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2014 ). These design options attempt to balance capturing the fuel economy improvement opportunity with system cost and also sensitivity to fuel options . Given fuel availability limitations and consumer behavior , these powertrains also need to function using non-SO fuel . Concurrently , OEMs also need a low-blend ( not more than 10 % ethanol ) fuel available at stations to remain compatible with the existing fleet ( see Table 1 ; see also Figure 3 ). Although the SO fuel and vehicle may be more expensive , the cost per mile and total cost of ownership may be lower due to the improved efficiency ( Anderson et al ., 2012 ; Morey , 2014 ; Yan et al ., 2013 ).
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Energy companies require a lowest cost
fuel blend option for regulatory compliance , and are motived to maximize their profit through the sale of cost-effective fuel . Although more expensive to produce , premium fuels also command a better profit margin . Concurrently , the energy companies need to meet the volume and carbon intensity reduction requirements in the renewable fuel standard ( RFS ) ( see Figure 4 ) and other state regulations ( API , 2014 ; EIA , 2013 ). These regulations impose significant risks and challenges to the industry and other stakeholders ( Committee of Economic and Environmental Impacts of Increasing Biofuels Production & National Research Council , 2011 ). The Renewable Fuel Standards requires that up to 15 billion gallons of renewable corn ethanol and 16 billion gallons of cellulosic ethanol be produced and consumed per year by 2022 . An additional 5 billion gallons of other advanced renewable fuel is also required . The mandated volumes would result in ethanol fuel blends that exceeded the 10 % allowed in most conventional engines and fuel systems . However , due to production capacity limitations the U . S . Environmental Protection Agency has lowered the mandated volumes on a year by year basis .
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Station owners have higher profit margin on premium fuels and want to increase the demand for these products ( Eichberger , 2014 ). In order to minimize financial risk , any additional expense for the equipment — several thousand dollars per station for above ground components — will need to be recovered through the sale of the higher profit super premium ( SO ) fuel ( Coker , 2014 ; Eichberger , 2014 ; Morey , 2014 ).
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Ethanol investors need to see a profit
opportunity that outweighs the investment risk . Ethanol producers and their supporting interests must put forth billions of dollars in upfront investment to build out new capacity with lead times over three years ( Abengoa , 2014 ; Cosan , 2013 ). In order to justify this investment and manage risk , they must foresee significant profits and hold confidence that those profits will be actualized ( Parsons , 2014 ; Stech , 2014 ). As demand for a nascent industry like ethanol is hard to forecast , producers are dependent upon the current demand and growth patterns to estimate what future demand is , and thus may use conservative forecasts ( Parsons , 2014 ). Capital expenditure investment in cellulosic ethanol ( biofuel from plant lignocellulose ) production to meet the renewable fuel standards occurred , but the failure to produce ethanol at a competitive market price has resulted in the bankruptcy and halted further expansion ( Mongeau , 2010 ).
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