Despite the recent widening of ethanol’s discount to gasoline — a trend that could potentially provide a long-awaited boost for E85 and other higher ethanol blends — San Diego-based Pearson Fuels co-founder Mike Lewis said he prefers to look at the big picture rather than day-to-day changes.
Front-month ethanol futures on the Chicago Board of Trade will likely settle January at a discount to RBOB gasoline futures of more than 50cts for the first time since June 2015. That gap should provide breathing room for E85 retailers to offer the fuel to consumers at a significant enough discount to boost sales.
Lewis, however, said the key is providing the option to consumers. It’s an approach that has worked well for Pearson Fuels since the company installed the first E85 site on the West Coast in 2003 in San Diego.
It was slow going in the early years, but thanks to a boost from grants from the California Energy Commission (CEC), Pearson Fuels has seen steady growth over the past five years.
In 2017, the company said it saw tremendous growth in E85 sales, with its top-12 sales months all coming last year, including 11 straight months of one new record after another. E85 sales at Pearson’s locations jumped 56% from 2016 to 2017.
The key has been steady growth in retail sites that offer E85.
Pearson Fuels currently supplies 86 retail sites and 26 government locations for a total of 112 sites. With 31 more sites under construction and several others on the drawing board, Lewis projects the company will have more than 150 sites
by the end of 2018.
Lewis said Pearson Fuels has set a conservative goal of a 35% increase in total E85 sales in 2018. California Air Resources (CARB) data shows E85 sales nearly tripled from 6.48 million gal in 2012 to 18.68 million gal in 2016.
Lewis said Pearson Fuels has accounted for more than half of the state’s E85 sales, with locations peppered across both Southern and Northern California. Last year, Pearson Fuels developed a smart phone app where consumers can find E85 sites and prices provided by GasBuddy.com.
Lewis said that at a majority of Pearson Fuels’ retail locations, E85 sales top that of midgrade and premium gasoline offerings combined. In many locations, E85 sales top diesel sales.
“You always hear about how E85 doesn’t work and consumers don’t want it, but we’re proving that wrong,” Lewis said. “It does work especially since California’s policy structure really helps E85.”
The key is offering the E85 at a price that makes sense for the consumer, Lewis said. Under Pearson Fuels’ structure, the company sells the blends to the retailer at a wholesale price that takes into account the price of gasoline, ethanol, freight, taxes, Low Carbon Fuel Standard (LCFS) credits, Renewable Identification Number (RINs) credits and other factors. The retailer then sets the price at a level of his choosing.
Pearson Fuels has a partnership with Zeeland Farm Services and its Nebraska Corn Processing ethanol plant, which serves as the primary supplier.
In a state that is increasingly focusing on the growth of its electric vehicle (EV) fleet, Lewis said he remains extremely bullish on E85’s potential in the coming decade.
“You hear a lot about EVs, but biofuels, in general, are truly the engine that fuels the state of California under the LCFS,” Lewis said. “The stars are aligning better and better for E85.”
–Jordan Godwin, email@example.com
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