e

– Economic


Resources to Develop Metrics

• AFLEET – Alternative Fuel Life-cycle Environmental and Economic Transportation (AFLEET) Tool

• DEQ – Diesel Emission Quantifier (US EPA)• Clean Cities Coalition Network

– Coordinator Toolbox• Idle Box• Workplace Charging Toolbox• TCO / emissions calculators

• Air Districts• OEM calculators• Consultant calculators• GREET - Greenhouse gases, Regulated Emissions, and Energy

use in Transportation (for LCFS)


Monetizing GHG ReductionsUnderstanding the Value of GHG Reductions

Raef Porter

If You Go Green, You Should Get Some Green

Zero-emission hydrogen vehicles, Heavy-duty and Light-duty; plus Monetizin your carbon reductions

Monetizing Greenhouse Gas (GHG) ReductionsMarket-based Low Carbon Incentives

“Cashback for your alternative fuels”

Part 2

Presented by:John ThorntonCleanFuture, Inc.May 9, 2019


LCFS Credit Values are Illustrative Only

• Many Variables Impact LCFS Credit Value, Please Note:– Only Eligible Fleets, Fuels and Vehicles Can Generate Credits– There are extensive Registration, Reporting and Record-

Keeping Requirements– The value of LCFS credits can vary widely, and is currently

quite high on a metric ton (MT) basis– CleanFuture has developed Proprietary Strategies to

Maximize Credit Generation and Value– Various assumptions have been made to develop illustrative

credit values in the slides that follow– To obtain a good estimate of value, CleanFuture can provide

a specific evaluation for your fleet

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LCFS Rewards Performance in Carbon Reduction

1) Vehicle Efficiency2) Lifecycle Greenhouse Gas Emissions benefits


1) Vehicle Efficiency

• “Energy Economy Ratio (EER)”– dimensionless value that represents the

efficiency of a fuel as used in a powertrain as compared to a reference fuel used in the same powertrain.

– EERs are often a comparison of miles per gasoline gallon equivalent (mpge) between two fuels.

• Comparison of powertrain efficiency to do the same work (clean fuel vs. reference fuel).


Vehicle Efficiency (EER) by Fuel Type


2) Carbon Intensity

• Lifecycle Emissions (“well-to-wheel”)– Total GHG pollution expressed in carbon dioxide

equivalence (CO2e)• Example for petroleum fuel:

• Example for biofuel (ethanol):


Certain Alternative Fuels are better than others (lower CI)

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Best Better Standard

Electricity Ethanol

Biodiesel

Renewable Diesel

Bio-CNG

Fossil CNG“Carbon Intensity (CI)” means the quantity of life cycle greenhouse gas emissions, per unit of fuel energy, expressed in grams of carbon dioxide equivalent per megajoule (gCO2e/MJ).


Certain Alternative Fuels are better than others (lower CI)

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Best Better Standard

Electricity Ethanol

Biodiesel

Renewable Diesel

Bio-CNG

Fossil CNG

* EER-adjusted CI value

Source: CARB

Carbon Intensity, Volume-weighted Average by Fuel Type*


Supply Chain (simplified schematic) & Value Distribution

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Producer or Importer Owner (Fleet or Station)


Fuels in the LCFS

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Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity







Fuel Universe in the LCFS

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Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity







Liquid Fuels in the LCFS

32


Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity








Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity









• Biofuels create value– LCFS credits– RINs

• Value distribution– Producer retains credit value to cover higher

fuel production costs• Sophisticated fleets can begin negotiating

for a piece of this value chain

34

Producer or importer

Owner (fleet or station)

$


Gaseous Fuels in the LCFS

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Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity








36


Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity







37

Gaseous Fuels in the LCFScomparison of CNG vs. CNG-Bio (i.e. RNG)

Bio-CNG

Fossil CNG


Gaseous Fuels in the LCFScomparison of CNG vs. CNG-Bio (i.e. RNG)

CNG (fossil)• Cost $0.88 DGE

Bio-CNG (RNG)• Offered $0.90 DGE• CI not known, so ran

calculations at assumed values:

• CI = 30• CI = 0• CI = -20

• What’s the LCFS value?

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Case Study:Fleet of 37 CNG buses with opportunity to use RNG37,000 Therms per quarter


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Gaseous Fuels in the LCFScomparison of CNG vs. CNG-Bio (i.e. RNG)1

Bio-CNG

Fossil CNG$3,338

$25,226$38,440

$47,223


1) Many Variables Impact LCFS Credit Value, see slide 21

Gaseous Fuels in the LCFSNegotiate a piece of that value chain for RNG

• Know your source of RNG– Carbon intensity (CI) is key

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Producer or importer

Owner (fleet or station)

$

Fuel Type Amount/Qtr

CI $/Qtr1

CNG 37,000 79.93 $3,339CNG-Bio 37,000 30 $25,226CNG-Bio 37,000 0 $38,440CNG-Bio 37,000 -20 $47,223




Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity








• Eligibility of Hydrogen as a transportation fuel:– Fuel station owner– Hydrogen Refueling Infrastructure– Forklift fleet owner

• Hydrogen as a transportation fuel has unique requirements in the LCFS

Gaseous Fuels in the LCFSHydrogen


Hydrogen Refueling Infrastructure

• Hydrogen stations now can generate credits for fueling capacity minus dispensed fuel

• Previously, credits only for dispensed fuel

• Reasoning: encourage rapid deployment of zero emission infrastructure and eliminate “chicken-and-egg” concerns

• Certain requirements apply for HRI crediting


Hydrogen Fleet Example1

• Hydrogen forklift fleet– 19,602 kg / quarter– $72,000 / year opportunity

• Hydrogen Pathway certification is challenging!– How is the hydrogen produced?– Where is the hydrogen produced?– SB1505 Renewable content requirements



Electricity as a Transportation Fuel in the LCFS

45


Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity







Electricity as a Transportation Fuel in the LCFS

46


Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity







Level 2 EV Chargers1

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beg date end date YearPathway to

Savings™ Rewards

1-Jan 31-Mar 2018 Aug-2018 $3,8011-Apr 30-Jun 2018 Nov-2018 $3,8011-Jul 30-Sep 2018 Feb-2019 $3,8011-Oct 31-Dec 2018 May-2019 $3,8011-Jan 31-Mar 2019 Aug-2019 $3,5821-Apr 30-Jun 2019 Nov-2019 $3,5821-Jul 30-Sep 2019 Feb-2020 $3,5821-Oct 31-Dec 2019 May-2020 $3,5821-Jan 31-Mar 2020 Aug-2020 $3,5171-Apr 30-Jun 2020 Nov-2020 $3,5171-Jul 30-Sep 2020 Feb-2021 $3,5171-Oct 31-Dec 2020 May-2021 $3,5171-Jan 31-Mar 2021 Aug-2021 $3,4531-Apr 30-Jun 2021 Nov-2021 $3,4531-Jul 30-Sep 2021 Feb-2022 $3,4531-Oct 31-Dec 2021 May-2022 $3,453

Total for 4-year term $57,414

Total through 2030 $155,015

Reporting Period

Earnings Distribution



Electricity as a Transportation Fuel in the LCFS1

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• Fleet = 11 medium-duty trucks (grant funded)– Cashback for subsidized or possibly “free” electric fuel

beg date end dateQ4-2017 1-Oct 31-Dec May-2018 $0Q1-2018 1-Jan 31-Mar Aug-2018 $0Q2-2018 1-Apr 30-Jun Nov-2018 $0Q3-2018 1-Jul 30-Sep Feb-2019 $0Q4-2018 1-Oct 31-Dec May-2019 $2,810Q1-2019 1-Jan 31-Mar Aug-2019 $15,366Q2-2019 1-Apr 30-Jun Nov-2019 $15,366Q3-2019 1-Jul 30-Sep Feb-2020 $15,366Q4-2019 1-Oct 31-Dec May-2020 $15,366Q1-2020 1-Jan 31-Mar Aug-2020 $14,827Q2-2020 1-Apr 30-Jun Nov-2020 $14,827Q3-2020 1-Jul 30-Sep Feb-2021 $14,827Q4-2020 1-Oct 31-Dec May-2021 $14,827Q1-2021 1-Jan 31-Mar Aug-2021 $14,581Q2-2021 1-Apr 30-Jun Nov-2021 $14,581Q3-2021 1-Jul 30-Sep Feb-2022 $14,581Q4-2021 1-Oct 31-Dec May-2022 $14,581



Pathway to Savings™Rewards Earnings

Calendar Quarter

Reporting Period Earnings Distribution



Electric School BusesRevenue Example (baseline)*

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• Example: electric school buses at Twin Rivers Unified School District– District with ambitious & aggressive goals to

replace diesel fuel• Electric school buses = 16

– Fleet expansion to 40 electric buses– Long-term goal to acquire 50 more electrics to replace diesel

• CNG school buses = 34

• How much value can be generated towards early fleet replacement to convert to electric buses?

* Earning estimate from LCFS



Pathway to Savings™ Rewards Program1

Revenue Example* for Electric School Buses at Twin Rivers USD

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* Earning estimate from LCFS in existing fleet

beg date end date Year

Annual Pathway to

Savings™ Rewards

1-Jan 31-Mar 2019 Aug-20191-Apr 30-Jun 2019 Nov-20191-Jul 30-Sep 2019 Feb-20201-Oct 31-Dec 2019 May-20201-Jan 31-Mar 2020 Aug-20201-Apr 30-Jun 2020 Nov-20201-Jul 30-Sep 2020 Feb-20211-Oct 31-Dec 2020 May-20211-Jan 31-Mar 2021 Aug-20211-Apr 30-Jun 2021 Nov-20211-Jul 30-Sep 2021 Feb-20221-Oct 31-Dec 2021 May-2022


Total through 2030 $1,186,396

$135,853

$142,061

$148,391

Reporting Period




Pathway to Savings™ Rewards Program1

Revenue Example* for Electric Transit Buses (status quo vs. Services)


Savings™ Rewards

Annual Pathway to

Savings™ Rewards

Incremental ($)

Total Annual Pathway to

Savings™ Rewards

1-Jul 30-Sep 2017 Feb-18 $0 $01-Oct 31-Dec 2017 May-2018 $0 $01-Jan 31-Mar 2018 Aug-2018 $41,659 $01-Apr 30-Jun 2018 Nov-2018 $41,659 $01-Jul 30-Sep 2018 Feb-2019 $41,659 $01-Oct 31-Dec 2018 May-2019 $41,659 $01-Jan 31-Mar 2019 Aug-2019 $47,638 $2,7531-Apr 30-Jun 2019 Nov-2019 $47,638 $2,7531-Jul 30-Sep 2019 Feb-2020 $47,638 $2,7531-Oct 31-Dec 2019 May-2020 $47,638 $2,7531-Jan 31-Mar 2020 Aug-2020 $46,873 $2,7531-Apr 30-Jun 2020 Nov-2020 $46,873 $2,7531-Jul 30-Sep 2020 Feb-2021 $46,873 $2,7531-Oct 31-Dec 2020 May-2021 $46,873 $2,7531-Jan 31-Mar 2021 Aug-2021 $46,106 $2,7531-Apr 30-Jun 2021 Nov-2021 $46,106 $2,7531-Jul 30-Sep 2021 Feb-2022 $46,106 $2,7531-Oct 31-Dec 2021 May-2022 $46,106 $2,753

Total for 3-year term $562,470 $562,470 $33,034 $595,505

Total through 2030 $2,084,102 $132,141 $2,216,244

KeyStatus Quo LCFS Revenue

Pathway to Savings™ LCFS Revenue

$187,492 $198,503

$184,425 $195,437

$166,638 $166,638

$190,553 $201,565

Reporting Period



*Conservative example based on historical usage


Electric Sanitation Truck Example1


Savings™ Rewards

Annual Pathway to

Savings™ Rewards

1-Jul 30-Sep 2017 Feb-18 $01-Oct 31-Dec 2017 May-2018 $01-Jan 31-Mar 2018 Aug-2018 $4,8041-Apr 30-Jun 2018 Nov-2018 $4,8041-Jul 30-Sep 2018 Feb-2019 $4,8041-Oct 31-Dec 2018 May-2019 $4,8041-Jan 31-Mar 2019 Aug-2019 $10,5421-Apr 30-Jun 2019 Nov-2019 $10,5421-Jul 30-Sep 2019 Feb-2020 $10,5421-Oct 31-Dec 2019 May-2020 $10,5421-Jan 31-Mar 2020 Aug-2020 $10,3731-Apr 30-Jun 2020 Nov-2020 $10,3731-Jul 30-Sep 2020 Feb-2021 $10,3731-Oct 31-Dec 2020 May-2021 $10,3731-Jan 31-Mar 2021 Aug-2021 $10,2031-Apr 30-Jun 2021 Nov-2021 $10,2031-Jul 30-Sep 2021 Feb-2022 $10,2031-Oct 31-Dec 2021 May-2022 $10,203

Total for 3-year term $124,472 $124,472


KeyStatus Quo LCFS Revenue

Pathway to Savings™ LCFS Revenue

Reporting Period


$19,217

$42,168

$41,493

$40,810



Electric Ground Support Equipment (GSE)

54

Pushback Tractor


New Opportunities


• Infrastructure can generate LCFS credits based on capacity, not just fuel sold– Fast Charge Infrastructure (FCI)– Hydrogen Refueling Infrastructure (HRI)

• Accepting applications now– Reviewed on first-come, first-served– Quarterly limits on approvals

• Must be publicly accessible– Other rules and conditions apply

Infrastructure Credits in LCFS


Fast Charge Infrastructure

• DCFC stations now can generate credits for fueling capacity minus dispensed fuel

• Previously, credits only for dispensed fuel

• Reasoning: encourage rapid deployment of zero emission infrastructure and eliminate “chicken-and-egg” concerns


California Transportation Carbon Credit Market Price

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Overview of Generating Credits

59

Registration Use Reporting Credit Generation

Monetize Credits(Sell to Obligated

Parties)

Quarterly Repeating Cycle

Distribute Proceeds

Startup / Onboarding

Repeating Cycle


Fuels in the LCFS

60


Liquid Fuels




Gaseous Fuels

natural gas fuels






Electricity







Roles & Value from a Third-party Service Provider

• Inform• Evaluate and Scope• Provide Expertise

– Registration and reporting– Monetization

• Scale to aggregate, market, sell, distribute proceeds

– Technical services– Regulatory, rules, advocacy– Other services & expertise to optimize value


CleanFuture’s Role

• Regulated party• Credit generator & aggregator• Measurement & verification• Approved market participant

– Registered in California & Oregon• The only 2 states with transportation carbon programs

• Market maker– Principal position, routinely marketing and

selling large credit volumes in LCFS & CFP– Existing relationships with major

counterparties

62Proprietary and Confidential – © 2018 CleanFuture, Inc.© 2019 CleanFuture, Inc.

Carbon Credit Quick Take Aways

• Liquid Fuels– Renewable diesel or biodiesel

• Look at your fueling agreement– LCFS & RIN clauses?

• Gaseous Fuels– Station ownership?

• If owned, opt-in to receive value

– Renewable fuels?• Where is your fuel coming from?

– What is the carbon intensity (CI)?– How are LCFS and RINs treated in your fuel contracts?

• Electricity– Opt-in to receive value– Consider a service provider

• Aggregation & scale• Value optimization


Summary and Conclusions

• LCFS is a novel and complex market-based incentive– Amendments will drive growth in renewable fuels and

alternative fuel vehicles• Strengthened and extended to 2030

• LCFS provides value to market participants• Get involved and participate!


in,

Questions

66

John ThorntonPresidentCleanFuture, [email protected]


monetizing greenhouse gas (ghg) reductions€¦ · intensity and lifecycle ghg emissions of...

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