Tesla Motors is apparently in talks with Sheetz, Inc. to install electric vehicle (EV) Superchargers in the latter's chain of gas stations. This caught my eye, because I was involved in a much earlier effort to install EV recharging facilities in service stations in the late 1990s. It wasn't just ahead of its time; it was stymied by some of the same economic challenges noted in the Washington Post article, as well as physical and regulatory issues that weren't mentioned.
The logic of an alliance between Tesla and gasoline retailers like Sheetz seems sound. Tesla embarked on its strategy to build a network of quick-rechargers in order to sell more cars. Its Superchargers are likely to be more effective in that role if they're installed in places that are both convenient to highways and offer a variety of other amenities for drivers, while they wait 15 minutes or more to top up their car's range. High-volume fuel retailers like Sheetz have already optimized their sites for convenience of location, and they have a wider range of food and beverage choices than the average gas station.
They also provide another essential feature: space. When Texaco was evaluating adding rechargers for GM's ground-breaking EV1 electric car to its Southern California retail network nearly 20 years ago, the fire marshals with whom we met insisted that high-voltage electricity and pumps dispensing volatile fuels like gasoline could not share the same pump island. They had to be widely separated for safety, and few of our L.A. locations had large enough footprints for that. Sheetz, by contrast, typically has large stations--many in rural or suburban locations--that could accommodate EV charging without endangering customers filling up with gas or diesel.
Another obstacle I encountered at Texaco was that EV rechargers are expensive, while electricity is cheap. Even if you're allowed to charge customers for it--we weren't, for regulatory reasons--it takes a lot of usage to pay back the substantial investment in equipment and installation. With EV sales still occupying a small niche in the market, that calculation hasn't changed much in the intervening decades. However, Tesla's primary motivation isn't to make money selling electricity, but to generate profits and support its stock price by selling more premium EVs. I would hate to see the standalone P&L for Tesla's growing Supercharger network, but that's beside the point.
This resolves a major hurdle for Sheetz and other fuel retailers that might want to add EV recharging to expand their customer base, or "green up" their image to enhance the loyalty of current customers, especially among Millennials. The profitability of such an investment would still be questionable, even if they sold EV owners lots of premium coffee and snacks while they wait. But if someone else is footing most of the bill for the added hardware, the extra revenue in the convenience store is all upside.
The service station of the future has been slower arriving than my colleagues and I envisioned when we developed Texaco's first global scenarios for the future of energy nearly twenty years ago. Sales of EVs and cars running on hydrogen have not grown as fast as we expected, while the improving performance of gasoline cars has raised the bar for alternative vehicles. However, current trends suggest that our vision of facilities offering a diverse mix of transportation energy was more premature than wrong. I will be very interested to see how Tesla and Sheetz or others move ahead with this idea.
Showing posts with label service stations. Show all posts
Showing posts with label service stations. Show all posts
Friday, July 01, 2016
Monday, December 20, 2010
UL Study Raises New Questions About E15
One of the energy stories I've followed with great interest all year concerns efforts to increase the proportion of ethanol blended into ordinary US gasoline. This began last year when Growth Energy, an ethanol trade association, asked the Environmental Protection Agency for a waiver to increase the allowed percentage of ethanol in gasoline from 10% to 15%. In October EPA issued a partial approval of the request, but only for vehicles built in model year 2007 or later. However, a new report from Underwriters Laboratories (UL) indirectly casts doubt, not only EPA's ruling, but on whether the agency was assessing all the relevant issues.
I ran across the UL report on the compatibility of mid-level ethanol/gasoline blends in gasoline dispensing equipment--the pumps, hoses and tanks in gas stations--in a posting on API's EnergyTomorrow blog. It cited the UL study, which had been commissioned by the Department of Energy, as evidence that E15, the 15% blend of ethanol and gasoline that the EPA just approved for use in newer cars, could result in serious failures of gas pumps. Yet when I read the report, I immediately encountered its innocuous-sounding conclusion stating, "The overall results of the program were not conclusive insofar as no clear trends in the overall performance of all equipment could be established." It went on to say that the equipment "generally performed well." If I had stopped reading there, I'd have concluded that API was blowing the whole story out of proportion.
When I read the data included in the report, however, a different story emerged. Of the new and used gasoline dispensers and associated equipment tested, very few exhibited no problems on the 17% ethanol test fuel used. In fact, in UL's long-term exposure test, many hoses, nozzles and swivels leaked. 100% of the meter, manifold and valve assemblies tested leaked or failed to shut off. Perhaps most worryingly, two-thirds of the breakaway couplings tested leaked, failed their pressure tests, or required more than the recommended pull to separate. (A breakaway is designed to pop the hose off the dispenser when a customer forgets to remove the nozzle from his car's gas intake and attempts to drive off. This happens a surprising number of times a year, and before the deployment of breakaways such incidents imposed significant repair costs on dealers, even when the resulting spills didn't cause fires.)
The common denominator in these failures was what the report refers to as "nonmetals", gaskets, seals and parts made from various polymers. From that I would draw two conclusions: First, it ought to be possible to design new dispensers and retrofit existing dispensers with new gaskets, seals and plastic parts designed to withstand higher concentrations of ethanol, just as the fuel systems in flexible fuel vehicles are designed to tolerate blends of up to 85% ethanol. However, considering that the US has between 90,000 and 160,000 gas stations, depending how you count them, the number of dispensers that would have to be modified is at least in the high tens of thousands, if not well into the hundreds of thousands. To my knowledge the ethanol industry has not offered to defray the cost of these conversions for a retail fuel industry that operates with extremely lean margins. Nor is it obvious that dealers would qualify for federal assistance, as they do when they add E85 capability.
My second conclusion--really more of a suspicion--has nothing to do with gas pumps or gas stations, and everything to do with cars. After reading the UL report I went back and reread portions of the EPA's official waiver response, which ran to 58 pages in the Federal Register. From what I can tell, EPA wasn't really looking at whether cars would suffer damage from operating on a higher percentage of ethanol than the fuel for which they were designed. The waiver was granted on the basis of those cars not emitting more pollutants than on the fuel for which they were designed. Quoting from the EPA document:
"For MY 2007 and newer light-duty motor vehicles, the DOE Catalyst Study and other information before EPA adequately demonstrates that the impact of E15 on overall emissions, including both immediate and durability related emissions, will not cause or contribute to violations of the emissions standards for these motor vehicles. Likewise, the data and information adequately show that E15 will not lead to violations of the evaporative emissions standards, so long as the fuel does not exceed a Reid Vapor Pressure (RVP) of 9.0 psi in the summertime control season. The information on materials compatibility and drivability also supports this conclusion."
That's good as far as it goes, but from my perspective this finding reflects a necessary but hardly sufficient standard for putting a new fuel into the marketplace, particularly when the failures of the dispensers in the UL study point to the possibility of similar failures of "nonmetals" in the fuel systems of cars or other devices not designed to run on more than 10% ethanol. Even if the leaks found in the testing of product dispensers didn't result in safety hazards, they would at a minimum increase the evaporative emissions from infrastructure, aside from the automotive impact on which EPA apparently focused. I also find it interesting that a bill was introduced in Congress this summer, as EPA was considering the waiver request, that would appear to make it more difficult for consumers to recover the cost of damages resulting from compatibility problems in approved vehicles or misfueling of non-approved vehicles.
As I've noted in my previous postings on this topic, I'm sympathetic to the box into which altered circumstances have placed both the ethanol industry and the federal government with regard to ethanol blending. US gasoline sales, which stagnated after the financial crisis and are only growing by a historically modest 0.7% this year (through November) according to API's latest statistics, are not expanding fast enough to accommodate the output of all the ethanol plants that have been built or are under now construction. When the Renewable Fuels Standard was enacted as part of the Energy Independence and Security Act of 2007, the bill's architects presumably expected that E85 sales would take up any slack. The fact that that hasn't happened does not justify creating a new outlet for additional ethanol in automobiles not designed to accommodate it, any more than it would justify running a new fuel through infrastructure that has been shown not to be up to the challenge. If EPA doesn't revisit the more comprehensive aspects of this question as part of its deferred decision on allowing E15 for cars made before 2007, then perhaps it's time for another government agency with a broader charter to take over this issue.
I ran across the UL report on the compatibility of mid-level ethanol/gasoline blends in gasoline dispensing equipment--the pumps, hoses and tanks in gas stations--in a posting on API's EnergyTomorrow blog. It cited the UL study, which had been commissioned by the Department of Energy, as evidence that E15, the 15% blend of ethanol and gasoline that the EPA just approved for use in newer cars, could result in serious failures of gas pumps. Yet when I read the report, I immediately encountered its innocuous-sounding conclusion stating, "The overall results of the program were not conclusive insofar as no clear trends in the overall performance of all equipment could be established." It went on to say that the equipment "generally performed well." If I had stopped reading there, I'd have concluded that API was blowing the whole story out of proportion.
When I read the data included in the report, however, a different story emerged. Of the new and used gasoline dispensers and associated equipment tested, very few exhibited no problems on the 17% ethanol test fuel used. In fact, in UL's long-term exposure test, many hoses, nozzles and swivels leaked. 100% of the meter, manifold and valve assemblies tested leaked or failed to shut off. Perhaps most worryingly, two-thirds of the breakaway couplings tested leaked, failed their pressure tests, or required more than the recommended pull to separate. (A breakaway is designed to pop the hose off the dispenser when a customer forgets to remove the nozzle from his car's gas intake and attempts to drive off. This happens a surprising number of times a year, and before the deployment of breakaways such incidents imposed significant repair costs on dealers, even when the resulting spills didn't cause fires.)
The common denominator in these failures was what the report refers to as "nonmetals", gaskets, seals and parts made from various polymers. From that I would draw two conclusions: First, it ought to be possible to design new dispensers and retrofit existing dispensers with new gaskets, seals and plastic parts designed to withstand higher concentrations of ethanol, just as the fuel systems in flexible fuel vehicles are designed to tolerate blends of up to 85% ethanol. However, considering that the US has between 90,000 and 160,000 gas stations, depending how you count them, the number of dispensers that would have to be modified is at least in the high tens of thousands, if not well into the hundreds of thousands. To my knowledge the ethanol industry has not offered to defray the cost of these conversions for a retail fuel industry that operates with extremely lean margins. Nor is it obvious that dealers would qualify for federal assistance, as they do when they add E85 capability.
My second conclusion--really more of a suspicion--has nothing to do with gas pumps or gas stations, and everything to do with cars. After reading the UL report I went back and reread portions of the EPA's official waiver response, which ran to 58 pages in the Federal Register. From what I can tell, EPA wasn't really looking at whether cars would suffer damage from operating on a higher percentage of ethanol than the fuel for which they were designed. The waiver was granted on the basis of those cars not emitting more pollutants than on the fuel for which they were designed. Quoting from the EPA document:
"For MY 2007 and newer light-duty motor vehicles, the DOE Catalyst Study and other information before EPA adequately demonstrates that the impact of E15 on overall emissions, including both immediate and durability related emissions, will not cause or contribute to violations of the emissions standards for these motor vehicles. Likewise, the data and information adequately show that E15 will not lead to violations of the evaporative emissions standards, so long as the fuel does not exceed a Reid Vapor Pressure (RVP) of 9.0 psi in the summertime control season. The information on materials compatibility and drivability also supports this conclusion."
That's good as far as it goes, but from my perspective this finding reflects a necessary but hardly sufficient standard for putting a new fuel into the marketplace, particularly when the failures of the dispensers in the UL study point to the possibility of similar failures of "nonmetals" in the fuel systems of cars or other devices not designed to run on more than 10% ethanol. Even if the leaks found in the testing of product dispensers didn't result in safety hazards, they would at a minimum increase the evaporative emissions from infrastructure, aside from the automotive impact on which EPA apparently focused. I also find it interesting that a bill was introduced in Congress this summer, as EPA was considering the waiver request, that would appear to make it more difficult for consumers to recover the cost of damages resulting from compatibility problems in approved vehicles or misfueling of non-approved vehicles.
As I've noted in my previous postings on this topic, I'm sympathetic to the box into which altered circumstances have placed both the ethanol industry and the federal government with regard to ethanol blending. US gasoline sales, which stagnated after the financial crisis and are only growing by a historically modest 0.7% this year (through November) according to API's latest statistics, are not expanding fast enough to accommodate the output of all the ethanol plants that have been built or are under now construction. When the Renewable Fuels Standard was enacted as part of the Energy Independence and Security Act of 2007, the bill's architects presumably expected that E85 sales would take up any slack. The fact that that hasn't happened does not justify creating a new outlet for additional ethanol in automobiles not designed to accommodate it, any more than it would justify running a new fuel through infrastructure that has been shown not to be up to the challenge. If EPA doesn't revisit the more comprehensive aspects of this question as part of its deferred decision on allowing E15 for cars made before 2007, then perhaps it's time for another government agency with a broader charter to take over this issue.
Tuesday, March 27, 2007
Fill 'Er Up
The Washington Post reports that when the auto industry CEOs met with President Bush yesterday, they pleaded for alternative fuel infrastructure to fill up the alternative fuel cars they are building. Despite decades of car makers and oil companies pointing fingers at each other over energy and environmental challenges, there's a lot to be said for the former worrying that the latter won't provide enough refueling opportunities to make owning a car requiring hydrogen, for example, convenient for consumers. The key question is who should pay for the installation of this infrastructure. It's not who you might think.
GM's CEO, in particular, has good reason to worry about the availability of alternative fuel. His company invested a fortune in the all-electric EV-1 in the 1990s, only to see it founder in the market, at least partly due to lack of recharging infrastructure, as I've described in detail in a previous posting. This is a big deal for hydrogen cars, as well, though they're years from the point at which refueling becomes the critical-path item. When the subject turns to ethanol and E-85, however, the argument gets considerably murkier.
By definition, cars that have been engineered to run on E-85, a mix of 85% ethanol and 15% gasoline, are "flexible fuel vehicles" (FFVs). That means they can run on gasoline with any fraction of ethanol from 0% to at least 85%. A shortage of E-85 pumps apparently didn't pose much of an impediment to selling "over 2 million" of these vehicles, as GM claims in its "Live Green, Go Yellow" campaign. The issue here is not selling more FFVs, but the risk that the government will stop counting them as alternative fuel vehicles that count towards carmakers' Corporate Average Fuel Economy quotas, because most of these vehicles have never used a gallon of E-85. That's worth serious money to Detroit.
So who should pay to make E-85 more widely available? Most people would probably say oil companies, but most of the service stations in the country aren't owned by the big oil companies; they're owned by small businesses, either individuals or local distributors. Selling retail gasoline isn't a terribly lucrative business, especially if you face competition from supermarkets and Walmart, who view fuel sales as a lure to customers, not a profit opportunity.
The problem at service stations is simple. A retail facility typically has only three underground tanks. One of them is in unleaded regular (ULR) service, one in premium (ULP) service, and the third most likely in diesel service. A dealer can't give up his ULR tank, because that's at least half of his throughput. And he won't give up his ULP tank, because he needs it to blend 89 octane mid-grade, which, along with ULP, provides his highest margin. That leaves the diesel tank. Switching that to E-85 is certainly possible, but how attractive is it? He must weigh lost diesel sales--plus any convenience store revenue that goes with them--against the chance that an FFV driver will pass his station to find one selling E-85. Absent a much bigger public outcry for E-85, I know that I wouldn't make that bet, myself.
Given these constraints, the choice comes down to an investment decision. Does a station owner rip up concrete to add another tank, putting his whole facility out of business for at least a month, in order to add a product for which the initial demand is probably only a few hundred gallons per month, versus the typical 100,000 gallons/month he sells on his other products? I don't see how you make a return on that investment, even after the $30,000 federal tax credit that's available.
What about providing more government assistance? Surely as taxpayers all of us have a vested interest in enabling sales of locally-grown ethanol that backs out imported oil. Well, even if the benefits of ethanol were large and unambiguous, the country saves exactly the same amount of foreign oil when a gallon of ethanol is sold as part of a 10% blend with gasoline (E-10), which requires no modifications to either service stations or cars, as when it's sold in E-85. Based on last year's ethanol production and current gasoline demand, ethanol output could nearly triple before it used up all its E-10 blending opportunities. The case for public support for converting stations to E-85 thus rests on political, rather than economic foundations.
The market isn't the answer to every problem, but in this case the market offers an important insight: if you want to make E-85 widely available, you should look to the parties that stand to gain the most from doing it. That brings us inevitably back to the carmakers, who have a major stake in ensuring that enough E-85 is available to preserve their CAFE ratings, along with citizens' groups that are passionate about energy security. A savvy auto firm might see some nice partnership opportunities in such alignments, which could eventually rope in an oil company interested in improving its image. In the meantime, the rest of us are no worse off if E-85 isn't available on every corner.
GM's CEO, in particular, has good reason to worry about the availability of alternative fuel. His company invested a fortune in the all-electric EV-1 in the 1990s, only to see it founder in the market, at least partly due to lack of recharging infrastructure, as I've described in detail in a previous posting. This is a big deal for hydrogen cars, as well, though they're years from the point at which refueling becomes the critical-path item. When the subject turns to ethanol and E-85, however, the argument gets considerably murkier.
By definition, cars that have been engineered to run on E-85, a mix of 85% ethanol and 15% gasoline, are "flexible fuel vehicles" (FFVs). That means they can run on gasoline with any fraction of ethanol from 0% to at least 85%. A shortage of E-85 pumps apparently didn't pose much of an impediment to selling "over 2 million" of these vehicles, as GM claims in its "Live Green, Go Yellow" campaign. The issue here is not selling more FFVs, but the risk that the government will stop counting them as alternative fuel vehicles that count towards carmakers' Corporate Average Fuel Economy quotas, because most of these vehicles have never used a gallon of E-85. That's worth serious money to Detroit.
So who should pay to make E-85 more widely available? Most people would probably say oil companies, but most of the service stations in the country aren't owned by the big oil companies; they're owned by small businesses, either individuals or local distributors. Selling retail gasoline isn't a terribly lucrative business, especially if you face competition from supermarkets and Walmart, who view fuel sales as a lure to customers, not a profit opportunity.
The problem at service stations is simple. A retail facility typically has only three underground tanks. One of them is in unleaded regular (ULR) service, one in premium (ULP) service, and the third most likely in diesel service. A dealer can't give up his ULR tank, because that's at least half of his throughput. And he won't give up his ULP tank, because he needs it to blend 89 octane mid-grade, which, along with ULP, provides his highest margin. That leaves the diesel tank. Switching that to E-85 is certainly possible, but how attractive is it? He must weigh lost diesel sales--plus any convenience store revenue that goes with them--against the chance that an FFV driver will pass his station to find one selling E-85. Absent a much bigger public outcry for E-85, I know that I wouldn't make that bet, myself.
Given these constraints, the choice comes down to an investment decision. Does a station owner rip up concrete to add another tank, putting his whole facility out of business for at least a month, in order to add a product for which the initial demand is probably only a few hundred gallons per month, versus the typical 100,000 gallons/month he sells on his other products? I don't see how you make a return on that investment, even after the $30,000 federal tax credit that's available.
What about providing more government assistance? Surely as taxpayers all of us have a vested interest in enabling sales of locally-grown ethanol that backs out imported oil. Well, even if the benefits of ethanol were large and unambiguous, the country saves exactly the same amount of foreign oil when a gallon of ethanol is sold as part of a 10% blend with gasoline (E-10), which requires no modifications to either service stations or cars, as when it's sold in E-85. Based on last year's ethanol production and current gasoline demand, ethanol output could nearly triple before it used up all its E-10 blending opportunities. The case for public support for converting stations to E-85 thus rests on political, rather than economic foundations.
The market isn't the answer to every problem, but in this case the market offers an important insight: if you want to make E-85 widely available, you should look to the parties that stand to gain the most from doing it. That brings us inevitably back to the carmakers, who have a major stake in ensuring that enough E-85 is available to preserve their CAFE ratings, along with citizens' groups that are passionate about energy security. A savvy auto firm might see some nice partnership opportunities in such alignments, which could eventually rope in an oil company interested in improving its image. In the meantime, the rest of us are no worse off if E-85 isn't available on every corner.
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