Ethanol Flex Fuel
This case study evaluates the process and business potential of investing in E85 for commercial fleets.
Specifically, this study will explore the results from a project under a U.S. Department of Energy (DOE) Clean Cities grant through the American Recovery and Reinvestment Act (ARRA) to fund the purchase of alternative fuel E85.
The City of Chicago fleet currently totals approximately 7,000 vehicles, of which 1,861 are E85 flex fuel vehicles.
Illinois now has 222 E85 fueling stations, more than any state in the country, according to the U.S. Department of Energy (DOE). More than 30 of the stations are located in Cook County.
Flex Fuel Vehicles
E85 fuel is composed of 85 percent ethanol alcohol and 15 percent gasoline. The gasoline ensures that the engine starts in cold weather, because pure alcohol will not start (in the winter, the blend is actually E70, or 70 percent ethanol and 30 percent gasoline). The ethanol in E85 comes from corn; most of the kernel is still available for use in traditional products such as animal feed. The 2011 Chevrolet Equinox, one of many General Motors (GM) vehicles that can run on E85, is flex fuel capable.
Approximately 11 million flex fuel vehicles on the road in North America can run on E85 fuel, a fact that is not widely known. In fact, a recent GM study found that roughly 70 percent of its flex fuel vehicle owners did not know that they could use E85 fuel, and fewer than 10 percent actually do use E85..
A flex fuel vehicle can burn any combination of E85 and pure gasoline, so owners can fill up with either fuel at any time. Technically, a non-flex fuel model can be modified to run on E85, but it is not cost-effective.
E85 Fueling Stations
There are currently three fueling stations in Chicago for E85 flex fuel vehicles.
On a national level, use of E85 is still not widespread. The highest concentration of filling stations is in corn-growing states such as Illinois, Iowa, and Minnesota. Overall, there are approximately 2,100 E85 stations across 44 states, according to the DOE. The lowest availability of the fuel is in the South and the Northeast U.S., where it is difficult to produce ethanol locally.
Green Fleet Goals
The Chicago Department of Fleet Management (DFM) is committed to expanding the size and percentage of environmentally friendly vehicles in the City fleet. DFM currently has 1,272 alternate fuel/hybrid vehicles in the City fleet, exceeding the 2010 year-end target of 1,059 by 20 percent. DFM anticipates continuing the 10 percent annual increase into 2011, setting a 2011 year-end target of 1,400 units.
At its current price per gallon, E85 does not save drivers money, and it might actually cost more. As of December 2010, a gallon of E85 was approximately 13 percent less than the cost of a gallon of gasoline nationally, according to e85prices.com.
There are minimal implementation costs for the vehicles, although some vehicles are slightly more expensive to purchase.
E85 produces 27 percent less energy per gallon than gasoline, so, on average, it ends up costing more.
For example, the flex fuel 2010 Chevrolet Impala equipped with a 3.5-liter V6 engine gets an EPA-estimated 18/29 mpg (city/highway) on gasoline and 14/21 mpg when burning E85. The acceleration is roughly the same, but the range is shorter. In other words, the driver will be filling the tank more often when using E85.
In fact, E85 must be priced roughly 28 percent less than gasoline in order to break even. For example, if gasoline is $3 per gallon, the cost of E85 would need to be less than $2.16 per gallon. There are regions in the Corn Belt in which E85 reaches this threshold.
The Future of the E85 Market
Ethanol costs are already subsidized in some states. Buyers in Illinois pay no sales tax, which brings down the posted price per gallon (tax is included in per-gallon prices for pure gasoline, not added to the total). Price hinges on supply and demand and economies of scale. Demand recently jumped when the gasoline additive MTBE (methyl tert-butyl ether) was detected in ground water. States that had used MTBE are now switching to ethanol as an octane booster and oxygenate, which reduces summertime air pollution from gasoline evaporation.
Ethanol proponents say an oft-cited study that claimed ethanol takes more energy to produce than it gives back is no longer accurate. According to the National Ethanol Vehicle Coalition (NEVC), the overall energy advantage of ethanol over gasoline is 3 to 1. This ratio is expected to reach 9 to 1 when the industry moves away from food crops and toward waste vegetation and/or plants that are simpler and cheaper to grow, harvest, and process. Switchgrass, which President George W. Bush mentioned in one State of the Union address, is one such plant.
As alternative fuels go, biofuels like ethanol and biodiesel offer significant real-world benefits. They can be distributed and dispensed like conventional liquid fuel, and used in vehicles that add very little to the cost of manufacturing vehicles. The same cannot be said about hybrids, which force consumers to pay a higher sticker price.
|This material is based upon work supported by the Department of Energy under Award Number DE-EE0002541.
This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof.