E85: Fill ‘Er Up and Up and Up and …

Mark Green
Posted July 18, 2014

Check out the cartoon below, which pokes fun at what actually is pretty big drawback with E85, the fuel containing up to 85 percent ethanol that some think is key to salvaging the flawed Renewable Fuel Standard (RFS).   

Sure, it’s a cartoon. But it helps illustrate a real dilemma with E85 – its significant fuel economy disadvantage compared to the E10 fuel that’s the staple of the U.S. fuel supply.

Basically, because ethanol is less energy-dense than gasoline, fuel that’s up to 85 percent ethanol gets fewer miles per gallon than fuel that’s only 10 percent ethanol. Go to the Energy Department’s fuel economy comparison tool, check the filter for E85 and the tool will show how specific vehicle types get fewer mpg and generate higher average annual fuel costs using E85. Bob Greco, API’s group director for downstream and industry operations, recently wrote EPA Administrator Gina McCarthy:

According to EIA (U.S. Energy Information Administration), energy adjusted ethanol prices have been and remain higher than gasoline blendstock; adjusted for energy, E85 prices are higher than E10. And according to AAA, E85 has cost consumers more, when accounting for fuel economy loss, for as long as the organization has been tracking E85 retail prices. EPA has acknowledged that FFV (flex fuel vehicle) owners who have been purchasing E85 have been doing so for reasons other than the economic benefit. As a result, EIA data show very low demand for E85 (approximately 45 million gallons/year), and no demand growth between 2010 and 2013. Lack of demand growth is also evidenced by data collected by Minnesota and Iowa that show combined E85 consumption in 2013 was less than in 2008 and 2011 and has remained within a range of 20-30 million gallons since 2006.

More from Greco’s letter:

Independent retailers have largely recognized the lack of consumer demand for E85 when weighing the potential costs and benefits associated with offering the fuel. Only about 6 percent of vehicles can use E85, and incentives for making more ethanol flex fuel compatible vehicles (i.e. FFVs) in the future are phasing out as a result of the new NHTSA/EPA CAFE/tailpipe GHG requirement. Even owners and operators of FFVs have largely rejected E85; the reduced economy inherent with E85 use results in a shorter driving range and more frequent refueling stops. Some retailers made the investments to sell E85, only to revert the infrastructure back to gasoline.

Some argue more E85 would be sold if more service stations offered it. First, 95 percent of the country’s stations are owned by independent businessmen and women, not oil companies. So which independent retailer is going to absorb potentially hundreds of thousands of dollars in costs for infrastructure that can tolerate E85, given such limited demand in the market? Greco, during a recent conference call with reporters:

“The fact is consumers have largely rejected E85, which severely limits its ability to act as a safety valve to forestall the looming 10 percent ethanol blend wall crisis. This lack of E85 demand stands in stark reality to the consumer demand for E0 – non-ethanol gasoline – which currently stands at over 3 percent of gasoline demand. Consumers want E0 for their boats, for lawn equipment, and for recreational vehicles.”

This gets us back to the broken RFS, because its mandates for increasing ethanol use are bringing on the blend wall crisis Greco mentioned – the point where the E10 fuel supply has absorbed all the ethanol it can under current demand conditions. Ethanol supporters say more E85 and E15 should be foisted on the country to keep the RFS propped up, but that’s not a real-world solution.

Congress must act to repeal the RFS outright. Until then, EPA should provide short-term relief by rolling back the RFS’ ethanol mandates – to protect consumers who risk damaging their vehicles and power equipment by using higher ethanol blend fuels, to allow non-ethanol gasoline for those who demand it and to reduce carbon emissions.