LCFS credit score costs in California proceed to plummet as provide outpaces demand. Present spot costs for quick supply are within the low to mid $60s, a ~30 % drop from costs final quarter.
Just like previous quarters when the California Air Sources Board (“CARB”) held stakeholder convenings, the market did see a slight uptick on pricing following CARB’s November 9, 2022 assembly when pricing was across the $63-69 vary. Nevertheless, the uptick was quick lived.
CARB’s Q2 2022 knowledge posted on October 31, 2022 exhibits an all-time excessive of credit outpacing deficits with a surplus of 1.35 million metric tons of credit generated in Q2. The credit score financial institution now sits at 11.3 million metric ton credit.
The downward spiral of LCFS pricing over the previous yr has impacted many stakeholders’ infrastructure growth plans in addition to LCFS credit score monetization methods. Close to undertaking buildout, builders and traders have been taking a extra cautious strategy, both delaying or halting initiatives altogether. For LCFS monetization, many market members, notably these within the electrical energy pathway, are re-thinking the cost-benefit evaluation of using renewable power credit (“RECs”) to decrease carbon depth (“CI”) scores. Up to now, there was no query of whether or not buying RECs was price it because the delta between REC buy prices and LCFS income was massive sufficient to make the REC funding pay for itself in multiples (i.e. regardless of the added REC procurement prices, market members would generate sufficient further LCFS credit from the acquisition to return out forward). Because the delta shrinks, buying RECs might now not be price it. The place that threshold is will differ from participant to participant based mostly on the automobile sort utilized, the power economic system ratio, and different elements. Sol Techniques can work with purchasers to reply any REC associated questions and decide what the optimum REC procurement technique could also be. This market dynamic may put a downward stress on REC pricing in CA.
This evaluation was featured within the November 2022 version of the Sol Customary, a quarterly publication that gives up-to-date pricing knowledge, market evaluation, and coverage developments to maintain purchasers on top of things on the nation’s rising low carbon and clear fuels packages. To subscribe and entry previous editions of the The Sol Customary, fill out our subscribe kind right here.
