Last year was a good year for E85, and this year could be even better.

Sales jumped in 2005 when high gas prices gave the alternative fuel a big price advantage at the pump. The number of E85 filling stations more than doubled last year, and automakers rolled out more ethanol-compatible vehicles.

In 2006, E85 promoters look for continued strong sales, especially if gasoline remains above $2/gal. And new federal and state incentives are expected to boost E85 infrastructure investments.

E85 use surged last year after gasoline prices topped $2/gal. In Minnesota, for example, consumption of the corn-based fuel tripled, to 8.1 million gallons, according to Minnesota Department of Commerce estimates.

Gasoline prices began climbing early in 2005, while E85 prices remained steady. That's when flexible fuel vehicles started filling up at the E85 pump, says Jerry Hentges, owner of Jerry's U-Save in Morris, MN. Flex-fuel vehicles can run on gasoline or the alternative E85, a blend of 15% gas and 85% ethanol. For consumers, the choice almost always comes down to price, Hentges says.

E85 is usually cheaper than regular gas because it delivers 5-12% fewer miles per gallon, according to the National Ethanol Vehicle Coalition (NEVC). Federal and state incentives also push the price lower. “When E85 gets to be 30 or 40¢ less per gallon than gasoline, that's when people really buy it,” says Hentges, who has stocked E85 since 1995.

Last spring and summer, a combination of high oil prices and low ethanol prices produced “a 50, 60, 70¢ advantage for E85,” says Michelle Kautz of the NEVC. E85's price advantage narrowed later in the year, partly because ethanol prices rebounded. In September, when gas prices peaked for the year, E85 was 36¢ cheaper on average than regular gasoline nationwide, according to a quarterly report from the Department of Energy's Clean Cities program. Across the Midwest, the price gap averaged 38¢/gal.

In Minnesota, the nation's leading biofuel state, E85 really took off in March after regular gasoline rose to a statewide average of $2.044/gal., says Mike Taylor, who tracks fuel sales and prices for the Minnesota Department of Commerce. State E85 sales jumped from about $4 million in 2004 to an estimated $15 million in 2005.

The number of E85 pumps around the country jumped, too.

More than 300 new E85 refueling facilities opened in 2005, the NEVC's Kautz says. By year-end there were 620 public and government fueling sites concentrated in the Midwest. Minnesota tops the nation with 190 stations, followed by Illinois with 98. Other states that are rapidly adding E85 outlets include North Dakota, South Dakota and South Carolina.

As interest in biofuels grows, Detroit has started making more E85-compatible vehicles — 1.3 million in just the last two years, according to the federal government. Automakers now offer more than two-dozen flex-fuel choices at no extra cost.

New E85 models in 2005 included the Dodge Ram, Chevy Avalanche and Nissan Titan; 2006 models include the Dodge Durango, Ford Crown Victoria, Lincoln Town Car, Mercury Grand Marquis, Chevy Impala and Chevy Monte Carlo. Late last year, Ford rolled out a flex-fuel version of its F-150 pickup truck. And in January, General Motors kicked off a national advertising campaign to promote its flex-fuel Chevy Tahoe.

“The automakers are starting to see E85 as a marketing tool,” says Tim Gerlach of the American Lung Association of the Upper Midwest, a champion of E85.

Today, there are at least five million flex-fuel vehicles on U.S. highways, but most are operating on gasoline. The Energy Information Administration estimates that only about 150,000 vehicles — most of them fleet vehicles — are actually running on ethanol.

One reason is that “many consumers have no idea they can use E85,” Kautz says. She points to a 2004 South Dakota survey, which found that two out of three motorists who drove flex-fuel vehicles didn't realize they could use the alternative fuel.

But the bigger problem is limited access to ethanol. Out of roughly 170,000 U.S. gas stations, not even one-half of 1% have an E85 pump. However, the industry is expected to add 2,000 new outlets this year, Kautz says, thanks to new federal tax credits for E85 infrastructure investments. “We anticipate that this will have a big effect on availability,” she says.

States are also offering incentives for E85 infrastructure investment. Illinois, Minnesota and Iowa, for example, have programs to share E85 equipment costs, which can run from a few thousand dollars to convert an existing storage and dispensing system for E85, all the way up to $50,000 for a new system.

Still, “it's a real juggling act” to establish a solid market for E85, Gerlach says. “You need enough vehicles, enough fueling stations, and competitive pricing.”

Does that mean consumers will abandon E85 if gasoline prices retreat? “Most people lead with their pocketbooks,” Gerlach acknowledges. But even if E85 loses some of its cost advantage at the pump this year, “We hope people who started using it because of price issues will stick with it because of its environmental and other benefits.”

E85 burns cleaner than gasoline, producing fewer tailpipe and greenhouse gas emissions. And supporters say the renewable domestic fuel boosts the farm economy and cuts dependence on foreign oil.

Mike Bull, Minnesota assistant commissioner for renewable energy, is convinced that “the values people attach to E85 will keep them using it.” Since 9-11, “we've become more open as a nation to alternative fuels,” he says. “Everyone is sensitive to the need for energy independence.”

Nobody expects E85 to displace gasoline as the dominant transport fuel, Bull says. But on the other hand, gasoline “won't be the monopoly it has been.” Adds Gerlach, “Within a few years, E85 could have a significant share of the market.”

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