In new twist, RFS could boost electric vehicles

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, July 9, 2014

The federal policy used to build up the nation’s ethanol and advanced biofuel capacity could soon be harnessed to spur the development of electric vehicle infrastructure.

In a final rule issued last week, U.S. EPA said it would allow renewable electricity made from certain biomass sources to qualify under the renewable fuel standard if it is used to power electric vehicles. Under the rule, entities would be allowed to generate credits for that electricity and make money selling them to refiners that must meet annual renewable fuel targets.

Clean vehicle advocates are hoping it will provide new incentives to utilities to invest in the electric vehicle sector and bring in new constituencies to support the RFS.

“There’s money in this, and that money could be used,” said Karen Glitman, director of transportation efficiency at the Vermont Energy Investment Corp. “It provides utilities with incredible motivation to support EVs so they can access this revenue stream.”

The renewable fuel standard put into place in 2007 has historically been used to boost the ethanol and advanced biofuels sectors in the name of lowering greenhouse gas emissions and reducing foreign oil dependence.

But the standard applies broadly to biomass-derived transportation fuel, and EPA has determined that renewable electricity made out of biogas from landfills, municipal wastewater treatment and solid waste digesters, and agricultural digesters meets the 60 percent greenhouse gas reduction threshold to qualify as a cellulosic biofuel.

The change will “facilitate the introduction of new renewable fuels under the RFS program,” EPA said. “By qualifying these new fuel pathways, this rule provides opportunities to increase the volume of advanced, low-GHG renewable fuel — such as cellulosic biofuels — under the RFS program.”

Previously, EPA had allowed biogas to qualify for RFS credit if it was used as a gas, rather than being converted to electricity. EPA first proposed the expansion last year as part of a rule qualifying other types of new renewable fuel.

The new rule would apply under specific conditions for both commercial and private electricity distribution systems, provided the generated electricity is used as a transportation fuel.

Interest groups representing electric vehicles and some utilities had advocated for the change, as well as for EPA to expand its original proposal to include on-farm digesters that convert manure to biogas.

The Vermont Energy Investment Corp., a nonprofit operator of three energy efficiency utilities in the country, was instrumental in gathering support. The Vermont congressional delegation also wrote in favor of the rule and of including digesters found on dairy farms throughout the state.

According to Glitman, Vermont has more biogas capacity than needed for electric vehicles. The existing biogas capacity could support more than 30,000 EVs, or about 40 times the number currently registered.

In Vermont and other places in New England, “there is a really strong and growing interest in getting more electric vehicles on the road,” said Jennifer Rushlow, staff attorney at the Conservation Law Foundation. “However, we’re still really at the early stages of making that happen.”

Advocates of electric vehicles would like to see a greater role for utilities, but incentives for electric vehicles have thus far been geared more toward consumers than building up infrastructure, Rushlow said. States are just starting to grapple with regulatory issues involving utilities and electric vehicle infrastructure.

Some Vermont utilities have already expressed interest in using the RFS rule.

“By enabling renewable electricity to generate [renewable identification numbers] when used by electric vehicles, a new business model for electric vehicle charging infrastructure can be established,” the Burlington Electric Department, which serves 16,000 residential and 3,600 commercial customers, said in a comment to EPA. “This will lower the cost of electric vehicle charging and enable a larger scale infrastructure powered by renewable energy.”

Renewable electricity from biogas is an attractive fuel source because it is not subject to the same blending constraints as ethanol, according to an analysis of the rule by the law firm Sutherland Asbill & Brennan. Today’s gasoline supply holds only about 10 percent ethanol.

The rule likely won’t immediately have much effect, but advocates said they view it as a good first step.

“Right now there’s a lot of value to opening this door and seeing who walks through it,” said Jeremy Martin, senior scientist at the clean vehicles program at the Union of Concerned Scientists. “If we show, hey, look, this is a really viable way to provide incentives to clean up, to continue to cut emissions from transportation, that will really help to make the case to do more.”

Ensuring that the renewable electricity generated by the approved sources is used to power electric vehicles will likely be the biggest challenge. It’s easy to see how much electricity is being used at a designated vehicle charging station, but it’s much harder to determine what percentage of a household’s electricity use is going toward EV charging versus other applications.

Each state also regulates electricity individually, leading to a wide variety of systems and requirements that must be accounted for in tracking electricity use, EPA said in its final rule.

In response to a white paper last year by the House Energy and Commerce Committee, the International Council on Clean Transportation recommended an approach whereby RFS credits would be calculated based on a utility’s average overall renewable electricity production.

In its rule, EPA said it must be “theoretically feasible” that the fuel produced can reach an electric vehicle. But the agency said it needed more time to study the tracking issue.

“Most commenters agreed that the electricity distribution system is complex, and that detailed and clear regulatory requirements specific to renewable electricity are needed,” the agency said. “EPA agrees that the electricity generation system is complex, and EPA intends to take more time to evaluate the options and their implications.”

Electric vehicle advocates say they also see potential for the RFS to one day include solar, wind, hydroelectric and geothermal power generating for EV use.

“If the overall objective is to get more renewable fuel into the U.S. transportation fuel stream, we see there’s a little bit of text in there related to electricity, in particular to biomass. We see almost a little bit of an opening there that we could play with,” said Nic Lutsey, ICCT program director for heavy-duty vehicles.

Expanding the RFS to those types of renewable energy would require congressional action because of the RFS’s language limiting incentives to biomass-based renewables. Opening up the RFS, though, is a tough political sell at the moment for supporters of the policy because doing so would potentially allow opponents to take stabs at it through amendments.

Martin of the Union of Concerned Scientists said EPA’s action last week highlights the RFS’s flexibility and scope, even without congressional action.

“In some ways it’s the renewable transportation fuel standard,” he said. “It’s not an ethanol standard, not even a liquid fuel standard.”