Three highlights show ethanol’s promising future.
By Joe O’Brien
In July 2023, the EPA issued final renewable fuel volume obligations (RVOs) for 2023-2025. The final RVOs were lower than the EPA’s proposed volumes, and as such, this was largely viewed as a setback for conventional renewable fuels.
Yet, there is reason for optimism, particularly for ethanol, which is poised for expansion despite the lean RVOs. Here are three reasons why the staying power of ethanol will likely intensify in the coming years.
- The expansion of sustainable aviation fuel (SAF) took a step forward.
The U.S. Department of Energy reports that aviation greenhouse gases (GHGs) account for up to 12% of U.S. transportation GHG emissions. While long-term solutions for reducing aviation GHGs may eventually include electric and hydrogen-fueled planes, the complete implementation of those technologies is a long way off.
Sustainable aviation fuel (SAF) represents a viable energy form that can be deployed in the near term. To that end, the White House’s Sustainable Aviation Fuel Grand Challenge was established with the goal of producing at least three billion gallons of SAFs by 2030.
As airlines are proving out the feasibility of SAF as a drop-in replacement for fossil-fuel derived jet fuel, the federal government has been taking steps to develop a framework for tax credits that will incentivize the production of SAF. In December the Biden administration said it would recognize the Department of Energy’s greenhouse gases, regulated emissions and energy use in technologies (GREET) model that will enable ethanol-based SAF to qualify for the tax credits.
Critics have voiced skepticism that ethanol alone would lower the GHGs in SAF enough to qualify for the tax credits, and a report prepared for the Air Transport Action Group indicated that current feedstock availability will pose a significant challenge in meeting decarbonization goals. That notwithstanding, new ethanol-to-jet fuel processing technology is showing promise when used in conjunction with cleaner production technologies and sustainable farming practices.
- Sales of E15 are on the rise.
There are strong indications that sales of E15 will swell in 2024.
First, E15 sales have been on an upward trajectory for the past two years. According to data from the Renewable Fuels Association, E15 sales surged in the summer of 2023. Sales volumes from the Minnesota Department of Commerce, which is the only monthly E15 data set available, rose 10 percent compared to sales in the summer of 2022.
Second, in April 2022, eight Midwestern states filed petitions with the EPA requesting the agency remove the 1-psi Reid vapor pressure (RVP) waiver for summer gasoline-ethanol blended fuels. If the EPA agreed, it would enable E15 to be sold year-round in Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin. Additionally, Montana became the 49th state to allow retail sales of E15 (California is the only state that has not approved E15 for retail sale).
After extensive delays, the EPA delivered its final rule to the White House Office of Management and Budget for review at the end of 2023, signaling that the rule could potentially take effect by the 2024 summer driving season. Expanded supply of E15 in the Midwest may set the stage for year-round E15 nationwide.
- Policymakers are pursuing legislation that would create a national high-octane, low-carbon fuel standard.
According to the Renewable Fuels Association, the Next Generation Fuels Act will establish the standard for high-octane (95 RON ramping up to 98 RON) and low-carbon fuels. To meet the standard established in the act, the source of the octane boost must reduce GHG emissions by 40% compared to today’s gasoline.
The bill doesn’t dictate how regulated parties must achieve the higher octane and lower carbon requirements. But presumably, higher ethanol blends could play a significant role in achieving those goals.
If signed into law, the Next Generation Fuels Act would require more efficient high-octane, lower-carbon fuels beginning in 2028.
Conclusion
Although SAF, E15 and a high-octane, low-carbon fuel standard will propel ethanol forward, there are other factors likely to increase ethanol production.
Beyond the national fuel standard, the ethanol industry also stands to gain from state-level clean fuel standards. California, Washington and Oregon have already established their own clean fuel standards, and standards are pending in at least 10 other states.
Furthermore, funding for higher ethanol blends infrastructure continues to flow. The U.S. Department of Agriculture is awarding $450 million in grants through its Higher Blends Infrastructure Incentive Program (HBIIP), with application windows scheduled through Sept. 30, 2024.
And while ample policy support is certainly a contributing factor toward ethanol’s success, the fact that this fuel enjoys bipartisan support may be the single greatest thing going for the fuel amid today’s political climate.
Joe O’Brien is vice president of marketing at Source North America Corporation. He has more than 25 years of experience in the petroleum equipment fuel industry. Contact him at [email protected] or visit sourcena.com to learn more.
