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In my last post, I started a series entitled "Turning the corner on gasoline: the good, the bad and the ugly." In it, I pointed out the "good" news in the changes in our attitudes (that is, policies) on energy. DOE's projections show us truly turning the corner on gasoline consumption. But a closer look at the details of our renewable energy policy suggests some serious bumps in the road ahead. The biggest one is the looming "ethanol blend wall" (see my chart below). Here, then, is "Part 2: the bad."
In conventional gasoline powered vehicles, EPA determined a long time ago that ethanol can be added to their fuel tanks up to a limit of 10% by volume without any deleterious emissions or performance impacts. For these vehicles (the vast majority of cars on the road today), this sets a limit on how much ethanol can be sold in the fuel market.
The purple shaded area in the chart shows the 10% limit for US ethanol usage over time. Until 2005, when the first renewable fuel standard (and the anticipation leading up to it) spurred ethanol production and use, it seemed like we were a long way from having ethanol production come any where close to the ethanol blend limit. With RFS2 we are now on a collision course with that blend wall. In just three years' time, the RFS2 target of 14.8 billion gallons per year will slightly exceed the total amount of ethanol that can be blended for use in conventional gasoline. As Jeff Broin (CEO of Poet, a South Dakota based ethanol company) put it in a recent New York Times article, "The market is full." To add insult to injury, RFS2 essentially encouraged the ethanol industry to fill the available blend market capacity with existing technology rather than using this limited space in the market to introduce innovative cellulosic ethanol technology, which by all accounts will enhance the ethanol industry's ability to reduce greenhouse gas emissions.
It didn't have to happen this way. We have painted ourselves into this corner with policies that have not addressed the whole supply chain from fuel to vehicle. For more than a decade, we have had policies that encouraged automakers to make flexible fuel vehicles (FFVs). But the fuel grade ethanol supply was too small. Now we are promoting policies to increase the amount of fuel. But with no fueling stations and an inadequate distribution system, there is no way to get that fuel to the consumer.
There is another route for further US market penetration of ethanol--the so-called flexible fuel vehicle (FFV) market. These are cars that can use any mixture of gasoline and ethanol containing up to 85% ethanol by volume (a fuel mixture known as E85). EIA estimates that in 2007 there were approximately 7.1 million FFVs on the road. At 15,000 miles per year per vehicle and 25 miles per gallon, these vehicles could theoretically soak up another 3.6 million gallons of ethanol. Unfortunately, only about 360 thousand of these vehicles actually use E85. Why? Price is one issue. But, the fundamental roadblock to fueling up with E85 is that consumers can't buy the fuel. E85 fueling stations are too few and far between.
So, now industry and some government folks are looking for a quick way around the wall. They want to tweak the blend limit to allow more ethanol into conventional gasoline. This seems to me like a potentially short sighted fix to a longer term set of problems. I, like EPA, am currently undecided on this issue.
The benefit of bumping the blend limit to 15% is obvious. It buys us time. The targets for RFS2 would continue to be met for six or seven years (until around 2017) without having to make any difficult infrastructure changes (see my chart, where ethanol volume crosses the gray shaded arean for a 15% ethanol blend). Furthermore, it would provide some needed space in the near term market for cellulosic ethanol to come in.
On the other hand, I can't help but think that it is a path to continued procrastination. For over a decade, we have avoided relatively simple opportunities to open up the market to ethanol as an alternative fuel and not just a blend. Brazil has made these choices. Fueling stations and vehicles in Brazil now handle any fuel mix from straight gasoline to "neat" ethanol. Consumers there can choose the fuel they want to put in their tanks based on price.
And allowing higher blends of ethanol in conventional gasoline is not without its risks and complications. Older vehicles and simple two stroke engines may not deal well with the change at all. In EPA's letter announcing their decision to delay any changes to the ethanol blend limit, they talked about weighing options for new "fuel labeling" presumably to warn owners of pre-2001 vehicles about the risk of using the new legal higher blend. This sounds like a recipe for real problems. And problems at the consumer level are the last thing the ethanol manufacturers, the automakers and the regulators need at this point. Ethanol has come out of the dark days when automakers and others blamed it for all sorts of engine problems. Let's not go back there.
Finally, I hate to think of all the engineering, scientific and other resources being squandered on the question of how or whether to tweak the level of ethanol in conventional gasoline. We are spending time and money trying to understand a question that, in the long run, does nothing to make a big dent in our energy problem.
The blend wall problem is a classic example of how Congress over-prescribes answers for energy in ways that focus more on satisfying a myriad of interests rather than the longer term public interest.
The opinions expressed in this blog are those of the author(s) and not necessarily
of the Institute on the Environment/University of Minnesota.