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Economist'Blending wall' stands in way of ethanol growth

Agriculture.com Staff 12/29/2008 @ 10:48am

Ethanol production opened the door to the renewable fuels industry. The industry now must get past an imposing wall of federal regulations and market conditions if it hopes to grow, says a Purdue University agricultural economist in a university report.

"The ethanol industry is now faced with what is called a 'blending wall,'" says Wally Tyner, an energy policy specialist. "The ethanol industry will not and cannot grow with the blending wall in place. That means we won't have cellulosic ethanol and the demand for corn for ethanol will be limited unless the blending wall is somehow changed or we find a way around it."

Unless the barrier is removed, ethanol production could level off by 2010, Tyner says.

The blending wall refers to the amount of ethanol gasoline companies are permitted to blend with petroleum-based fuel. Federal standards set the amount at 10% of gasoline consumption.

"As a nation we consume about 140 billion gallons of gasoline a year," Tyner says. "So if we blended ethanol with every single drop of gasoline we consume, the maximum amount of ethanol blended would be 14 billion gallons a year. But for a number of reasons we can't blend ethanol with every drop of gasoline. Our effective blending wall is actually about 12 billion gallons, or 9%.

"We're not at 12 billion gallons yet, but we'll be there in 2009 or 2010. When we hit that blending wall, the Environmental Protection Agency cannot require gasoline companies to blend more ethanol than they are legally permitted to blend."

Several factors prevent the ethanol industry from breaking through the blending wall, Tyner says.

For starters, there are too few cars and trucks on the nation's roads capable of running on any gasoline with an ethanol blend higher than 10%, or what is commonly called E10, Tyner says. A huge gap exists between the E10 fleet and flex-fuel vehicles that run on E85 -- an 85/15 ethanol to gasoline blend, he says.

"Only about 7 million of our nation's 300-plus million cars are E85 flex-fuel vehicles," Tyner says. "Also, we have just 1,700 fuel pumps in the entire country that can dispense E85, and most of those are in the Midwest. All of the E85 that's marketed nationwide could be produced by one ethanol plant."

Some in the ethanol industry have proposed that E10 be replaced by an E15 or E20 blend, thereby increasing ethanol use. However, automobile manufacturers do not believe today's E10 vehicles can run on a higher ethanol blend, Tyner says.

"Because the automobile fleet in the United States turns over about every 14 years, it would take some time before E15 or E20 cars would be as common as E10 are now," he says.

Ethanol production growth also is held back by environmental and infrastructure factors, Tyner says.

"In the South during the warm summer months, the vapor pressure of ethanol blends is higher than conventional gasoline," he says. "That causes more evaporative emissions and means the blended fuel does not meet Environmental Protection Agency evaporative emission standards.

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