Five Reasons Ethanol Blend Economics Matters
As the world shifts towards cleaner and more sustainable fuels, refineries face increasing pressure to optimize their blending processes while balancing economic and environmental considerations.
For gasoline, ethanol plays an important role in reducing CO2 emissions. In 2023, ethanol in gasoline reduced global CO2 emissions by 56.5 million metric tons, equivalent to removing 12 million cars from the road.
Figure 1: Route of gasoline blended with ethanol at the terminal and onwards to the filling station
The increasing global demand for higher percentages of ethanol means refineries need to run sophisticated models to predict the impact of ethanol content on the gasoline they are producing, ensuring it meets specifications. Ethanol is not added to gasoline at the refinery, but at a terminal where the gasoline will be consumed. This is because ethanol can attract water over time, which can negatively impact automobile engines, so it's added at the last moment.
Estimating the impact of ethanol at the refinery involves guesswork, limiting the refinery’s ability to run close to specifications for octane, vapor pressure, and other parameters. Ultimately, this can result in the refinery losing out on millions of dollars in blend optimization unless they use the Ethanol Blend Optimizer from Icon/PAC. This Ethanol Blender precisely mixes ethanol with gasoline before going to the process or lab analyzers, allowing the refinery to take control of the blending process.
1. Gasoline Giveaway and Blend Economics
Gasoline is made from several different products that have been refined at the refinery. These products are blended to form gasoline, which must meet several specifications to function properly as fuel and not cause any issues with the engines that will consume it.
Figure 2: Role of Ethanol Blende Optimizer in a refinery
Running as close to the specification as possible while optimizing the ratio of the products used to form the gasoline is called blend economics. Each product has its own cost, and when blended with others, it affects the specifications of the final gasoline blend.
The refinery reduces its costs the closer it produces gasoline to the actual specification. If it produces gasoline that is over-spec, for example, for octane, then it is losing money. This loss is known as the giveaway.
In addition to optimizing the blend of gasoline at the refinery, the refinery needs to estimate how ethanol can impact the final product to ensure it meets gasoline specifications when ethanol is added elsewhere, typically at a terminal. This guesswork, theoretically adding ethanol using mathematical models, further increases the giveaway.
The specifications are measured using analytical instrumentation. If the refinery can take a sample of the gasoline and mix it extremely accurately with ethanol, supplying it to these instruments either in a laboratory or ideally online, then this giveaway can be reduced, saving a refinery several tens of millions of dollars per year.
The Icon Ethanol Blend Optimizer enables this true representation of the final gasoline with ethanol to be measured at the refinery, allowing the refinery to meet specifications.
2. Global Importance of Ethanol
Ethanol, as a renewable biofuel, supports reduced greenhouse gas emissions, aligning with increasingly stringent environmental regulations globally.
Governments worldwide are actively promoting cleaner fuels as environmental and energy security concerns escalate. Ethanol, derived from renewable sources such as corn or sugarcane, offers a sustainable alternative to fossil fuels. Countries in which corn production is available at large scales, such as in the USA, consumers can not only benefit from lowering environmental impact, but they can also benefit from a reduction in the cost of gasoline. For example, increasing from 10% ethanol (E10) to 15% ethanol (E15) can save customers 25 cents per gallon (as of 2024).
By blending ethanol into gasoline, gasoline producers can contribute to reducing greenhouse gas emissions as well as reducing dependency on oil from other countries.
A study by the Economic Research Service, part of the USDA (Global Demand for Fuel Ethanol through 2030), stated that under governmental targets for blended gasoline, fuel ethanol consumption is expected to increase by 180%, increasing as much as 23.7 billion gallons from its pre-pandemic consumption in 2018. Outside of the USA, the average blend percentage of ethanol is expected to grow from 5.2% in 2021 to 12.4% by 2030.
These increases are coming from large gasoline consumption nations such as India and Indonesia, which are targeting a 20% blend rate by 2025, and China, which is targeting 10%. Given that as of 2023, the last 5 years' average blend percentages in China, India, and Indonesia were 2%, 5%, and 0%, respectively. The three main drivers for these countries are oil import dependence, worsening urban air pollution, and overstored grain reserves.
3. Timing and Cost Implications
Blending occurs at the end of the refining process. However, unless there is an onsite distribution terminal, ethanol cannot be added to the gasoline blend produced. Sometimes the product is blended directly to ships, or pipelines, but mostly into onsite storage ready for transportation by road to terminals where the ethanol is added. Refineries have to get the blend properties correct to ensure that the product meets the specifications before the ship can leave port or the gasoline can move through the pipeline infrastructure. Measurements of octane, vapor pressure, distillation, and other important parameters take time when done in the laboratory. However, delays due to slow lab measurements can lead to inaccuracies in the blend resulting in massive costs. Not only is there a financial cost, but there is also an environmental cost resulting from the emissions while waiting. Globally, the impact of ships waiting across the whole maritime industry is $18 billion, with emissions of 160 million tons of CO2, as reported by the MarineTraffic Blog.
On many occasions, the gasoline at the point of custody transfer from the refinery to the pipeline or ship or terminal is tested. If the product falls outside the spec, then re-tests are done. The product may be sold as sub-spec gasoline at a lower price or worst-case, sent back to the refinery.
Ultimately, the risks involved here mean that it can be difficult for refineries to produce gasoline close to specification and further increase the cost to the supply chain.
The Icon/PAC Ethanol Blend Optimizer offers a solution, as it can make the final product with ethanol included before going through process analyzers. This combination not only allows the refinery to run closer to specification and eliminates the time to perform timely lab measurements but also builds confidence across the supply chain.
4. Online Certification vs. Lab Certification
Traditional lab certification involves time-consuming sample analysis conducted in a laboratory setting. Certification in the laboratory usually includes boost models. This is where the specifications that have been measured have a mathematical model (the boost model) applied to them to estimate the impact that ethanol would have on those numbers. Some refineries will also add ethanol to lab samples to measure the final specification. The issue here is that the accuracy of adding ethanol to the gasoline with traditional methods contains large errors that add to the giveaway.
Process analyzers have many advantages:
- Multiple results during the blend mean that no allowance is needed for precision, that is, only if the analyzer uses the same measurement technology as the laboratory method. This means that the refinery can run extremely close to specification.
- Detecting upsets and providing instant feedback from process analyzers allows for finer control of the blend.
- No time-consuming waiting around for measurements.
- When combined with Icon's Ethanol Blend Optimizer, refineries can save from $2 million to $25 million and reduce the giveaway in the blending of gasoline.
5. Positive Environmental Impact
Figure 3. Biogenic CO2 circle of Ethanol
Ethanol is produced from a biorefinery; the source is usually sugarcane or corn. The carbon emitted from ethanol when burned in an automobile is biogenic, meaning that the carbon is part of the short-term carbon cycle, where the carbon released from it goes back to growing crops within a few months or years. Gasoline containing blends of ethanol can play a role in the pathway to net zero. Currently, 10% of all global emissions of CO₂ are due to automobiles. In 2023, ethanol in gasoline reduced global CO2 emissions by 56.5 million metric tons, equivalent to removing 12 million cars from the road.
Opportunities exist to further improve this, both increasing the amount of ethanol that is mixed into gasoline and improving the use of carbon in the supply chain of ethanol. Biorefineries are moving away from being powered by fossil fuels. Together with farmers improving the management of fertilizers and increasing yields, and green energies used throughout the supply chain, significant reductions in the carbon used to produce ethanol can be achieved.
The biggest opportunity exists within carbon capture at the biorefinery. Fermentation to convert corn to ethanol only converts about 50% of the carbon; the other half is lost during the process to biogenic CO2. Capturing and storing CO2 from fermentation allows the ethanol to be produced with a negative carbon intensity.
Ethanol plays a crucial role towards net zero, and its use currently in gasoline is helping us bridge the gap. Icon/PAC Ethanol Blend Optimizer is aiding in this transition towards a greener planet. The Ethanol Blend Optimizer allows refineries to measure gasoline to specification as it would be with the final ethanol mixed in. This allows the refinery to optimize its gasoline production, save significant amounts of money, but arguably more important reduce the carbon used throughout the production of gasoline at the refinery and enabling a greener gasoline product that will ultimately be blended with ethanol at a fuel terminal.
The Role of the Ethanol Blender
Blend economics isn’t just about numbers—it’s about efficiency, compliance, and sustainability. Icon Scientific's Ethanol Blender ensures precise mixing, meeting regulatory requirements, and maintaining product quality. Refineries benefit from cost savings by using real-time analyzers within the blending system, allowing immediate adjustments and eliminating the need for time-consuming lab certifications. This translates to economic efficiency as refineries contribute to a greener, more sustainable energy landscape through the production of gasoline at the refinery too the ethanol blending at the terminal.