Iowa: Sales of E85 to flex-fuel vehicles on the rise

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, August 27, 2013

More gas stations are selling gasoline containing up to 85 percent ethanol, or E85, to owners of flex-fuel vehicles this year, according to renewable fuel groups.

In Iowa, sales of fuel to flex-fuel vehicle owners jumped 43 percent in the second quarter of 2013, the Iowa Renewable Fuels Association said last week. Gas stations in the Hawkeye State sold 2.62 million gallons of E85 in the second quarter, compared to 1.83 million gallons sold in the first three months of the year, based on data from the state Department of Revenue.

In Minnesota, E85 sales dipped slightly in June, the last month for which data are available, but are up about 60 percent from the beginning of the year.

“We are seeing real-world evidence that E85 sales are really taking off,” said Geoff Cooper, chief economist at the Renewable Fuels Association. “I think E85 is going to be an important piece of the puzzle in the next several years.”

Records of E85 sales are kept on a state-by-state basis and showed that sales dipped last year during the drought even as more gas stations added the fuel to their fuel lineups. In Iowa, for example, sales declined about 15 percent between 2011 and 2012.

Today, more than 3,000 gas stations in the nation offer E85, and there are about 15 million flex-fuel vehicles on the road, constituting about 6 percent of the entire vehicle fleet, renewable fuel experts said last week. Half the new vehicles built by the three big Detroit auto companies are currently flex-fuel vehicles, which can handle any combination of gasoline containing up to 85 percent ethanol.

The amount of ethanol sold to owners with flex-fuel vehicles can vary. ASTM International standards allow retailers to sell fuel for flex-fuel vehicles that contain at least 50 percent ethanol. To be labeled as “E85” at a gas station, fuel must contain at least 70 percent ethanol; on average, E85 is likely about 75 percent ethanol, Cooper said. The exact combination of fuel at a station depends largely on the weather.

The low price of E85 compared to that of gasoline — E85 can be more than $1 cheaper than regular gasoline in some places — and the incentives provided by high renewable fuel credit prices this year are driving the increase in its use, according to Ron Lamberty, a fuel expert at the American Coalition for Ethanol.

“We’ve seen some pretty dramatic increases of E85 in same-store units over the last few months,” Lamberty said during a Web-based seminar last week.

Challenges to widespread acceptance of E85 remain. While E85 is cheaper at gas stations, a car fueled on it can drive only about 80 percent the distance that a car fueled on gasoline containing 10 percent ethanol can travel. A survey by the National Association of Convenience Stores in June found that consumers were largely still unaware of E85: Only 29 percent of 1,183 consumers surveyed were familiar with E85, while only 10 percent said they drove a flex-fuel vehicle (Greenwire, June 12).

There is also still a disconnect between where E85 is sold and where flex-fuel vehicles are located.

A study by Iowa State University researchers last week, for example, found that most flex-fuel vehicles are located in urban areas, while most gas stations selling E85 are clustered in rural areas in the Midwest where the majority of corn is grown and where ethanol is politically popular.

“Many of the existing stations that sell E85 were not located with the purpose of selling a lot of fuel to owners of flex vehicles,” Iowa State economists Bruce Babcock and Sebastien Pouliot said. “This can be explained by the fact that E85 has been priced not to generate large sales, but rather to meet the relatively small market demand of drivers who like the idea of using a renewable fuel.”

Earlier this month, Babcock and Pouliot found that about a third of flex-fuel vehicle owners have access to an E85 station within 5 miles of their home. They predicted that it was reasonable to expect that flex-fuel vehicle owners would seek out E85 only if the cost per mile traveled with E85 was lower than regular gasoline.

Cooper of the Renewable Fuels Association painted the results in a optimistic light.

“A third is a fairly large number when consider that you have millions of flex-fuel vehicles out there. I don’t think it’s a stretch that an owner might drive an extra mile or two to a station that’s selling E85 at a steep discount to gasoline,” he said. “I think a lot of people had kind of written off E85 in the last several years. In the last three to five months, there’s more excitement and talk.”