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Demand for Biofuels: E85, Flex-Fuel Vehicles, and Intermediate Ethanol Blends

US Chamber of Commerce

Demand for Biofuels: E85, Flex-Fuel Vehicles, and Intermediate Ethanol Blends

US Chamber of Commerce

September 27, 2007

Tom Stricker, Director

Technical & Regulatory Affairs

Toyota Motor North America, Inc.

September 27, 2007

Tom Stricker, Director

Technical & Regulatory Affairs

Toyota Motor North America, Inc.

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Awareness of IssuesAwareness of Issues

Three issues: energy, CO2, and air quality Three issues: energy, CO2, and air quality

Global development ofGlobal development ofindustry & technologyindustry & technologyin the 21st centuryin the 21st century

Global development ofGlobal development ofindustry & technologyindustry & technologyin the 21st centuryin the 21st century

Accelerated Accelerated consumption of consumption of

fossil fuelsfossil fuels

Accelerated Accelerated consumption of consumption of

fossil fuelsfossil fuels

Automotive Powertrain IssuesAutomotive Powertrain Issues

1. Energy Issues1. Energy Issues

3. Air Quality Issues3. Air Quality Issues

PopulationPopulation growth growth (in USA, Asia, etc.)(in USA, Asia, etc.)PopulationPopulation growth growth (in USA, Asia, etc.)(in USA, Asia, etc.)

Growing number Growing number of motor of motor vehiclesvehiclesGrowing number Growing number of motor of motor vehiclesvehicles

2. CO2 Issues 2. CO2 Issues (global warming measures)(global warming measures)

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Right TimeRight TimeRight TimeRight Time Right PlaceRight PlaceRight PlaceRight PlaceRight VehicleRight VehicleRight VehicleRight Vehicle

Gaseous Gaseous fuelfuel

ElectricityElectricityHydrogenHydrogenSynthetic Synthetic fuelfuel

Bio fuelBio fuel

Hybrid TechnologyHybrid TechnologyHybrid TechnologyHybrid Technology

Gasoline / Gasoline / DieselDiesel

Ultimate eco-carUltimate eco-car

Toyota’s ApproachToyota’s Approach

No silver bullet, but hybrid is beneficial to all typesNo silver bullet, but hybrid is beneficial to all types

4Biofuels (Ethanol) Discussion OverviewBiofuels (Ethanol) Discussion Overview

• Some Benefits of Ethanol

• Benefits/Challenges of Expanding Ethanol

- Low-Level Blends

- High-Level Blends

- Mid-Level Blends

• Food for Fuel Thought!

5Some Benefits of EthanolSome Benefits of Ethanol

Domestic Resource

Job Creation

Energy Security/Diversity

Potential CO2 Reductions

Source: LiveScience Image Gallery

Grinnell Glacierc. 1940 2004

6Low-Level Blends (E10↓)Low-Level Blends (E10↓)

All-Vehicle Compatibility Good Energy Content

0%10%20%30%40%50%60%70%80%90%

100%

Gasoline E10

BT

U v

s. G

aso

line

Blending Infrastructure

Legal Fuel

Other Non-Auto Equipment

7High-Level Blends (E85)High-Level Blends (E85)

High Oil Displacement ~8M FFV’s on the Road

Legal Fuel

Key Challenges: Customer Value, Fuel Availability, Fuel SupplyKey Challenges: Customer Value, Fuel Availability, Fuel SupplyKey Challenges: Customer Value, Fuel Availability, Fuel SupplyKey Challenges: Customer Value, Fuel Availability, Fuel Supply

8High-Level Blends (E85) – Customer FactorsHigh-Level Blends (E85) – Customer Factors

Main Reasons to Consider FFV

Main Reasons Not to Consider FFV

Decrease oil dependence

Lower fuel costs

Better for the environment

Availability of refueling

Never thought about it

Cost

Consumers Appear Both Educated and Uneducated at the Same TimeConsumers Appear Both Educated and Uneducated at the Same TimeConsumers Appear Both Educated and Uneducated at the Same TimeConsumers Appear Both Educated and Uneducated at the Same Time

9High-Level Blends (E85) – Potential Vehicle Mods.High-Level Blends (E85) – Potential Vehicle Mods.

Key upgrades for Ford Taurus FFV

Widely reported Big-3 cost of $150-200 per vehicle

10High-Level Blends (E85) – Customer FactorsHigh-Level Blends (E85) – Customer Factors

0%10%20%30%40%50%60%70%80%90%

100%

Gasoline E10 E85

0.000.501.001.502.002.503.003.504.00

WestCoast

Rocky Mt GulfCoast

Mid West LowAtlantic

CentralAtlantic

NewEngland

Reg. Gas. E85 (BTU)

Source: DOE Clean Cities Alternative Fuel Price Report July 2007

Lower Energy Density = Lower MPG and Reduced Range

Current E85 Fuel Cost > Current Gasoline Cost

11High-Level Blends (E85) – Customer FactorsHigh-Level Blends (E85) – Customer Factors

0%10%20%30%40%50%60%70%80%90%

100%

Before After

Definitely/Probably Consider

Flex Fuel technology loses about 1/3 of its considerers upon learning about the reduction in fuel economy and the loss of driving range per fill-up.

Q: Assume that today your preferred manufacturer offered a vehicle that met your needs for vehicle size and your tastes for vehicle styling, to what extent would you consider purchasing this vehicle as your next new vehicle if it had the following vehicle technology…? (Definitely would consider, Probably would consider, Might or might not consider, Probably would NOT consider, Definitely would NOT consider)

Q: Now that you have read about each of the advanced technologies, assume that today your preferred manufacturer offered a vehicle that met your needs for vehicle size and your tastes for vehicle styling, to what extent would you consider purchasing this vehicle as your next new vehicle if it had the following vehicle technology…? (Definitely would consider, Probably would consider, Might or might not consider, Probably would NOT consider, Definitely would NOT consider)

50%

34%

12High-Level Blends (E85) – AvailabilityHigh-Level Blends (E85) – Availability

Source: DOE Alternative Fuels Data Center (as of May 2007)

Only about 1,200+ pumps nationwide – focus in the mid-west

13High-Level Blends (E85) – SupplyHigh-Level Blends (E85) – Supply

Figure 3. Ethanol production

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

marketing year

mill

ion

gal

lon

s

Baseline Scenario 1 Scenario 2

31%

37%

47%

An Analysis of the Effects of an Expansion in Biofuel Demand on U.S. Agriculture, U.S. Department of Agriculture, May 2007 % Corn Crop

12B

15B

20B

14High-Level Blends (E85) – SupplyHigh-Level Blends (E85) – Supply

Estimate of Cellulosic Ethanol Potential

0%

20%

40%

60%

80%

100%

Current Future

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Current (Lab) Future

DOE Target for Cellulosic Ethanol Cost

% U

S G

aso

line

De

ma

nd

$/g

allo

n

Source: USDA, DOE

$1.04

$2.50

$3.50

30%

0%

15Mid-Level Blends (E20)Mid-Level Blends (E20)

High Oil Displacement ~8M “E20” Vehicles on the Road

Legal Fuel

and

FFV Other

Key Challenges: Emissions, Near-Zero Fuel Availability, Non-AutosKey Challenges: Emissions, Near-Zero Fuel Availability, Non-AutosKey Challenges: Emissions, Near-Zero Fuel Availability, Non-AutosKey Challenges: Emissions, Near-Zero Fuel Availability, Non-Autos

16Mid-Level Blends (E20) – Potential Vehicle ConcernsMid-Level Blends (E20) – Potential Vehicle Concerns

(1)

(2)

(3), (4)

(5)

(6)

(*): Only some vehicles

Item

(1) Fuel cap valve rubber (*)

(2) Tank gasket (*)

(3) Fuel pump (*)

(4) Sender gauge

(5) Fuel delivery (*)

(6) Pulsation dumper (*)

Potential Issues: Potential Issues:

Materials failures, Evaporative Emissions, Hot Re-Start, Idle QualityMaterials failures, Evaporative Emissions, Hot Re-Start, Idle Quality

Potential Issues: Potential Issues:

Materials failures, Evaporative Emissions, Hot Re-Start, Idle QualityMaterials failures, Evaporative Emissions, Hot Re-Start, Idle Quality

17Toyota ViewToyota View

• Biofuels (ethanol) have a key role to play

• Low-level (E10) makes sense

- Interested in exploring all options – concern about E11+ usage

- Cooperation with/among CRC, EPA, DOE, etc.

• Still examining the best way to use “excess” ethanol

• 2009 Toyota Tundra FFV

- Support biofuels policy

- Pockets of demand (rejection criteria for some)

- Cautious approach while assessing customers, fuel supply and infrastructure

18Food for Thought (Not Toyota Position)Food for Thought (Not Toyota Position)

• Assume corn reaches 15B and cellulose reaches 15B in the next 15 years (cost-competitive) - total 30B gallons

• This is about 20% of future gasoline demand

• Let manufacturers choose between E20 and E85 vehicles - substantially greater potential for large ethanol-capable fleet (E20) at much lower cost

• Distribute “excess” ethanol as E20 rather than E85- Four times as many refueling locations with same amount of ethanol

- 1/4 to 1/8 the mpg, range and cost hit of E85 for consumers

Still Challenges: Fuel Spec, Certification Fuel, Misfueling Still Challenges: Fuel Spec, Certification Fuel, Misfueling

(E10 vehicles and non-automotive applications)(E10 vehicles and non-automotive applications)

Still Challenges: Fuel Spec, Certification Fuel, Misfueling Still Challenges: Fuel Spec, Certification Fuel, Misfueling

(E10 vehicles and non-automotive applications)(E10 vehicles and non-automotive applications)

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TODAY for TOMORROWTODAY for TOMORROW