Sources say Tesla has applied to enter the multi-billion US renewable energy credit market

• Unnamed sources told Reuters that Tesla wants to enter the US renewable energy credit market.

• Ethanol producers currently dominate the program, but electric vehicle makers are expected to join the White House soon.

• The move could anger oil refining companies, which will have to buy credits from Tesla.

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Tesla is seeking to enter the multibillion-dollar U.S. revolving credit market, hoping to benefit from the Biden administration’s march toward new zero-emissions goals, two sources familiar with the matter said.

The electric car maker is one of at least eight companies with pending applications to the Environmental Protection Agency related to power generation and renewable loans, sources said. EPA compiles a list of pending applications with some details but no company names.

Tesla’s entry could potentially reshape the revolving credit market, created in the mid-2000s to spur investment in the U.S. biofuel industry. The market generated approximately 18 billion credits in 2020 and is currently dominated by ethanol producers. Tesla’s use would likely be linked to biogas-related electricity production.

The Biden administration is expected to review EPA applications this summer and determine how electric vehicles can qualify for tradable credits under the Renewable Fuel Standard (RFS), both sources said.

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The move could mark the largest expansion of the RFS program created by President George W. Bush to revitalize rural America and wean the country off oil imports.

The entry of Tesla and other electric vehicle makers into the renewable energy program could attract investment in a much-needed infrastructure network, including electric vehicle charging stations.

But it will likely anger parts of the U.S. refining industry, which will have to buy credits, called RINs, generated by Tesla and other alternative fuel suppliers, essentially subsidizing the electric car maker as it tries to push petrochemical refiners out of business.

Rural farmers could see Tesla’s entry as the Biden White House’s response to prioritizing electric vehicles over biofuels in response to the climate crisis.

Biogas logistics

In 2016, just before the Obama administration left office, EPA published a request for comment on how best to structure credits for renewable electricity used as a transportation fuel.

The proposal largely lay dormant during the Trump administration, which spent much of its time on fuel credits trying to find common ground between rivals in the corn and oil industries.

Electricity generated from biogas—taken primarily from the nation’s landfills—already qualifies to generate credits under the RFS program, but the EPA has never approved such applications because the agency has not yet resolved the logistical issues.

Key questions include how credit-eligible biogas can be traced from its origin to the car battery, and who in that supply chain should be able to apply for lucrative credits.

Under the RFS, refiners must add biofuels such as corn ethanol to their fuel pool or purchase compliance credits in the credit market, where prices have fluctuated wildly in recent years.

The program has helped spur investment in ethanol plants in states such as Iowa and Nebraska, but the Biden administration has attacked liquid fuels.

Tesla would generate the most profitable type of credits, known as D3s, which are significantly higher in sales compared to the larger pool of traditional ethanol credits.

In addition to building electric cars, Tesla is also investing in charging stations and large-size batteries.

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