Future Looks Bright for Alternative Fuels

Ethanol, electric take center stage at inaugural Alternative Fuels Summit

Alternative fuels making a significant dent in the marketplace within the next five years was just one attention-grabbing prediction made during the inaugural Convenience Store News Alternative Fuels Summit, held in December and sponsored by Growth Energy.

The event — attended by executives from such organizations as Ricker’s Convenience Stores, Delek US Holdings Inc., Crawford Oil, Hoff Bros. Inc., Zarco USA Inc. and the Minnesota Service Station & Convenience Store Association (Minnoco) — took place at southern Florida’s Boca Raton Resort and Club, and offered all participants a respite from frigid temperatures in their respective hometowns, as well as plenty of quality information to boot.

The Summit got off to a quick start with CSNews Editorial Director Don Longo revealing the results of the publication’s 2013 Motor Fuels Study. Perhaps the most important finding uncovered by the exclusive research is retailers’ desire to sell alternative fuels. Among respondents, 43 percent currently offer alternative fuels. However, in five years, 51 percent expect to sell these fuels. Delving deeper, only 8 percent of retailers surveyed currently sell natural gas at the pump, but that number is expected to rise to 28 percent by 2018.

Electric-vehicle charging stations are also poised to be on the upswing at convenience stores. While only 2 percent of the c-stores surveyed said they currently have such an offering, more than 7 percent indicated they will offer electric charging in five years’ time.

Regarding ethanol, 18 percent of respondents currently sell fuels above the E10 blend wall and nearly 36 percent plan to sell these fuels by 2018. Flex-fuels and E15 — a blend of 15 percent ethanol and 85 percent gasoline — will both reap the benefits. Flex-fuels are currently sold at 10 percent of respondents’ gas stations. That figure will rise to 23 percent by 2018.

Despite some controversy surrounding E15, retailers participating in the study said they are not deterred from selling the fuel. One-quarter of respondents expect to sell it within five years.

Mike O’Brien, vice president of market development at Growth Energy, an organization that supports ethanol, placed an emphasis on E15 during his Summit presentation. He noted that 38 U.S. retail locations have sold E15 for at least the past six months. Eight more gas stations have sold it for 30 days or less, and 15 sites are expected to sell E15 in the next six months.

“E15 generates good news,” said O’Brien, pointing to news stories written by the Minneapolis Star Tribune when E15 debuted at its first Minnesota location on Oct. 31. “Retailers are saying they are receiving zero complaints and consumers are saying they are having no performance issues.”

On hand to discuss the experience in Minnesota was Lance Klatt, executive director of Minnoco. “We are looking at introducing E15 as an alternative fuel to be sold rather than offering midgrade fuel due to the octane levels E15 supports,” he explained.

Although only a few Minnesota retailers offer E15, good sales of this fuel could allow other retailers to sell it, hence changing the fueling landscape permanently, Klatt said.

Despite claims by the American Petroleum Institute and AAA that E15 can cause vehicle engine trouble, retailer Scott Zaremba, president of Kansas-based Zarco USA, told fellow Summit attendees that he, too, has not experienced any customer concerns regarding E15.

“We must have competition against [traditional] motor oil,” said Zaremba, whose company was the first retailer in the country to offer E15 in 2012. “Fortunately, auto manufacturers are finally moving forward with vehicles that can run on alternative fuels.”

Matt Horton, CEO of Propel Fuels Inc., was another presenter at the Summit who lauded ethanol. His Redwood City, Calif.-based company has installed Clean Mobility Centers at 38 already-existing gas stations and also operates six c-stores and gas stations of its own.

According to Horton, Propel has been the first company to offer alternative fuels in many West Coast towns, with E85 being its largest offering. Propel is looking into selling E15 in the near future. “These sites have been big winners,” he said. “Consumers want these [alternative] fuels.”

In fact, Horton unveiled results of a recently completed consumer survey of 900 customers in four of the markets Propel serves. The results revealed that half of the respondents only fill up at Propel and customers fill their tanks an average of 3.3 times per month.

In addition, half of the survey respondents surprisingly don’t look at pump prices any longer at Propel locations because of the trust and loyalty they have toward the retailer.

“We’ve done a lot of things to bring customers in, like [giving] $10 of free fuel on the first fill-up,” Horton shared during the Summit. “Once they visit our locations, most come back. People trust our brand and the consistent benefits it offers.”

CHARGE UP

Representing electric vehicles (EVs) at the event was Mike Calise, director of electric vehicles for Schneider Electric. He touted EVs as particularly great for consumers who primarily use their cars for commuting purposes. As for sales figures, he presented data suggesting that 100,000 EVs will be sold in the United States in 2014, with that number rising to 1 million by 2020. A changing consumer perception of EVs is expected to drive the tenfold sales increase.

“We are in the bottom of the second inning of a nine-year ballgame regarding electric vehicles,” said Calise, using a baseball analogy. “Early adopters today tend to be tech savvy and wealthy, but that will change over time.”

As for how EV chargers fit in with c-store operations, Calise acknowledged not every retailer would add such an offering because of an average 20-minute charge time and a lack of EVs in more rural areas. But he did say EVs are a great option for consumers in more populated areas; therefore, c-store operators in these areas must look to fill consumers’ needs.

If and when they do offer EV chargers, however, c-store retailers face a strong competitor in Walgreen Co. “Walgreens is putting in a ton of EV [chargers] because it wants to be the next gas station,” said Calise.

He concluded that many EV owners will charge their vehicles at home in the future, as costs for installing chargers come down. That will result in fewer consumer visits to c-stores, perhaps as early as 2020. “You must be aware of the disruption; it’s a freight train,” he said. “[Retailers] don’t have to do anything now. But changes are coming.”