E85 report detailsoptimal conditions for retail

By Timothy Charles Holmseth | May 09, 2008
The National Renewable Energy Laboratory in Golden, Colo., has released a technical report to help retailers decide if selling E85 fuel makes sense for their businesses.

The 40-page report, "E85 Retail Business Case: When and Why to Sell E85," lays out the factors that retailers need to consider when deciding to sell the ethanol fuel blend, which can be a sound business decision in the highly competitive gasoline market. According to the report, the total number of gasoline retail stations has decreased by 1.5 percent in the past four years, and the average net taxable income of a retail station was $36,000 in 2004.

Despite tough competition, the reports said E85 can be an investment opportunity if certain conditions are present. First, a retailer should be in a competitive environment, where differentiating its product lineup could help increase its market share. A low-cost source of E85 is also important. The retailer should also assess the potential market for E85. The report called this a difficult and uncertain process, but retailers can determine potential sales from a survey of E85 retailers conducted by Underwriter Laboratories Inc. in Minnesota and Iowa.

Similar considerations were likely observed at Alternative Fuel Distributors Inc. in Wilmington, Del. The company unveiled a three-year plan to construct and operate 1,000 convenience stores on the East Coast that will provide E85 and other alternative fuels. Created in June 2007, it plans to see 100 stores open by the first quarter of 2009. The stores will be called "Go Green Stations" and will help bolster the existence of fewer than 20 gas stations between New York and Richland, Va. To reach the goal, the company expects to file a registration statement with the U.S. Securities and Exchange Commission for an initial public offering of up to 2 million shares of its Class A membership units.