Clock ticking on flex fuels opportunity

OREANDA-NEWS.  Time may be limited for retailers to attract more flex fuel vehicle customers to higher ethanol blends, despite the potential to grow the market, the director of a fuels industry think tank told a renewable fuels conference today.

Flex fuel vehicles (FFVs) — vehicles with engines capable of running up to 83pc ethanol blends — fill up with high-ethanol fuels just 1pc of the time, said John Eichberger, director of the Fuels Institute.

But data collected from major unbranded US retailers offering the fuel shows properly discounted high-ethanol blends will attract loyal customers, creating billions of gallons of potential ethanol demand, he told attendees at the Renewable Fuels Association's National Ethanol Conference in Grapevine, Texas.

A tax credit expiring in 2019 that gives automakers incentive to produce the vehicles gives sellers a limited amount of time to build up consumer demand, however.

"The bottom line is that there's a lot of potential for E85, but there's got to be a lot of work," Eichberger said.

US retailers make much more on in-store sales than fuel sales, giving operators an incentive to offer cheaper fuels that create loyal customers buying more profitable items. Unbranded retailers especially have flexibility to add biofuels to entice new customers to their stores. Stores can see a roughly 6pc bump in sales — in line with the percentage of FFV in the US auto fleet — when adding the fuels.

But adding dispensers and sometimes underground storage tanks needed to legally provide higher-ethanol fuels is much more expensive that offering a new product in the store. Store operators want to see more demand for the fuel before taking an expensive leap.

While a disappearing federal tax incentives to the automakers may cool production of FFVs, another regulation could make higher-ethanol blends more widely available. Stores beginning later this year must upgrade credit card equipment or assume liability for fraudulent charges made on older equipment. Some owners may choose to upgrade dispensers ahead of schedule to E85 or more moderate E25-capable dispensers, Eichberger said.

The number of US stores offering E85 has consistently grown by 14pc per year since the fuel became available, but efforts to make drivers more interested in FFVs will be critical.

"If the FFVs aren't there, the retailers won't offer E85," Eichberger said.