Yellow Hose program brings price stability to E85 in Michigan

By Holly Jessen | December 24, 2014

A Michigan ethanol plant has had success with its Yellow Hose program, blending E85 and supplying area retailers, as well as sales at an on-site fuel pump.  

Carbon Green Bioenergy LLC blends E85 at the Lake Odessa, Michigan, ethanol plant using automated inline blending with direct injection of natural gasoline. It then sells the fuel at its own on-site credit card only flex-fuel pump as well as to 33 area retailers that are part of its Yellow Hose program.

 Since Oct. 1, 2013, the ethanol plant has had an agreement with those retailers, keeping E85 priced $1 less per gallon than E10. “So we will have 15 months of holding a $1 spread and in January, the Yellow Hose network is going to 70 cents under retail gas,” says Mitch Miller, CEO of the 50 MMgy plant. “This is an ethanol producer that has decided to stabilize our market in our backyard, and grow the network of flex-fuel pumps and increase sales, by bring price stability in the form of a price spread to the retail gasoline providers.”

A key part of the Yellow Hose program is that the ethanol plant advertises the fuel for its retail station customers. Carbon Green spends about $15,000 a month to advertise though billboards, geo-targeted internet banner ads and other methods, such as some local television and radio spots and local sports team sponsorships.  “It’s your product,” Miller said. “I think that’s the disconnect. The ethanol producer has to take ownership of their product at the retail site. You can’t just sell it to them and expect them to market it for you. It doesn’t happen.”

The Yellow Hose program is trademarked by Carbon Green and is currently only available out of its Michigan ethanol plant. However, the company is in talks with other interested ethanol producers. “We have strong interest in franchising the Yellow Hose program,” he said.

Because Carbon Green is a blender, it can separate and sell the renewable fuel identification numbers (RINs) attached to the blended gallons, which helps the company keep the price of its E85 down. Currently, RINs prices are going up. According to an Atlas Markets pricing email, bids for 2013, 2014 and 2015 D6 RINs ranged from 69 to 82 cents on Dec. 23, slightly up from 65 to 76 cents on Dec. 22.

Carbon Green is also doing well with its on-site flex-fuel pump, which offers E10, E15, E30 and E85. The company installed the pump because it wasn’t successful in convincing any gas station retailers in the immediate area around the plant to put in a flex-fuel pump. Interest was high from ethanol plant employees and the farmers that provide corn to the plant and Miller was receiving requests daily for a local E85 pump, he said. So the company spent about $100,000 to install one.

“We anticipated selling only 2 to 300 gallons a day, at the plant in east Michigan, and we are averaging over a 1,000 gallons a day,” Miller said, adding that the project had a two year payback. In fact, the 40 MMgy Iroquois Bio-Energy Co. LLC ethanol plant in Rensselaer, Indiana, which, like Carbon Green, is managed by NUVUfuels LLC, recently installed an on-site pump because of how well things were going at the Michigan ethanol plant, Miller said.