Alternative Fuels and Vehicles

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The term alternative fuels first appeared in the energy literature in the late 1970s as a way to refer to nonconventional fuels—fuels that are not gasoline, diesel or aviation fuel. Alternative fuels excludes all fuels refined from petroleum that are normally liquid at ambient conditions, such as gasoline through heavy fuel oil. It does include the highly volatile fractions: liquefied petroleum gas (propane), liquefied natural gas, and compressed natural gas. The category also comprises all fuels made from other fossil fuels, such as coal and oil shale, biofuels originating from plant material, and chemically derived fuels such as methanol and hydrogen. The nonfossil plant-derived fuels such as ethanol and bio-diesel (from vegetable oils), and hydrogen made from water via solar powered electrolysis, are the only renewable energy alternative fuels. Electric vehicles are considered alternative-fuel vehicles since only about 3 percent of electricity comes from burning petroleum.

Alternative fuels should not be confused with alternative energy, which is another term whose origins date back to the 1970s. Alternative energy and alternative fuel both exclude petroleum energy, yet alternative energy goes further by excluding all fossil fuel sources and nuclear. However, sometimes energy sources such as hydroelectric, which accounts for about 10 percent of U.S. electricity production, may be considered alternative even though it has been a major energy source for centuries.

Of all the fossil fuels, petroleum is considered the least sustainable fuel option (most finite and fastest rate of depletion), which is the main reason for the development of alternative fuels. Resources of natural gas and coal are far greater, and depletion slower, which makes alternative fuels developed from these sources more sustainable. The nonfossil plant-derived fuels of ethanol and bio-diesel (from vegetable oils) are the only renewable energy alternative fuels and, in theory, are considered the most sustainable. However, there is not enough agricultural land for biofuels alone to ever become a total replacement for petroleum at the year 2000 world petroleum consumption rate of about 30 million barrels a day

In the United States, the leading use of alternative fuels is not as standalone fuels, but as additives to petroleum-based gasoline and diesel fuel. For example, gasoline sold in much of the United States is 10 percent ethanol or 10 percent methyl tertiary butyl ether (MTBE).


The first major government investment in an alternative fuel was for the purpose of energy security and oil import independence. Beginning in the late 1970s, billions of dolars were spent on synthetic fuels (converting coal and oil shale into gasoline and diesel). When oil prices began to fall in the early 1980s, and it became apparent that the costs of producing synthetic fuels would remain well above that of petroleum fuels, the program was abandoned.

Interest in alternative fuels grew again in the late 1980s in response to urban air quality problems. Early in the 1990s, environmental regulations calling for oxygenated fuels (nonpetroleum fuels containing oxygen blended with gasoline) to cut carbon monoxide emissions went into effect that significantly increased the sales of MTBE and ethanol. In 1995, alternative fuels comprised about 3 percent of all fuels consumed in the United States (4.4 billion gallons versus 142 billion for gasoline and diesel). MTBE and ethanol consumption is greatest since these fuels are blended with gasoline as required by environmental regulations for carbon monoxide reduction. However, when the 1999 National Research Council study found that there was no statistically significant reduction in ozone and smog based on the data available, the continued requirement of using MTBE was questioned, especially since MTBE leaking from storage tanks can quickly contaminate groundwater.


Alternative fuels are advocated as a way to improve the environment, enhance energy security, and replace dwindling petroleum reserves. Thus, the federal government continues to generously fund research and development for alternative fuels either as a replacement for, or for blending with, conventional fuel. Among the federal subsidies and regulations to promote alternative fuel use are the Energy Policy Act of 1992 (requiring alternative fuel vehicles in fleets and providing tax breaks for people who buy these vehicles), the Intermodal Surface Transportation Efficiency Act of 1991 (providing grants for purchasing alternative-fuel vehicles and for building refueling stations), and the Alternative Motor Fuels Act of 1988 (allowing automakers to sell more large, higher-profit conventional cars with poorer fuel economy if they also sell alternative fuel vehicles). However, even with subsidies and favorable regulations, alternative fuels face significant hurdles before becoming practical replacements for conventional fuels. Foremost is cost, followed by safety, practicality and reliability, and finally, the development of infrastructure (production, distribution and retailing availability).


Natural-gas-derived fuels are the most cost-competitive because natural gas does not need to be refined like gasoline and diesel fuel from petroleum (Figure 1). Ethanol, a heavily subsidized alternative fuel, is not as cost-competitive as natural-gas-derived fuels. If not for the subsidies and environmental regulations requiring oxygenates, ethanol would not be used at all. The chances of ethanol ever becoming cost-competitive in the free market are slim since extensive land is needed to raise high-energy-yield plants for fuel, and the energy that must be expended to raise, harvest and dry the plants for the fermentation alcohol results in a low net energy yield.

When gasoline-powered automobiles are modified to burn a fuel such as ethanol alone, they are known as dedicated ethanol vehicles—risky investments for buyers who have concerns about future availability. For example, Brazil's Proalcool program promoted and heavily subsidized ethanol, and thus dedicated ethanol vehicles, from 1975 to 1988. Once the subsidies were curtailed and then eliminated (estimates of the costs of the subsidy to the government range from $7 to $10 billion), shortages resulted. Many of the owners of ethanol-dedicated vehicles either had to junk or retrofit the vehicles to run on gasoline, and the sales of ethanol-dedicated vehicles went from 50 percent of the market in 1988 to 4 percent by mid-1990.

Aside from the difference in fuel costs, the cost of redesigning and equipping vehicles engines and fuel tanks to run on alternative fuels has to be considered. Responding to the desire to switch fuels for cost reasons, or refueling security when the alternative fuel is not readily available, several auto makers offer flexible fuel vehicles that run primarily on compressed natural gas, but also gasoline when compressed natural gas is not available. These vehicles are sold at a premium and have shown little success in attracting buyers since low fuel prices ensure their return on investment will be poor in comparison to standard gasoline vehicles.

Practicality and Reliability

When the energy density of the alternative fuels is considerably less than gasoline and diesel fuel, it greatly impacts the practicality of the fuel for transportation. Most of the alternative fuels have a much lower energy density (Table 1). For vehicles, much more storage space is required to accommodate much larger fuel tanks to achieve comparable range or, for gaseous fuels, storage tanks that can withstand greater compression. Moreover, it will always take longer to refuel a vehicle using a lower-energy-density liquid fuel or a gaseous fuel.

The lower energy density of alternative fuels is even more problematic for aircraft. Methanol has been suggested

Energy Density lb./ gal. @ 60 degrees F.
No. 2 Diesel Fuel6.7 - 7.4
Gasoline6.0 - 6.5
Propane (LPG)4.22

as a jet fuel replacement. But using methanol would seriously curtail range and payload since the plane's weight is a principle determinaent of how much fuel is needed. A typical four-engine commercial jet will carry 775,000 pounds of aviation fuel to maximize range; to achieve the same range with methanol would require one million more pounds of fuel.

Since most of the alternative fuel vehicles burn cleaner, experience has found that this reliability is equal or better than that of comparable gasoline or diesel fuel vehicles.

Infrastructure Needs

A vast petroleum production, refining, distribution and retailing operation exists to deliver gasoline and diesel fuel. The major oil companies have invented billion of dollars in the setup and delivery of liquid fuels that can be stored in underground tanks; thus, any alternative fuel that requires massive new investments in infrastructure will face considerable market resistance. Moreover, there are personal investments in over 200 million vehicles on the road that are designed to consume either gasoline or diesel fuel, and a dauntingly immense and specialized infrastructure of industry building these vehicles and small businesses maintaining them. Since so much of the economy has a vested interest in the internal combustion engine burning gasoline or diesel fuel, a market transition to alternative fuels and vehicles is likely to be gradual.

In the free market, as long as petroleum supplies are plentiful, there is little incentive for oil companies to transition to any of the alternative fuels, which is a major reason that the U.S. Department of Energy projects petroleum consumption will rise from 18.6 million barrels per day in 1997 to 22.5-26.8 million barrels by 2020. As the crude oil reserves dwindle, the marketplace will either transition to the electrification the transportation system (electric and fuel cell vehicles and electric railways), or see the development of alternative fuels. Any short-term transition to an alternative fuel is likely to meet environmental air quality regulations. Beyond 2020, the transition is likely to occur due to the depletion of oil reserves resulting in steeply rising gasoline and diesel prices, or from advances in technologies that make alternative fuels and alternative transportation more attractive.

John Zumerchik

See also: Biofuels; Capital Investment Decisions; Hydrogen; Kinetic Energy, Historical Evolution of the Use of; Methanol; Natural Gas, Processing and Conversion of.


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Hadaller, O. J., and Momenthy, A. M. (1993). "Characteristics of Future Aviation Fuels." In Transportation and Global Climate Change, edited by D. L. Greene and D. J. Santini. Washington DC: American Council for an Energy Efficient Economy.

Howes, R., and Fainberg, A. (1991). The Energy Sourcebook: A Guide to Technology, Resources and Policy.New York: American Institute of Physics.

Lorenzetti, M. S. (1995). Alternative Motor Fuels: A Nontechnical Guide. Tulsa, OK: Pennwell Press, Inc.

National Research Council, Energy Engineering Board. (1990). Fuels to Drive Our Future. Washington DC: National Academy Press.

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Alternative Fuels and Vehicles

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