Clean Fuel Availability, for the Pacific Coast

In California, the International Council on Clean Transportation and E4Tech released a comprehensive study of clean fuel availability for the Pacific Coast.

The report is available here.

Mary Solecki of E2, one of our most distinguished Digesterati, writes:

“The takeaways are positive: a clean fuels standard in CA, OR, WA and BC is very much achievable, and with good policies, clean fuels can do a lot to lessen our dependence on petroleum even in the short-to-medium term. In CA, OR, WA and BC, the clean energy opposition has claimed repeatedly that the lack of available clean fuels makes clean fuels standards infeasible. This report from ICCT, drawing from region-wide data sources and experts, contradicts those claims. 

“This report drew on data from E2’s 2014 Advanced Biofuel Market Report  released earlier this month. We find that despite significant challenges, advanced biofuel capacity continues to grow, and reached over 800 million gallons in 2014. With over $200 million new investment in domestic projects since last year, the industry of 180 companies has 165 facilities planned, under construction, or operating in the next 3 years.”

The study authors themselves add:

What are the key findings of the study? 

There are four key original findings: (1) low-carbon fuels could replace over a quarter (i.e, over 400,000 barrels worth) of gasoline and diesel use in the Pacific Coast region (including California, Oregon, Washington, and British Columbia) by 2030; (2) low-carbon fuels could reduce the overall carbon intensity of on-road transportation fuels in the region by 14-21% by 2030; (3) the region’s targets for fuel carbon intensity reductions can be met in a variety of ways; (4) diverse combinations of fuel pathways involving conventional biofuels, electric-drive, natural gas, and advanced cellulosic biofuel could achieve similar oil-saving and climate mitigation goals.

What is the study? 

It is a state-of-the-art “bottom-up” study that evaluates scenarios for the amount of low-carbon fuels of various types that could be deployable for California, Oregon, Washington, and British Columbia in the 2020-2030 timeframe.

How were the scenarios constructed? 

Each scenario is based on a combination of assumptions across sixteen fuel supply parameters. The scenarios reflect combinations of optimistic assumptions for some fuels with pessimistic assumptions for others, aiming to represent a range of possible development pathways for the low-carbon fuel sector. For instance, one scenario (Scenario 8) has a larger contribution from electric vehicles but very little cellulosic biofuels, while another (Scenario 2) has a large cellulosic biofuel deployment but low-end assumptions on electric drive.

Who conducted the study? Who else was involved in the study? 

Researchers at two independent research organizations, the International Council on Clean Transportation and E4Tech. A Stakeholder Advisory Group that consisted of 24 expert advisors including government officials from each of the four jurisdictions, university experts, independent research consultancies, industry associations, and non-governmental organizations helped vet and guide the analysis and report. Anthony Eggert of UC Davis helped lead and advise on the project, and Ross Strategic facilitated the stakeholder process. The study was sponsored by the David and Lucile Packard Foundation and the TomKat Charitable Trust.

What is meant by a “bottom-up” analysis of low carbon fuels? How does it differ from a compliance analysis? 

A bottom-up study considers the potential availability of each low-carbon fuel option within a certain timeframe. Based on best-available data from a range of sources, the study identifies plausible ranges for the availability of fuels and for how quickly they can ramp up to greater production by 2015, 2020, 2025, etc. It is not directly constrained by any assumptions about policy goals, or regulatory compliance. In particular, the bottom-up scenarios may result in either fewer or more carbon reduction credits than are required for compliance with any given regulation. Bottom-up analysis is contrasted with “compliance analysis,” in which scenarios would be developed for how regulatory targets could be precisely met.

Are there fuels that are not analyzed in the study? 

A number of non-road transportation sector alternative fuels, including liquefied natural gas in marine applications, biofuels in marine applications, biofuel use in the aviation sector, and electrification of heavy-duty trucks are not analyzed. The study also does not consider all possible biofuel pathways – for instance, not all potential feedstock crops are included, and algal biofuels are not included. The potential carbon reductions from fixed rail transit, potential petroleum refinery upgrades, and upstream fossil fuel carbon reductions are outside the scope of the modeling, although they are given indicative values to allow the scenarios to be compared to regulatory targets. Changes to the carbon intensity of the fossil fuel pool are also not considered.

Does the study analyze the associated costs and economic impacts? 

The study does not seek to quantity the investment required to achieve any given scenario, potential associated costs to consumers or the compliance cost associated with any regulation supporting the deployment of low-carbon fuels. Similarly, there is no assessment of what level of carbon pricing might be associated with any of the scenarios. However, by constraining the analysis to fuel pathways that are already technologically demonstrated we have sought to ensure that the fuel scenarios are grounded in market realities. The findings are based on a literature base that includes comprehensive expert analyses of fuel and vehicle technologies that do directly include costs.

There appears to be a 2020 carbon saving shortfall for some scenarios. Does this imply that the regional policy goals might not be met? 

The study shows six different decarbonization scenarios for the Pacific Coast region’s fuel supply that would allow policy goals to be met. It also, however, shows two scenarios in which policy goals may not be met. The regional commitment to low-carbon fuels is intended to be transformative, and achieving that transformative change will require investment and commitment. The two scenarios in which policy goals may not be achieved represent cases in which investment may fall short of what is required to deliver the intended transformation.

Note that policies in the Pacific Coast region are designed to reduce the risk of inadequate investment in two key ways. First, the market for low-carbon fuel credits will increase the value of low-carbon fuels if the supply is limited, allowing the market to respond to the possibility of non-compliance by developing additional capacity. Second, cost-containment mechanisms being introduced into the programs will provide certainty about what will happen in the event that there is a credit shortfall in a given year, allowing the market to steer itself back into full compliance, and (based on the current California proposal) recoup missed savings in later years.

What about the “blend wall”? What happens if E15/E85 demand does not materialize? 

The research shows that substantial carbon intensity reductions can be achieved from 2020-2030 without widespread E15 or E85 usage. Of the eight scenarios, only one includes high usage of E85 fuel by flex-fuel-capable vehicles, while seven of the eight scenarios retain E10 (i.e., not E15) as the standard gasoline blend until 2020. Scenario 8 delivers 21% carbon intensity reductions in 2030 without any substantial shift to either E15 or E85. In summary, E15 and E85 can indeed deliver additional emissions reduction potential, but large carbon intensity reductions can be achieved without them.

How dependent are the scenarios on rapid progress on cellulosic biofuels? 

The study shows that cellulosic biofuels could be one of the largest contributors to carbon savings in the transport fuel pool by 2030, but that aggressive expansion of cellulosic biofuel production is not a necessary precondition of meeting 2020 targets nor of delivering impressive savings in the 2030 timeframe. Two of the eight scenarios (i.e., Scenarios 1 and 8) have very slow deployment of cellulosic biofuels and still result in high levels of carbon intensity reductions in both 2020 and 2030 timeframe (See Figure 7.18 in the study). This result emerges from the considerable potential identified in the literature for carbon savings from electric-drive, natural gas, and conventional biofuels. While cellulosic biofuels are not the only way to deliver carbon savings in the fuel pool, it is worth remembering that many cellulosic fuel pathways have advantages over conventional biofuels beyond emissions reductions – for instance reduced impacts on food security and reduced pollution associated with feedstock production. The case for developing these technologies therefore remains compelling.

Why is the carbon saving in one of the scenarios so much lower than in the others? 

Scenario 3 in particular ended up being significantly lower than the rest. This scenario represented a case where many of the developments in low-carbon fuels in the 2015-2030 timeframe are on the lower end of expert assessments of the various fuel industries. This scenario ultimately resulted in about a 5% carbon intensity reduction across the Pacific Coast region in 2020 and a 14% carbon intensity reduction in 2030. Examples of the underlying factors for this Scenario 3 include; relatively low biodiesel, drop-in gasoline, drop-in diesel, cellulosic ethanol, and HVO deployment and no electric-drive vehicle deployment beyond the targets of the ZEV program.

Why are the cellulosic biofuel volumes higher than US DOE EIA Annual Energy Outlook 2014 reference? 

The EIA (2014) assumes that the value of policy support available for cellulosic fuels will be inadequate to drive any additional investment beyond 2021. This is a surprising conclusion and does not seem to be consistent with the need to accelerate action on climate change over the coming decades. the combination of federal support (the combination of the RFS and support from U.S. DOE, USDA and the U.S. military) and state support (e.g. low-carbon fuel standards and clean fuel standards, investment incentives) for cellulosic fuels gives every prospect of a good investment environment to 2030.. The case outlined in the 2014 AEO of a cellulosic fuels industry that has a brief spurt of growth to 2020 and then freezes is implausible, and inconsistent with projections by industry and academic groups. The growth rates outlined in the report are moderate and consistent with feedstock availability and historical levels of investment in biofuels.

How much of the low-carbon fuels will be produced within the jurisdictions? 

Any of the fuel supply chains discussed in this report could be developed in the Pacific Coast region. Guaranteed local markets due to progressive alternative fuel policies will increase the appeal of investment locally, and there are supplies available of most feedstocks considered. The literature demonstrates that there is an opportunity for cellulosic plants and other biofuel facilities to be built in the region, but also suggest that there will be competition from other parts of the U.S. and from imports. Investment decisions will depend on a combination of feedstock availability and cost, proximity to markets and investment support available at the state level, and we can expect a combination of locally produced fuels, out-of-state fuels and imported fuels to contribute to any given scenario.

Some low carbon fuels like electricity and hydrogen are particularly likely to be produced within the four jurisdictions because of constraints on long distance distribution. Also, all electric vehicle charging equipment, hydrogen refueling facilities, and natural gas (CNG, LNG) retail infrastructure will of course be developed locally. Complementarity between infrastructure developments, carbon intensity reduction targets and investment incentives will maximize the potential in-region production of low carbon fuels.

What does the study say about low-carbon fuel policies (e.g., LCFS, CFS)? Does the study predict that compliance is likely? 

The study analyzed the potential deployment of fuels based on industry developments and best available data. There is no single predicted pathway, but in six of eight scenarios compliance would be achieved with the regional policies. Which of these scenarios (or other possible outcomes) will be delivered will depend on a combination of factors including policy certainty, investment climate, availability of federal incentives, oil prices, competition from other markets and so forth. The diversity of low carbon fuel supply assumptions in these scenarios shows that there are many credible pathways to successful LCFS/CFS/RLCFRR compliance. There is no single fuel pathway in which dramatic market breakthroughs are required for policy success. At the same time, investment beyond business as usual in some fuel supply pathways will almost certainly be required for policy targets to be achieved. In the 2030 timeframe, region-wide carbon intensity reductions in the range of 14-21% appear to be achievable.