Advanced Search
August 19, 2016
Carbon emissions from the transportation sector are higher than emissions from any other sector for the first time since 1979. Renewable biofuels could be key to reducing these emissions, and a new report from the American Coalition for Ethanol (ACE) outlines how each state could use higher blends.
Ethanol is commonly offered to consumers as a ten percent blend in gasoline, or E10. Gas stations that offer higher blends are currently few and far between, but the ACE’s “Retailer Roadmap” aims to help change the fuels landscape. The Roadmap analyzes the potential demand for higher blends in each state, compiles the incentives for retailers available at the state and federal level, and provides simplified calculations of the additional profits a retailer could earn by offering higher blends to consumers.
Common Ethanol Blends
Currently, about 95 percent of U.S. gasoline is sold as E10 (10 percent ethanol, 90 percent gasoline). Thus far, there has been reluctance to move beyond E10 because of the “blend wall,” the idea that infrastructure and engines would need to be updated to be compatible with blends above E10.
Despite the so-called “blend wall,” the Environmental Protection Agency (EPA) has approved E15 (15 percent ethanol and 85 percent gasoline) for use in model year 2001 and newer vehicles—over 80 percent of the cars on the road today. Vehicle manufacturers have also certified the use of E15 in two-thirds of model year 2015 vehicles on the U.S. market.
In addition, there are 17.4 million FlexFuel Vehicles (FFVs) on the road today, which can run on even higher blends of up to 85 percent ethanol (E85). However, an average FFV only uses an estimated 13.4 gallons of E85 per year, likely due to two main factors: limited availability and insufficient consumer knowledge.
Why Aren’t Higher Blends Commonly Available?
Upgrading to the infrastructure required to sell E15 or E85 imposes a significant cost burden on retailers. Many retailers don’t see a demand for higher blends, and aren’t willing to make the investment.
Lack of Consumer Awareness
The lack of demand comes from the lack of consumer knowledge. Many consumers don’t know anything about ethanol or the various blends available, even though the vast majority are buying E10 every time they go to the pump.
Mike Lorenz, executive vice president of petroleum supply for Sheetz gas stations, says, “The problem is there’s nothing that calls it E10. Even if I know it’s 10 percent ethanol, I don’t know that it means E10. So when you say, ‘How about buying E15?’ they say ‘What are you talking about?’”
However, surveys show that the primary driver for customers in choosing a fuel is price. Since ethanol is most often cheaper than gasoline, increasing the ethanol blend will lead to price savings and incentivize consumers to buy. But the cost for retailers remains a major deterrent.
Upgrade Costs
Another hassle to retailers comes from regulations of Reid Vapor Pressure (RVP), a measure of gasoline volatility. EPA regulates the volatility of gasoline in the summer months, requiring retail gasoline stations to offer summer blends between June 1 and September 15.
The problem for retailers is that E10 blends get a waiver, allowing them to be sold during summer months, but higher blends like E15 don’t. There is no technical reason for regulating E15 and E20 differently than E10, as their RVP ratings during summer months are similar. While retailers can freely sell E15 during the winter months, come summer, they must label the fuels as “FlexFuel Vehicle Only.” This requires sign change-outs and other administrative adjustments and, therefore, is viewed as an impediment to selling E15 by many retailers. To learn more about seasonal RVP regulations and why they relate to ethanol, check out our recent article: "Summertime, When the Living’s Easy."
While these costs only apply to blends lower than E50, infrastructure upgrades for E85 fueling generally represent a much more significant cost to individual retail gas station owners than mid-level blends containing up to 25 percent ethanol.
Adding a new tank requires closing the station while the tank is buried. Jeff Gallic, vice president of fuels for Thorntons, says, “The grant money is available for the equipment and installation, but the grant does not include reimbursement for revenue lost while your location is shut down. Our expense is fairly substantial for this project.”
Promoting Higher Blends: State Spotlight
In October of 2015, the U.S. Department of Agriculture (USDA) announced 21 states would be receiving funding through the agency’s competitive grant program, the Biofuels Infrastructure Partnership (BIP). BIP is providing $100 million in grant funding to install blender pumps at gas stations; these pumps are capable of dispensing a variety of higher biofuel blends, such as E15 and E85.
In total, USDA estimates that $210 million will be invested as a result of the program, increasing the number of blender pumps by 5,000 at over 1,400 gas stations. The increased funding comes from the ethanol industry-backed Prime the Pump initiative, which matches the BIP investment.
Maryland and Virginia
Maryland and Virginia make up the only regional project supported by BIP. The area is receiving $5 million in federal funds and $3 million from other partners, with the goal of adding more than 200 blender pumps.
The Retailer Roadmap reports that Maryland has the potential to use 330 million gallons of E85 per year and 2.2 billion gallons of E15. Currently, only 33 gas stations in the state offer E85 to nearly 400,000 FlexFuel Vehicles. Virginia could use 469 million gallons of E85 each year, a demand that could sustain almost 300 more E85 stations than the current 20 that exist in the state. Additionally, 5.5 million Virginia vehicles are approved for E15—an implied demand of 2,726 E15 stations. Neither state currently offers any incentives for higher blends through state programs or funds.
Illinois
Illinois currently has 268 stations offering E85—second only to Minnesota, which has 297. The state offers infrastructure grants to retailers who want to offer E85, and also provides an ethanol tax exemption. These incentives, as well as the corn production in the state, allowed Illinois to reach the top of the pack in E85 availability. However, even in Illinois, the Retailer Roadmap estimates an additional demand for 176 E85 stations and more than 3,000 E15 stations.
E15 is beginning to appear in Chicago, as retailer Thorntons expands its ethanol offerings. As of July, Thorntons has 9 stores in Chicago selling E15, and expects to expand to all 44 by early next year. The stores are offering E15 at a price three cents cheaper per gallon than regular unleaded.
Minnesota
Minnesota, which has the highest number of E85 stations of any state, has been supported by BIP funding. But there’s also strong support at the state level. The Retailer Roadmap outlines eight different incentives that the state offers to promote the use of ethanol and blends beyond E10.
For example, the state has Biofuels Replacement Goals, which set a timeline for replacing petroleum with biofuels. 2017 has a goal of 18 percent biofuels, and that goal moves up to 30 percent in 2025. Minnesota also has an executive order directing state-owned vehicles to use E85 whenever possible.
Increasing Consumer Awareness
Despite the increasing availability and cost benefits of ethanol blends, consumer education is still lacking. Retailers aren’t sure how to proceed. While the lower cost is drawing some consumers in, many retailers feel that uncertainty is keeping the demand from reaching its peak. Lorenz echoes this uncertainty, saying, “It’s not that people are anti-corn or ag or ethanol, necessarily. Our research has shown 90 percent of the people are oblivious, while 5 percent are pro-ethanol and 5 percent are anti-ethanol. The majority of the people don’t have a reason to want to know. What’s going to convince them?”
Author: Rebecca Chillrud
For more information see:
Top-Rated Climate Nonprofit – 4-Star Charity