In a country where corn-based ethanol incites an avalanche of controversy, you may be surprised to know that ethanol isn't the most common alternative fuel. Well, not by the EIA's accounting method, anyway. The 134 billion gallons of gasoline that powered our vehicles last year included about 13 billion gallons of ethanol. But the Energy Information Administration doesn't consider one drop of blended ethanol as a true alternative fuel.
Qualifying for the official tally are electricity, hydrogen, propane, natural gas, and ethanol blends exceeding 85%, or E85. Even without counting blended ethanol, E85 is a relatively common fuel in the country's heartland and Pacific Northwest. So the fact that it still didn't top the list was pretty surprising to me. What took the biggest piece of the pie?
Total alternative fuel use grew 13% in 2011 from 2010 to a total of 515.92 million gasoline-equivalent gallons, with growth occurring in nearly every category. However, the annual summary from the EIA isn't a marginal news story that investors should overlook. Here's what it means for you.
I knew that Clean Energy Fuels (NASDAQ:CLNE) was pushing full steam ahead into natural gas vehicles and infrastructure, but I was shocked that natural gas was the leading alternative fuel. In 2011, natural gas vehicles consumed 247 million gasoline-equivalent gallons. To put that in perspective, you are 541 times more likely to drive to work on a tank of gasoline than on natural gas.
The long road ahead can be viewed as a negative or an opportunity. It may be painfully slow and incredibly difficult to challenge the monopoly of gasoline-powered vehicles, but changes are happening. One reason for the slow adoption of natural gas vehicles is simple. The EIA admits that currently, natural gas and other alternative fuels are used primarily in heavy-duty vehicles. That's just fine for Clean Energy Fuels, because it still represents an entire industry worth a-changing. In fact, from 2003 to 2011, the amount of natural gas vehicles on the road grew at an annual rate of 10%! No wonder analysts expect the company to grow at a 20% clip for the next five years, according to Yahoo! Finance.
Consider that municipalities and industrial giants such as Waste Management (NYSE:WM) are converting their fleets -- in this case garbage trucks -- to run on natural gas fuels (link opens a video). It's a little easier for Waste Management, since it uses biogas generated from its managed landfills to fuel its own vehicles. Clean Energy Fuels also sources biomethane from one of its landfills in Dallas. In fact, the facility can produce up to 36,000 gasoline-equivalent gallons each day. It's like the old saying goes: One man's trash is another man's fuel.
That doesn't mean smaller vehicles aren't in the race. Energy giant Halliburton (NYSE:HAL) is going all-in on a nationwide pilot program testing natural gas vehicles. The company will deploy 100 light-duty trucks to determine the challenges and feasibility facing their wider adoption. Aside from being a potentially huge step forward for bringing the technology mainstream, Halliburton expects the savings to pile up. The company's estimated annual fuel savings are $5,100 per vehicle.
Charging up for a bright future
Electric vehicles have yet to go mainstream, accounting for just 7.6 million gasoline-equivalent gallons of fuel use in 2011. However, that represented growth of 36% over 2010. The EIA admits that electricity use in transportation is dominated by "low speed category vehicles" (whatever that means). That won't last very long if Tesla Motors (NASDAQ:TSLA) has its way. And right now, the company can do no wrong.
Luckily for the electric-car pioneer, the trend was being established well before it went public. Despite the domination by, presumably, golf carts, the EIA also states that electric-automobile inventory increased by 10,245 in 2011. In 2010 there were only 11,654 electric vehicles in the United States, which means the industry grew 88% in 2011.
That is astonishing, but it's just the beginning. Tesla cranked out more than 4,750 Model S vehicles in the first quarter. Say what you want, but the idea of plugging in your car is certainly catching on.
Foolish bottom line
Ethanol may have lost on a technicality, but it still dominates the alternative-fuel discussion. It's easy to find flaws with the Renewable Fuel Standard, which mandates the use of ethanol and biodiesel in transportation fuels, but there's no debating that it has thrust the renewable fuel into the energy mix virtually overnight. Can you imagine how quickly natural gas or electric vehicles would grow if the government mandated their use? No such bill is on the table, but it would certainly make sense to get one drafted.
Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio or his CAPS page, or follow him on Twitter, @BlacknGoldFool, to keep up with his writing on energy, bioprocessing, and emerging technologies.
The Motley Fool recommends Clean Energy Fuels, Halliburton, Tesla Motors, and Waste Management and owns shares of Tesla Motors and Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.