Blending renewable fuels can make fuel retailers more competitive in their marketplace while also benefitting the environment, and Jeff Hove, vice president of NATSO’s Alternative Fuels Council, recently shared his industry insight on the alternative fuels market on the podcast Convenience Matters! (Listen to the podcast episode here.)
“Since 2007 the RIN credit has gone from a profit center to almost a necessity to compete because we live in such a cut-throat market,” Hove said during the session, Evolving to Alternative Fuel Sales.
As retailers try to hit a price point that makes them competitive, it is going to become more and more necessary for operators to be involved in renewable fuels, Hove said while speaking with Donovan Woods, director of operations for the Fuels Institute, and John Eichberger, executive director of the Fuels Institute.
Hove told Woods and Eichberger that NATSO created its Alternative Fuels Council to ensure all fuel retailers feel comfortable adding renewable fuels into their product offerings. The Renewable Fuels Standard requires renewable fuel blenders and the truckstop and travel plaza industry to introduce renewable fuels into the transportation market.
We saw a discrepancy between the large companies that have the bandwidth to handle this versus the smaller company. Our goal is to make sure everyone feels included and can do this if they want to,” he said.
The Alternative Fuels Council works with operators to identify the economics associated with blending. “We crunch the numbers and say, ‘This is where your margin becomes more favorable or, in some cases, maybe it is a wash and isn’t good for you.’ We look at the economics first and then the available supply in your region,” he said. “At the end of the day, when you run the calculations and you see the price differential, it is really kind of a tell all.”
Hove said biodiesel is completely reliant on incentives, but ethanol isn’t. “Probably the biggest factor isn’t, ‘Is the price of biodiesel going to come down?’ It is, ‘Is ULSD going to go up,’” he said, adding that factors such as IMO 2020 and price spikes in home heating oil could drive ULSD prices higher.
Currently, the Blender’s Tax Credit will go to 2022. “That’s a big deal. There is going to be nobody in any hurry to try to lower the cost of the biodiesel,” Hove said.
A move towards increased low-carbon fuel standards could increase demand for ethanol, Hove said. That makes this a good time for retailers to get their feet wet. “I don’t see these low-carbon fuel policies going away any time soon,” he explained.
After crunching the numbers on renewable fuels for operators, the Alternative Fuels Council looks at how operators can blend, store and sell the fuels. Hove and his team also work to ensure operators are in compliance and can complete the necessary reporting.
Hove added that there are several best practices operators can employ to ensure fuel quality, particularly with biodiesel. He said operators should look for water and sentiment and remove it from tanks prior to adding biodiesel. In addition, NATSO’s Alternative Fuels Council has released a biodiesel fuels quality document. “A lot of the language resembles how we handle diesel tanks,” Hove said, adding that his goal is to break down the rules, regulations and best practices related to alternative fuels.
Operators who would like to learn more about the role alternative fuels can play in their operations can reach out to Hove at jhove@natso.com.
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