The 4 Monster Myths of Renewable Fuels

October 3, 2013 |

mythbustedAs Matt Horton, CEO of Propel Fuels, relates the tale, he hears the 4 Monster Myths of Renewable Fuels, also known as the “conventional wisdom,” all too often.

Turns out the conventional wisdom is, er, dead wrong.

“Number one, there’s no brand loyalty in the fuel business, they’ll tell you right away,” Matt Horton explained to delegates at this year’s Algae Biomass Summit, where the still-youthful but now seasoned Propel Fuels CEO was giving a keynote address. “Two. People only care about price. Three. They have no real interest in the content of the fuel. Four. They are afraid of putting new fuels in their car.”

Those are going to sound pretty familiar to a lot of people in renewable fuels. In fact, a lot of people in the industry believe it, too.

“The thing is, we asked customers,” said Horton, “and they’re just not true.”

Propel CEO Matt Horton (and family) at one of Propel's California stations

Propel CEO Matt Horton (and family) at one of Propel’s California stations

Brand loyalty? Our research shows that there’s a lot. 53 percent of our customers fuel up exclusively with Propel, and another 17 percent go with us if it is feasible to do so. 18 percent of our customers are occasional with us, and 12 percent in the survey were first-timers. That means that 70 percent of our customers are either always with us, or with us if they can be. What else can you call that except brand loyalty?

Price and pain at the pump

OK, there’s myth number one. What about #2, the all-important price at the pump?

“Take price, for example,” he told ABO’s summiteers. “It’s the most important factor. But it’s not the only factor. Not by a long shot. 61 percent of customers said that price was important to them. But 42 percent said that convenience was important. 29 percent said that carbon was a key factor, 24 percent keyed in on. 21 percent wanted a fuel made in the USA and 19 percent wanted fuels that helped end imports. There are lots of factors.”

So, price is perhaps the most important, but far from the only factor — and there’s a surprising focus on emissions and energy security. What about the content of the fuel?

Do ingredients matter?

“Algae biodiesel gave us a really good opportunity,”said Horton, ” to test the importance of fuel contents. We had a 30-day trial of B20 Solafuel, priced competitively with conventional diesel. Here’s what we found. 71 percent will visit us more frequently, after we introduced algae content in our biodiesel. 61 percent said that they will drive farther to go with us for a refuel. 34 percent said they would pay more to refuel with algae biodiesel, compared to conventional food crop-based biodiesel.

“Now, the only variation there is the content of the fuel. We didn;’t change our pricing policy, the amount of biodiedsel content, or the design of the pump, anything. Just the content of the fuel. That’s why we know that it’s a myth that customers don;t care.

OK – but what about Myth #4 – that customers are afraid to try new fuels?

propel-biodiesel

“Well, think of it this way,” Horton told the Digest after his address. “98 percent told us in our survey that they are willing to try algae fuel. 98 percent! But maybe you are as skeptical about consumer surveys as I am, because people sometimes don’t behave exactly the way that surveys tell us they will. So, look at the hard data. We saw a 35 percent increase in sales with algae biodiesel versus conventional biodiesel. Where have you ever heard a product getting a 35 percent sales increase, in a store-to-store comparison, in just 30 days, where the only change is a single ingredient.”

A 35 percent jump in sales

It’s true. You never see that even with hot products like, say, an iPhone. Imagine 35 percent jump in iPhone sales because they swapped their glass supplier. Or, an increase in sales or Ford F-150s because they swapped out tire suppliers. It’s extraordinary.

“Algae’s advantage,” Horton said, “is that it is differentiated, sustainable and in a more profound way that most people think first-gen fuels are sustainable. In our case, we went with a local supplier, Solazyme, and that made a difference, and of course the economics were in line.”

“That isn’t to say that there aren’t challenges with renewable fuels. There are. Consistent quality and fuel testing is a must. Cost parity is not everything but it is important. Scale is a challenge, because downstream partners like ourselves can find it challenging to handle very small quantities. Plus, there’s a lot of education to do, and you have to master the standards and regulations.”

“But in many ways, we see renewable fuels are being on the last mile before broad adoption. If you understand the end-user customer requirements, and are prepared to work with supply chain partners on their needs, and you are beginning conversations now with stakeholders – when you see numbers like 34 percent willing to pay more and 71 percent being willing to visit more frequently if you have ingredients like algae, you know that the market is there.”

More about Propel including the locations of their stations in California and Washington, is right here.

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