Prices of Renewable Identification Numbers (RINs) that are needed by refiners to comply with Renewable Fuel Standard, have increased significantly over the past few months, an indication that the ethanol “blend wall” is becoming more of a challenge, according to a Platts news report.

The price for traded RINs for corn-based ethanol have risen from a trading range of about 2-3 cents per RIN to as much as 79 cents per RIN.  Ethanol industry sources told Platts that the sharp increase in ethanol RIN prices started in early 2013 and the increase is the result of a perceived lack of RINs because of the impending “blend wall.”

“I think the real issue is that you have obligated parties looking forward to 2014, where even with a carryover, it is unlikely that there will be enough D6 RINs available to meet the anticipated 14.4 billion gallon requirement at an E10 blend ratio,” said David Dunn, an analyst at Progressive Fuels Limited. “D6” is the label for the corn-based ethanol category that EPA assigns.

Other RINs are issued for biodiesel, cellulosic ethanol and other advanced biofuels. When the volumetric blending levels were set for the RFS in 2007, lawmakers, as well as industry representatives, did not expect the level of ethanol produced to exceed 10 percent of the national gasoline supply until much later this decade. But steadily declining gasoline demand coupled with increased fuel efficiency mean that the benchmark, called the “blend wall,” will hit this year and, for some refiners, may have already been reached.

“The RIN price is a really good proxy” for the onset of the blend wall,”  Bob Greco, downstream director for the American Petroleum Institute said last week. “Suddenly this is a very real issue.”

The Environmental Protection Agency (EPA) issues RINs to track renewable fuel usage throughout the supply chain. Refiners, importers and blenders–called “obligated parties”–use them to show the EPA that they have fulfilled their mandated government use of renewable fuels. If the obligated party has not used enough physical product it can buy RINs to satisfy the quota. If RIN prices move too high, refiners will be left with three options that will not be “popular,” said Jason Bordoff, professor of professional practice in international and public affairs director, Center on Global Energy Policy, at Columbia University. The options include passing the cost of RINs to consumers through higher retail prices, exporting products, or lowering refinery utilization rates.