The alternative fuels market is evolving faster than anticipated in California, heartening those involved in implementing the state’s Low Carbon Fuel Standard. A recent report concludes the state’s goal of reducing the carbon intensity of its transportation fuels by 10 percent in 2020 is achievable. The LCFS is also achieving its goal of encouraging technological innovation.

The report, “California’s Low Carbon Fuel Standard: Compliance Outlook for 2020,”  was prepared by the consulting firm ICF International for a consortium led by the California Electric Transportation Coalition.

“The market has certainly taken some unexpected turns – we’re seeing very interesting, if nascent developments from alternative fuel providers that are both encouraging and reflective of the market – based approach of the Low Carbon Fuel Standard,” said Philip Sheehy, analyst for ICF International.

The LCFC was established by an executive order in 2007 and implemented by the California Air Resources Board starting in 2011. It requires a 10 percent reduction in the carbon intensity of transportation fuels by 2020. Carbon intensity is measure on a lifecycle or well-to-wheels basis in units of grams of carbon dioxide equivalent per megajoule (gCO2e/MJ).  

Based on new market data, recent industry investment, and likely consumer behavior, the report outlines three scenarios for how California’s transportation industry might comply with the fuels standard by 2020. The report is the first phase of a comprehensive, year-long project to analyze the environmental and economic impacts of meeting the LCFS. It is the work of a diverse coalition including the California Electric Transportation Coalition, the Advanced Biofuels Association, Ceres, the National Biodiesel Board, Environmental Entrepreneurs and the California Natural Gas Vehicle Coalition.

The LCFS is driving investment in low-carbon ethanol, biodiesel, renewable diesel and biogas along with natural gas and alternative vehicle technologies, the report says. “Although cellulosic biofuels have been produced at a slower-than-expected rate, these lower carbon biofuels are available to California in significant quantities today and supply is forecast to increase dramatically over the next several years. Each of these fuels has a carbon intensity less than 35 gCO2e/MJ, and represents a more than 60 percent reduction in carbon intensity compared to the LCFS compliance schedule.”

The expansion of natural gas consumption is expected to facilitate a transition to biogas, the report adds. “With a carbon intensity less than 30 gCO2e/MJ, even modest penetrations of biogas are feasible.” Landfill biogas, for instance, is rated at 11.56 gCO2e/MJ in the CARB tables.

In looking at ethanol and ethanol blending, the report says it anticipates E15 will be consumed in meaningful quantities in California in the 2017-’18 timeframe. Nearly 1.5 billion gallons of conventional corn ethanol, typically sourced from the Midwest, is now consumed in California and an estimated 90 million gallons of sugarcane ethanol imported from Brazil in 2012. “There is significant potential to lower the carbon intensity of corn ethanol through a variety of measures. For the purposes of this report, ICF assumed a lower limit of 73 g/MJ for what we term low carbon intensity corn ethanol. There has already been a shift towards more efficient corn ethanol production as a result of the LCFS, with many new lower carbon pathways submitted to and approved by CARB.”

It is expected that biofuel blending will be relied upon to achieve the LCFS goals, but two levels of market penetration of advanced vehicle technologies such as electric cars were considered. In the scenarios, it is assumed that 264 million gallons of conventional corn ethanol will be blended in 2013, and none in subsequent years. The first scenario which assumes 10 percent ethanol blending, California-produced corn ethanol usage increases slightly from 215 million gallons in 2013 to 220 million through 2020. Low-carbon intensity corn ethanol peaks at 884 million gallons in 2014, then drops off as cellulosic and sugarcane ethanol both increase to around 500 million gallons each in 2020. Total ethanol consumption in 2020 is projected to reach 1.3 billion gallons.

The report anticipates that biodiesel blending will grow from 1 percent in 2013, using 45 million gallons in 2013, up to 12 percent in 2020 at 325 million gallons. Renewable diesel increases from 19 million gallons in 2013 to 139 million gallons in 2020.

Biogas converted to compressed or liquid natural gas has some of the lower carbon intensity values evaluated by CARB. “There is growing interest from regulated parties and natural gas fueling companies to invest in biogas projects since they have the potential to be a significant source of LCFS credits,” the report says. Based on conversations with industry sources, the report’s author estimate heavy-duty biogas will become part of the natural gas supply in 2015 with an estimated 5 million gasoline gallon equivalents (gge) consumed, growing to 111 million gge in 2020. Medium-duty biogas follows by a year, with 1 million gge projected for 2016, growing to 9 million by 2020. The two grades of biogas are expected to make up just under 10 percent of the volume expected from natural gas consumption for transportation fuels.

The second scenario examined assumes a greater degree of ethanol blending, staying level at 10 percent until 2018 when it grows to 11.5 percent up to 13.5 percent in 2020, for a total of 1.8 billion gallons, 500 million gallons more than Scenario 1. Most of the additional gallons are provided by low-carbon intensity corn ethanol. Biodiesel blending in the second scenario is slightly less while the renewable diesel is pegged at 251 million gallons by 2020. Biogas stays at roughly 10 percent the volume of natural gas, with projections lowered in the second scenario to 7 million gge medium-duty biogas by 2020 and 83 million gge heavy duty by the end of the decade.

Corn ethanol producers have submitted to CARB more than two dozen pathway documents for approval, each of which includes distinctive production processes that help achieve a lower carbon intensity score. Transitioning to wet distillers grains generally results in a 7 gCO2e/MJ reduction in carbon intensity scores compared to drying distillers grains. Other carbon reducing technologies include biogas or biomass for on-site energy, cogeneration and feedstock diversification to incorporate grain sorghum or wheat slurry. The report also outlines the efforts of California ethanol producers to lower their carbon scores and the impact of Brazilian sugarcane imports.

In looking at the potential for cellulosic ethanol, the report says 27 facilities are in some advanced stage of financing that would represent a combined production capacity of between 337 and 512 million gallons annually by 2014, although some of that production would not likely be shipped to California. “Despite the slower-than-expected deployment of cellulosic ethanol, there is evidence that the industry is looking up,” the report says, citing the work being done on the West Coast by Edeniq and Zeachem. “Even in a scenario in which cellulosic ethanol continues to struggle to achieve expected market penetration, innovation is occurring with other waste feedstocks. Most recently, Pantaleon Sugar Holdings applied for a pathway using molasses to produce ethanol with a carbon intensity of 22.75 g/MJ.”   Pantaleon is a Guatemala-based sugarcane/ethanol company.

The report also examines the potential for an enhanced LCFS program as well as the potential impacts from LCFS credits being banked and traded. Over compliance in the first years of the standard has already generated an excess of LCFS credits that reached nearly 1.3 million by the end of 2012. The next phase of the study will focus on the macroeconomic impacts of the scenarios developed in phase 1.