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ISU study: Investment in E85 could be cheaper than purchasing ethanol credits

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A study from Iowa State University said the cost of installing tanks to handle fuel with 85 percent ethanol could be cheaper than purchasing energy credits to avoid blending the fuel mostly made from corn.

 

Iowa State professor Bruce Babcock said ethanol demand would increase by between 800 million and 1 billion gallons per year for every 2,500 stations with E85 fueling capabilities. His study estimated that it could cost those stations about $87.5 million if new tanks do not need to be installed and at least $325 million if they do.

 

Congress created Renewable Identification Numbers (RIN), a special serial number given to batches of biofuels before they are sold to refiners and gasoline importers looking to comply with a federal mandate to use a certain amount of ethanol. In exchange for not blending ethanol, the refiner can choose to purchase RINs. Iowa is the nation’s largest ethanol producer.

 

“With the price of the tradable ethanol credits trading between 60 cents and 70 cents per gallon, and with at least 14 billion credits needed under current mandates, it seems that the reduction in compliance costs could be greater than the costs of investing in E85 infrastructure, which would create an incentive for investment,” Babcock said in the report.

 

“Oil companies might find it more efficient to make the investment themselves if the required price of ethanol credits rises too high for too long,” he added.

 

The study estimated that if the Environmental Protection Agency sets 2014 ethanol blending mandates at 13.9 billion gallons, then investment in 2,500 E85 stations would reduce oil company compliance costs from $2.84 billion to $1.09 billion.

 

The Renewable Fuel Standard, created in 2005 and expanded two years later by Congress, requires refiners to buy alternative fuels made from corn, soybeans and other products in order to reduce the country’s dependence on foreign energy. It calls for 18.15 billion gallons of renewable fuels to be blended into the nation’s gasoline supply in 2014 – a figure energy trade groups are asking the EPA to lower to 14.8 billion gallons. This year 16.55 billion gallons must be blended into the U.S. fuel supply.

 

As motorists drive less and cars become more fuel efficient, fewer gallons of motor fuel with ethanol are consumed. That means it’s harder for companies to blend as much of the corn-based fuel as they are required to do each year — a problem known as the blend wall.

 

Babcock and a colleague at Iowa State’s Center for Agricultural and Rural Development said the United States can overcome the blend wall and meet the country’s renewable fuels mandate starting next year by lowering prices of 85 percent ethanol to spur demand.

 

 

http://blogs.desmoinesregister.com/dmr/index.php/2013/09/23/isu-study-investment-in-e85-could-be-cheaper-than-purchasing-ethanol-credits/article

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Just like to remind everyone all this Focus on E85 would not be happening if E15 had taken off..

 

 

 

 

It appears Oil considers E85 less of a market share risk than E15 ..at least short term

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Just imagine if the E-15 obsession had been dismissed by the RFA at the time...perhaps the renewed focus on the real alternative, E-85, could be in its third year and thriving.

 

I am not complaining however at the current state of affairs. My only concern at this point would be waning FFV focus from the automakers....

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Just imagine if the E-15 obsession had been dismissed by the RFA at the time...perhaps the renewed focus on the real alternative, E-85, could be in its third year and thriving.

 

I am not complaining however at the current state of affairs. My only concern at this point would be waning FFV focus from the automakers....

 

 

Morning Steve

 

 

Yeah it comes back to people trying to make a fast buck instead of solid growth IMO

 

 

I still see solid support from the Automakers..it isn't like they stopped they are just offering sideways support until they see which direction ethanol is going(low blend or high blend)

As I am adding the 2014 Models http://e85vehicles.com/ interesting to see strong support for the high performance sport and luxury vehicles  , the Audis, Bentley's Mercedes , Jaguar , Land Rovers etc..

 

I was thinking the other day about the usual anti ethanol comments in every ethanol article about how ethanol damages engines..how dangerous ethanol is that I have to start using these expensive cars as examples ..ethanol is so terrible for engines that Bentley and Mercedes recommends it in their vehicle s ;D

 

 

 

 

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Is this the reason why we are seeing large chains like speedway going on this MASSIVE e85 build out campaign?

 

Just curious if this was the reasoning behind this. 

 

As stated, imagine if this had been the priority for all the years they have been dumping into e15...  think of all the money spent testing, certifying, advertising, and lobbying on behalf of e15.

 

Imagine if even 1/2 of that had been spent on promoting and incentives for adding e85 and or blender pumps...

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It appears Oil considers E85 less of a market share risk than E15 ..at least short term

 

And if they start to see it as one.. well since it's going into FFVs, there goes the engine damage BS. They won't have that one. So the other BS points will be emphasized over "Families stranded on the road, vacation memories ruined forever." LOL!

 

And the whole "make your mechanic richer" thing... Don't get me started or I will go buy a government Impala TODAY! Running E-40-50 just aint cutting it today, I am too fired up.

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I once almost got my family "stranded on the road, vacation memories ruined forever"...  we were heading down I80 in eastern Iowa with our then new Minivan FFV.  We hadn't done a lot of driving, so I didn't know that the last 1/2 of the tank on Chrysler goes WAY faster then the top 1/2... so we passed up several e85 stations because if we could get 200 miles on the first 1/2, then we could easily make the Quad Cities where according to e85prices.com the prices were much cheaper... I had it all mapped out ;D

 

Well, 2AM, cold February morning wife and kids in van on our way to visit my mother in the hospital, and that fuel gauge is dropping like a stone driving into a stiff side-wind out of the north (Missouri must really SUCK because the winds in that part of the state can be pretty bad ;))

 

We had committed ourselves with a vow NEVER to use gasoline, and we were torn... do we play it safe and violate our conscious, and put 2 gallons of carbon fouling, tank varnish producing, greedy oil Barron, soldier killing, terrorist financing gasoline (with 10% ethanol added to help people feel a bit better), or do we risk it and try to make it to the nearest e85 pump...

 

Well, we rolled the dice, and limped in (started drafting behind semis going uphill, and coasting down hills in neutral...) Coralville IA's Kum & Go...  ended up paying the same for e85 that we did in Omaha before we left ;D

 

The lack of availability and fear of price gouging of e85 nearly ruined my families vacation... 

 

Still a funny story. 

 

In hind-site we were being more then a bit stubborn...  it is in my German DNA :-X.

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That's kind of the point though. Oil companies are willing to spend more money avoiding compliance than supporting a competitor. At what point would Blender pumps start being more attractive?

 

Maybe regulators could try to encourage Fuel Station owner's to get on board and to start putting pressure on their Oil suppliers? It could be time to start breaking the hold Oil companies have on this country. Let's face it, most stations have contracts to keep their prices low. If there was more competition they would be free to buy from other suppliers, including offering alternative fuels.

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That's kind of the point though. Oil companies are willing to spend more money avoiding compliance than supporting a competitor. At what point would Blender pumps start being more attractive?

 

 

 

I just don't see blenders making much headway because of cost.. you can install 4-5 E85 pumps for what it takes to install one blender... I guess I have changed my tune on blenders..good Idea long term  but I prefer to see 4 E85 Pumps going up rather than 1 Blender. 

 

 

Husker was commenting about Vilsaks 10,000 blender pump program...it seems the issue is specifically because these pumps need to be in "rural" areas to qualify .. I don't think Independent let alone Oils Stations can justify the cost ..

  Vilsak should change focus on that program and same (allocated subsidy for installs) money the 40,000 E85 pumps.. at far less expense for the Station owners

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I've changed my tune on blenders as well, but moreso for my own use. I loathe petroleum, and would run pure ethanol if I could.

 

But it's like I was telling my uncle who has a flex fuel Sierra: I'd rather you blend half E85 with half E10, than for you to use all E10. The ultimate goal, for now, is to get the ball rolling for ethanol. I keep thinking that if we had more blender pumps, ethanol sales would break through the stratosphere. I would imagine there are quite a few people out there who have non-flex fuel cars and want to use E85, but they're not financially able to get a new or used flex fuel car (such as my dad, for example).

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