Vehicles and E85 Stations Needed to Achieve Ethanol Goals

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Vehicles and E85 Stations Needed to Achieve Ethanol Goals

Greene, David L.

An analysis of the number of stations and vehicles necessary to achieve future goals for sales of ethanol fuel (E85) is presented. Issues related to the supply of ethanol, which may turn out to be of even greater concern, are not analyzed here. A model of consumers’ decisions to purchase E85 versus gasoline based on prices, availability, and refueling frequency is derived, and preliminary results for 2010, 2017, and 2030 consistent with the president's 2007 biofuels program goals are presented. A limited sensitivity analysis is carried out to indicate key uncertainties in the trade-off between the number of stations and fuels. The analysis indicates that to meet a 2017 goal of 26 billion gallons of E85 sold, on the order of 30% to 80% of all stations may need to offer E85 and that 125 to 200 million flexible-fuel vehicles (FFVs) may need to be on the road, even if oil prices remain high. These conclusions are tentative for three reasons: there is considerable uncertainty about key parameter values, such as the price elasticity of choice between E85 and gasoline; the future prices of E85 and gasoline are uncertain; and the method of analysis used is highly aggregated—it does not consider the potential benefits of regional strategies or the possible existence of market segments predisposed to purchase E85. Nonetheless, the preliminary results indicate that the 2017 biofuels program goals are ambitious and will require a massive effort to produce enough FFVs and ensure widespread availability of E85.