A report published by the USDA’s Office of Chief Economist in May assesses the future market opportunities and challenges for E15 and higher blends of ethanol, including a discussion of technical, regulatory, consumer acceptance, and economic challenges.

Virtually all gasoline sold in the U.S. today contains 10 percent ethanol. Due to vehicles with improved fuel efficiency and the growing popularity of hybrid and electric vehicles, U.S. gasoline consumption is expected to decline 19 percent by 2050, according to the report. If E10 continues to be the standard gasoline blend, ethanol consumption will decrease as well.  However, if the standard blend increases to 15 or higher, ethanol consumption could continue to rise while simultaneously reducing greenhouse gas (GHG) emissions. The report stresses that higher ethanol blends can also support energy independence.

Approximately 93 percent of all light-duty vehicles on the road today can safety refuel with E15, making the fuel blend a viable option for the vast majority of vehicles. While there is great potential for the expanded use of E15, there are also technical, legal, and economic challenges that must be evaluated and addressed. The report specifically discusses challenges related to consumer acceptance, legal and contractual considerations for retail fueling stations, vehicle warranties, and investments in wholesale and retail distribution infrastructure.

The report cites a 2018 study from the Center for Agriculture and Rural Development at Iowa State University that determined a move to E15 will likely require a price discount relative to E10 on an energy parity basis. Given the fact that E15 has an energy content approximately 1.75 percent less than E10, that study found that at 2018 prices, E15 would have to be priced 4.3 cents lower per gallon than E10 to make it equal on a per mile-driven basis. The USDA also notes that given the small difference in energy content between E10 and E15, and E15’s one-point octane advantage over E10, it is possible that consumers would simply compare the two fuels on a price basis, in which case E15 uptake would be quicker. The report also discusses a suggestion by Protec Fuel Management that retailers could price E10 and E15 equally to avoid consumer skepticism due to the price difference. The agency said evidence from Biofuel Infrastructure Program-funded stations shows that the price differential between E10 and E15 fell between 2016 and 2019 while sales continued to increase. In addition, the USDA cites Growth Energy as indicating consumers value E15’s octane advantage and react more positively to the name unleaded or regular 88. The USDA also noes that placement within the station and dispenser configuration can significantly impact sales. Demand for E15 is also sensitive to convenience costs, according to the agency.

“It can be anticipated that consumers would adopt E15 with similar rates as E10 if there was a price incentive to do so,” the USDA said in the report. “When choosing a motor fuel, consumers have generally shown that they are primarily motivated by price and convenience.” Consumer education campaigns to address potential concerns about engine performance and degradation will also be important.

The report also addresses legal and contractual considerations related to expanded E15 sales, noting that contract restrictions can make it difficult for branded stations to invest in E15. It also discusses unique challenges for E15 adoption in California.

Regarding economic considerations for station owners, the USDA notes that difference ownership structures create different challenges. More than half of the fueling stations in the U.S. have single-station ownership. These stations are more sensitive to the size of financial investments, particularly with respect to equipment upgrades, according to the USDA. When compared to multi-station owners, single station owners are in a less optimal position to bargain with equipment manufacturers and have less sources and personnel to take advantage grant programs. Multi-station owners, in general, also have larger stations with more tanks, making it easier to repurpose an existing tank for E15. “It will be important during policy design to recognize that smaller ownership entities (with less than 10 stations) face more significant financial barriers relative to larger multi-station ownership entities,” the USDA said in the report.

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