The Selling of Renewable Fuels

August 19, 2011 |

The forgotten, er, customer – or, the Case of “Someone Else’s Problem” – and what Propel Fuels is doing about putting low-carbon fuels into tanks.

In all the discussions about renewable fuels R&D, engineering, policy, finance, and construction, the customer – that is, you and me – generally are an afterthought.

Could be because most renewable fuels producers generally will sell their wares to an oil company (operating under a mandate), or a distributor. Could be that the companies are simply overwhelmed with the early-stage tasks of getting into business.

Either way, its a classic case of Someone’ Else’s Problem: “an effect that causes people to ignore matters which are generally important to a group but may not seem specifically important to the individual.”

Out in California, Propel Fuels is doing something about it. Founded several years ago in Seattle, the company has shifted focus to the biggest fuel market in the country – the car mecca of California, and yesterday Propel announced a multi-year agreement with Pacific Convenience and Fuels (PC&F)  to co-locate Propel “Clean Fuel Points” with PC&F gas stations and convenience stores throughout the Western U.S. Propel and PC&F have identified more than 80 potential locations for Clean Fuel Points throughout PC&F’s network of 300 stations in California, Washington, Oregon and Colorado, which operate under various brands including Chevron, 76, Conoco and Circle K.

Propel currently operates Clean Fuel Point stations throughout California and Washington State with more than 200 sites planned for new and existing markets over the next two years.

The capital-light route to renewable fuels at the pump

The model for a Propel Clean Point is as capital light as, say Amyris, Solazyme, Butamax or Gevo.

It’s a bolt-on, essentially, to an existing gas station. Propel installs green-built, self-serve filling stations (Clean Fuel Points), providing convenient access to domestic, renewable higher-blend ethanol and biodiesel, at places customers are already going for fuel.

By co-locating their stations with existing gas stations, Propel drives additional revenues to onsite convenience stores and provides new revenue streams to station owners such as PC&F. Through the partnership, PC&F provides Propel with access to premium real estate on existing sites, while Propel owns and operates the equipment and provides the expertise, fuel supply and outreach to drive renewable fuel adoption.

In short, gas station owners are not “on your own” when it comes to bringing in the customer, after having put in a pump. A welcome antidote to the “if you build it, they will come” approach of the past.

But it only works if the partnership really does drive revenues, which comes down to the hard work of converting a customer to renewable fuels, delighting them, and keeping them. In sufficient numbers to make it work not only at the macro-economic level of renewable fuel standards, but at the convenience store level where owners must make decisions to add, keep, or drop renewable fuels based on sales at the pump.

To learn more about how Propel earns and keeps a customer, we spoke to Propel CEO Matt Horton.

BD: California’s a big car market, but why does it work as a market for renewable fuels, as opposed to markets in the Midwest where E85 has been struggling?

MH: Generally, the flex-fuel vehicles are on the coast, the big markets are out here. While e85 is around in the Midwest, here there are more cars and greater concentration of flex-fuel vehicles. In many places, it doesn’t make sense to install a pump, because there isn’t enough vehicle density. You have to really focus in on the biggest and best opportunities, rather than spread out. You go where the concentrations are.

BD: So, you are suggesting that some of the struggles of E85 are related to poor site selection?

MH: That’s for others to say. But there aren’t many people who have a clue what makes for a great renewable fuel location. It takes a lot of effort to put together the tools and knowledge.

Finding the customer

BD: Factors like?

MH: It’s a combination of a lot of factors. First of all, the vehicles. Also, the demos – an inclination to use the fuels. You need outstanding real estate – the sites have to be very accessible and convenient. It’s take a

BD: What about psychographics, add opposed to demographics?

MH: There are a broad swathe of people who are interested in using renewable fuels. People who are concerned about climate change. Some are concerned about energy security, or the domestic economy. There also are those who are focused on value at the pump.

BD: So its wider than, say, the typical green audience?

MH: Our target customer is not the kind of person who buys a Tesla or Prius. These are vehicles for everyday Americans. Let’s face it, there’s a lot of hand wringing that green is only for the wealthy, because of the premium costs associated with many of the choices [e.g. rooftop solar, Tesla cars]. This is different. It’s affordable eco.

BD: How many of your potential customers, when you first go into a new location, know that they are driving flex-fuel vehicles?

MH: Anecdotally, awareness is very low before we come to a market. I have seen reports that more than half of the people who drive a flex-fuel car don’t know it. For us, those are great opportunities.

BD: How much are customers affected by the negative press that has been generated by cattle ranchers, dairy farmers and oil companies opposing renewable fuels?

MH: We find that. actually, consumers tend to be less troubled by, for example, ethanol than the headlines might lead you to believe. Most understand that it is better for environment , that it is a good, positive first step.

The First Fill

BD: So, what’s the first goal in your marketing campaign?

MH: We really want to get that first fill. That feeling is so exciting, to put something other than gasoline or diesel into the car. It’s something totally new. If we can do that, it’s a big win.

BD: How do you attract that first-fill customer?

MH: We do onsite events, free fuel giveaway cards, very targeted outreach. It doesn’t work to so, for example, big billboard or radio campaigns because the flex fuel vehicle numbers are still low in density. We get great PR too.

BD: What about marketing partners?

MH: For example, with Enterprise Rent-a Car, at some of their locations they provide info to their customers. With jiffy lube, we have had a similar type of program, a free fuel card for the first time buyer. We also work with local auto dealerships to provide information on renewable fuels for their customers.

BD: How important is the environment you cleared with a Clean Fuel Point, at the pump?

MH: We have to balance the need to be a differentiated experience, with the need to make it familiar and comfortable.

Customer retention

BD: And how do you keep customers?

MH: One thing we do that is unique – our clean drive online program, where our customers can track their results, in CO2 avoided, or gallons of petroleum avoided.

BD: Online is important to you?

MH: Very. The ability to go online and see the difference your choices are making, helps to set the experience apart. Besides, how many people have “friended” their oil company – their traditional fuel provider? We have a thriving social media presence.

Drop-in fuels and electric vehicles

BD: The Obama Administration is pivoting towards drop-in fuels in recent announcements. Today, you are selling unique fuels like ethanol and biodiesel. How do you look at drop-ins?

MH: We see three major platforms out there. Diesel, flex fuel, and gasoline. Of course there are natural gas and electrics but the numbers are so small. We want to serve all those customers.

There’s a perspective that drop-ins should be an invisible part of the fueling experience. That you should you get some 0.5 percent blend that you don’t even know is there. To us, drop ins shouldn’t be invisible. The higher level blends, we should be highlighting how great they are. I mean, great mileage, a great fuel experience, and save 90 percent on the CO2 in some cases. Just because a fuel can drop in doesn’t mean it should. So we are working with a couple of companies to deliver drop in fuels.

BD: Lot of work?

MH: People in the industry say that nothing has to be done with drop-ins, but there are a lot of regulatory barriers that you have to go through with a fuel. You have to go through a process.

BD: How arduous?

MH: Looking at the conversation around e15 is instructive. In theory, it shouldn’t be controversial. But just a little more ethanol – and there’s this huge controversy. There’s a lot of fear uncertainty and doubt being spread around. And there’s the cost of conversion, and concerns about liability. It takes a lot of time. The EV platforms are just starting to find that out.

BD: Well, that’s a good question. Many say, why not deploy electrics instead of liquid fuel cars.

MH: We are all for electrics. But the additional costs and hassle is a huge surprise to people who want to buy electrics, if they want to charge with anything above a 110 volt plug [to get a faster charge, for example]. People don’t fully understand the permitting, the new electrical service issues, and there are a lot of issues at the utility level. People at the EV platform are just beginning to understand how to actually get it done.

The PC&F partnership

BD: Speaking of getting it done, what was the catalyst for partnering with PC&F?

MH: Some time ago we started trying to identify scale-up partners who could really address this lack of infrastructure with us. PC&F are among the largest station owners, and we have always admired what they had done as a top-notch group of operators. We first made contact shortly after the big deal, where they purchased 600 stations from Conoco. Taking over 600 stations is a massive massive project, so while there’s been a lot of interest for a long time – now, time was right for them. With the massive growth in flex fuel vehicles, they’ve decided that E85 is going to be a big part of the mix for them.

You can follow Propel on Twitter at: @PropelFuels.

Category: Fuels

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