General Motors, for all its hype about the Volt (which won’t run on ethanol), has announced that E85 (ethanol, up to 85%) is the “best near-term” alternative fuel solution.  This comes from their FastLane blog on which it’s touted that GM will be moving forward with an “ambitious” expansion of its flex-fuel vehicles.

In this succinct paragraph, HybridCars.com sums it up:

Despite commitments from major automakers like GM, E85′s long-term outlook remains in question. Why’s that? Because evidence suggests that very few people who own flex-fuel vehicles actually end up using the fuel. Just 2,500 of the 162,000 gas stations in the United States actually offer E85, which in most parts of the country offers little to no cost savings compared to standard gasoline.

There are a lot of reasons that ethanol (esp. corn-based ethanol) is a no-win game.  Not the least of which is that if gasoline prices go up, so do ethanol prices since 15-30% of E85 is still just gasoline and most of the production process for ethanol requires even more gasoline and diesel.

Rising oil prices?  Ditto.  The only thing that makes ethanol even feasible as it’s done in the U.S. are government subsidies.  Note that with the 45 cent per gallon subsidy going away at the end of the year, a lot of ethanol producers are beginning to beg and plead for it to be renewed.  More than a few have gone out of business or sold to larger companies with a more diverse financial footing now that their future is in jeopardy and investors are skittish.

Then we get into the questions of supply, demand, infrastructure, and availability.  Currently, none of those are in place: there is relatively little supply, demand is low, infrastructure is mostly non-existent, and thus availability is negligible.

Ethanol is one of those industries that exists purely at government’s whim.  The entire business model of corn-based ethanol in the U.S. is dependent on government subsidies, kickbacks, and incentives.  Without them, it fails.

So why is GM so keen on flex fuel cars?  Well, again, government subsidies.  In this case, the ability to get double the mileage numbers from the EPA for a flex-fuel vehicle versus its real-world numbers.  In other words, they get to cook the books to make their CAFE (corporate average fuel economy) numbers higher without having to actually make their vehicles more efficient.

So let’s say a GMC 1/2 ton truck gets 18 miles to the gallon.  If that truck is a flex-fuel truck, it’s credited as being a 36mpg truck, despite the fact that it actually gets less than 18mpg on ethanol (due to E85′s much lower BTU rating compared to gasoline).  So without making the truck more efficient, GM just got to double its value as a high MPG vehicle for its CAFE rating – a number the EPA watches closely and has specific requirements for in order to avoid fines.

Besides, GM just filed for their initial public offerings (IPO) to once again become publicly traded.  So they need to keep up the green hype and propaganda while also pushing the “really, folks, we’re making money now, we swear” line.

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