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Summary
- Tesla is one of the eight companies that submitted applications with the Environmental Protection Agency (EPA) for power generation and renewable credits.
- Then-President George W. Bush created the Renewable Fuel Standard (RFS) program to make the country less dependent on oil.
- The renewable credit market was established in 2000 to strengthen the US biofuel industry. It generated around 18 billion credits last year.
The American electric vehicle and clean energy company Tesla Inc. (NASDAQ:TSLA) is eyeing an entry into the multimillion-dollar US renewable energy market. The sector has grabbed a lot of attention of late and is set to rise as Joe Biden's administration focuses on zero-emission goals.
Tesla is one of the eight companies that submitted applications with the Environmental Protection Agency (EPA) for power generation and renewable credits. Besides cars, Tesla's focus is also on building charging stations and mass production of batteries. In 2016, just before the end of the Obama administration's tenure, EPA published a proposal and sought suggestions on best ways to structure credits for renewable electricity, with a primary focus on transportation fuel.
The Biden administration is expected to study how EVs can accrue tradable credits prescribed under the Renewable Fuel Standard (RFS). Then-President George W. Bush created the RFS program to make the country less dependent on oil imports.
Pic Credit: Pixabay.
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Future of the Renewable Energy Sector
The renewable credit market was established in 2000 to strengthen the US biofuel industry, which generated around 18 billion credits last year. Currently, the sector is dominated by ethanol producers, such as Valero Energy Corporation, Cargill, etc. Tesla's entry will help restructure the industry. The EV maker may focus on producing electricity from biogas.
Tesla's entry into the market may also catch the interest of other electric vehicle makers to join the renewable energy sector. It will also attract the infrastructure network providers that mainly focus on charging stations.
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However, there remains a significant challenge - how to track the credit-eligible biogas from its origin to the car's battery? Furthermore, only those entities that are involved in the sector can claim renewable credits. Tesla can generate one of the credits, such as D3s, which trades at an outstanding premium for a large pool of conventional ethanol credits.
Benefits of the RFS program
- It allows the refiners to blend biofuels, such as corn-based ethanol, into the fuel pool.
- The program empowers them to purchase credits in the market, although the price has changed over the years.
- It has attracted huge investments, particularly ethanol plants based in Iowa and Nebraska.
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Rural farmers are likely to welcome Tesla's entry into the market. The White House's emphasis on electric vehicles over biofuels is also expected to boost the sector and help fight the climate crisis. The program will require refineries to buy Renewable Identification Numbers (RINs) produced by Tesla and other alternative fuel providers. It will help subsidize the electric car companies, and it might even put the petrochemical firms out of business.
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