Out of Gas: E10 Debacle Puts the Brakes on Biofuels

By Dietmar Hawranek and Alexander Neubacher

An attempt to introduce the biofuel mixture E10 in Germany has been a disaster, after motorists refused to buy the supposed green gasoline. Car makers, oil companies and politicians have all tried to blame each other for the mess. Even environmentalists oppose the new fuel.

Photo Gallery: Tanked Photos
DPA

There is a lot of work to be done these days in Schwedt, a town in the eastern German state of Brandenburg, where the Druzhba pipeline -- which transports oil from Russia to Central Europe -- ends. The odor of Siberian oil hangs in the air. The Easter travel season is coming up and Germany's filling stations need gasoline. Production is in full swing at the PCK refinery in Schwedt.

Not much is going on at the bioethanol refinery, however, where two tanks are filled to capacity with up to 100 million liters (26 million gallons) of the plant-based fuel, enough to make a billion liters of biofuel mixture. But demand is much lower than expected, which is why the entire production process now has to be shifted away from E10 -- a mixture of 10 percent ethanol and 90 percent gasoline -- and back to the old super unleaded fuel.

German motorists are to blame for the commercial failure of the supposed green gasoline. The first attempt by politicians to foist a product that is both expensive and environmentally questionable on consumers has failed. German Environment Minister Norbert Röttgen, who had earlier argued in favor of the fuel, is now as embarrassed as the petroleum industry and the auto industry.

"Consumers have made up their minds," says Volker Kauder, chairman of the parliamentary group of the conservative Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU). "With people starving in many countries, wheat doesn't belong in our gas tanks."

Expensive U-Turn

Of course, drivers are the ones paying for the setback. Oil companies, like Aral, Shell, Esso and Jet, have already raised their prices to recoup their additional costs. According to industry information, the cost of converting refineries and filling stations to E10 was in the triple-digit millions, while reversing the development is unlikely to be much cheaper.

And then there are the penalties the oil industry must pay the government now that it will not reach the legally mandated quota for plant-based fuels. An industry association anticipates penalties of up to €456 million ($552 million) for this year alone, which corresponds to about two euro cents per liter. Companies will presumably add this cost to the price of gasoline.

Motorists will also face additional costs because many cars are now only equipped to run on expensive higher-octane "Super Plus" gasoline. On balance, the cost of the E10 experiment to German motorists will likely run into the billions this year.

But the eco farce will also have unpleasant consequences for Volkswagen, Daimler and BMW. Biofuel was part of a deal that had allowed the automakers to circumvent even stricter European Union environmental protection regulations.

Sense of Uncertainty

The EU had in fact intended to require carmakers to limit emissions in their new models to an average of only 120 grams of carbon dioxide per kilometer. The plan would have been more detrimental to German auto companies than their Italian and French counterparts, which tend to specialize in smaller cars.

With the help of Chancellor Angela Merkel, the Germans negotiated a discount of sorts. European carmakers were permitted to achieve 10 grams of CO2 reduction through "supplementary measures," as it was called, such as configuring their vehicles to run on biofuel. But now that the E10 concept has been such a flop, engineers will have to come up with new ideas on how to limit CO2 emissions.

The auto company executives have only themselves to blame for the debacle. Making sure that E10 would be a success ought to have been in their best interest, and yet there was little sign of any willingness to promote the fuel. Instead, they contributed to the general sense of uncertainty about E10.

Many car owners still aren't quite sure whether their vehicle can cope with E10. The manufacturers' lists are incomplete. This confusion even prompted the German Interior Ministry to instruct its employees not to fill up their official vehicles with biofuel until further notice. The same applied to all government agencies and organizations associated with the Interior Ministry, such as the Federal Police and the German Federal Agency for Technical Relief (THW), where officials were concerned that emergency vehicles could end up stalling because of engine damage.

Lack of Trust

Automaker Saab retroactively reduced the number of E10-compatible models in its lineup. BMW felt compelled to give "more specific" consumer information, while Audi and SEAT also corrected their data.

Many German motorists found that having to compare their registration documents with lists from the Internet did not exactly inspire trust in the new fuel, especially considering they live in a country in which every chocolate bar is labeled with precise information about its ingredients.

The manufacturers didn't seem to have enough confidence in the issue themselves. Only after weeks of debate did automakers issue a liability promise for E10 damage. But motorists are required to prove that the biofuel mixture has damaged their engine. That's a "major hurdle," says Ulrich May, a lawyer for the German Automobile Association (ADAC).

One auto industry executive, who preferred not to be identified, admits that the industry "messed up" with the introduction of E10. The manufacturers, he says, allowed a feeling of great uncertainty to develop, even though almost all German-made cars can use E10 without any problems.

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BTraven 04/20/2011
As soon as the penalties companies are obliged to pay because of missing the quota for plant-based fuels will be demanded by the government car owners will accept E10 which will probably much cheaper than normal petrol. It will be interesting to learn with which sort of petrol the oil companies want to recoup their losses. Perhaps the government will remit the fines
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