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Highway Bill Would Equalize Taxes of Alternative Fuels

By Green Fleet

A provision within the House-passed highway and transportation bill, H.R. 3038, would equalize the tax disparity between alternative and conventional fuels.

Currently, LNG and diesel are taxed at the same rate of 24.3 cents per gallon even though LNG produces 58 percent of the energy output of diesel and propane is charged the same 18.3 cents per gallon that gasoline is charged while only producing 72 percent the energy output, according to a release from Rep. Todd Young (R-Ind.).

Under the new provision, federal highway excise taxes on liquefied natural gas and propane autogas will be levied based on the fuels’ energy output instead of their volume and will have their rates changed to 14.1 cents per gallon and 13.2 cents per gallon respectively.

The bill, which passed 312-119, would provide $8 billion in funding to highway and infrastructure expenditures through December 18. Funding would mainly come from applying $3 billion of savings from Transportation Security Administration fees and $5 billion from tax-compliance measures.

Although the bill passed with a majority vote, many Democrats criticized the bill for only being a short term solution where a long term solution is needed.

Rep. Bill Shuster said in a statement that the approval of H.R.3038 will give Chairman Paul Ryan and the Ways and Means Committee time to come up with a long-term transportation bill that is fiscally responsible.

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Feeling Pain at the Pump? Factors That Affect Fuel Prices

What factors affect fuel prices?

When gasoline and diesel prices spike, we often want to blame someone for our pain at the pump. The reality is that the oil industry is a complex market. Though there are numerous factors that could ultimately influence the price of fuel, such as weather, government policies, and international relations, there are four factors that have the most significant influence. These factors include the cost of crude oil, refining costs and profits, distribution and marketing costs, and fuel taxes. Alternative fuels, such as natural gas, propane, electricity, and biofuels, can mitigate some price fluctuations attributable to short-term events, like natural disasters, because they diversify the fuel supply. However, some alternative fuel prices are also dependent on similar factors.

In May 2015, the average retail price of regular grade gasoline was $2.72, according to the Energy Information Administration(EIA). Below is a summary of the factors that affect gasoline prices, and the relative percentage of each component. We have also described how each of these factors may affect alternative fuel prices.

Crude Oil

As of May, approximately 51% of the cost of gasoline was related to the price of crude oil. The fluctuation in crude oil price is the biggest factor in the volatility of the price of gasoline, as the other costs (described below) are relatively static.

Crude oil prices are largely a product of supply and demand. Global demand has grown in recent years due to world economic growth and increased access to vehicles, particularly in developing nations. The Organization of Petroleum Exporting Countries (OPEC), which produced about 40% of the world’s crude oil between 2000 and 2014, also has significant influence on oil prices by setting production limits among members. Part of the reason oil prices have declined significantly since July 2014 is that OPEC nations are not limiting production, resulting in a global ‘glut’ of crude oil. Much of this glut stems from a surge in oil production in the United States and Canada over the last few years from unconventional sources, like shale. This price could change dramatically, however, if there is a major global supply disruption.

With the exception of electricity and natural gas, alternative fuel prices can also be impacted by the price of crude oil and the price and demand for petroleum products. Higher or lower demand for gasoline also influences ethanol demand, for example, and ethanol is closely linked to the price of gasoline, as shown in the Clean Cities Alternative Fuel Price Report. Biodiesel wholesale costs are largely influenced by the price of diesel. Propane costs historically tend to follow crude oil prices, though not to the same extent as other fuels, and change seasonally because of the demand for propane as heating fuel in the winter.

Alternative fuel prices are also affected by the applicable commodity price, though the impact varies by fuel. For example, the price of natural gas only comprises 20% of the compressed natural gas (CNG) price at the pump, according to the American Gas Association. Because natural gas is a relatively small percentage of the overall fuel price, a swing in the natural gas commodity prices has less of an effect on the CNG price at the pump. In addition, natural gas costs are typically regulated and less expensive than petroleum (on a gasoline gallon equivalent—or GGE—basis) and the infrastructure is independent of oil infrastructure.

Refining Costs and Profits

Crude oil must be refined into gasoline and diesel so it is compatible with vehicles. Refining oil takes energy and costs may vary based on the type and origin of the crude oil used in the process. In May, refinery costs and profits represented about22% of the cost of a gallon of gasoline.

Alternative fuels, such as propane, natural gas, and biofuels, are also “refined” or otherwise altered before they can be used in vehicles. Propane is a by-product of crude oil refining and is also produced as a liquid from natural gas and oil wells. Propane from natural gas liquids does not require refining; however, it must go through a scrubbing process to remove contaminants, as well as a separation process. Natural gas is produced from natural gas and oil wells, and is also subject to a separation and treatment process to remove contaminants. It must also be compressed in order to be transported in major distribution pipelines. Biofuel production facilities are often called ‘biorefineries’ because they produce and refine crude biofuels at the same location.

Distribution and Marketing

Since many of us do not live next to oil refineries, gasoline and diesel must be transported to local fueling stations. This occurs through a sophisticated system of pipelines, trucks, or barges to a network of fuel terminals, which can also be referred to as a distribution rack. The distributors, also called jobbers, load and blend the gasoline and diesel with other products (e.g., ethanol, biodiesel) in tanker trucks, which is driven to your local retail outlets and placed in underground storage tanks. In every part of the supply chain there are costs associated with employee salaries and benefits, equipment, taxes, insurance, and other types of overhead. In May, these resulting costs equaled about 10% of the price of a gallon of gasoline.


Finally, motor fuel taxes contribute to the construction and maintenance of the roads we use on a regular basis. In the early 1900s, state governments devised ways to collect taxes on each gallon of fuel to help cover these costs and increase revenue. In May, federal, state, and local taxes accounted for 17% of the average retail price of a gallon of gasoline. Federal excise taxes are currently $0.184 per gallon of gasoline or ethanol, and $0.244 per gallon of diesel or biodiesel. Propane and CNG are taxed at $0.183 per gallon of propane or GGE of CNG, and liquefied natural gas is taxed at $0.243 per gallon. The September Question of the Month blog will delve into this topic in more detail.

State and local fuel taxes vary widely by jurisdiction. Though motor fuel taxes are applied to each gallon of gasoline or diesel sold, alternative fuels can also be taxed on an energy equivalent basis with gasoline and/or diesel. Some states use alternatives to traditional state fuel taxes, such as annual fees for alternative fuel vehicles or taxes based on the number of miles traveled. Watch for the August Question of the Month blog for more information on these alternatives.

Though the alternative fuel supply chain differs slightly from conventional fuels, many of the same factors influencing oil prices also impact alternative fuels. Now when you fill up your vehicle, take a moment to think about all the infrastructure and people required to process and deliver fuel from the field to the pump.

For more information on fuel prices, please refer to the following websites:


Partners Integrate Energy Storage with EV Charging

by NGT News

Green Charge Networks, a California-based provider of commercial energy storage, has announced a partnership with ChargePoint, a leading provider of electric vehicle (EV) charging networks.

The partners say that combining energy storage with EV charging eliminates the high cost of demand charges caused by spikes in power usage, often a barrier to installing EV charging stations. Demand charges are part of every commercial electricity bill and are determined by the highest 15 minutes of use during a billing cycle.

“Having EV charging readily available at public locations, especially along highly traveled corridors, will enable further electrification and accelerate adoption of electric vehicles,” says Vic Shao, CEO of Green Charge Networks. “The combination of energy storage with EV charging is important and necessary – especially in California, where demand charges are some of the highest in the nation.”

Redwood City, Calif., a city with more than 84,000 residents, is the first joint customer to install the combined solution. The expansion of the city’s EV charging stations furthers the Redwood’s environmental standards outlined in its Climate Action Plan to reduce greenhouse gas emissions within the community and city operations by 15% below 2005 levels by 2020. The city installed five EV charging station locations in 2014.

Green Charge Networks says its intelligent energy storage is shaving multiple peaks per day (80 in May 2015) caused by the EV charging stations. The energy storage is expected to save nearly $7,000 annually in demand charges at the five Redwood City locations alone.

“By combining EV charging and energy storage to reduce consumption during peak hours, businesses can save money,” says Pasquale Romano, ChargePoint CEO. “This can significantly reduce the cost for a business to offer EV charging, thereby increasing EV adoption while promoting grid stability.”

For more information, visit www.greencharge.net/chargepoint.

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Powering Texas: Big, Clean, Market-Driven Changes are Already Underfoot

By: Peter Sopher, policy analyst, clean energy, and Sarah Ryan, clean energy consultant

Over the past century, the electric grid in the United States has experienced only minor changes. There is evidence, however, the power sector is changing. We are moving away from traditional coal generation and toward alternative, cleaner energy sources. And despite our state being primarily known for oil and gas, Texas is no exception.

In fact, Texas’ electricity sector has been trending cleaner over the past decades, driven by deregulation of the electricity market, the development of the massive highway of transmission lines built to carry West Texas wind to cities throughout the state – the Competitive Renewable Energy Zone (CREZ), and technological progress. Basically, once the market was opened up to competition, the more economic options – which also happen to be cleaner – began to gain a foothold. And there’s no stopping this train.

Where we are and where we’re going

To start, the declining use of fossil fuels to power our lives is perhaps the most significant change in Texas. As shown in Figure 1 below, fossil fuels’ (coal and gas’) proportion of the state’s electricity generation mix shrunk from 88 percent in 2002 to 82 percent in 2013.

Meanwhile, renewable energy was taking its place – wind’s share grew from one percent to eight percent.

texas generation mix

Not only is fossil fuels’ slice of the generation mix on the decline, we are using cleaner fossil fuels in place of coal. Natural gas generation has grown substantially more than coal generation in the state since 1990, even before deregulation. During this stretch, coal’s percentage of Texas’ generation mix has steadily declined from about 45 percent to 35 percent, while natural gas’ has remained between 45 percent and 50 percent.

Energy forecasters predict this trend toward cleaner power will intensify. The business as usual (BAU), or “Current Trends,” scenario – the best forecast for what the future could hold under the current economic and policy landscape– from the Electric Reliability Council of Texas (ERCOT), the state’s grid operator, projectswind generation capacity will double the 2013 total by 2017. Even more ambitious, SNL Financial’s wind capacity projection – based on “actual planned/under construction projects” – for 2020 is nearly three times the 2013 total.

Further, Texas has barely begun to scratch the surface of our solar potential. ERCOT’s BAU forecast is for the state’s solar capacity to increase to upwards of 10GW by 2029, making solar power’s share of the state’s generation mix six percent, up from zero percent in 2013. That’s a big jump.

With regard to fossil fuels, ERCOT’s BAU scenario predicts zero additional coal capacity and 8.6 GW of additional natural gas capacity by 2024. Not only will there not be any new coal coming online, SNL Financialforecasts coal generation capacity dropping by 2020, while natural gas capacity increases significantly during that timeframe.

In sum, renewable energy and natural gas are increasingly powering Texas, while the use of coal is on the decline.

Why is this trend toward cleaner power sources occurring?

Lower prices and technological progress for renewables and natural gas – under a deregulated market structure and in parallel with the construction of CREZ transmission lines – have improved the economic context for cleaner fuel sources, making the electric market in Texas ripe for clean energy.

Prior to deregulation, the regulatory framework guaranteed conventional utilities the economic right to recover costs with a reasonable profit. For example, if a utility needed to fix broken equipment, they could then structure their rates in such a way to recoup those costs plus a reasonable rate of return, subject to the approval of the Public Utilities Commission. There was no real incentive to retire inefficient resources. Deregulation, on the other hand, created the opportunity for more retail electricity providers to enter the state and compete with one another, forcing inefficient resources to give way to more cost-efficient options.

And which resources have been winning under this competitive environment? Natural gas and renewables – especially wind – so far. This is largely due to the continued construction of CREZ lines over the past decade, which   will eventually enable 18.5 GW of wind capacity, or over 30 percent of all 2012 onshore wind capacity in the entire United States. This competitive environment has fostered the upspring of five of the world’s 15 largest wind farms right here in Texas.

In addition to CREZ infrastructure, technological progress and related decreases in costs have improved clean power’s ability to compete in Texas. Lazard’s levelized cost of energy (LCOE) – the most commonly used metric for comparing cost competitiveness of fuel sources – for solar and wind power dropped 78 percent and 58 percent, respectively during 2009-2014. To put these cost reductions in perspective, imagine if your cable bill dropped 58 percent with no strings attached: instead of paying $50 per month, you’d be looking at a price tag of $21 per month.

As with renewables, prices for natural gas have also declined – largely due to the breakthrough of fracking– over recent years. Energy Information Administration (EIA) data show natural gas prices were more or less cut in half during 2008-2014.

Notably, since 2009, as wind and gas’ proportion of the Texas generation mix have become more significant, wholesale electricity prices in Texas have plummeted. Cleaner energy and lower electricity bills can go hand in hand.

And this trend toward cleaner, more affordable power should continue in Texas. One reason? Bloomberg New Energy Finance forecasts energy from wind and solar becoming even more competitive with coal and natural gas in future years. In fact, as the generation costs of coal and natural gas continue to rise, those of wind and solar are predicted to keep going down.

LCOE forecast

As prices for renewables decline, Texas stands to benefit more than any other state. According to National Renewable Energy Laboratory, Texas is by far the most resource-rich state in the country for wind and solar energy. Specifically, our state has twice the potential for wind and three times the potential for solar than the second place state for each category.

Even in Texas – a state famous for its oil and gas – our own grid operator, ERCOT, entitled its clean power section of its annual report “Connecting tomorrow’s resources to today’s grid.” Anyone that has been to West Texas has felt the state’s abundance of wind, and the sun shines year-round. That’s excellent news for us because the primary reason for Texas transitioning toward cleaner electricity generation – or “tomorrow’s resources,” in the words of ERCOT – is simple economics.

In anticipation of the Environmental Protection Agency’s Clean Power Plan being finalized, Environmental Defense Fund will be releasing a policy paper demonstrating how Texas is well-positioned to comply with the upcoming rules.

Senate Panel Passes Bill With Alt-Fuel Tax Credit Extensions

by NGT News

In a 23-3 vote Tuesday, the U.S. Senate Finance Committee passed a tax extenders package to revive dozens of tax credits that expired at the end of last year, including key incentives for the alternative fuel industry. The bipartisan legislation now moves to the Senate floor for consideration.

The bill would retroactively extend the various tax credits for two years from Jan. 1, 2015, through Dec. 31, 2016.

Among the bill’s many provisions is an extension of the federal $0.50/gallon alternative fuels excise tax credit, which covers compressed natural gas, liquefied natural gas, propane autogas and other alternative transportation fuels.

The measure would also extend the 30% alternative refueling infrastructure tax credit, which is capped at $30,000. Furthermore, the bill would renew the $1,000 home refueling tax credit.

In a press release, NGVAmerica applauds the Senate panel for approving the package, and the group says that renewing the federal alternative fuel incentives would help boost the natural gas vehicle market.

“NGVAmerica commends the Senate Finance Committee for their leadership to advance natural gas vehicles,” says Matthew Godlewski, president of NGVAmerica, in the statement. “If passed, this legislation is great news for fleets who are looking to clean-burning, low-cost, domestic natural gas to power their transportation needs.”

NGVAmerica notes the legislation also includes an amendment authored by U.S. Sens. Michael Bennet, D-Colo., and Richard Burr, R-N.C., to help put liquefied natural gas (LNG) on equal footing with diesel fuel under the federal highway excise tax.

According to a press release from Bennet, the measure would allow LNG to compete fairly with diesel by taxing LNG based on the natural gas’ energy output, rather than on its volume. NGVAmerica, which calls the measure a “common-sense amendment,” says LNG is currently taxed at a rate 70% higher than that of diesel.

“LNG is becoming a larger part of Colorado’s diverse energy industry, and we have an opportunity to help grow this market and increase the use of natural gas as a transportation fuel,” comments Bennet, in his release. “This bill will help us embrace that momentum and encourage the use of this domestic, cleaner-burning fuel.”

Notably, Bennet and Burr’s LNG provision is similar to an alternative fuel tax parity measure thatrecently passed in the U.S. House of Representatives as part of a larger highway funding bill.

Meanwhile, the biofuels industry has also welcomed the Senate tax extenders package. The legislation would extend several incentives for the sector, including the second-generation biofuel producer tax credit, as well as biodiesel and renewable diesel tax credits.

“I commend the Senate Finance Committee’s leadership for recognizing how important these tax credits are for the continued growth and innovation of the U.S. biofuels industry,” states Bob Dinneen, president and CEO of the Renewable Fuels Association, in a release. “Stability in the marketplace is crucial to encouraging development in second-generation biofuels, like cellulosic ethanol. By extending these incentives, the committee has helped to provide that needed stability.”

Last December, Congress passed H.R.5771, a bill that established a one-year retroactive extension for the alt-fuel and dozens of other expired tax credits through the end of 2014. President Barack Obamasigned the bill into law soon after, but many considered the eleventh-hour legislation too little, too late.

As U.S. Sen. Ron Wyden, D-Ore., explained in a statement Tuesday, “At the stroke of midnight on January 1st, [H.R.5771] expired, the tax incentives again were dead as a doornail, and Americans were back in limbo not knowing what taxes they’d owe in the future.”

Wyden, the Senate Finance Committee’s ranking member and former chairman, continued, “This [new] legislation is going to lock these policies in place for two years, past the next election.

“This two-year bill is the right way to ensure these incentives live up to the hype,” he said. “The budgetary math might look the same regardless of the date, but the economic value of these incentives virtually disappears when Congress waits until the end of the year. The economy would get about as much use out of spending those billions on 8-track tapes and pocket pagers.”

In his opening statement Tuesday, U.S. Senate Finance Committee Chairman Orrin Hatch, R-Utah, also emphasized the need for swift action to pass a new extenders package and again restore important tax breaks.

“I want to note that this year marked the first time in 20 years that a new Congress began with the tax extenders already expired,” said Orin. “In other words, we began this Congress with a built-in disadvantage when it comes to tax policy.

“All of these tax provisions are meant to be incentives – they are meant to encourage and promote certain activities,” he added. “If they are expired, they aren’t doing much good.”

Wyden said, “It’s my hope that once the committee reports this legislation, the Senate will act quickly.”

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