The pros and cons of ethanol

Australian motorists will soon have a new choice at the bowser -- and a new risk of putting the wrong fuel in the wrong car.

Fuel blended with 10 per cent ethanol is already widely available in most states in Australia and most new and near-new cars can safely handle this mixture.

Indeed, some states have mandated that E10 replace regular unleaded, leaving motorists with a large price gap between E10 and premium unleaded.

But following today's announcement by Caltex, a new choice is about to emerge, even though the overwhelming majority of cars will not be able to run on it.

Over the next 12 months, oil company Caltex will install up to 100 pumps across Australia that can dispense E85 fuel -- regular unleaded petrol that's been mixed with 85 per cent ethanol.

E85 cars are still able to run on regular unleaded, E10 and premium unleaded -- or any combination of the above, including any E85 that may be swilling around in the tank -- because the car's engine management computer constantly monitors the quality of fuel going through the system, and makes adjustments accordingly.

But is E85 the magic solution to the energy crisis we've all been waiting for? The jury is still out on that one.

First, the benefits. Ethanol produces more power because it has a higher octane rating, and so in a drag race with two otherwise identical cars, a car powered by E85 would nose ahead of a car powered by regular unleaded.

Most ethanol refined in Australia and overseas comes from a renewable source (it's a by-product of sugar cane and other grain crops, and would otherwise be waste).

There are currently three main commercial producers of fuel ethanol (other forms of ethanol are used in alcoholic drinks). CSR's Sarina plant (near Mackay in Far North Queensland) and the independent Dalby plant (about 200km north-west of Brisbane) produce ethanol from molasses. And the Manildra Group produces ethanol from waste starch and grain at a factory near the NSW south coast town of Nowra. Sarina and Dalby each produced about 50 million litres of ethanol last year while the Manildra Group produced an estimated 300 million litres, most of which was blended with fuel.

The combined output of 400 million litres sounds like a lot, but actually represents about 2.2 per cent of fuel used in Australian passenger cars annually. (According to the Australian Bureau of Statistics, passenger cars used 18,094 million litres of fuel in 2008).

In the case of a new joint venture between Holden, Caltex, the Victorian Government and waste management company Veolia, ethanol can also be derived from municipal and industrial waste that would otherwise be bound for landfill.

The processing plant that can turn waste (including old tyres and nappies) into ethanol is yet to be built locally, but is planned over the next two years. A similar factory has been built in the North American town of Madison, Pennsylvania.

Once up and running, the Australian factory that produces ethanol from waste plans to produce 200 million litres of ethanol each year -- or approximately 1.1 per cent of fuel used in passenger cars.

In an attempt to increase ethanol production, the Federal Government has waived the 38 cents a litre fuel excise on ethanol while producers get established, but it is unclear how long this exemption will remain.

Litre for litre, ethanol produces about 37 per cent less C02 tailpipe emissions than regular unleaded -- 1.51kg per litre compared to 2.39kg per litre, while General Motors estimates combustion of 1 litre of E85 produces 1.65kg of C02  -- but you need to burn more ethanol blended fuel to travel the same distance as a car using unleaded.

This means the benefit at the tailpipe is diminished: in a car running on 85 per cent ethanol, the reduction in C02 emissions at the tailpipe is estimated to be between only 2 and 10 per cent.

Science tells us that ethanol burns 34 per cent faster than regular unleaded, but in a real world test by the Carsales Network we found a car running on E85 travelled less than half the distance of a car running on regular unleaded (190km compared to the typical 400km range of the vehicle).

According to Holden's internal testing in the lead-up to the Series II Commodore, the fuel consumption of prototypes running on E85 has been 20 to 30 per cent higher than those running on regular unleaded.

Another example: the number of pit stops in last year's Bathurst 1000 race (pictured), where all V8 Supercars ran on E85, typically increased from five to eight, because each car could travel fewer laps between refills.

So, for there to be a financial benefit -- or at least cost parity -- the cost of E85 needs to be approximately half (or slightly more than half) the price of regular petrol.

However, at the moment, E85 costs about 90 cents per litre at a time when regular unleaded has been between $1.20 and $1.30 per litre.

Given that there is a waiver on the 38 cents a litre fuel excise, someone somewhere is making a tidy profit.

There is also a question mark over the total environmental benefit of ethanol when the impact of harvesting and production is taken into account.

A 2005 study by the North American Cornell University and University of California-Berkeley found that when the production/consumption lifecycle is considered, E10 blended fuel "did not yield a discernible overall environmental benefit".

The study found that ethanol derived from corn required 29 per cent more fossil energy than the fuel produced, switch grass required 45 per cent more energy than the fuel produced and wood biomass required 57 per cent more energy than the fuel produced.

Other studies have since shown the energy balance varies depending on how the ethanol is produced. Technology in recent years has reduced the amount of energy required to create ethanol.

There is still much misinformation about the benefits of ethanol. The website for the Dalby refinery in south east Queensland claims ethanol delivers 67 per cent more energy than it takes to produce it. But it also claims that "ethanol's higher octane actually results in improved fuel consumption". Not only is this wrong, the opposite is true.

Whatever the truth in the energy balance debate, creating ethanol is a massive task. In Brazil, one of the world's biggest producers of ethanol fuel, 1 tonne of sugar cane waste typically produces just 85 litres of ethanol.

The consortium working on the Australian plant that will produce ethanol from waste says that it produces 7.7 times more energy than it takes to make it.

A practical downside to ethanol is that it does not like starting engines in cold conditions. Ethanol doesn't evaporate as easily as unleaded in low-to-freezing temperatures.

For this reason, the mixture of E85 will change throughout the year. In the winter months, E85 will likely be closer to a 70 per cent blend of ethanol with regular petrol. It will still be called E85 as this is the internationally accepted norm. In summer, the mix will return to 85 per cent ethanol.

This is one of the reasons Australia will likely only ever have a maximum of E85. Brazil can have E100 because its climate rarely dips below 20 degrees Celcius.

For the record, LPG and diesel fuels also have different blends for summer and winter.

Finally, cars must be modified to run on E85 -- and it's not something that should be tried at home. Car makers spend millions of dollars testing and developing their vehicles to ensure they can run trouble-free on E85.

Because ethanol absorbs moisture more easily than unleaded petrol, it can be more corrosive to more materials, in particular the seals, the fuel lines and the fuel pumps themselves.

On E85 cars the engine management computer needs to be modified to cope with a greater variation in the air-fuel mixture. Bigger fuel injectors and a bigger capacity fuel pump are also required, because you need to churn through more E85 to get the same range and performance as unleaded.

With all of the above in mind it will be some time before the availability of E85 cars widens. The most likely source, initially, will be vehicles sourced from North America; there are already more than 3.5 million E85-compatible (or "flex fuel") cars on the roads there because E85 is becoming more widely available.

Holden, too, will no doubt be at the forefront of E85 technology and increase the number of E85-compatible models. Its next Colorado utility will likely be sourced from Brazil, one of the world's biggest consumers of ethanol fuels. And although Holden has not confirmed this, given its investment in the ethanol-from-waste factory it will likely develop its small and medium-sized cars to run on E85 too. Watch this space.

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