Fairytale Thinking on E85 and Ethanol Mandates

E85 is not a solution to the blend wall: e85 sold in 2017 is less than 1 percent of annual gasoline demand

Some have suggested that requiring more production of
higher ethanol-blend fuels like E15 and E85 can satisfy
RFS mandates but these measures are expensive,
temporary at best, and could have serious impacts on
consumers and the broader economy.

E85 has several limitations. For starters, only flex-fuel
vehicles (FFVs) can use it, which becomes a logistical
issue because there is a lack of E85 pumps across the
country – only about 3,000 retail stations out of more
than 150,000 offer it. It is clear that there is a lack of
customer demand for this fuel (see chart). Second,
there is a mismatch between pump locations and FFVs,
illustrated by a recent Department of Energy (DOE)
Inspector General’s report that found DOE has been
fueling its FFVs with regular gasoline instead of E85. This
eliminates any supposed benefits
of having a fleet of cars that can use fuel containing up
to 83 percent ethanol. And finally, E85 has not been
cost-competitive – according to AAA’s website that tracks
retail E85 prices.

A lot of these problems simply come down to the
amount of energy in E85. According to the Energy
Information Administration, the energy content of ethanol
is about 33% less than pure gasoline, and E85 contains
51-83% ethanol, lowering gas mileage and forcing
consumers to fill up more frequently. That is why there is
so little demand for the product.

Ethanol supporters, to avoid the blendwall, suggest E85 be heavily discounted to reach
maximum sales, but the numbers do not add up: actual
sales of E85 have never come close to the annual rate
which would be needed to avoid the blend wall, and
E85 is more costly on an energy-equivalent basis. Such
arguments ignore ethanol market dynamics. Ethanol
production has expanded and the U.S. has been a net
exporter of ethanol since 2010. Trade flows of ethanol are
responding to market signals, which appear to be placing
a higher value on ethanol for its use as a low-level blend
gasoline blendstock for export rather than as a high-level
blend as a gasoline replacement (such as E85).

Devising unrealistic solutions to justify
bad policies is just another distraction from the real
problem: The RFS is fundamentally flawed, and its
renewable fuel volume mandates are broken. Rather than trying to push
higher ethanol-blend fuels into the market, which the
consumer is not even demanding (E85) or which could
harm engines (E15), we need Congress to address the
RFS with long-term and meaningful action.