Under the RFS, ethanol consumption for 2016 is set at 15 billion gallons. However, in its proposal this year, the EPA has set 14 billion gallons for ethanol consumption in 2015. The reason for this has something to do with the EPA's fixation on the oil industry's fictitious 10 percent "blend wall."
According to CARD's latest study, E10 consumption for 2016 is estimated at 13.7 billion gallons which means another 300 million gallons will have to be consumed as E15 and E85 to meet the 14 billion gallon target. Since E15 availability is still limited, the study looks at potential E85 usage to not only meet the EPA's target, but the original target of 15 billion gallons.
Here are quick takeaways from the study:
- The EPA believes E85 usage can be as high as 600 million gallons next year if E85 is priced favorably. This would bring the total ethanol consumption to 14.3 billion gallons.
- The cost-per-mile for E85 and E10 are the same when E85 is priced 22 percent less than E10
- However, the study's authors believe that under favorable pricing, E85 usage could increase ethanol consumption by 1 billion gallons.
- E85 sales would amount to 250 million gallons if it was priced at the same level as E10.
- E85 sales would increase ethanol consumption by 1 billion gallons in metro areas of the US if E85 was priced at 23 percent lower than E10.
- E85 prices can be attractive to consumers if it reflects RIN prices.
- With each 5 percent drop in the price of E85, its market penetration increases by 2.5 percent.
- If 30 percent (5.4 million) of the flex-fuel vehicles (FFVs) were to use E85 all year, 2.1 billion gallons of ethanol would be consumed annually.
- The study was based on estimates of E85 usage in metro areas and that no new E85 stations are installed.
- The Twin Cities were among the metro areas included in the study's estimates.
- In one metro area where there was one E85 station for every 2,070 FFVs, the market share of E85 exceeded 15 percent (as long as as E85 pricing was favorable).
- More E85 stations are needed to increase E85 usage.