The U.S. Renewable Fuel Standard: It’s Not Just for Ethanol Anymore

The debate surrounding ethanol and federally mandated targets for its production tends to dominate the conversation about the United States’ Renewable Fuel Standard (RFS). But the Environmental Protection Agency recently issued a tweak to the RFS that also deserves attention.

The agency said that electricity generated from biogas counts toward compliance with the RFS, a change that stands to have significant implications for electric vehicle drivers, the utilities that supply those drivers with power, and—especially here in Vermont—dairy farmers.  Refiners and importers of gasoline and diesel who are obligated under the RFS to buy renewable fuels can fulfill that obligation by purchasing credits from producers of these compliance fuels, which now include biogas generated electricity.

Biogas is produced when organic waste material such as manure from a dairy farm is broken down and the resulting gases are captured. That gas can then be used to generate electricity, which becomes a transportation fuel when it’s used to charge an electric car.

This is not a casual change in the rules. To date, ethanol has been the “compliance fuel” of choice for obligated parties; opening up this electricity pathway means that a whole new set of players can participate in the growth of U.S. renewable fuels.

Even in a small state like Vermont, the use of these alternative fuels is scalable. Vermont has more biogas capacity than electric cars on the road. The electric capacity from Vermont’s biogas could support more than 30,000 electric vehicles, about 40 times the number currently registered in Vermont.

What’s the incentive for farmers and utilities to take part? Revenue. The production and sale of biofuel under the RFS earns it valuable credits that can be traded. If farmers who produce biogas-fueled electricity then sell it to their local utilities, for example, this new pathway suddenly becomes a possible new revenue stream for them, changing their economics, and the economics for utilities.

Electric utilities have not traditionally been engaged in the renewable fuel or transportation sector. But the adoption of this new rule gives utilities an even greater incentive to support the deployment of EVs and EV charging stations to support this pathway. That’s because if a utility earns credit for selling biogas-generated electricity, it can then earn money by selling that credit to, say, an oil refiner that wants to meet its RFS obligations by buying credits rather than actual biofuels. In this way, oil refiners could end up paying for electricity that powers EVs.

One of the criticisms leveled at electric vehicles is that they aren’t so green if the electricity that powers them comes from burning fossil fuels. If farms and landfills across the country can help power those cars, then they have an even stronger chance of bringing down our transportation emissions.