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Platts to update California ethanol assessments April 1

  • Update methodology for North California Rail Car ethanol with 70 CI
  • Publish price of ethanol's Carbon Intensity per CI point
  • Discontinuation of existing South California ethanol assessment

S&P Global Platts will update its North California Rail Car ethanol assessment to reflect a carbon intensity (CI) of 70, discontinue its existing South California Rail Car ethanol assessment, effective April 1, 2020, to better reflect where the bulk of spot market activity occurs.

Platts has observed that spot market liquidity for rail car ethanol in California has concentrated on ethanol with a CI in the high 60s-low 70s in recent years. In addition, an analysis of quarterly data from the California Air Resources Board in 2018-2019 also suggests that domestic ethanol, excluding imports, has averaged around a CI of 70.

The updated North California assessment will reflect a minimum volume of 145,000 gallons, or five rail cars, of ethanol that is delivered into the Richmond, Stockton, McClellan Park and Sacramento terminals in northern California.

Monday through Wednesday, the assessment reflects this-week shipment, while the assessment Thursday and Friday reflects next-week shipment.

Platts understands that the seller will provide a bill of lading to the railroad by end of day Saturday of the shipment week. The buyer will provide nomination to the seller by close of business on Thursday of the shipment week.

Platts will publish bids, offers and trades for California Rail Car ethanol with different CI levels, but these may be normalized to the reference CI of 70 for assessment purposes.

Platts will continue to publish this assessment as both a flat price and as a differential to the Platts Ethanol Chicago front-month derivative in cents/gallon.

NEW CARBON INTENSITY VALUE

In addition, Platts will launch an assessment that values each point of Carbon Intensity (CI) for ethanol under California's Low Carbon Fuel Standard.

CI is expressed in grams of carbon dioxide equivalent per mega-joule (gCO2e/MJ) and reflects the measure of Greenhouse Gas emissions associated with the life cycle of the fuel.

The new assessment will support normalization as needed for the updated Northern California Rail Car ethanol assessment and provide clarity for market participants regarding the cost variations between different different CI levels of ethanol.

The published CI price per point will be calculated daily using the Platts assessment of front-quarter California LCFS credits ($/mt) and the energy density of denatured ethanol, as published by the California Air Resources Board, and currently 81.51 MJ/gal then divided by 10,000 to give a cents/CI per gallon value.

Platts expects counterparties who trade in the Market on Close assessment process to use the value per CI point when applicable to normalize for the difference between the actual CI of the delivered ethanol and the 70 CI reference.

DISCONTINUATION OF SOUTH CALIFORNIA RAIL CAR ETHANOL PRICES

Platts will discontinue its existing delivered South California ethanol rail assessments, which reflect a CI equal to the annual gasoline standard, effective April 1, 2020.

Spot activity around non-obligated ethanol, or ethanol with a CI equal to the annual gasoline standard as set by the CARB, has been limited as trading has typically concentrated on reference CI levels that are closer to the final CI level of the physical ethanol that is delivered.

In 2019, the annual gasoline standard CI was 93.23 CI, while the CI of ethanol traded in California was in the high 60s-low 70s. In addition, Platts has observed that spot trading liquidity for ethanol rail cars delivered into South California terminals has fallen, while the North California spot trading liquidity has shifted to rail cars containing ethanol with CI levels in the high 60s-low 70s.

The discontinuation will affect the following assessments:

Ethanol SoCal Rail Prompt AAMNK00

Ethanol SoCal Rail Prompt MAvg AAMNM00

Ethanol SoCal Rail Premium to Ethanol Chicago IL Swap Mo01 AAVYD00

Ethanol SoCal Rail Premium to Ethanol Chicago IL Swap Mo01 MAvg AAVYD03

The daily assessments appear in the Platts price database under the symbols listed above, on Platts Biofuels Alert pages 10 and 210 and in Platts Biofuelscan. The monthly averages appear in the Platts price database under the symbols listed above and on Platts Biofuels Alert page 11 and 212.

Please send all feedback and questions to americas_ags@spglobal.com and pricegroup@spglobal.com.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available to the public upon request.