E-Zero – ethanol-free gas, has been popular with boaters, but here comes isobutanol, with Gevo leading the pack.
Are the economics a slam-dunk? Here’s the hard data.
One of the more interesting trends in recent years has been the rise of ethanol-free gasoline.
Overall, Pure-gas.com reports 9915 stations offering ethanol-free gas in the US and Canada although it is a crowd-sourced site and may have missed stations adding or dropping E0 fuels. The site does not include stations in Alaska because “all gasoline is ethanol-free.” 314 of those are in Canada.
That’s around three times the number of stations offering high-ethanol blends such as E85, despite the inducements that emerge under the Renewable Fuel Standard for high-ethanol blends, especially as the US reaches the E10 saturation point and RIN prices rise, as they are designed to do to provide “blend-wall busting” incentives.
In many cases, customers are looking for ethanol free gasoline for a “boat, truck, RV, plane, farm equipment, snowblower, hotrod or motorcycle”, based on concerns over corrosion, engine wear, and performance of E10 in boat engines and outdoor power equipment.
Isobutanol makes a move
In that context, along comes news this week that Harbor Marina, at Lake Pomme de Terre in Missouri, has become the first U.S. marina to sell gasoline blended with Gevo’s (GEVO) renewable isobutanol at the pump. Harbor Marina owner Todd Spencer said he made the decision to offer isobutanol-blended gasoline to his recreational boating customers once he concluded that it would be a superior renewable fuel for their boats.
Oil and Octane Shop of Springfield, Missouri enabled testing of Gevo’s isobutanol by supplying test blends to major marine engine manufacturers, such as Mercury Marine. Following the success of these tests, Oil and Octane Shop has been recommending the use of isobutanol to its marina customers, including Harbor Marina.
“My fuel supplier introduced me to the idea of blending Gevo’s renewable isobutanol with the straight, ethanol-free gasoline my marina was previously offering,” Spencer said. “At Harbor Marina, we pride ourselves on providing the best in entertainment, food and beverages – and now we can add: the best-in-marine fuel.”
The move by Gevo into boating fuels follows a decision last June by the National Marine Manufacturers Association to officially endorse isobutanol as a drop-in fuel for marine and recreational boat engines. The fuel is moisture resistant, does not cause phase separation and helps reduce engine corrosion. thereby addressing concerns that many boaters have with ethanol-blended fuels.
It’s early days, but certainly there’s a market in the “ethanol-free” world, and Gevo has certainly targeted marine, outdoor equipment and off-road vehicle markets, and we’ll see how that roll-out goes.
The Deep Dive
We take you through the data in The Digest’s 2015 8-Slide Guide
to renewable marine fuels, which is right here.
Some price background: E10 vs E0
Perhaps the most fascinating stat in this growing market is the pricing. E85prices.com reports the national E85 price average at $1.93, E10 at $2.30, and E0 averaging $2.88. Looking at E10 and E0, we don’t know yet whether that E0 price would be available for an (ethanol-free) isobutanol blend with gasoline, but it could be a substantial premium market for isobutanol.
A price case for $5.00 per gallon isobutanol
For example, a $5.00 per gallon (wholesale) isobutanol fuel blended at 12.5 percent adds 47.8 cents to the hard cost of a gallon of fuel, compared to using $1.468 ethanol (today’s CBOT September ethanol futures contract price). At the same time, there’s a 5.6 cent gain in the RIN value in the fuel (slightly higher blend, higher RIN value for advanced biofuels and more energy density). So, you net out with a $0.42 premium in this scenario or $2.72 for B12.5. That’s less than the $2.88 average for E0.
In a nutshell, you have the answer to the age-old question in renewables: why sell a $2 fuel when you can sell a $5 chemical? Answer, sell a $5 fuel, and be happy that you don’t have to meet the exacting green chemistry performance spec.
The two-stroke market
There’s ample evidence elsewhere on premium pricing available for other ethanol-free alternatives. Consider, for example, the pricing on two-stroke gas/oil mix, optimized for leaf blowers and other equipment of that type.
TruFuel is selling at chainsawsdirect.com for $27.95 today, per 1.5 gallon pack, or $18.63 per gallon, and ChainSawsDirect will tell you straight out the rationale: Ethanol Free, High Octane fuel. There are other benefits in lubricity, such as the blend with synthetic oil, and there’s the 2-year shelf-life from gas in a can. But we see right away in the marketing pitch that there’s a perceived advantage for ethanol-free fuel in this sector.
How big is the addressable market?
Well, that gets tricky; there doesn’t seem to be an easy-to-find stat on how much fuel is used by powerboats, much less all outdoor uses where there’s a market for ethanol-free fuel.
But we know it’s big. The 2011 Recreational Boating Survey found 10.11 million power boats in the US. 70% of them were operated in the past year, and an average of 75 hours of operation and an average of 100 horsepower in the engine. Boating Magazine advises a rule of thumb of 0.5 pounds of fuel per HP per hour, without taking into account boat drag., sea conditions and so on. Putting all those together, we came up with a 4.4 billion gallon addressable market for powerboats. We’d be guessing at fuel sales for home-based outdoor power equipment, but there’s additional market available.
Now, addressable is one thing, sales are quite another. But, there’s some heft in this sector when mapped against Gevo’s capacity and any capacity Butamax might develop. And, ample evidence of an ethanol-free premium that isobutanol, if well-positioned, might capture some of, or even all of.
Marinas, and stations near the water, that’s probably where you’ll see your friendly Gevo rep in the upcoming months.