Substantial Growth in Iowa Sales of Higher Ethanol Blends in 2017
By S. Patricia Batres-Marquez
Decision Innovation Solutions
Iowa is the number one ethanol producer in the country with 43 ethanol refineries and an annual existing production capacity of 4.2 billion gallons, plus an additional 120 million gallons of production capacity reported under construction at the end of 2017 (RFA, 2018). In 2017, Iowa’s ethanol plants produced a record volume of 4.2 billion gallons, increasing 2.4 percent from the previous year (4.1 billion gallons). Annual ethanol production data up to 2017 at the national level is available (Bioenergy Statistics, USDA-ERS); however, at the state level data is available up to 2015. Iowa’s historical share of U.S. total ethanol production from 2010 to 2015 (26.8 percent) was applied to 2016 and 2017 U.S. ethanol production to estimate Iowa’s production during those two years.
The Renewable Fuel Standard (RFS), a federal program that mandates the blending of biofuels into the U.S. fuel supply, has encouraged the development of the ethanol industry. At the state level, Iowa’s General Assembly authorized House File 2754 in 2006, which established the goal that 25% of all petroleum used in the formulation of gasoline in Iowa be replaced by biofuels by 2020. This legislation continues supporting ethanol production in Iowa through several tax credits (see AgMRC, May 2017). In addition, on May 2, 2018, the Iowa Legislature (Senate File 2414) approved $3.0 million for another year of funding for the Iowa Renewable Fuels Infrastructure program (RFIP). Signing of this legislation is currently under consideration by Iowa Governor Reynolds. These funds would be available for the 2018-19 fiscal year. RFIP allows more Iowa consumers to have access to higher biofuel blends such as E15 and E85 by providing cost-share dollars to Iowa fuel retailers to install blender pumps to offer higher-blend ethanol and biodiesel. RFIP provides up to 70% of the installation costs, up to a maximum of $50,000 per project, with a five-year commitment to sell E15, E85 or biodiesel blends.
Iowa E10 Sales in 2017
Based on Iowa Department of Revenue (IDR) data published in the Motor Fuel Monthly Reports in 2017, rack level sales of E10 (gasoline blended with 10 percent ethanol) reached a volume of 1.153 billion gallons, which was about the same as the previous year (1.151 billion gallons) (see Figure 1). The monthly data also shows gasoline sales stayed roughly equal to last year at 616 million gallons. E10 accounted for 65 percent of taxable gallons of motor fuel. The monthly average ethanol share of total gallons of motor fuel sold in Iowa was about 73 percent from January 2005 to May 2015, but since then, this share has fallen to about 64 percent due to changes in the way taxable gallons are reported by suppliers. Annual gallons sold at the rack level estimated from the monthly data included the months of February of one year to January of the following year, as the Motor Fuel Monthly Reports reflect fuel sales made during the previous month.
IDR’s 2018 edition of Retail Motor Gallons Annual Report indicated the annual volume of E10 sold in Iowa at the retail level was down 2.6 percent to 1.315 billion gallons in 2017, compared with 2016, as sales of other blends increased. E10 monthly wholesale data converted to annual data and retail annual data reflect a difference of about 162 million gallons in the 2017 sales. This difference indicates the blending occurring from the terminal to the final consumer. Due to changes in the way rack level data was reported by suppliers, the gap between wholesale and retail data rose in 2015 (see Figure 2).
Figure 1. Iowa Rack Level Monthly Taxable Gasoline, Ethanol Blended Gasoline (E10), and Percent Ethanol Blended
Figure 2. Iowa E10 Annual Rack and Retail Level Sales
Iowa Sales of Higher Ethanol Blends in 2017
Most gasoline in the United States is sold as E10. Motor gasoline with more than 10% fuel ethanol content is mainly sold in the Midwest where most ethanol production takes place. 2017 Iowa sales of higher ethanol-gasoline blends experienced a substantial increase year-over-year, particularly sales of E15 (15 percent ethanol and 85 percent gasoline) and E85 (70 to 85 percent ethanol blend).
Registered E15 Sales
IDR’s 2018 Retail Motor Gallons Annual Report indicates registered E15 sales in Iowa were up 427 percent to 26.082 million gallons in 2017 compared with the previous year (4.951 million gallons) (see Figure 3). Registered E15 blend is sold by retailers that have registered with the U.S. Environmental Protection Agency (EPA) to sell E15 to all 2001 and newer vehicles (non-flex fuel vehicles) and in all flex fuel vehicles. From June 1 through September 15, retailers cannot sell registered E15 due to restrictions. At the time EPA allowed E15 for use in 2001 and newer vehicles, it did not approve the same vapor pressure waiver as E10. So as of now, retailers can only continue to sell registered E15 during these summer months if they use low volatile gasoline for blending, which is not piped into Iowa. Registered retailers can only sell E15 as a flex fuel E15 (15% to 19% ethanol, E15 flex) during this period.
Information from the Iowa Renewable Fuels Association (IRFA, 2018) indicates there are currently 158 refueling E15 sites in Iowa.
Flex Fuel E15 and E20 Sales
2017 Iowa sales of flex fuel E15 were equal to 1.626 million gallons. Flex Fuel E15 includes gallons sold by retailers through a blender pump at any time during the year. In addition, sales in Iowa of ethanol blended gasoline with 20 percent to 69 percent ethanol (E20) totaled 1.2 million gallons during 2017, down 61.2 percent from the volume sold in 2016.
Figure 3. Iowa Annual Sales of E15, E20, and E85 (Retail Level)
IDR’s 2018 Retail Motor Gallons Annual Report shows Iowa E85 sales grew 52.7 percent to 20.571 million gallons in 2017 relative to 2016 (13.472 million gallons) (see Figure 3). In 2017 there was a difference of 13.2 million gallons between E85 rack level sales (7.381 million gallons) and E85 retail sales (20.571 million gallons) in Iowa. This difference was almost twice as much as in the previous year (7.5 million gallons) (see Figure 4). This indicates more E85 blending occurred from the terminal to the final consumer in 2017 than in 2016.
E85 requires dedicated pumps and is for flexible fuel vehicles (FFVs) only. FFVs have been designed to run on any ethanol blend up to 85 percent ethanol. Consumer awareness of the type of vehicles they drive helps to increase sales of E85. Information from the U.S. Energy Department (May 2018) indicates because FFVs are factory made and can operate on gasoline and ethanol-gasoline blends, many vehicle owners do not realize their car is an FFV and they may have a choice of fuel. The U.S. Department of Energy also indicates that at the national level there are more than 20 million FFVs. According to the IRFA, currently about 300,000 FFVs are owned by Iowa motorists and the state has 258 E85 fueling stations (IRFA).
Figure 4. Iowa E85 Annual Rack and Retail Level Sales
IDR’s annual data also shows gasoline (non-ethanol, E0) sales in Iowa declined by 8.8 percent (19.2 million gallons) to 199.380 million gallons in 2017 compared with 2016 (218.582 million gallons) (see Figure 5). There are differences between the rack and retail levels of gasoline sales, indicating there were more gallons of E0 sold at the rack level than at the retail level (i.e., more gallons of E10 were available at the rack level that were not sold at the retail level). These differences result from the increased downstream E0 mixed with ethanol to produce the different blends sold at the retail level, and because of the incomplete reporting at the retail level. According to the IDR’s annual report, IDR identified 2,367 potential retail locations at which fuel may have been sold at retail during 2017. However, IDR received webform reports, paper forms, or electronic files from 2,079 retail locations, representing a response rate of 87.8 percent, which was down from 91.8 percent in 2016.
In addition, sales of total ethanol-gasoline blends (E10, registered E15, flex fuel E15, E20, and E85) fell 0.5 percent in 2017 to 1.364 billion gallons from the previous year (1.371 billion gallons) mainly due to the drop in E10 sales (see Figure 5). However, because the decline in E10 sales was accompanied by a substantial increase in sales of higher ethanol-gasoline blends in 2017, pure ethanol usage increased by 3.5 percent (5.105 million gallons, equivalent to 1.823 million bushels of corn) to 152.128 million gallons in 2017 from 2016 (147.024 million gallons) (Figure 6). Overall, 2017 Iowa annual total sales (the sum of E0 and total ethanol-gasoline blends) fell 1.7 percent to 1.563 billion gallons from the volume sold the previous year (1.590 billion gallons) mainly because of the E0 and E10 decline in sales.
As indicated by IDR, together, the five ethanol blends (1.364 billion gallons) represented 87.2 percent of reported total fuel sales during the 2017 year (see Figure 5). E10 sales comprised the largest share (84.1 percent) of total sales. Despite the substantial increase in registered E15 and E85, their shares of total sales were only 1.7 percent and 1.3 percent, correspondingly. Of the 2,053 locations that sold gasoline, 1,999 (97.4%) sold one or more ethanol blend.
Figure 5. Iowa Retail Annual Sales of Ethanol-Gasoline Blends and Gasoline (Non-Ethanol) and Share of Ethanol-Gasoline Blends
Figure 6. Iowa Pure Ethanol Usage in E10, Registered E15, and E85 Blends (Gallons) (2015-2017)
Sales of higher ethanol-gasoline blends in Iowa, particularly E15 and E85, had a successful 2017 year. These two blends experienced record sales compared with previous years. Further approval of RFIP for the 2019 fiscal year, the availability of Iowa retailer tax credits, along with consumers’ growing interest and demand for E15 and E85, will continue to support sales expansions of these ethanol blends in Iowa. In the case of E15, EPA’s vapor pressure requirement for this blend in the summer months is preventing its further increase in sales. It has been reported the current administration has recently agreed to allow E15 sales year-round. Action on the part of the EPA to grant the same waiver as for E10 is required.
On June 1, 2018, Iowa’s Governor signed into law Senate File 2414, which included $3.0 million of funding for Iowa Renewable Fuels Infrastructure program (RFIP) out of the Rebuild Iowa Infrastructure Fund for fiscal year 2019.
Batres-Marquez, S. Patricia. 2018. “Substantial Growth in Iowa Sales of Higher Ethanol Blends in 2017." Renewable Energy Report, Agricultural Marketing Resource Center, Iowa State University. May 2018.