- Renewable Identification Numbers (RINs) - What Are They?
- Investing and Trading Renewable Identification Numbers
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A Renewable Identification Number (or RIN) is a serial number assigned to a batch of biofuel for the purpose of tracking its production, use, and trading as required by the United States Environmental Protection Agency's Renewable Fuel Standard (RFS) implemented according to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.
Argus Media has been publishing renewable identification number (RIN) prices in the US for five years and has emerged as the industry’s most respected publisher of global biofuels market data.
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A biofuel is a fuel that is produced through modern biological techniques, such as agriculture and anaerobic digestion, rather than a fuel produced by geological techniques such as those involved in the formation of fossil fuels, such as coal and petroleum, from prehistoric biological matter. Biofuels can be derived directly from plants, or indirectly from agricultural, commercial, domestic, and/or industrial wastes. In 2010, worldwide biofuel production reached 28 billion gallons, up 17% from 2009, and biofuels provided 2.7% of the world's fuels for road transport. Global ethanol fuel production reached 23 billion gallons in 2010, with the United States and Brazil as the world's top producers, accounting together for about 90% of global production.
A Renewable Identification Number – otherwise known as a RIN – is a serial number assigned to a batch of biofuel for the purpose of tracking its production, use, and trading. A RIN is generated, assigned and is completely unique to one – and only one – specific processed batch of biofuel, and applies to each and every gallon taken that specific batch. A RIN is comprised of a 38-character series of numbers that represent information such as the calendar year of the production of the biofuel batch in question; manufacturer identification; the facility it was created in, batch number; renewable fuel designation; and other aspects of the biofuel’s creation that are unique to that exact batch. Specifically, a RIN will be comprised of this encoded information, in the following order:
The above letters of a RIN would correspond to the following breakdown, where the letters would be replaced by numbers reflecting the appropriate information:
- K = Code distinguishing assigned RINs from separated RINs
- YYYY = Calendar year of production or import
- CCCC = Company ID
- FFFFF = Facility ID
- BBBBB = Batch number
- RR = Code identifying the Equivalence Value
- D = Code identifying the renewable fuel category
- SSSSSSSS = Start of RIN block
- EEEEEEEE = End of RIN block
The United States Environmental Protection Agency is authorized to set annual quotas dictating what percentage of the total amount of motor fuels consumed in the US must be represented by biofuel blended into fossil fuels. To ensure compliance, obligated parties are periodically required to demonstrate they have met their RFS quota by submitting a certain amount of RINs to the EPA. Anyone who owns RINs must register with the EPA on an annual basis and obey mandated record-keeping requirements. All RINs are reported to the EPA after creation.
RINs are a direct requirement of the United States Environmental Protection Agency’s Renewable Fuel Standard – or RFS – which governs Renewable Energy Certificates (RECs). RECs represent tradable energy commodities in the United States that offer verifiable proof that 1 megawatt-hour (MWh) of electricity was generated from a specific renewable energy resource (biofuel, solar electricity, etc) and was fed into a power line system for the express purpose of that transportation of energy.
Energy types that qualify for RECs include:
- Solar electric
- Biomass, biofuels and landfill to gas
- Fuel cells
- In some states, combined heat and power systems
RECs allow their owners to be able to prove that they have purchased renewable energy for the purpose of renewable energy production subsidies from Federal or private sources supporting its production. REC certificates can be sold and traded or bartered once the green energy is fed into an electrical grid; upon doing so, the REC is considered retired and may no longer be sold, donated, or transferred to any other party.
Prices depend on many factors, such as the year the RECs were generated, location of the facility, whether there is a tight supply/demand situation, and the type of power created. This differentiation is intended to promote diversity in the renewable energy mix.
The Renewable Fuel Standard (and, as a result, RECs) was introduced to the Environmental Protection Agency (EPA) as a result of two policies signed into law by President George W. Bush- the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.
The Energy Policy Act of 2005 passed by the United States Congress on July 29, 2005, and signed into law by President George W. Bush on August 8, 2005. The act provides tax incentives and loan guarantees for energy production of numerous types.
The Energy Independence and Security Act of 2007 was passed by Congress on December 18, 2007 and signed into law by President George W. Bush on December 19, 2007. The act’s stated purpose is “to move the United States toward greater energy independence and security, to increase the production of clean renewable fuels, to protect consumers, to increase the efficiency of products, buildings, and vehicles, to promote research on and deploy greenhouse gas capture and storage options, and to improve the energy performance of the Federal Government, and for other purposes.”
The bill originally sought to cut subsidies to the petroleum industry in order to promote petroleum independence and different forms of alternative energy. These tax changes were ultimately dropped after opposition in the Senate, and the final bill focused on automobile fuel economy, development of biofuels, and energy efficiency in public buildings and lighting.
In closing, in order to comply with the purposes of the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007, and offer incentives for the production and use of renewable energy, the EPA adopted the Renewable Fuel Standard and its Renewable Energy Certificates as a way of helping promote, sustain, grow, and invest in environmentally friendly energy sources such as solar, wind, biofuel, and more.