Energy Outlook: E85, FFV market shares to lead growth

By Susanne Retka Schill | July 02, 2012

The latest look at long-term projections by the U.S. DOE’s Energy Information Administration shows E85 use growing to a 37 percent share of domestic ethanol production by 2035. The EIA’s “Annual Energy Outlook 2012,” released June 25, takes a close look at the probable impact of new corporate average fuel economy standards as the nation’s light duty vehicle fleet turns over to newer, more fuel efficient models. Flex-fuel vehicles (FFVs) are expected to represent the largest share of all vehicles, at 17 percent of all new vehicle sales. Five other types of alternative fuel cars, mostly different combinations of electric with other technologies, achieve market shares ranging from 3 to 9 percent.

In the EIA projections, biofuels production grows by 800,000 barrels per day (33.6 million gallons per day) from 2010 to 2035, with ethanol accounting for 700,000 barrels of that increase. Biofuels will reduce petroleum-based motor gasoline components by about 6 percent in 2035 compared to 2010 on an energy-equivalent  basis. In fact, the report shows that the increase in ethanol production matches the total increase in U.S. consumption of petroleum and other liquids – 700,000 barrels per day, with total U.S. consumption at 19.9 million barrels per day in 2035.

Taking into account potential issues as E15 is adopted, the projections show ethanol blending in gasoline increasing slowly from 13.2 billion gallons in 2010 (about 9 percent of the gasoline pool) to 15 billion gallons in 2020 (about 11 percent) and 15.8 billion gallons in 2035 (12.5 percent). “Given the blending limitations, the remaining growth in ethanol use is in E85, which grows from about 0.6 billion gallons in 2018 to 9.5 billion gallons in 2035,” the authors said in the report.

The slower than expected start to commercial production of cellulosic ethanol restrains growth in that sector until the later years of the projection’s time-frame. The EIA outlook does not expect the mandated renewable fuel standard (RFS) of 36 billion gallons to be met in 2022. “Financial and technological hurdles delay the start of many advanced biofuel projects, particularly cellulosic biofuel projects,” the authors said. “Three consecutive years of substantial reductions in the cellulosic biofuels mandate have significantly reduced the possibility that the original RFS levels mandated in [Energy Independence and Security Act of 2007] will be reached by 2022.”  Instead, the modeling indicates “only 22.1 billion RFS credits are generated in 2022 in the reference case, with 15 billion gallons of credits coming from domestic production of corn-based ethanol.”    

Other next-generation fuels will quickly catch up with ethanol and biodiesel, according to the outlook. “Growth in next-generation “xTL” production, which includes both biomass-to-liquids and coal-to-liquids, contributes significantly to the growth in total U.S. petroleum and other liquids production, particularly after 2020, adding about 0.6 and 0.3 million barrels per day of production, respectively, from 2010 to 2035.”

The EIA outlook uses the National Energy Modeling System to analyze multiple scenarios for all sectors of energy use, including the transportation sector, electric generation, cooling and heating. While most of the report’s discussion is based on a reference case using medium price and economic growth factors and known policies, the 252-page outlook also reports multiple scenarios in an extensive table session. The impacts of low and high oil prices and low and high economic growth are evaluated, among other factors and policy scenarios. The growing use of renewable energy in all sectors has prompted several modeling adjustments to better incorporate new market complexities, which are also explained in the outlook’s discussion of its methodology.