CSP Fuel: Ethanol's Upward Climb
E15 gains traction as more retailers sign on to sell it
Garner says differentiation drives many retailers to install the ethanol blend. Most of Protec’s first E15 clients have been small operators, a move that is partly strategic, allowing the company to perfect its conversion process.
“When you go to a much larger retailer, you can’t afford to have any glitches,” says Garner, citing that Protec first approached several large Southeast chains about installing E15. “They were definitely interested but wanted to see what direction it would take.”
Since Sheetz announced plans to install E15 in North Carolina, other large chains have called Protec back, wanting to restart the conversation. “They want to see someone bigger go first,” Garner says.
For a large chain, sizing the E15 introduction is important. “There’s a lot that goes into it,” he says. That research includes determining the desired launch city and homing in on the highest-volume sites that offer the most cost-efficient installation. Other factors: area demographics, the makeup of the local automotive fleet and even the competition—and the likelihood they would try to replicate the offer.
From there, it is a matter of winning acceptance. Consumers have two main questions, says Garner: Will E15 hurt their car, and what is the price? “Most people who live in the area know E15 is coming to a location. Some people repeat what they hear on the news—that E15 damages your car—but you just need to be able to go through that process with everybody,” says Garner.
As for the price, the goal is to keep E15 at least 5 cents per gallon (CPG) below E10. Protec manages the price risk for its clients; in E15 sites opened so far, the retailer’s margin can be 1 to 2 CPG greater than E10, depending on how the operator sources its gasoline. Some of the retailers Protec works with have seen E15 rise to 30% of their fuel volume.
Indeed, perhaps a tougher party to convince would be the retailer’s major oil brand.
“It’s night and day between branded and unbranded,” says Garner of the approval process, pointing out that while Protec has “a good number” of branded E15 sites, getting to “yes” is not “an easy hill to climb.”
That’s because to sell E15, a retailer must blend its own E85 on site with the major oil’s E10. Protec sometimes can blend the fuels and supply it direct to the retailer. But in most cases, the retailer needs to do the blending.
“Some [brands] are definitely fighting it. They have some concerns,” says Garner. “ ‘It’s under my canopy, it’s got my branded name on it; am I liable for that? What happens if someone misfuels?’ ”
He and other supporters of E15 largely dismiss misfueling concerns, saying that there has not yet been a reported incident. Eventually, even major-oil brands will come around to embracing the ethanol blend, he believes.
“In the next couple of months, there will be few holdouts,” says Garner. “For the majority, it won’t be an issue. I don’t know how they can stop it and say no—because it’s going to happen, it’s going to come.”
Biofuels: It Takes a Coalition
In late 2014, what is said to be the United States’ longest biofuels corridor took its final shape. More than 40 fueling sites now offer E85 and/or B20—a 20% biodiesel blend—across the 1,786-mile stretch of I-75, which connects Sault Ste. Marie, Mich., to Miami. The Clean Fuels Corridor’s goal: to allow flex-fuel vehicles (FFV), which can fuel up on E85 or regular gas, the ability to travel from Michigan to Florida on the 85% ethanol blend.
Jonathan Overly, executive director of the East Tennessee Clean Fuels Coalition, Knoxville, Tenn., says while the project has met its goal, it was by no means an easy task. One of the biggest challenges? Finding retailers willing to install E85 and/or B20, despite the fact that the project organizers offered a 50/50 match on infrastructure costs.
The team learned the best way to connect with retailers was through local Clean Fuels coalitions and state biofuels organizations. The size of the retailer mattered in scaling up quickly.
“You were better off knowing a chain than you are a few station owners in the area,” says Overly. “The bigger they are, the easier it is to get multiple stations in an agreement than it is to get one.” Small retailers can be intimidated by the contracts they must sign to receive the funding for installing the biofuels, he says, whereas large chains were familiar with the process.
Even after first agreeing to participate, a few retailers backed out. Pilot Travel Centers, for example, found itself in the middle of finalizing its acquisition of Flying J. Another retailer greatly underestimated the cost of concrete work required to install E85.
“I’m surprised we got so many different reasons for ‘We can’t just do this right now,’ ” says Overly. However, “I never got an anti-biofuel reason.”
And in at least one case, issues with a retailer’s brand stood in the way. One operator in Michigan had almost finished installing B20 when he called his major-oil brand for permission to put the biofuel on his leaderboard. Unfortunately, the oil company required that its branded retailers sell traditional diesel before adding B20; this particular operator did not. Overly advises any retailer branded by a major oil to understand its contractual requirements for selling alternative fuels before embarking on the process.
Ultimately, the Clean Fuels Corridor installed E85 at 31 sites and B20 at nine, from small retailers to big chains such as Thorntons, Mapco and Speedway.
Clean Fuels Corridor Volume
From 2010 through the fırst few months of 2014, retailers sold 2.6 million gallons of E85 and B20 on the Clean Fuels Corridor, displacing 1.8 million gallons of petroleum per year.
|Year||Gallons of biofuels sold|
* January and February only
Source: Clean Fuels Corridor