Written on: January 5, 2021
In discussions of renewable propane being America’s future energy solution, one of the challenges that this new kid on the renewable block faces is getting recognized for consideration in the long chain of government financial incentives being offered by both federal and state sources for subsidizing renewable energy technology, project and equipment installations, and the actual cost of the renewable energy being produced.
The first step in making this happen will be increased, consistent demand for renewable propane for residential and commercial use. While this includes propane autogas, it also extends beyond the autogas space. In this article, we’ll explore existing incentives as well as areas we’ve identified as leaving quite a bit of room for growth.
On the renewable front in general, several federal incentives exist. But when we look at propane versus electric incentives, the level playing field is missing. Federal incentives for renewables include the Renewable Electricity Production Tax Credit (PTC), the Investment Tax Credit (ITC), the Residential Energy Credit, and the Modified Accelerated Cost-Recovery System (MACRS).
Grant and loan programs are available from several government agencies including the U.S. Department of Agriculture, the U.S. Department of Energy (DOE), and the U.S. Department of the Interior. There is currently not enough recognition of renewable propane in any of these programs. Most of these federal incentives go toward the production of renewable electricity.
On the brighter side, renewable propane used for over-the-road autogas is recognized by the U.S. EPA for RINs credits under the Federal Renewable Fuel Standards Program (RFS). RINs credits are recognition of individual batches of renewable fuel, such as ethanol, renewable diesel and renewable propane. These credits are used by the producer or the retailer to offset the higher production cost of the renewable fuel, especially in the earlier stages of the renewable’s demand curve.
If a credit similar to RINs for autogas were also available for the residential and commercial use of renewable propane it would certainly jumpstart the use of renewable propane in those market segments by offering a way to bring the cost of renewable propane within reach of the plentiful conventional propane popular in those markets now.
One of the advantages of renewable propane is its fungibility or interchangeability with conventional propane when considering important factors like storage and delivery. In other words, the storage vessels, delivery trucks, and other approaches to storage and transportation can be used in the same manner with renewable propane as they are with its older sister, conventional propane.
At some point a propane marketer may want to add equipment for storage and mixing purposes of renewable propane but that is probably not a mandatory requirement in the early stages of the demand curve.
A real kickstart for renewable propane would be a system set up like the Renewable Portfolio Standard (RPS) that allows electric utilities to trade Renewable Energy Certificates (RECs) that facilitate purchase of renewable energy production without moving the electricity onto the purchaser’s grid. In the propane world we call that type of transaction an exchange. This type of exchange has not yet been used for purchasing renewable propane without having to actually move the product into the purchaser’s storage.
All of this conversation about increasing government incentives for renewable propane comes with a big note of caution. It is certain that the propane industry does not want to head down the road of over-regulation like the oligopoly public utilities are enduring under government regulation overreach. The key will be finding a balance that gives renewable propane a strong position on several new radars: primarily demand in the residential and commercial markets.
The two energy industry organizations best prepared to accelerate overall incentive improvements and parity for renewable propane use in the residential, commercial and other energy market sectors are the National Propane Gas Association (NPGA) and the Propane Education & Research Council (PERC). Your communication with these two organizations can help them focus on the future of renewable propane.