High-ethanol gas: Not coming to a pump near you
As RINs prices rose, the cost of investing in E85 systems began to make sense. So long as the fuel mandate was in place, a fuel blender could collect a large number of increasingly valuable RINs simply by selling the ethanol-rich fuel.
Critics of the RFS program say the spike in RINs was a sign that the biofuel law was broken. Proponents countered that the higher cost of credits was the price producers paid for not building the infrastructure needed to dispense more biofuels.
A reduced RFS would cut demand for RINs. Prices have fallen to around 25 cents, still higher than the 5 cents or so of last December, but analysts figure that price reflects the fact that some traders are guarding against the possibility of a successful legal challenge to the EPA proposal.
"Definitely, if the current (EPA) proposal holds true, the RIN value will be essentially nothing, and that's what was really driving retail equipment investment and overall volume in E85," said Robert White, director of market development for the biofuels trade group the Renewable Fuels Association.
Protec's Walk says RINs are a factor for his potential customers. They are "moderately interested, but if the RINs were higher, they'd be pulling the trigger."
Uncompetitive at the Pump
The number of fuel stations offering E85 has slowly grown from a handful in 1995 to more than 3,000 today, out of more than 100,000 fuel stations in the country. They are concentrated in Corn Belt states such as Iowa and Minnesota, where filling up with ethanol can be a political statement.
Automakers, led by General Motors, can adapt a conventional car into a flex-fuel vehicle simply by adding extra equipment - enhancements in hoses, censors and fuel pumps - that cost a few hundred dollars.
Customers in search of "green" transportation have shown interest in purchasing the vehicles. Some 15 million flex-fuel vehicles are on the road today, up from fewer than 1 million in 2000.
But when it comes time to fill those vehicles, many drivers decline to gas up with E85 fuel.
In large measure, that is because cars using the higher ethanol mix generally get about 25 percent fewer miles per gallon than they do with standard gasoline, due to the lower energy content of the blended fuel.
For E85 to make economic sense for a driver, the fuel generally must sell at a discount of at least 25 percent from the cost of gasoline. The average discount this week across the United States was only 17 percent, according to the fuel monitoring website E85prices.com.
The average E85 gallon was priced at $2.70, compared with $3.25 per gallon for gasoline, the website's data showed - making it more costly to run a vehicle on E85 despite its lower price.
"The price difference is too small - 99.9 percent (of drivers with flex-fuel vehicles) fill up with gas," LMC Automotive analyst Mike Omotoso said of drivers.
Biofuel boosters still hold out hope. E85 sales have increased more than 30 percent this year as the fuel became more widely available, according to a Renewable Fuels Association survey.
An expanded RFS coupled with a record U.S. corn crop - 40 percent of which is used to make ethanol - would have made 2014 the fuel's best chance to succeed.
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