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The only thing more

Fuel’s

UNPREDICTABLE FUTURE

As Washington pushes fuel economy, EVs draw the spotlight, with alternative fuels and improved engine technology set to play bigger roles in moving America.

Thomas Mulloy • Senior Editor

Electric vehicles are grabbing the headlines. Auto manufacturers like Ford have committed to an all-electric F-150 pickup truck, while convenience store chains, concerned about the future of fuel sales, are exploring options for installing electric vehicle charging (EVC) stations. Carbon neutral remains a buzz-phrase hanging over the oil industry, while the Biden administration released new minimum fl eet fuel economy standards.

For John Eichberger, president of the Fuels Institute, based in Alexandria, Va., the main players in the fuel, auto and renewable energy industries are asking the wrong questions. Today’s fuel landscape is much more complicated than doing away with the internal combustion engine (ICE), making all passenger cars and trucks EVs.

Ford Motor Co. took a major step in introducing its F-150 Lightning pickup, an all-electric version of its best-selling light- duty passenger truck.

Many global leaders, he explained, have adopted a simplistic soundbite of electrified transportation. That’s their goal. That’s their solution.

“They’re trying to apply that across the board, and it’s not going to work,” Eichberger said. “We need to have a much more strategic and diverse strategy that takes into careful consideration use-case scenarios and applies the right strategy where it needs to be applied. Will they do it? I don’t know.”

The question Eichberger believes leaders should be asking is: “What types of policies promote more rapid decarbonization?”

Electric vehicles are merely one option, especially for passenger cars and trucks. But what about the other vehicles on the road? Electrification for medium and heavy-duty vehicles may not be the best option for all vehicle types.

Fuels Institute data projections found that even if passenger EVs reach 60% of light-duty vehicle sales by 2040, they’ll still be just over one-fourth of the passenger vehicles on the road. That means three out of every four vehicles will still be burning carbonbased fuels.

“We still have 260 million combustion engine passenger vehicles,” said Eichberger. “What are we going to do about them? Hopefully we’ll see a discussion broaden beyond EV as the goal and back to reducing carbon emissions as the goal — but EVs being part of the toolbox.”

The hype has gotten so intense that Eichberger noted that there are a lot of misleading market signals coming from industry players, even the automakers — or in industry parlance, OEMs: original equipment manufacturers.

Lately, automakers have been prone to public announcements about their commitment to lower carbon emissions and ratchet up production of EVs.

“All those pronouncements, all those forecasts are kind of blowing in the wind right now because of the supply chain problems,” Eichberger said. “We get caught up in this hype of everybody’s ‘in,’ all these announcements, ‘we’re going to have 40 new EVs in the market in 2021,’ and we don’t. So it’s tough to read between the lines and find the right strategy.”

It’s early in the process of decarbonizing. That means that the market is going to change, and many unexpected developments are in store. Fuel industry consultant and founder of Fuel Insights, Brandon Lawrence, sees the EV landscape moving in the right direction, but there are issues lurking in the background.

“There’s a lot to like, but there’s also a lot of things that I think a lot of people don’t fully appreciate about what the transition means, particularly from basically the supply chain perspective,” Lawrence said.

Lawrence pointed out that battery EV production is comparatively low and is untested in its ability to scale up. That could present difficulties down the road. Will there be enough metals available as the demand for batteries and other components rises? When today’s vehicle batteries are depleted, how will they be disposed of?

PLUGGING INTO EVCS

The so-called EV revolution is certain to move at a snail’s pace simply because of the overwhelming number of ICE vehicles that are and will continue traveling the roads. So what’s the motivation for fuel retailers in the convenience industry to enter the EVC business?

“Why wouldn’t we be positioning ourselves so the consumer knows our brand and that we’re energy agnostic,” said Kevin Smartt, CEO of Spicewood, Texas-based Texas Born (TXB), with approximately 50 stores in Texas and Oklahoma. Energy agnostic, he added, means that TXB wants to sell whatever its customers want to buy.

The folks at Giant Eagle’s GetGo Café + Market convenience store chain have a simple reason for starting an EVC program: “We think it’s the future,” said Rug Phatak, senior vice president of marketing for GetGo, which operates 265 stores. The company,

he explained, recognizes the long timetable involved and feels the sooner GetGo gets going, the better.

“We’re talking about a long runway here,” Phatak said. “And one of the things that GetGo and Giant Eagle have always been really good at is looking at the future and being on the ground floor of those futures — even if it takes a little bit of time and a little bit of an investment.”

To capitalize on the investment, GetGo is incorporating chargers at new builds because it makes more sense from a budgetary standpoint. Retrofitting existing locations involves more design work, tearing up concrete and mothballing part or all of the existing facility. Those are costs that lower the incentive to install EVCs.

GetGo’s main goal is for customers to be able to charge their vehicles across its major markets — so that drivers can take a trip from its Eastern markets all the way to the West, North and South. While its footprint is concentrated around the Pittsburgh area in southwest and middle Pennsylvania, it extends west across Ohio. “Cleveland, Columbus, Indianapolis are

Spicewood, Texas-based TXB has initiated an EV program the company said will put EV fast chargers at all of its new-build locations, with five new sites coming in 2022. our major markets,” Phatak said. “So our goal is to be able to charge the fleet across our markets.”

GetGo has only installed Tesla chargers at a pair of stations, but those locations bookend its footprint with a location just outside of Pittsburgh and another in Indianapolis, near the famed Indianapolis Speedway. Those EVCs, said Phatak, are doing really well.

GetGo is a believer. It has plans beyond Tesla chargers, Phatak said. The company is finalizing plans with EV consultant Greenlots for five new fast charger stations around Pittsburgh and another pair in Columbus.

While TXB is a smaller chain, it’s proceeding with EVs nearly as aggressively as GetGo. “Our plan is, at every new store we build, to put in EV fast chargers,” said Smartt. “And we should complete, I think, five new-to-industry sites in ‘22. So all those locations will receive at least two fast chargers.”

Most of the new store growth will come in the Austin, Texas, market. Smartt said that Austin is a good fit because it’s fertile ground for EV sales in the state, but it’s also a larger, densely populated market.

DUE DILIGENCE

As for retrofitting existing locations, TXB is doing its homework.

“We’re in Texas, and we’re pretty spread out, so we have a lot of sites in rural Texas,” Smartt explained. “And I’m not sure that, on a retro-site, that makes sense for us right now to go through the cost and effort of putting them in every rural market.”

Initiating an EVC program is no simple task. There’s lots to think about. It takes a group of people to navigate a rather long laundry list of variables. Installing EVCs will involve marketing plans, budgetary expertise, legal advice on regulations at all levels of government, construction partners, knowledge of electric utilities and engineering, applications for grants and subsidies — all before you flip the switch.

“You still have to pay the utility demand charges. You still have to pay all the costs of operating,” said Eichberger. “Until you have enough throughput customer demand, it’s difficult to spread those costs out and make a return on your investment, even if you get a grant or some sort of rebate to put it in.”

For a c-store chain, Eichberger advised that’s it’s all about timing and capitalizing on demand in the market you’re installing EVCs.

Because TXB is a smaller chain, Smartt’s team is made up of people who are already doing other things there. People in these hybrid roles, as he calls them, have taken on the additional duties to get the effort off the ground.

Smartt said there is funding from public utilities or co-ops that periodically offer grants as well as cities or other government entities that make funding available. He cautioned that it’s a lengthy process. And be ready when those opportunities present themselves.

“Texas just recently released a round of grants based on the (Volkswagen) settlement money that some of the states received,” recalled Smartt. “So our state just received a batch of money, released those grants. They were literally gone within, I think, three days.”

But that source of cash may soon be growing, according to Eichberger. That could be a double-edged sword for convenience retailers, though.

“You’ve got a $7.5 billion federal program now being put together to help build out charging infrastructure — which could take away from a lot of c-stores getting into the business,” Eichberger cautioned. “It doesn’t change operating costs, but it opens up the door for more opportunities.”

Those opportunities won’t be limited to c-stores. The new federal program will be developed over the next six months, he advised. “For those interested in getting into the charging business, now is a pretty good time to be looking at it.”

IT’S STILL ABOUT THE CUSTOMER

In the midst of all of the myriad details to be seen to, Phatak advised not to overlook the most essential element of it all: the customer. “We do have to start being thoughtful about the experience with the consumer like we are on the fuel side, right?” he said. “We have the washer fluid for wiping and washing windows. We have paper towels. We have sanitizer. We have trash cans. We have a roof.”

Many EVC operators forget about those staples of the forecourt when it comes to a charger setup that’s away from the fuel pumps. Smartt said he’s never seen a roof over an EVC setup. He’s noticed the same tendency for operators to simply forget about the charger area once the installation is complete.

“We typically put them farther away from the store because we don’t want them taking up parking spots close to the store because, typically, they’re there for 20-plus minutes,” Smartt said. “And so, we just have some things we have to figure out as an industry if we want to attract customers and we want to give them the best experience possible.”

Part of that experience could be remaking the c-store dining experience. Lawrence believes far too many retailers aren’t yet asking themselves how they’ll improve their appeal to EV consumers looking to charge.

“What offer is going to encourage them not just to stop there instead of a competitor?” he asked. “What about your offer is going to compel them to take time out of their day and treat you as basically a destination instead of a chore that’s less inconvenient than the other guy?”

Many retailers are expanding seating areas, upping their foodservice game, improving their coffee and other beverage offering and fashioning a more welcoming atmosphere to not only attract charging customers, but also improve the location’s overall appeal.

Phatak feels GetGo’s way ahead of the game when it comes to atmosphere and in-store offerings.

“We actually think the amenities dovetail really nicely for the EV consumer,” he said. “That this is a place that if you have to wait 15 or 20 minutes, it’s at least a place where you can sort of stop and not only refuel your car, you can refuel yourself.”

ALTERNATIVE FUELS

According to the Fuels Institute, biofuels represent a solid opportunity to provide lower-carbon fuel options for ICE vehicles. The carbon intensity of starch ethanol, cellulosic ethanol and biodiesel fare well in low-carbon intensity.

While year-round sales of E15 ethanol are up in the air, companion versions of the Better Blend Act to make more ethanol available to drivers are now in both houses of Congress. President Biden’s Build Back Better Act contains nearly $1 billion for biofuels infrastructure as well as provisions to benefit biofuel producers and the agriculture industry.

Lawrence cited the commercial vehicle adoption of compressed natural gas (CNG). He used a local interstate near his home as an example of the freight use of CNG.

Source: Ricardo Consulting

The soon-to-be-released all-electric Aptera line of three-wheeled vehicles require no charging for most daily use, the company said, because they’re solar-powered. As governments mandate lower fuel emissions standards and consumers begin to buy in, more vehicle innovation like the Aptera will come to the market. (Photo/Aptera Motors Corp.)

“Basically, I-30, half of the trucks on that are owned by only a few companies,” Lawrence said. “Those lines, they use a lot of natural gas in them because it’s plentiful here in the South. It’s not hard to get it to market.”

But for consumer-facing vehicles, it won’t work. Much like EVs, drivers will need to purchase a new car with a CNG burning engine. It’s just not practical.

“And I think with any of these alternative fuels, the biggest thing is going to be scale and consistency of delivery,” Lawrence said.

RISING FUEL EFFICIENCY

Eichberger explained that hybrid electric vehicles (HEV) are becoming an increasingly viable option for lowering carbon emissions.

“It’s only about 20% higher carbon intensity over 200,000 miles as a battery EV, but it has about 21% lower carbon intensity over straight ICE engine,” he said. “If you can do that, and then if you can improve the carbon intensity of the fuel, you can get those numbers even closer to a battery EV.”

While those advancements in hybrid as well as more efficient ICE vehicles may play a larger role in decarbonization, TXB’s Smartt sees them as a bigger threat to c-stores than EVs.

“Right now, what keeps me up at night with fuels is not the emergence of EVs,” Smartt noted. “Mine is more the increasingly better fuel mileage that vehicles get.”

The math is simple: Consuming fewer gallons means fewer fill-ups. “That’s a bigger deterrent to me in my mind than EVs (are) to our industry,” he said.

The technology is driven by automakers’ desires to make better vehicles, but also by government regulations. The Obama administration in 2012 set higher fuel efficiency standards that were then revised downward by the Trump administration. President Biden’s administration recently increased them. The U.S. Environmental Protection Agency (EPA) last month issued new rules to lift fuel efficiency standards for new passenger cars and light trucks from the current 38 mpg to 55 mpg by 2026, a boost of nearly 45%.

How sensitive is Washington to the unintended consequences legislation and executive branch rules have in hurting smaller businesses, like those in the c-store industry? “You’ve got some in Congress who acknowledge we need to maintain competitive markets, we need to ensure that we’re not putting private businesses in a disadvantageous position with government money,” said Eichberger.

Eichberger noted that the nation is already entering the midterm election cycle with a president whose approval ratings are not strong. “And I think there’s a big chance the house switches to Republican control, which puts the brakes on almost everything,” he said. “My hope is we’ll calm down, reflect back to the second term of the Clinton presidency and start working together and start trying to solve problems constructively, collaboratively.”

NO SIMPLE SOLUTIONS

As for fuel retailers in the c-store industry, electrification may be a long way off, but operators should probably stay in tune with what’s happening on the fuels front. There’s much to be learned from heavy hitters like TXB, GetGo and others who are investing in EVC technology and infrastructure.

“We’re going to make some mistakes, but Giant Eagle is really good at being innovative and learning quickly from anything like that and pivoting and trying stuff,” said Phatak. “We’re very innovative in that sense. And we’re excited about taking our innovative spirit and bringing that to helping to build out the EV charging infrastructure.”

With all of the hype, noise and uncertainty attached to decarbonization efforts, Smartt, the former chairman of the National Association of Convenience Stores (NACS), is nevertheless optimistic about the future of convenience retail.

“I think, in general, our industry is still, with the emergence of food and technology, poised to continue to get stronger over the next three to five years,” he said. CSD