A Renewable Identification Number is generated whenever renewable fuel is produced or imported into the United States, as we discussed in Briefing No.3 in this Educational Series. Established within the RIN is a vintage year at the time that it is generated. The vintage year is embedded in the RIN number at the time it is produced and can be found in digits two through five. As an example consider the following RIN number:

22008480270076000011020003994400048031

In this example the RIN has a vintage year of 2008.

According to the regulations a RIN can be used to demonstrate compliance in the year in which it was generated or the year that follows its year of generation. In the case of our example, this 2008 vintage year RIN could be applied to an obligated party's 2008 obligation or to their 2009 compliance year obligation.

Although a RIN having a vintage year of one year earlier than the current compliance year can be used to demonstrate compliance, there remains a volumetric limitation. This limitation is addressed in Section 80.1127 of the Renewable Fuel Standard regulations and states that RINs submitted from the prior year vintage cannot exceed 20 percent of the total RIN submission for the current compliance year.

Another important factor to keep in mind is that a 2008 RIN could actually trade up until the last day of February 2010 – two years and two months after its earliest possible generation. The reason for this is the fact that compliance year 2009 reports are not due into EPA until the last day of February and therefore EPA permits the trading of the prior compliance year RINs up until the deadline. In our example, the 2008 RIN would then be automatically expired on March 1, 2010 if it was not already applied to a party’s obligation. More about this later.

The qualification of RINs based on vintage year is an important consideration and should be well understood by anyone electing to trade in this market or otherwise a regulated party under the RFS program.

Market Factors Influencing RIN Values
RIN values are affected by a number of factors, ranging from the current year’s mandate of renewable fuel to the level of overall confidence in the marketplace. The following would represent a partial list of contributing factors to the value of a RIN:

--Transportation cost – The cost to transport ethanol and other biofuels play a key role in the overall RIN value.
--RFS mandate – The mandated level of renewable fuel, the Renewable Fuel Standard, for the specific year establishes the demand and therefore influences price.
--Waiver petitions and other uncertainties that await EPA’s ruling have proven to have a dramatic impact on RIN prices.
--Vintage year – Current vintage year RINs will have more value than RINs from the prior year due to limitations on the use of prior year RINs.
--Blending Margins – The net economic margin considering petroleum product price, biofuel price, and other blending tax credits has a direct impact on the availability of RINs and consequently the price.
--RIN failures – Invalid RINs in the market place result in oversupply of RINs and consequently drive the price of RINs down and with it the demand for physical product.
--Deadlines – The yearend deadline and the overall readiness by industry can result in last hour panic and a resulting price increase.

Since the inception of the RFS program, RIN prices have seen a dramatic increase from when RIN trading originally started on Sept. 1, 2007. RIN credits originally traded at 0.25 cents each – primarily because industry did not initially understand the program. RINs have since traded for over 25 cents each, a multiple of 100 times.

FUTURE VIEW: With the impending RFS2 regulations, there will be several types of RINs in the marketplace – each trading at a different price point and in some cases driven by technology specific issues. These future RIN values will be based upon similar factors as described above and as they apply to a specific type of RIN. For example cellulosic RINs (Type C RINs) will have a different value than RINs derived from say corn ethanol (Type R RINs – also known as renewable fuel RINs), due to their availability in the market place.

In fact, due to a special consideration in the 2007 Energy Independence and Security Act (EISA), RINs derived from cellulosic biofuels (Type C RINs), bring a new twist to RIN values. Type C RINs will have a floor price of not less than 25 cents per RIN, and possibly more depending upon the rack price of gasoline in any given year. This is a subject we will explore more in future briefings.

Clayton McMartin is the President of the Clean Fuels Clearinghouse and the founder of the RINSTAR® renewable fuel registry. Hundreds of companies process renewable fuel and RINs on RINSTAR® each day. More information about the company is available at www.CFCH.com or by calling (575) 377-3369.