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Home My WebLink About13 California's Low Carbon Fuel Standardenda Item # ACTION To: Board of Directors From: Steven Poncelet Date: March 01, 2017 Subject: Participating in California's Low Carbon Fuel Standard (LCFS) Market 1. WHY THIS MATTER IS BEFORE THE BOARD 13 This item is before the board as entry in to California's Low Carbon Fuel Standard (LCFS) market will generate new revenue for this district from the adoption of Electric Vehicles (EV's) in our service territory but does require some staff time to administer the program and for regulatory reporting. 2. HISTORY The Low Carbon Fuel Standard (LCFS) is a California regulation designed to reduce Greenhouse Gas (GHG) emissions associated with the lifecycle of transportation fuels. The lifecycle of a fuel includes the emissions associated with producing, transporting, distributing, and using the fuel. The regulation reduces lifecycle GHG emissions by assessing a "Carbon Intensity" (CI) score to each transportation fuel based on its lifecycle assessment. The California Air Resources Board (ARB) adopted the LCFS regulation in 2009 to reduce the carbon intensity of transportation fuels used in California by at least 10% by 2020 from a 2010 baseline. In 2011, the Board passed amendments to the LCFS. In September 2015, ARB approved the re - adoption of the LCFS. The regulation applies primarily to producers and importers of finished fuels such as gasoline, diesel fuel, and their substitutes and blendstocks. LCFS specifically exempts a number of lower -carbon fuels, such as electricity and hydrogen, because they meet the carbon intensity targets through 2020. Providers of these fuels, if they choose not to participate in the LCFS program, have no obligations for these fuels under LCFS. However, the LCSF allows the fuel providers to "opt -in" to the program, and generate LCFS credits that they can sell and trade in the California LCFS market. Opting in is a voluntary decision, and it is accomplished simply by registering in the LCFS Reporting Tool (LRT) as a credit generator. For electricity used as a transportation fuel, the entities that are eligible to generate LCFS credits are: • Electric Vehicle Services Providers (EVSP) for public charging stations (i.e. the TDPUD and NRG/EVGO) • Site hosts of private access EV charging equipment at a business or workplace (i.e. Tesla and Cedar House Hotel) • EV fleet operators for fleets of EV's including electric forklifts (i.e.Town electric motorcycle, TDPUD fleet EV, etc.) • Transit agencies operating a fixed guideway system of electric buses (N/A) • Battery switch station owners (N/A) • Electrical Distribution Utilities for residential charging, and for all of the above categories, if no other parties opt -in and generate credits (i.e. TDPUD) Electricity providers that opt in to the LSCF program are subject to reporting requirements that include quarterly and annual reports. The date for the quarterly reports must be initially uploaded to the LRT within the first 45-days after the end of each quarter. The uploaded draft reports and be revised and edited for a period of time but must be finalized by end of the subsequent quarter. An annual compliance report for the prior calendar year must be submitted by April 30th of the following year. The primary parameter reported are the amount of fuels (in kWh for electricity) dispensed per compliance period to motor vehicles for transportation use. Opting into the LCFS program becomes effective when the electricity provider establishes an account in the LRT. If the TDPUD enters before March 31, 2017, the District would generate credits for the entire Q1, 2017. There is a set formula for calculating LCFS credits and, other than in -home charging and electric forklifts, all electricity supplied for transportation must be individually metered (either by the TDPUD or the charging equipment itself). At today's LCFS price of ~$100 per credit, each EV registered in TDPUD's service territory would generate revenue of $250/year and each kWh of electricity supplied by TDPUD, and not claimed by another entity eligible to generate LCSF credits, would generate revenue of $0.08/kWh. There are currently no expiration date for the LCFS credits which can be held/banked for any period of time. 3. NEW INFORMATION Staff have been monitoring both the emergence of EV's in our community along with the evolution of the LCFS market and believe that the current revenue potential would cover the costs to enter and participate in the LCFS market and that there is significant potential for increased revenue over time with minimal increases in the costs to participate. The District would be joining other Public Owned Utilities (POU's) - such as Sacramento Municipal Utilities District (SMUD), City of Palo Alto Electric Utility, Silicon Valley Power, Alameda Municipal Power, Los Angeles Department of Water Resources (LADWP), and Burbank Water and Power to name a few. The three big Investor Owned Utility (IOU's) - Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) are also participants. The current market price for a LCFS credit is ~$100 per credit. At this market price, every vehicle registered with the California Department of Motor Vehicles (DMV) in the District's service territory would generate ~$250/year in revenue and each kWh that we serve for the District's public access charging stations would generate $0.08/kWh. It should be noted that both Tesla and NRG/EVGO, who own and operate EV chargers in the District's services territory, both already participate in the LCFS market so those credits would not be available to the District at this point. Future District revenue from the LCFS would be largely driven by the registration of EV's in our service territory and, to a lesser extent, by credits generated by the District's public access EV charging stations and other potential credits that are not being claimed by others. Based on the last DMV registration numbers (16 EV's as of 6/30/16) and from the kWh usage of the District's public access charging stations in 2016 (~4,000 kWh's), it is estimated that the District would have generated ~$5,000 in revenue in 2016 had been been in the LCFS market. If the explosive trend of EV adoption continues, it is possible that the District would quickly see revenues in the $10's of thousands and eventually in the $100's of thousands or more. There are requirements that revenues generated by electric utilities in the LCFS market be reinvested in the District's efforts to reduce GHG emissions. This is similar to the requirements the District currently adheres to with revenues from the Cap-n- Trade market. As an example, SMUD is currently generating almost $1,000,000 in revenue from the LCFS market. SMUD has used this money to create a series of rebates and incentives to promote the adoption of EV's and the construction of EV charging stations in SMUD's service territory. Their suite of incentives cover EV residential charging, workplace charging, multi -unit housing charging, and public access DC Fast Charging. In each case, SMUD either gets the LCFS credits automatically (i.e. residential) or it is a condition of the incentive that SMUD get the credits. Promoting additional EV's and EV charging both increase a utilities sales of electricity (i.e. load growth and revenue) while generating additional LCFS revenue and credits. There appears to be the potential for significant return on investment with these types of programs. While the current number of EV's and usage of public access charging stations in the District's service territory remains relatively low, the growth rate has been dramatic and the trend is similar to what the larger IOU's and POU's have already experienced. As EV's increase in performance (both in range and all -wheel drive capability), it is expected that the growth will increase even further. It has been well demonstrated by the number of EV's in Truckee -Tahoe and by the significant investments made by Tesla, NRG/EVGO, and the District in EV charging that Truckee is going to be a major stop on the electric highway. 4. FISCAL IMPACT There is no direct fiscal impact associated with joining the LCFS market it only requires a limited amount of existing Staff resources. Revenue projections for FY17 are $5,000-$10,000 and will be driven by DMV registrations of EV's in the District's service territory. Future revenues have the potential to be significantly higher in the $100's of thousands or more. 5. RECOMMENDATION Direct the District's General Manager to register and establish an account with the California Air Resource Board's Low Carbon Fuel Standard Reporting Tool Credit Bank & Transfer System (LRT-CBTS). Steven Poncelet Public Information &Conservation Manager Michael D. Holley General Manager