Governors' Biofuels Coalition

The Houston-based downstream consultant, in one part of her presentation, said the Renewable Fuel Standard going forward could still trip up refiners, but she also addressed whether E85 has a part to play in meeting the ever-rising mandates set under RFS2.

Here’s how her math works:

Temple makes a few assumptions. First, E15 is a non-starter in terms of growing its market share. Second, US gasoline demand in 2021 will be about 8 million b/d. Third, the fleet for flex fuel vehicles, which can burn E85, will grow from current levels that are believed to be anywhere from 13 million to 16 million up to about 25 million. She also assumes that the average size of the fuel tank on those cars will be about 15 gallons.

With those assumptions, Temple then turns to the preliminary mandate for the RFS that refiners, blenders and other suppliers will need to supply the US with 15 billion gallons of corn-based ethanol in 2021. That 15 billion gallons of corn ethanol would be a little less than 980,000 b/d of ethanol. Against a gasoline consumption level of 8 million b/d, that’s about 12.2%, in excess of the 10% blend wall. (On the margin, that would probably send RINs prices soaring). So that’s a problem, if the only way to get to that level of corn-based ethanol consumption is through E10.

Enter E85. The idea that E85 is the logical way to get through the blendwall isn’t new, but Temple tries to take that argument to a very retail level: what sort of consumption patterns are needed from flex fuel vehicle owners for E85 to have an impact?

Temple said in her presentation and in remarks on the conference’s sideline that if US drivers poured about 200,000 b/d of E85 into their flex fuel cars in 2021–or 170,000 b/d of actual ethanol–that would be about 17% of the ethanol mandate being taken care of by E85. It’s also about 2.1% of the entire gasoline-ethanol fuel pool.

In raw numbers, it’s about 2.6 billion gallons of ethanol supplied by E85 out of a mandate of 15 billion gallons. That sounds like a lot. Her presentation shows graphs with current E85 consumption floating along at a level not much more than zero. To get to 17% of the ethanol mandate is a pretty big jump.

The 25 million flex fuel vehicles, if the tank size is 15 gallons, have 375 million gallons of capacity. If every one of those drivers fills those tanks eight times a year with E85, Temple said, that is 3 billion gallons of ethanol consumed toward meeting the mandate provided by E85.

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If you do all the math — and we did — that would mean that in 2021, after the US consumes about 200,000 b/d of E85 against total consumption of gasoline of 8 million b/d, and a mandate of 15 billion gallons during the year, meeting the rest of the mandate would still put required corn-based ethanol consumption at about 10.5% of gasoline demand. It’s still in excess of the blendwall, but it’s a lot closer to the 10% figure as a result of what seems a fairly modest goal: get every flex fuel driver to fill up their 15 gallon tanks eight times per year. Tack on one or two more fillups, and you’re getting closer.

Temple concedes a huge amount of uncertainty. Will the flex fuel vehicles be located where E85 is most readily available, or conversely, will E85 retail outlets be installed in areas where they aren’t located now? And how much will drivers actually like E85, the lower per gallon cost offset by the reduced energy content relative to gasoline? And of course, somebody who really does like E85 will probably fill up their tanks a lot more than eight times per year. But some won’t use it at all.

Still, the very modest number of eight fillups per flex fuel vehicle per year makes the whole blendwall issue seem a lot less daunting, and Temple’s analysis does shed an interesting light. It’s rarely that simple in ethanol economics, which by its very nature is driven by politics and posturing as much as any sort of “invisible hand.”