What's the Alternative?

As chicken-and-egg dilemma challenges growth, alternative fuels try to find a foothold.

By
Samantha Oller, Senior Editor/Special Projects Coordinator

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“You can discount E85 on a BTU basis to compensate for the mileage penalty, but you’ve got to go further than that and compensate them on the convenience factor,” says Eichberger. “We’re all about quick in, quick out, serve the customer when they want to be served. You double or increase by 30% their visits to c-stores to fill up the car, and they’re not happy. And they’re going to reject it.”

This same convenience conundrum is tripping up electric in the c-store channel. Kwik Trip has 70 free EV charging stations in its network, but their use is “very low level,” Hirschboeck says.

“We’re at a point where we need a bump in technology,” he says. “For a c-store, our average in and out time is probably 5 minutes per customer. The customer comes in, gets what they need and then wants to move on. To offer parking stalls requiring 30 to 40 minutes or an hour to charge your vehicle is really counterintuitive to what the customer is looking for.”

For Eichberger, any alternative fuel that requires special handling or does not deliver the expected convenience experience faces an immediate disadvantage.
The “magic bullet,” he believes, is a drop-in fuel that can substitute for petroleum and go straight into the pipeline, storage tanks, dispensers and cars, as a mix with regular unleaded or pure—“whichever the market is ready for.”

“If you have an alternative or synthetic gas that looks, feels, performs and has the same fueling experience as traditional fuels, the consumer will accept it, and chances are if we can sell it for less, the consumer will demand it.”

Eichberger cites as an example E10 vs. E15 and E85. E10 offers a seamless fueling experience for the consumer and no special handling for the retailer or distributor, other than an inability to be transported via pipeline. “With E15, you have to know what car you’re in, and does your auto manufacturer support it or not,” he explains. “E85 needs a special vehicle. We’ve got to get away from that.”

There are a few promising future drop-in fuels. Butanol is an alternative to ethanol that offers an energy profile that is very close to gasoline; it avoids the greatly reduced mileage and can be blended at a greater percentage than ethanol into gasoline, and it does not require special storage or transportation. The butanol industry is working with the EPA on regulatory permission to allow blending.

Then there is “green crude,” or renewable crude oil derived from algae, which also can move within the existing fuel infrastructure and be refined into gasoline, diesel and jet fuel. In March, Tesoro Refining & Marketing Co. sealed a deal to buy green crude from Sapphire Energy Inc., which it plans to make into off-road diesel fuel.

The key is scale. While Sapphire, for example, aims to eventually produce 1.5 million barrels of green crude per year, today it generates a little more than 700 barrels. It will supply two barrels per day (bpd) to Tesoro, whose seven refineries combined churn out 675,000 bpd.

“They’re not buying a lot,” Eichberger concedes, “but they are taking oil from algae production and putting it straight into refineries. That’s a pretty good opportunity if we can scale it up.”

Ultimately, scale and price competitiveness will be essential in determining whether an alternative fuel becomes more mainstream. 

“When gas prices reach a certain point, consumers will be much more open to consider an alternative, even if it means inconvenient fueling for a while,” says Hurst of Navigant.

“My advice, if you’re looking at a fuel product, is just check all the boxes,” says Eichberger, who anticipates natural gas will enjoy the greatest growth in the next 24 months, especially if prices remain low compared to gasoline and diesel. “Make sure all the equipment is compatible, know who the market is, and comply with applicable laws and regulations.” 

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