renewable diesel growth & lcfs outlook
TRANSCRIPT
Renewable Diesel Growth & LCFS Outlook Jacobsen Fuel and Feedstock Conference - 2021
Mike McCurdy, P.E.Managing Director – Fuels & Power
08/25/2021
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ICF’s bioenergy footprint
Global advisory, digital services provider
Over 7,000 people
Headquartered outside Washington, D.C. with 70+ offices worldwide
Publicly traded with $1.51B in annual revenue
40 years in lenders advisory business
Independent Engineering Services • Conventional Biofuels, RNG/LFG, WTE, Biochemicals, Sustainable Aviation
Fuel, Renewable Diesel, Cellulosic and other Advanced Biofuels • Private, DOE, and USDA Guaranteed Loans
Market Advisory Services• Investment Grade LCFS and RIN Forecasting• Alternative Technology Risk Analysis
Carbon Services• LCFS Pathway Registration Assistance• Investment Grade Carbon Intensity Evaluations
Utility Decarbonization• Resource Assessments• Climate Business Planning
Credit Bank & Credit Generation
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Source: CARB LCFS Data Dashboard - https://www.arb.ca.gov/fuels/lcfs/dashboard/dashboard.htm
Limited Credit Generating Opportunities in Gasoline Pool (15 BGal)
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• Ethanol • CCS reducing CI by 20-25 gCO2e/MJ (Most ethanol 65 gCO2e/MJ)• E15 on pause following Reid Vapor Pressure Waiver decision by U.S. Circuit Court of Appeals for the District of
Columbia
• Electricity • Approximately 10% of new car sales in 2020• Average age of fleet approaching 12 years
• Hydrogen (Light Duty Vehicles)• Approximately 10,000 Hydrogen FCEV’s• Lack of fueling infrastructure, supply
interruptions, and Covid delaying rollout
• CARB estimates of units sold approximately ½ of 2017 estimates Source: via CARB’s Annual Evaluation of Fuel Cell Electric Vehicle Deployment and Hydrogen
Fuel Station Network Development
Credit Generating Opportunities in Diesel Pool (4 Billion Gal)
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• Renewable Natural Gas• Slow steady growth ~5%, mostly in private fleets• Some pickup in credits due to shift from landfill gas to manure
• Renewable Diesel• Biggest credit generating opportunity, but high marginal cost fuel• Questions of ultimate penetration via four distribution channels• Retail, Fleets, High Volume Retail, and Miscellaneous Aggregators
• Biomass Renewable Diesel• High Capital Cost and Low Output per Facility limit credit generation
• Biodiesel• Limited to 5% blend due to NOx concerns
• Hydrogen (Medium/Heavy Duty Vehicles)• Advanced Clean Truck Rule – 55% FCEV/BEV by 2035• Most promising ZEV technology for heavy duty trucks, limited availability at present
The “value stack” for renewable diesel
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Tax value (U.S. biomass production tax credit)
Physical fuel value(ULSD + Cap at the Rack “CAR”)
Blend mandate value (US RFS, D4 RIN)
CO2 offset value (California LCFS at Carbon Intensity (CI)=25g CO2/MJ)
LCFS Value($180/Metric Ton),
$1.61
RFS Value(D4 RIN@$1.78),
$3.03
Physical Fuel + CAR, $2.11
Production Tax Credit,
$1.00
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0$
/ ga
llon
(Aug
ust 2
021v
alue
)Value ComponentRD in California
UCO RD in California has $8.00 per gallon in value to be divvied up between the parties
Copyright 2021 ICF, Resources, LLC
With increased penetration, ICF expects some margin compression for RD, most likely in physical fuel and CAR
ICF’s View on Credit Bank
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20112012
20132014
20152016
20172018
20192020
20212022
20232024
20252026
20272028
20292030
LCFS
Cre
dits
(Mill
ions
)
Credits Generated, Net Annual Cumulative total Credits (Bank)
Low CI Biofuel Blending
ICF’s LCFS Credit Bank and Annual Contributions Forecast (2011-2030)
Reliant on RD Blending
Program Out of Compliance
EV’s Start to Close Gap
• Credit prices going up as market moves from surplus to deficits
• ICF sees credit prices remaining near $200 ($2020) for the near and medium term, with slight reductions in the 2030’s due to electrification of the fleet
• CARB looking at credit QE in late 2020’s
A tightening LCFS Program? And Expanding Markets…….
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SB32 =>40% GHG Reduction by 2030
80% GHG Reduction by 2050
Carbon Neutral by 2045
Going forward – RD capacity moves to harder to decarbonize markets such as aviation
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Renewable diesel can be made into SAF via isomerization
“[SAF] is a wonderful emerging opportunity because a substantial investment is not required to make renewable jet fuel from renewable diesel," - President and CEO Cynthia Warner, Renewable Energy Group
Time
Demand
Transit & medium duty road
Long distance road
Aviation
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SAF - It’s a 20+ billion-gallon potential market in the U.S.
10Copyright 2021 ICF, Resources, LLC
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)
FL NY MO KY AR MN NE MI TX WI PA AK IL IA WA WY OH CA ND IN KS NC SD OK TN
MT ME CO AZ NH NM HI NJ UT VT LA AL OR ID GA MS MA RI NV VA SC MD WV CT
States With LCFS Program States Considering LCFS Program
Conclusions
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• Limited credit generation opportunities keeps credit prices high through the 2030’s
• Margin compression may occur on physical fuel and CAR before LCFS
• RD capacity moves to SAF market in high hydrogen and electricity penetration scenarios
Get in touch with us:Mike McCurdy, P.E.
Managing Director – Fuels & Power+1.303.728.6332 skype [email protected]
About ICF
ICF (NASDAQ:ICFI) is a global consulting and digital services company with over 7,000 full- and part-time employees, but we are not your typical consultants. At ICF, business analysts and policy specialists work together with digital strategists, data scientists and creatives. We combine unmatched industry expertise with cutting-edge engagement capabilities to help organizations solve their most complex challenges. Since 1969, public and private sector clients have worked with ICF to navigate change and shape the future.