‹ Analysis & Projections

Annual Energy Outlook 2011

Release Date: April 26, 2011   |  Next Early Release Date: January 23, 2012  |   Report Number: DOE/EIA-0383(2011)

Legislation and regulations

6. EPA approval of E15 waiver

In October 2010, the EPA approved a waiver for the use of motor gasoline blends containing up to 15 percent ethanol (E15) in MY 2007 and newer vehicles-an increase over the 10-percent ethanol limit (E10) set in 1978 [38]. In January 2011, the EPA extended the waiver to vehicles manufactured in years 2001-2006 [39]. That change was incorporated in the modeling for AEO2011.

Although the EPA's January 2011 ruling will allow the use of E15 blend in approximately 60 percent of the current vehicle fleet, there are issues that may limit its widespread adoption:

  • Retailers must justify the significant costs of upgrading pumps and storage tanks while weighing the prospects for increased liability and uncertain consumer acceptance. Because the majority of U.S. service stations are "pay at the pump," there is concern about potential liability for engine damage resulting from consumer misfueling in motor vehicles not approved for E15 use, as well as in small engine applications. In addition, much of the retail outlet infrastructure for blends containing more than 10 percent ethanol lacks Underwriter Laboratory certification, creating concerns about the costs of any equipment malfunctions.
  • In addition to liability issues, infrastructure costs in the form of blender pumps and additional storage tanks could deter retailers from choosing to offer a higher ethanol blend. Most service stations use two storage tanks, one containing a regular E10 blend and the other a premium blend. Adding a higher E15 blend could force service station owners either to add an additional tank and modified pumps or to stop offering E10 gasoline blends or profitable premium-grade fuels.
  • Retailers may be unwilling to commit to E15 in the short term, because consumer acceptance is uncertain. Warning labels about possible engine damage could dampen consumer demand, despite educational efforts.

To examine the potential impacts of high and low penetration of E15 fuel in retail markets, two sensitivity cases were compared with the AEO2011 Reference case. In the High E15 case, ethanol blending above 10 percent occurs earlier in the projection and increases more rapidly than in the Reference case. The High E15 case also assumes that any State which currently has laws or regulations prohibiting ethanol blends above 10 percent or oxygenate content in excess of 3.5 percent will remove those restrictions by 2015. As a result, ethanol use for gasoline blending increases to 18.1 billion gallons in 2015, compared with 15.8 billion gallons in the Reference case, and to 21.2 billion gallons in 2020, compared with 17.8 billion gallons in the Reference case.

Most of the additional ethanol needed to meet increased demand in the High E15 case is corn ethanol produced domestically,with cellulosic ethanol and imported ethanol beginning to make larger contributions after 2020. Ethanol blending increases to 14.5 percent of the motor gasoline pool in 2020-compared with 12.4 percent in the Reference case-and to 14.8 percent in 2035.

In the Low E15 case, the results are similar to those in the Reference case, and many of the infrastructure and regulatory barriers reflected in the Reference case govern the dynamics in the Low E15 case. Ethanol blending in the Low E15 case never rises above 11.5 percent of the motor gasoline pool and is 11.4 percent in 2035. Total ethanol supply in 2020 is almost 2 billion gallons less than in the Reference case, but with E85 consumption increasing at a faster rate after 2020, it reaches levels similar to those in the Reference case. In 2035, E85 use in the Low E15 case totals about 12 billion gallons, or 2 billion gallons more than in the Reference case. In both cases, total ethanol supply in 2035 is approximately 28 billion gallons.

Rapid increases in E85 consumption in the Reference, High E15, and Low E15 cases indicate the importance for ethanol producers of E85 availability after the motor gasoline blending pool has been saturated, even with an increase to a 15-percent limit for ethanol blends. Growth in E85 consumption is affected by the level of demand for ethanol in gasoline blends, particularly in the High E15 case. Because most of the growth in ethanol use for blending occurs in the near term in the High E15 case, growth in E85 use begins later (in 2024) than in the Reference and Low E15 cases (2016).

While more ethanol blended into gasoline reduces its energy content and often the miles per gallon of the vehicle using it, AEO2011 assumes that only E85 will be priced at a discount for its lower energy content. E10 and E15 are assumed to compete for demand on price alone. Nevertheless, the ability to switch out volumes of E85 with E15 can be expected to affect gasoline pricing. When E15 penetration is high, gasoline prices are lower, because more of the less expensive blend stock (ethanol) is used. In addition, there is less need to encourage E85 demand by subsidizing infrastructure cost and E85 prices with higher gasoline prices. With low penetration the opposite is true: gasoline prices are higher, because more cost recovery is needed for E85 marketing and infrastructure, and less ethanol is available for blending.

Reference Case Tables
Table 2. Energy Consumption by Sector and Source - United States XLS
Table 2.1. Energy Consumption by Sector and Source - New England XLS
Table 2.2. Energy Consumption by Sector and Source - Middle Atlantic XLS
Table 2.3. Energy Consumption by Sector and Source - East North Central XLS
Table 2.4. Energy Consumption by Sector and Source - West North Central XLS
Table 2.5. Energy Consumption by Sector and Source - South Atlantic XLS
Table 2.6. Energy Consumption by Sector and Source - East South Central XLS
Table 2.7. Energy Consumption by Sector and Source - West South Central XLS
Table 2.8. Energy Consumption by Sector and Source - Mountain XLS
Table 2.9. Energy Consumption by Sector and Source - Pacific XLS
Table 7. Transportation Sector Key Indicators and Delivered Energy Consumption XLS
Table 17. Renewable Energy Consumption by Sector and Source XLS
Table 18. Carbon Dioxide Emissions by Sector and Source - United States XLS
Table 18.1. Carbon Dioxide Emissions by Sector and Source - New England XLS
Table 18.2. Carbon Dioxide Emissions by Sector and Source - Middle Atlantic XLS
Table 18.3. Carbon Dioxide Emissions by Sector and Source - East North Central XLS
Table 18.4. Carbon Dioxide Emissions by Sector and Source - West North Central XLS
Table 18.5. Carbon Dioxide Emissions by Sector and Source - South Atlantic XLS
Table 18.6. Carbon Dioxide Emissions by Sector and Source - East South Central XLS
Table 18.7. Carbon Dioxide Emissions by Sector and Source - West South Central XLS
Table 18.8. Carbon Dioxide Emissions by Sector and Source - Mountain XLS
Table 18.9. Carbon Dioxide Emissions by Sector and Source - Pacific XLS
Table 19. Energy-Related Carbon Dioxide Emissions by End Use XLS
Table 36. Transportation Sector Energy Use by Mode and Type XLS
Table 37. Transportation Sector Energy Use by Fuel Type Within a Mode XLS
Table 38. Light-Duty Vehicle Energy Consumption by Technology Type and Fuel Type XLS
Table 39. Light-Duty Vehicle Sales by Technology Type - United States XLS
Table 39.1. Light-Duty Vehicle Sales by Technology Type - New England XLS
Table 39.2. Light-Duty Vehicle Sales by Technology Type - Middle Atlantic XLS
Table 39.3. Light-Duty Vehicle Sales by Technology Type - East North Central XLS
Table 39.4. Light-Duty Vehicle Sales by Technology Type - West North Central XLS
Table 39.5. Light-Duty Vehicle Sales by Technology Type - South Atlantic XLS
Table 39.6. Light-Duty Vehicle Sales by Technology Type - East South Central XLS
Table 39.7. Light-Duty Vehicle Sales by Technology Type - West South Central XLS
Table 39.8. Light-Duty Vehicle Sales by Technology Type - Mountain XLS
Table 39.9. Light-Duty Vehicle Sales by Technology Type - Pacific XLS
Table 40. Light-Duty Vehicle Stock by Technology Type XLS
Table 41. Light-Duty Vehicle Miles per Gallon by Technology Type XLS
Table 42. Light-Duty Vehicle Miles Traveled by Technology Type XLS
Table 43. Summary of New Light-Duty Vehicle Size Class Attributes XLS
Table 44. Transportation Fleet Car and Truck Fuel Consumption by Type and Technology XLS
Table 45. Transportation Fleet Car and Truck Sales by Type and Technology XLS
Table 46. Transportation Fleet Car and Truck Stock by Type and Technology XLS
Table 47. Transportation Fleet Car and Truck Vehicle Miles Traveled by Type and Technology XLS
Table 48. Air Travel Energy Use XLS
Table 49. Freight Transportation Energy Use XLS
Table 51. Technology Market Penetration in Light-Duty Vehicles XLS
Table 52. New Light-Duty Vehicle Fuel Economy XLS
Table 53. New Light-Duty Vehicle Prices XLS
Table 54. New Light-Duty Vehicle Range XLS