“Fueled for Thought” By Joe O’Brien, Source North America Corporation

 

As the U.S. looks for ways to reduce its carbon footprint and its dependence on petroleum, renewable ethanol-based fuels deliver an alternative fuel at a price point that is accessible to most consumers.

As such, the market for E85 has grown substantially over the past decade, and is projected to continue to grow. There are now over 2,600 retail fueling locations for E85 in the U.S., as marketers compete to entice this additional segment of consumers to their stations. According to the 2014 Fuels Institute report “E85—A Market Performance Analysis and Forecast,” the number of outlets selling E85 annually increased an average of 14.3% from 2007 to 2014. By 2023, there could be between 8,907 and 11,151 stations selling E85. And although the cost-benefit of ethanol production has been a source of public debate, recent studies cited by the Alternative Fuels Data Center about corn production methods indicate that corn ethanol has in fact demonstrated a positive energy balance, meaning that the energy required for fuel production does not exceed the amount of energy contained in the fuel itself.

Notwithstanding these forecasts, there are competing factors impacting the market for E85. The recent Renewable Fuel Standards suggest that ethanol is not as critical to federal long-term plans, but various governmental and pro-ethanol entities are providing significant financial incentives to encourage infrastructural development. And ethanol is often seen as a fuel that has strong influence in the Midwest and the corn belt, rather than a fuel that benefits the entire nation equally, so adoption of E85 has followed a regional growth pattern. In this environment, most vehicle manufacturers will likely maintain the current relative percentage of E85 flex-fuel vehicles in their fleets, and wait for the market demand to justify any increased production.

Despite the potential for market growth, investing in E85 equipment upgrades can be a daunting task—from both a financial and logistical perspective. The chemical properties of ethanol pose a significant challenge for retailers looking to add E85 compatible systems to their forecourt. For example, ethanol blends can damage soft metals including aluminum, lead, brass and zinc, as well as affect the functional properties of natural rubber, polyurethane, cork gaskets, leather, polyvinyl chloride nylon, and certain thermoplastic and thermoset polymers. Additionally, as a conductor of electricity, ethanol can cause galvanic corrosion in piping, pumps, tanks and dispensers. Therefore, only ethanol-compatible materials can be used to store and dispense the fuel.

Upgrading the forecourt to offer E85 can be an expensive investment — especially with EMV conversions on the horizon. Depending on site-specific and state code requirements, the cost of installing new or converting existing equipment can vary widely: from a few thousand dollars to install approved dispenser retrofit kits up to hundreds of thousands of dollars to retrofit underground systems.

A retailer who poorly executes an E85 equipment upgrade — or fails to properly maintain it — risks damaging expensive equipment, diminishing customer loyalty, and, ultimately, sacrificing profits. Here are five “best practice” considerations that all retailers should keep in mind if they decide it is right for them to add E85 to their forecourt:

1. For retailers converting existing underground infrastructure, proper preparation of compatible tanks and the entire fuel handling system is essential. In many cases, existing gasoline and diesel storage systems can be used to store ethanol blends. However, E85 will absorb contamination left behind by petroleum. Insufficient tank cleaning can result in tainted E85. Contaminated fuel can affect vehicle performance or, in extreme cases, damage automotive fuel systems, and result in diminished customer loyalty. And, although the AFDC reports that E85 dispenser failures have been rare, when they occurred they were attributed to either poor tank cleaning or failure to use compatible filters, nozzles or hoses.

2. Become familiar with current Underwriters Laboratories and manufacturer standards for E85 equipment to ensure your equipment is operating both safely and according to regulation. Retailers who dispense fuel through equipment that is not properly listed for that fuel risk violating federal and state regulations, as well as tank insurance policies and bank loan covenants, which could result in litigation. Be aware that UL listings only certify that various products meet the UL’s fire safety standards; and that manufacturer assertions of product compatibility with E85 may not necessarily meet all local and state fire codes. Recent UL standards for ethanol equipment include 2586A, 567A, 842A, 87A, 79A, 331A and 25A. In addition, the Alternative Fuels Data Center provides equipment lists denoting ethanol blend compatibility for tank manufacturers, compatibility with ethanol blends for other equipment such as pipes, sumps, vents, and valves, and UL-Certified E25 & E85 Fuel Dispensing Equipment.

3. Be sure installation technicians use thread sealant designed for E85 on any and all threaded mechanical joints throughout the entire fuel system. In addition to utilizing piping and storage tanks that can withstand the corrosive properties of ethanol blends, it is essential to use a thread sealant engineered for E85. A pipe dope that is not specified for E85 is likely to degrade, making the infrastructure susceptible to leaks. A Teflon-based pipe thread sealant will provide corrosion protection for black-iron and galvanized pipe. It is critical that the proper thread sealant be used not only on externally visible and easily accessible mechanical joints such as nozzles, hoses and dispenser fittings, but also on mechanical joints throughout the entire fuel system, such as pipe fittings that are underground or buried.

4. Update blender pump control systems as the spec for E85 varies. Just as gasoline and diesel are adjusted for seasonal and geographic variances, E85, which can contain anywhere from 51 to 83% ethanol, is adjusted to address temperature differentials to ensure performance. Fuel retailers who fail to update blender pump control systems when the fuel spec changes risk distributing fuel that is not meeting American Society for Testing and Materials (ASTM) international standards.

5. Deploy an E85 dispenser filter as a last line of defense. A quality dispenser filter that is regularly maintained will help prevent possible contaminants from reaching customers’ fuel tanks. The U.S. Department of Energy’s “Handbook for Handling, Storing and Dispensing E85 and Other Ethanol-Gasoline Blends” issues the following guideline for E85 dispenser pumps: E85 and blender pump dispensers require filters with a nominal rating of 50% for particles 5 microns or larger and an absolute rating of 99% for particles 10 microns or larger.

The E85 market has been on the precipice of growth for the last decade and some retailers may be intimidated by the prospect of infrastructure upgrades. But with C-stores realizing record profits in 2014, now may be a fortuitous time to make capital investments. Experienced equipment suppliers can not only help retailers analyze the compatibility of their current infrastructure, they can provide cost-effective equipment and installation recommendations that will fit into their operation’s overall plans.

With fuel sales spurring purchases inside C-stores at convenience stores across the country, stations offering E85 position themselves to attract new customers and, ultimately, drive profits. Fuel retailers who partner with a trusted fuel equipment adviser and follow best practices for installing E85 equipment will align their operations to not only capture revenue from the growing E85 market segment, but maximize their return on investment.

Source_JoeO'Brien2Joe O’Brien is Vice President of Marketing at Source™ North America Corporation. He has more than 20 years experience in the petroleum equipment fuel industry. Contact him at jobrien@sourcena.com.