Energy Transition

California Dreamin’ | Long-Term LCFS Price Forecast

byRyan Notacker

Renewable fuel uptake has surged in California in recent years, contributing to a 141% increase in the California Low Carbon Fuel Standard (LCFS) credit bank surplus and resulting in a drop in credit prices from ~$185/tonne to $75/tonne from 2019 through 2023. A tsunami of renewable diesel (the largest credit-generating fuel type), renewable natural gas/biomethane and electric vehicles have flooded into the state, accounting for 81% of the credits generated in 3Q23. Fuel volumes grew by 233%, 62% and 130% since 1Q19, respectively, while the corresponding credits generated increased by 166%, 674% and 206%. The program might be on the brink of working too well, desensitizing investments in nascent clean fuel technologies and ultimately failing to achieve California’s stated emission reduction targets in the long term.

In our first LCFS Price Forecast, available to Energy Transition Research clients only, Enverus Intelligence Research (EIR) explores the relationship between credit bank volumes and the historical prices of LCFS credits, finding an R2 value of 0.98. EIR’s forecast includes our long-term price curve assumptions for LCFS under the California Air Resource Board’s latest scoping plan, which will be critical to navigating the volatile market dynamics of low-carbon fuels.

Research Highlights

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About Enverus Intelligence®| Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.

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Ryan Notacker

As an Analyst on the Energy Transition Research team at Enverus, Ryan is the lead on biofuels and energy transition equities. He was previously an energy investment banking analyst at an American independent broker-dealer and has spent time in refined products and low-carbon fuels commodity trading. His education in commerce at the University of Calgary focused on finance.

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