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Feature article in the April - May 2001 edition of the State Energy Program's bimonthly newsletter, Conservation Update.
Ethanol is quickly becoming the alternative transportation fuel of choice for Minnesota, a state with a strong farm economy and home to more than a dozen ethanol production facilities.
Later this month, Minneapolis-St. Paul, Minnesota, will become the 81st Clean Cities (CC) Coalition. "Twin Cities already has an innovative alternative fuels program with several influential partners participating and growing public support," says Melinda Latimer, Clean Cities program manager for the U.S. Department of Energy's (DOE) Midwest region.
The Twin Cities Clean Cities Coalition (TC4) makes Minnesota the 41st state participating in DOE's Clean Cities, a voluntary program to promote use of alternative fuels and alternative fuel vehicles (AFVs).
Already, Minnesota has more refueling stations for E85— a mixture of 85 percent ethanol with 15 percent gasoline—han any other state. E85 is suitable for use in flexible fuel vehicles, capable of running on ethanol, gasoline, or any combination of the two fuels. Minnesota's success is due, in part, to a unique loan program to station owners for conversion of one or more tanks and pumps to ethanol. The experience points the way for other states to advance clean, alternative transportation fuels and AFVs.
Ethanol rises to the top
Since 1992, Minnesota has had a robust program in place to support production and consumption of ethanol. Today it is the only state in the country to require that all of its gasoline contain 2.7 percent oxygen by weight, and ethanol is Minnesota's oxygenate of choice. Since Minnesota's drivers consume 2.4 billion gallons of gasoline per year and ethanol as an oxygenate is 10 percent of that amount, this creates a market of 240 million gallons per year for ethanol producers in the state.
In fact, Minnesota is home to 14 ethanol production facilities. Twelve of these are owned by cooperatives of corn farmers, who make ethanol by fermenting cornstarch and then distilling the batch to separate the liquid alcohol. One bushel of corn yields 2.6 pounds of corn meal and enough cornstarch to produce 2.6 gallons of ethanol. Two additional production facilities are operated by dairy processors that make ethanol as a byproduct from dairy residues. For these farming cooperatives, ethanol represents another market for agriculture.
"We're an agricultural state," says Mike Taylor, project consultant for the Minnesota Department of Commerce, "and ethanol seems to make sense to many Minnesotans." For example, the Minnesota Corn Growers Association has been a strong supporter of the state's ethanol program.
Even state legislators from rural districts are getting involved with alternative fuels. This year, several of them proposed legislation to mix 2 percent - 5 percent biodiesel with all on-road diesel in the state. Biodiesel is similar to ethanol in that it is also produced from renewable resources, such as, vegetable oils, fatty residues from agricultural and meat processing, etc. It may be blended in varying percentages with conventional diesel without requiring modifications to diesel engines.
Twin Cities cleans its air
For the past several years, Clean Cities has been working with state energy offices such as the Energy Division of Minnesota's Department of Commerce through DOE's State Energy Program (SEP). Among other activities, SEP (special projects) funds the development of infrastructure to distribute alternative transportation fuels.
Alternative fuels consist of compressed natural gas, liquid natural gas, propane, ethanol (E85), methanol (M85), biodiesel (B20), and electricity. All CC coalitions, including TC4, are committed to promoting a mix of alternative fuels that best suits their region through a "fuel-neutral" approach. E85 has been a strong part of TC4's initial success, but future development depends on a diversity of fuels.
Most of the Clean Cities coalitions are located in or near large metropolitan areas that have experienced air pollution problems due, in large part, to emissions from transportation vehicles. Clean Cities helps reduce urban pollution by promoting use of clean, alternative fuel vehicles and their associated fuels. All AFVs are low-emissions or ultra-low-emissions type vehicles.
The TC4 coalition has pursued a public education campaign around the clean air issue. This effort is led, in part, through the American Lung Association of Minnesota's (ALAMN) Clean Air Choice Campaign for informing consumers about the lower emissions from AFVs running on alternative fuels. For example, Ford Motor Company, a coalition member, gave away an E85 flexible-fuel car in April at the end of a season-long promotion with the National Basketball Association's Minnesota Timberwolves. Twenty-five TV commercials and 35 radio commercials were aired through April. This campaign distinguishes TC4 because most CC coalitions have focussed on developing niche markets for alternative fuels among owners of fleet vehicles rather than public education.
According to ALAMN's Tim Gerlach, "Changing the way people fuel their vehicles is a major undertaking. That's why education and marketing are just as important as building refueling sites."
Stations convert to E85
The coalition's key challenge has turned out to be getting service station owners involved. "Once there is a critical mass of stations and vehicle owners," says Gerlach, " market forces take over."
The coalition's strategy is to use the funding from coalition partners and DOE to provide "forgivable" loans to station owners for installation and conversion of pumps to dispense E85. The funding is used to clean out the tanks and ensure proper fuel-equipment compatibility. For this pilot project, conversions have turned out to be the most cost-effective option compared with installing new tanks and pumps.
For their part, station owners commit to offer E85 for at least four years. If during this four-year period they want to reconvert to conventional fuels, they have to pay some of the money back. Otherwise, the loan is "forgiven" at the end of the four years. The hope is that markets will develop sufficiently to keep station owners interested in providing E85 for much longer than the loan period.
Unfortunately, negotiating with many different station owners has been time consuming, according to the state energy division's Mike Taylor. The problem was each station owner has a different set of requirements. According to Taylor, the real breakthrough came in early 2000 when the coalition negotiated with a national chain of convenience stores, called Holiday Stationstores, to convert 15 stations at once. Thus TC4 was able to hammer out requirements for all the stations at once. Furthermore, the deal with the Holiday chain seemed to create a positive momentum that won over other station owners.
As of May 2001, Minnesota has 55 refueling stations providing E85, which is almost half of all such stations in the country. Correspondingly, ethanol consumption is growing quickly, according to the state energy division, which tracks fuel sales. Monthly consumption in January 2000 was 11,000 gallons. By June, it had jumped to 36,000 gallons. And in 2001, ALAMN estimates E85 consumption will double that of 2000. The Minnesota Department of Commerce estimates that there are 50,000 flexible-fuel vehicles in the state capable of running on E85, gasoline, or a combination of the two fuels.
As the Twin Cities of Minneapolis-St. Paul formally joins DOE's Clean Cities, its coalition already has something to show CC coalitions in the rest of the country. Recent awards include the Minnesota Governor's Awards for Excellence in Waste and Pollution Prevention and DOE's National Partners Award for the three coalition members-the Minnesota Corn Growers Association, Holiday Stationstores, and the Minnesota Department of Commerce.
To learn more about State Energy Program activities in other states, visit the State Energy Program Web site.
E85 overcomes hurdles
May 18, 2001
The experience Minnesota's Twin Cities Clean Cities Coalition (TC4) has helped it identify several challenges to wider acceptance of ethanol-E85 as a mainstream fuel for transportation. E85 is a mixture of 85% ethanol and 15% gasoline for use in flexible fuel vehicles [FFVs]. These vehicles can run on E85, gasoline, or any combination of the two fuels.
E85 is already experiencing some growth. In 1990, there were fewer than 200 E85-FFVs on American roads. Today there are more than 1.2 million.
Nevertheless, E85 still encounters the chicken-egg syndrome consumers aren't likely to use E85 until it is widespread and convenient, but E85 won't become widespread until consumers adopt the fuel.
DOE's Alternative Fuels Data Center publishes an online station locator for all types of alternative transportation fuels, including E85. The locator asks for your zip code or city.
In addition, many states have similar maps on their Web sites that help consumers find E85 stations. See, for example:
Online locator for refueling stations for alternative transportation fuels published by the Minnesota Department of Commerce.
The Kentucky Clean Fuels Coalition publishes a (flat) map accompanied by a list of refueling stations, similar to the one published by Minnesota. The Kentucky coalition also publishes a list of flexible fuel vehicles available to consumers in 2001 models for all types of alternative fuels, not just E85.
The Nebraska Ethanol Board keeps a list of national and state legislation affecting ethanol markets. Currently there are a number of states adopting California's limits on diesel emissions, which may create opportunities for biodiesel.
In related news, DOE announced new rules on April 30, 2001, that biodiesel now qualifies for alternative fuel-use credits under the Energy Policy Act of 1992.
The Importance of Alternative Fuels.
South Carolina summarizes the case for alternative transportation fuels. See also short summaries of the state's ethanol and biodiesel demonstration projects. Finally, the Catawba Council of Governments is using an innovative funding mechanism by applying EPA fines from an air-quality violation case to build the first E85 stations in the Charlotte/Rock Hill area.
As consumers' experience with ethanol-E85 vehicles approaches a critical mass, several issues have come to the fore of consumers' attention. These issues involve cost and availability of flexible fuel vehicles (FFVs), lack of information about the benefits of ethanol and E85, and convenience of refueling.
Cost
Unlike some alternative fuel vehicles, E85 flexible fuel vehicles do not cost any more than their conventional counterparts. The essential piece of technology that allows vehicles to run on both ethanol and gasoline is fuel injection, which now predominates as the fuel-delivery mechanism in vehicles. Beyond that, FFVs have their gas tanks lined with a polymer coating and several gaskets in the fuel-delivery system beefed up to resist corrosion by ethanol.
The cost of ethanol fuel, however, varies more than the cost of gasoline. In Minnesota, station owners priced E85 at $0.15 to $0.20 per gallon less than gasoline in the summer of 2000, according to the Minnesota Department of Commerce. At the same time, though, some station owners charged the same amount for E85 and gasoline, while at one station, E85 was $0.55 cheaper per gallon than gasoline. In March 2001, Minnesota reported the average retail cost of E85 was $1.31 per gallon, and 87-octane gasoline reformulated with 10% ethanol (all Minnesota gasoline is oxygenated with ethanol) was $1.40.
Ethanol, however, contains only about two-thirds the energy content per unit volume (gallon) of fuel compared with gasoline. Therefore, fuel cost is a function of both price and energy content. In a state like Minnesota with a stable supply of ethanol and at current (relatively high) gasoline prices, some FFV owners are able to operate on E85 at a cost that is comparable to that of operating on gasoline.
General Information on E85 for Consumers
One of the most important factors affecting the growth of the market for E85 is lack of consumer awareness. Even though there are more than 1 million E85 FFVs on the road today, many consumers are not aware that their vehicles can operate on E85 or of the benefits of doing so. Many organizations are addressing this information challenge, including:
List of E85 Flexible Fuel Vehicles.
The National Ethanol Vehicle Coalition publishes a list of FFVs for model years 1998 through 2001 offered by Ford, General Motors Corporation, and Daimler-Chrysler. The coalition also provides information on how to read a vehicle sticker to determine if you own a flexible fuel vehicle capable of running on E85.
The National Ethanol Vehicles Association answers a list of about 20 frequently asked questions about production and use of ethanol as a transportation fuel.
The National Ethanol Vehicles Coalition answers a common misconception about the energy input to ethanol fuels.
Convenience
Since refueling sites are limited, consumers need to plan their refueling stops if they are to take advantage of E85. In addition to DOE's national locator (see below), several states have online locators for refueling stations. See "What are other states doing?" above.
DOE's Alternative Fuel Data Center publishes an online station locator for all types of alternative transportation fuels, including E85. The locator asks for your zip code or city.
In 1990, there were fewer than 200 E85 flexible fuel vehicles (FFVs) on American roads. Today there are more than 1.2 million. In 2000 alone, more than 750,000 FFVs made their way to auto showrooms for sale to consumers. In 2001 and 2002, that number will like grower even higher because automakers are offering more models for sale.
All of these vehicles require refueling, which means more and more stations will have to learn about how to handle and dispense E85, and address the cost and market outlook for this new alternative transportation fuel.
Technical Issues and Training
Guidebook for Handling, Storing, and Dispensing E85 (PDF 2.99 MB).
Basic information for workers handling and dispensing alcohol fuels; Argonne National Laboratory; 32 pp.
Alternative Fuels Training.
Training that can lead to job opportunities for technicians to work on AFVs, published by DOE's Office of Transportation Technologies.
Flexible Fuel Vehicles-A Guide for Fleet Managers.
A brochure for vehicle maintenance personnel explaining how E85 flexible fuel vehicles work, published by the Minnesota Department of Commerce, TC4-Twin Cities Clean Cities Coalition, and the Minnesota Center for Automotive Research; 8 pp.
Cost
Historically, gasoline has been cheaper to produce than ethanol. But with high gasoline prices during the past two years, E85 is becoming more competitive.
According to the Renewable Fuels Association, ethanol costs an average of $0.71 per gallon to produce. These prices evidently do not include the refiners' markup. In an unpublished report by the Nebraska Ethanol Board, the average "rack price" of ethanol from 1988 to 1997 was about $1.20 per gallon, and the "rack price" of gasoline during this same period was about $0.60 at a terminal in Omaha Nebraska. "Rack price" is a trade term that refers to the price an oil company charges to distributors at a truck distribution terminal and does not include excise taxes.
Summer 2000 average wholesale cost of gasoline in the Midwest
The Renewable Fuels Association, an association of ethanol producers (that compete with gasoline refiners in some markets) pegs gasoline at $1.24 per gallon in a press release from June 2000. During summer 2001, rack prices for gasoline are expected to be as high or higher than they were last summer.
The American Petroleum Institute, on the other hand, claims that gasoline is historically much cheaper than ethanol.
Price components of a gallon of gasoline in California.
The California Energy Commission provides a graphical breakdown of the components of the average retail cost of regular unleaded gasoline in California in 2000.
Market Outlook
DOE's Energy Information Agency (EIA) predicts very strong growth for ethanol fuels, including E85, from 2004 through 2020. This chart is published by the Renewable Fuels Association and refers to the EIA's Annual Energy Outlook 1998.
Interview with Ford Motor Company's Beryl Stajich, Fleet/AFV Brand Team Manager.
Among U.S. auto manufacturers, Ford has been one of the strongest supporters of alternative fuel vehicles; Alternative Fuel News; Vol. 4 No. 4; March 2001; U.S. Department of Energy Office of Transportation Technologies.
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