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$100M for blender pumps from USDA... the rest of the story.

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The USDA just announced $100M for blender pumps. Here is the main text from the announcement:

 

As part of that commitment, USDA is investing up to $100 million in clean energy infrastructure that will make more options available to American consumers. Through the Biofuels Infrastructure Partnership, USDA funds, administered through competitive grants and matched at least one-to-one by funds from States, will test innovative ways to distribute higher blends of renewable fuel. States that offer a greater than one-to-one ratio in funding will receive higher consideration for grant funds. A typical gas pump can deliver fuel that contains a maximum 10% ethanol, which limits the amount of renewable energy most consumers can purchase at the pump, despite the fact that our farmers now produce record amounts of renewable biofuels. 

 

At this point, I don't know if retailers will be able to directly apply or how the match from states will work. The information is not yet available.

 

The announcement comes on the heels of the EPA failing to enforce the statutory levels of the RFS and citing the blend wall as the reason. Also in response to the RVO levels, RINs are dropping like a rock, which will affect E85 prices negatively quickly.

 

I will share more once I have more to share.

 

Robert

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The question I have is, is the blend wall due to the pump availability, the ability of the vehicles on the road today to use it (Either E15 or E85), or jump simply consumers reluctance to want to purchase it do to aggressive marketing and bad information? 

 

I think it's a combination of all three, but you can't force Ethanol into a market where there is no demand, and the only way to create demand is to make cars that can use the fuel and actually take advantage the properties that make it such an incredible resource.

 

I'd like to see every vehicle be a FFV.   Lay the seeds for demand, and let the consumers decide what they want to do either on their personal beliefs or their pocketbooks.

 

WM  

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You left out one key element, and in my humble opinion, the greatest hurdle... oil companies. The combination of franchise, supply and branding agreements keep E15 and E85 from being major contributors today. It really doesn't matter that Big Oil now owns just 0.4% of fuel retail, they still control more than 60% of the decisions of those that own gas stations today. I have hundreds, if not thousands, of retailers that would install one or both, but they simply cannot until their agreements have expired. The next piece is money. More than 60% of all fuel stations are single station owners and they simply don't have the cash.

 

Here is some of the statistics on equipment, both at retail and in vehilcles:

 

1. If E15 penetrated the market to the “full extent,” we would expect total U.S. ethanol consumption to be in the 18.5-19 billion gallon range. In this case, “full extent” means E15 is offered at 3 out of every 4 pumps across the nation. This is a conservative assumption, but we know that it is unlikely that E15 will be offered at 100% of pumps due to EPA’s misfueling mitigation plan requirements, demand for a little bit of E0, AND the fact that about 20% of the auto fleet is only approved by EPA to run on E10. Math and explanation is attached.

 

2. For E85, we know there are nearly 18 million FFVs out there today. If FFVs refueled with E85 (74% ethanol content on average) every time they filled up (i.e., “maximum extent”), those vehicles alone would consume 9-9.5 billion gallons of ethanol per year. If you add that to the ~13.5 BG already consumed as E10, you get something around 23 billion gallons.

 

3.  We have also crunched numbers looking at the following scenario:

a.      All MY2001 and newer non-FFV vehicles use E15.

b.      All MY2000 and older non-FFVs use E10.

c.      All FFVs use E85 (74% ethanol).

d.      In this scenario, total ethanol consumption capacity is about 29-30 billion gallons.

 

4.       These examples illustrate why vehicles are not really the constraining factor. The current fleet has plenty of room to absorb more ethanol. So, previously everyone believe that the real constraint was on the infrastructure side, but the new NREL report (we released this week) shows that the compatibility of USTs and even some above-ground hardware isn’t nearly as big of a concern as some have argued.

 

As for your other comments, I too would like to see all vehicles as FFVs, but that isn't going to happen. We are actually headed in the opposite direction. We also have some stations that we all know sell E85 for more than RUL. Is that really trying?

 

Robert

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The general public is normally fed "negative" articles about ethanol whether it is about engine damage-stealing food from people-MPG losses or whatever.   There is insufficient positive ethanol information to counter this perception.   There has to be a change for the ethanol to increase its market share.  

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