USDA Invests $100M in Renewable Fuel Pumps: The Deep Dive into Who Got What, and How the Landscape Shifts

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September 14, 2015

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by Jim Lane (Biofuels Digest) USDA announces state finalists for the Biofuel Infrastructure Partnership. Will it move the needle? The Digest investigates. In Washington, US Agriculture Secretary Tom Vilsack announced that 21 states will receive grants through the Biofuel Infrastructure Partnership (BIP) to add infrastructure needed to supply more renewable fuel to America’s drivers.

Since announcing the program in May 2015, the U.S. Department of Agriculture’s Farm Service Agency received applications requesting over $130 million, outpacing the $100 million that is available. With a more than 1:1 match from private and state resources, USDA estimates that the BIP grants will support a projected 4,880 pumps at more than 1,400 fueling stations across the country.

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BIP funds from the Commodity Credit Corporation must be used to pay a portion of the costs related to the installation of fuel pumps and related infrastructure dedicated to the distribution of higher ethanol blends, for example E15 and E85, at vehicle fueling locations. The matching contributions may be used for these items or for related costs such as additional infrastructure to support pumps, marketing, education, data collection, program evaluation and administrative costs. ...

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One caveat before we break out the bubbly

These are grants to states, not grants for specific installations of pumps at stations that have agreed to do it. As Ron Lamberty at the American Coalition for Ethanol observed, “We will do all we can to make fuel marketers aware of these funds and help them obtain what they need to make E15 and flex fuels available at their stations.” Note the remark about building “awareness” of the grants among fuel marketers.

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We’re frankly not quite sure, here in Digestville, why there’s an average of 3.48 pumps per station in this project — a number of renewable fuel advocates have been emphasizing getting at least one pump into as many outlets as possible, especially for E85 and other high-blends.

So, this is something completely different — more like adding an E15 option alongside the “normal” 87-89-91 octane options that feature E10 ethanol blends.

So, we’re looking at adding E15 at approximately 1400 stations, or 1.23% of total US fuel outlets. With the USDA tipping that matching grants are in approximately a 1:1 ratio, we’re looking at a conversion cost per pump of $40,984 and a per station cost of $142,857.

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Given the trivial cost of some station conversions where existing dispensers can be used and what is needed is essentially a signage change, for $1200 — we are looking at either a case where actual conversion costs are coming in for many stations at around the figures cited by the American Petroeum Institute. Or, there are fewer “low-cost, easy conversions” than once hoped. Or, states are spending money on funding the drapery in state offices instead of putting money on the street.

How much renewable fuel will this move?

It’s early days for E15, but Growth Energy touted E15 sales of 1660 gallons per month per station. If this holds up, we’re looking at 1.39 million gallons in additional renewable fuel content from this $200 million program,. Amortizing the cost over 10 years, per station, it comes to an added infrastructure cost of $14.39 per gallon, per year.

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ACE Senior Vice President Ron Lamberty said: “Secretary Vilsack has worked tirelessly to see that his vision of 10,000 blender pumps across the nation becomes reality, and the Biofuels Infrastructure Partnership is another great example of his commitment to expanding markets for farmers’ products,” Lamberty said.

“BIP is a matching grant program, which means USDA also challenged states and ethanol supporters to step up and make equal or greater amounts of infrastructure funding available to station owners. The intended result is nearly a quarter of a billion dollars petroleum marketers can use to buy equipment and offer more ethanol blends to consumers. In many cases, station owners will pay little or nothing to add state-of-the-art blender dispensers and other equipment they may need to sell flex fuels and E15. We encourage retailers to apply for funding assistance through the appropriate state agencies.”

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There’s good news, bad news, and news for thoughtful observers who want change, but not at any cost.

The bad news we’ve dwelled on above — the installation cost may be quite high compared to results, and in any case the program, although a strong first move, needs to be continued in order to “move the needle” on more renewable fuels.

The good news? All gallons of affordable low-carbon fuels are steps forward for a low-carbon society.

The thoughtful news? In each of these cases, it’s a cautionary tale on the cost of infrastructure change that should, rather than discourage friends of biofuels, rather encourage them.

The cost of infrastructure change is something that affects all alternatives, and one of the very reasosn many nations focus on biofuels is because of the daunting costs and timelines associated with converting to other renewables. READ MORE and MORE / MORE (Ethanol Producer Magazine) and MORE (WTHR/Associated Press) and MORE (Washington Times) and MORE (North Dakota Governor's Office) and MORE (Indiana Public Media) and MORE (Wisconsin Ag Connection) and MORE (Trade Only Today) and MORE (AgWeek) and MORE (Washington Times/Associated Press) and MORE (Grand Forks Herald) and MORE (Brownfield Ag News) and MORE (Iowa Corn Growers Association)

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Richard Figueroa September 28, 2015 22:13

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