EPACT’s Replacement Goal Is Not Likely to Be Achieved

The goal of EPACT to replace 10 percent of the conventional fuel consumed by light-duty vehicles by 2000 and 30 percent by 2010 with replacement fuels is unlikely to be achieved. On the basis of EIA’s modeling analysis, we estimate that alternative fuels will account for less than 1 percent of the total fuel to be consumed by light-duty vehicles in 2000 and about 3.4 percent in 2010, even after accounting for EPACT’s provisions mandating that fleets acquire AFVs. In addition, the lower price of gasoline discourages increased use of the higher priced alternative fuels. EPACT Will Lead to a Small Increase in the Use of Propane as a Transportation Fuel

EPACT is expected to lead to a small increase in the use of propane as a transportation fuel. As a result, consumption of propane as a transportation fuel will account for about 1.5 percent of the total propane used in the United States in 2000 and about 5.1 percent in 2010. The effects of EPACT specifically on the consumption of propane fuel by light-duty vehicles are summarized in table 2. EPACT Will Have Very Little Impact on the Supply and Price of Propane

Because EPACT is not expected to cause any significant increase in propane demand, it will have very little impact on the supply and price of propane. We estimate that the additional U.S. production of propane that will result from EPACT will be about 7,000 barrels per day in 2000 and 85,000 barrels per day in 2010. According to EIA’s modeling results, these levels of domestic production will satisfy most of the additional propane demand or consumption caused by EPACT, while imports will satisfy the rest. 2). We estimate, based on EIA’s modeling, that the effect of EPACT on the overall price of propane will be negligible: an increase of 0.17 cent per gallon in 2000 and 3.28 cents per gallon in 2010 (fig. The estimated price increase effects for residential consumers will be only 0.10 cent per gallon in 2000 and 1.50 cents per gallon in 2010; the increase for industrial consumers is estimated to be 0.10 cent per gallon in 2000 and 1.70 cents per gallon in 2010; and the increase for transportation consumers is estimated at 0.43 cent per gallon in 2000 and 2.33 cents in 2010. Scope and Methodology

To determine whether and how including propane as an alternative fuel under EPACT will affect the supply, price, and existing consumers of propane, we asked EIA to use its National Energy Modeling System to estimate the likelihood of achieving EPACT’s fuel replacement goal and to estimate the potential impact. In comparing the overall results of these two studies, the Oak Ridge authors noted that their results were “in marked contrast to DOE’s 1996 long-run analysis, which concluded that if the necessary infrastructure for a mature alternative fuel and vehicle industry were present, then alternative fuels, as a group, appear likely to sustain a 30-percent market share under equilibrium conditions.” The Oak Ridge report went on to state, “However, the modeling results here suggest that the necessary infrastructure may not evolve smoothly, and fuel and vehicle prices may not benefit from economies of scale in the absence of additional policies . . ..”

Estimating the Effect of EPACT’s Fleet Mandates

This appendix describes the Energy Information Administration’s (EIA) methodology for estimating the effect of EPACT’s purchase mandates for alternative-fueled vehicles (AFV) on the replacement of petroleum fuels used by motor vehicles in the United States and on the demand, supply, price, and existing consumers of propane. We also asked EIA to use NEMS to model the effect of including propane as an alternative motor fuel under EPACT on the demand, supply, price, and existing users of propane.
Why GAO Did This Study

Pursuant to a congressional request, GAO determined whether and how including propane as an alternative fuel under the Energy Policy Act of 1992 (EPACT) will affect existing propane consumers as well as the supply and price, focusing on: (1) whether EPACT's goal of replacing at least 10 percent of the conventional fuel used in light-duty vehicles by 2000 and at least 30 percent by 2010 with replacement fuels will be achieved; (2) the extent to which the use of propane as a motor fuel will increase as a result of EPACT; (3) the impact the use of propane as a motor fuel under EPACT will have on the supply and price of propane; and (4) the impact the use of propane as a motor fuel under EPACT will have on existing users of propane.

What GAO Found

GAO noted that: (1) it is unlikely that the goal of EPACT of replacing at least 10 percent of the conventional fuel used by light-duty vehicles in the United States by 2000 and at least 30 percent by 2010 with replacement fuels will be achieved; (2) GAO estimates, based on the Energy Information Administration's (EIA) modeling, that alternative fuels will account for less than 1 percent in 2000 and about 3.4 percent in 2010 of the total motor fuel projected to be consumed by light-duty vehicles; (3) the act's focus on the acquisition of alternative-fueled vehicles rather than on the use of alternative fuels, high alternative-fueled vehicle costs, low gasoline prices, and an inadequate refueling infrastructure for these vehicles are factors hindering the increased use of alternative fuels for transportation; (4) EPACT can be expected to lead to a small increase in the use of propane as an alternative fuel in the transportation sector; (5) GAO estimates that after the vehicle acquisition mandates in the act are factored in, consumption of propane as a motor fuel will account for about 1.5 percent of the total propane used in the United States in 2000 and about 5.1 percent in 2010; (6) the effects of EPACT on the supply and price of propane will be minimal; (7) incremental domestic production of propane as a result of the act will be about 7,000 barrels per day in 2000 and 85,000 in 2010; (8) according to the EIA, these levels of domestic production will satisfy most of the estimated additional propane demand caused by the act; (9) GAO estimates that the increase in the overall price of propane attributable to the act will be a negligible 0.17 cent per gallon in 2000 and 3.28 cents per gallon in 2010; (10) similarly, EPACT will have little impact on the existing consumers of propane because the price increases will be so small; (11) GAO estimates that propane prices paid by residential and industrial consumers will increase by an average of just 0.10 cent per gallon in 2000, while the prices paid by transportation consumers will increase by about 0.43 cent per gallon; and (12) GAO projects that in 2010, price increases due to the act will be, on average, 1.50 cents per gallon for the residential sector, 1.70 cents per gallon for the industrial sector, and 2.33 cents per gallon for the transportation sector.