Fuels Institute report predicts increased E85 sales through 2023

By Erin Voegele | November 17, 2014

The Fuels Institute, a nonprofit think-tank founded by the Association for Convenience & Fuel Retailing, recently published a study that predicts a substantial increase in E85 sales over the next several years. At minimum, the report predicts E85 sales will double by 2023. Depending on specific market circumstances, however, the report forecasts E85 sales could experience a 20-fold increase over the same time period.

According to information published by the Fuels Institute, the report, titled “E85: A Market Performance and Analysis Forecast,” was commissioned to examine the current performance of E85 in the market and prospects for its expansion. Researchers evaluated the performance of more than 300 stores that sell E85 and developed forecasts that account for a variety of factors that could affect sales. As a result, the report projects E85 sales will increase from 196 million gallons last year to between 400 million and 4.4 billion gallons by 2023.

The report notes that between 2,685 and 3,349 retail fuel stations in the U.S. currently sell E85, accounting for up to 2.2 percent of the nation’s 152,900 retail fuel stations. As of the beginning of the year, there were between 14.2 million and 16 million flex fuel vehicles (FFVs) registered in the U.S. Minnesota currently leads the national with E85 stations, with a peak of 357 in 2011. This year, the report estimates Minnesota has 303 operating retail stations selling E85.

According to the Fuels Institute, the 10 states with the most E85 stations include Minnesota, Illinois, Michigan, Iowa, Indiana, Wisconsin, Ohio, Missouri, Texas and California.bTogether, the 10 top states for E85 availability feature 60 percent of the E85 stations nationwide.

By 2023, the report forecasts that 8,907 to 11,151 stations could be selling E85 in the U.S., with 25.9 million FFVs on the road. Theoretically, if every FFV were to exclusively use E85, sales could reach as high as 31.9 billion gallons.

To complete the analysis, the Fuels Institute said it leveraged publicly available data from the U.S. Energy Information Administration, the Alternative Fuels Data Center, state government agencies and previously released Fuels Institute reports. In addition, the study utilized data contributed by NACS-CSX, Growth Energy, the Renewable Fuels Association, and others, along with reports from retailers that currently sell E85. Within the study, the Fuels Institute indicates the report does not take into consider consumer perception of FFVs and E85. A supplemental report that addresses those issues is expected to be released separately.

Overall, the report predicts the relative price of E85 will play a significant role in its future growth. According to the Fuels Institute, its analysis indicated that consumers seem to be much more concerned about the absolute price differential between E85 and gasoline than the percent differential. The report notes that 60 cents per gallon was shown to be the optimal price differential to encourage flex fuel consumers to switch to E85.

The report also cites uncertainty created by the expiration of FFV credits under new Corporate Average Fuel Economy regulations. According to the study, it is unclear if vehicle manufactures will continue to produce FFVs at current rates in the absence of that credit.

 “This report is essential reading for federal regulators who are considering strategies to meet the goals of the Renewable Fuel Standard and for fuel marketers seeking options to diversify their product offer,” said Fuels Institute Executive Director John Eichberger in a statement. “It presents an objective analysis of the overall market for E85, including actual retail sales data, and represents a collective effort to identify opportunities and challenges facing this alternative fuel — without taking a position of advocacy.”

“We developed this report in direct response to requests from multiple congressional committees to provide a comprehensive source for information about the market for E85. This objective analysis of E85 in the market and the range of its market potential is essential to provide guidance regarding the potential for E85 to meet the goals of the Renewable Fuel Standard,” Eichberger added.

A full copy of the report can be downloaded from the Fuels Institute website.