Special Coverage

SAE World Congress

DETROIT – Industry leaders at the SAE World Congress here express little confidence in the future of biofuels and are equally lukewarm about diesel engines, blaming U.S. consumers and regulators who fail to see their value.

John DiCicco, senior lecturer-School of Natural Resources and Environment at the University of Michigan in Ann Arbor, MI, says researchers have been chasing the “magic enzyme” to making biofuels production cost-effective compared with gasoline for more than 30 years with few successes.

“We’ve seen zero measurable benefit to date, and I don’t see one on the horizon,” DiCicco says during a panel discussion today.

The Detroit Three would argue otherwise. General Motors Co., Ford Motor Co. and Chrysler Group LLC have millions of vehicles on the road capable of running on a gasoline-ethanol mix.

So many flex-fuel vehicles, in fact, the cost for those OEMs to make their cars and trucks flexible to burn either fuel has sunk to an inconsequential level.

GM has gone so far as to invest millions of dollars in several startup companies researching a cost-effective way to produce next-generation cellulosic ethanol from garbage and non-grain sources.

“We think there will be a (research) breakthrough,” says Roger Clark, senior manager of the Energy Center at GM, a unit focused on developing technologies to meet new corporate average fuel economy and emissions standards.

Clark says Brazil’s pervasive use of biofuels demonstrates its potential and also points to grain-rich states such as Minnesota and Iowa, where consumers are embracing E85.

But critics argue ethanol refining facilities in the Midwest drive down the per-gallon cost of E85, erasing its 30% energy deficiency against gasoline. Ship it to the coasts, however, and E85 loses its edge.

According to E85prices.com, the price spread today between a gallon of E85 and a gallon of gasoline is 27%. In California, the spread shrinks to 16%.

Rogers says gasoline prices are expected to rise in the coming years, which would make E85 more logical throughout the U.S.

Auto makers outside the U.S. tend to discount the value of E85, saying the Detroit Three make their truck-heavy fleets flexible to gain juicy credits towards meeting CAFE and emissions standards.

Clark downplays the impact of CAFE credits, saying they affect just 10% of GM’s fleet. At the same time, GM wants 50% of its fleet biofuels flexible by 2012.

John Juriga, director-powertrain at Hyundai-Kia America Technical Center Inc., says his company could add FFV technology to its products but finds little motivation from consumers.

“We don’t see that it provides our customers value,” he says. “It offers (government) credits, but we don’t need them. So we’re not going to put (FFVs) out there, because we don’t see the value.”

Eric Fedewa, vice president-Global Powertrain Forecasts at CSM Worldwide, suggests another dynamic may be at work. He says governments here and abroad see the promise of ethanol as a means to subsidizing the agricultural industry.

In auto industry terms, ethanol production utilizes idled agricultural capacity. “That’s really what biofuel is about,” he says.

Fedewa also considers the prospects for diesel engines in the U.S. dim, despite their overwhelming use in Europe.

According to Ward’s data, just 3.7% of all engine installations in 2009 were diesels. In Europe, usage is far north of 50%.

Fedewa blames consumers who learned to dislike diesel fuel years ago, the lack of a heavy gasoline tax as in Europe, a weak distribution infrastructure and stricter U.S. emissions standards.

Production hurdles also exist, he says, because all extra diesel fuel in the U.S. gets sent overseas to Europe and sold by refiners at a tidy profit.

“So there are international supply issues, in addition to the consumer tax and infrastructure issues, that really prevent certain technologies from cross-pollinating over regions,” he says.

GM’s Clark is equally skeptical of the oil burner’s future in the U.S., given the weight of current regulations and the premium price diesel commands at the pump.

“It just doesn’t add up here,” he says. “I don’t see the diesel path materializing in the near future in the U.S.”

jamend@wardsauto.com