Supply and demand of renewable fuels like ethanol and biodiesel are expected to continue their rise this year despite continued challenges and uncertainties. Executives from organizations representing renewable-fuel producers recently provided insights into the opportunities and challenges ahead.
The U.S. ethanol industry produced a record 15.3 billion gallons of the fuel in 2016. And production reports through the first quarter indicate that 2017 will likely be another record-breaking year.
“Consumers saw a record of almost 2.9 billion gallons of biodiesel and renewable diesel in 2016, outpacing the previous record by about 40 percent,” said Donnell Rehagen, CEO of the National Biodiesel Board.
Biodiesel blends such as B20 – 20 percent biodiesel, 80 percent petroleum diesel – and others are used in various applications, from municipal fleets to school districts to agriculture to consumers.
“Biodiesel users are taking advantage of the significant emissions benefits and premium properties of the fuel like higher cetane, increased lubricity and reduced environmental impact,” Rehagen said.
Meanwhile the ethanol industry’s growth is being driven by increased demand for higher-level blends – such as 15 percent ethanol, 85 percent gasoline, known as E15 – as well as growing demand for high-octane fuel. The rating for E15 is 88 octane. For E85 – gasoline blended with 85 percent ethanol – the rating is 108 octane.
“The E15 market is emerging in many parts of the country,” said Brian Jennings, executive vice-president of the American Coalition for Ethanol. “Early adopters have been in the Midwest, but there have been major moves by big players on the East Coast, in the South and throughout the country.”
Growth is attributed to the fact that nine out of every 10 cars on today’s highways are built to use E15, which costs less than E10 and less than straight gasoline. For higher blends the price advantage is even greater, Jennings said.
Rachel Gantz, communications director for the Renewable Fuels Association, said about 700 fuel stations in 29 states across America now offer E15. Meanwhile about 3,870 fuel stations are selling E85 in more than 2,250 cities.
“Strong Renewable Fuel Standard targets have driven demand for higher ethanol blends,” Gantz said.
The Renewable Fuel Standard was created under the Energy Policy Act of 2005, which amended the Clean Air Act. The Energy Independence and Security Act of 2007 expanded the Renewable Fuel Standard. The U.S. Environmental Protection Agency implements the program.
The Renewable Fuel Standard requires a certain volume of renewable fuel to replace or reduce the quantity of petroleum-based fuel. The Energy Independence and Security Act of 2007 set annual yearly volume requirements out to 2022.
Also helping to drive growth for higher-level renewable blends have been the U.S. Department of Agriculture’s Biofuels Infrastructure Program and an industry-led program called “Prime the Pump.” Those programs and various state-funded initiatives to install blender pumps have provided greater access to consumers wanting to use renewable fuels.
Despite improvements in infrastructure for renewable fuels, current EPA regulation prevents consumers from having year-round access to E15, Gantz said.
The EPA sets a maximum allowable Reid vapor pressure for gasoline and gasoline-ethanol blends in the summer months to reduce evaporation of fuel from cars and from fuel-storage and fuel-transfer equipment. The addition of 10 percent ethanol to gasoline increases the Reid vapor pressure of the fuel by about 1 pound per square inch.
Beginning in 1992, 10 percent ethanol – E10 – summertime blends were permitted a vapor pressure 1 pound per square inch greater than the normal EPA summer standards for conventional gasoline. But higher-level ethanol blends such as E15 have not received that waiver, according to the National Renewable Energy Laboratory.
“Bipartisan legislation is pending in congress that would allow retailers to sell E15 year-round,” Jennings said. “Retailers want to sell E15 in the summer months because the fuel is less-emitting and lower-cost than E10 and straight gasoline. But EPA’s current interpretation of its Reid vapor pressure rule handcuffs retailers in conventional-gasoline areas of the country.”
In addition to pending legislation, EPA has options at its disposal to make a regulatory change that would allow consumers to have access to E15 and other lower-cost fuels, he said.
For America’s biodiesel industry, one of the biggest challenges is foreign competitors.
“U.S. producers are losing an increasing share of the market to foreign imports,” Rehagen said. “A simple change to how the federal biodiesel tax incentive is administered could help level the playing field.”
The American Renewable Fuel and Job Creation Act of 2017 recently was introduced by U.S. senators Chuck Grassley, R-Iowa, and Maria Cantwell, D-Washington, with 14 other original sponsors. The biodiesel tax credit bill would convert the $1-per-gallon blender’s credit for biodiesel to a production credit for fuels produced in the United States for three years. The bill provides an additional 10-cent-per-gallon credit for small U.S. biodiesel producers, providing needed stability within the industry, Rehagen said.