ALEXANDRIA, Va. -- While E85 is currently a limited fuel offer--only 2% of retail fuel sites sell the 85% ethanol blend--a new study suggests it has great growth potential, if the right market conditions play out.
E85: A Market Performance Analysis & Forecast, a 40-page report by The Fuels Institute, suggests that E85 sales should at the least double by 2023. To determine the growth potential, researchers examined the sales at more than 300 stores that sell E85, developing forecasts that factored in such dynamics as past retail sales, consumer trends and vehicles sales. From here, The Fuels Institute estimates that E85 sales will at least double from 196 million gallons in 2013 to 400 million gallons in 2023, although they have the potential to hit up to 4.4 billion gallons--a 20-fold increase.
Which factors will affect the final growth figure?
- Availability of retail sites. With only 2% of fueling locations offering E85 and 60% of these in only 10 states, the lack of infrastructure currently acts as a big brake on greater growth of the high-ethanol blend; however, when comparing the number of flex-fuel vehicles (FFV)--the only type of vehicle that can use E85--to the number of E85 fueling locations, the study found a ratio of 5,289:1, compared to 1,466:1 for light-duty vehicles.
"Increasing the E85 station count would improve the potential for additional E85 sales and introduce additional competition to the market," said Fuels Institute executive director John Eichberger.
- Price of E85. The high ethanol blend contains around 23% less energy per gallon than regular grade gasoline, so consumer demand will depend greatly on E85's price discount relative to gasoline. According to The Fuels Institute report, consumers appear to be more focused on the absolute price differential than the% differential. The optimum price differential that would encourage FFV drivers to buy E85 instead of regular gasoline is 60 cents per gallon, the study found.
- Number of FFVs. FFVs make up 6% of all light-duty vehicle registrations in the country. While growth in FFV production was stimulated by credits that automakers earned for producing these vehicles, these credits are set to expire under the new Corporate Average Fuel Economy (CAFE) regulations. It is uncertain whether automobile manufacturers will keep up their pace of FFV production after the credit disappears.
To download the full report, click here.
The Fuels Institute, founded by NACS in 2013, is a non-profit research-oriented think tank dedicated to evaluating market issues related to vehicles and the fuels that power them. Founded in 1961 as the National Association of Convenience Stores, NACS is the international association for convenience and fuel retailing.
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