Ethanol Entrepreneur Marks His Comeback

10/9/08Follow @bvbigelow

After years of disappointment, Mike Lewis is finding encouragement in small signs that business is coming back to life for Pearson Fuels.

Lewis opened Pearson Fuels in a blighted San Diego neighborhood in 2003, with financial backing from the owners of a local Ford dealership, where he had worked in finance. It was part of an ambitious $15 million “Regional Transportation Center” regarded by state and federal energy officials as a model for promoting the use of alternative fuels.

The centerpiece was a futuristic automobile showroom operated by Pearson Ford that sold Think electric cars and alternative-fuel vehicles then made by Ford.

The adjacent Pearson Fuels service station, built and operated by Lewis, sold nine kinds of fuels, including conventional gasoline, ethanol, biodiesel, propane and different grades of compressed natural gas.

By 2004, however, Ford stopped making alternative fuel vehicles and the gleaming showroom, which is now empty, lost its reason for being. Lewis continued to operate Pearson Fuels, but the service station sold mostly conventional gasoline.

I met Lewis as a reporter for the San Diego Union-Tribune earlier this year, when the price for unleaded gasoline was soaring beyond $4 a gallon. Amid a resurgence of interest in alternative fuels, I described his entrepreneurial quest here.

Lewis remains convinced that alternative fuels will prove to be a good business over time. But even as millions of venture dollars pour into the development of new biofuels each quarter, he still sees enormous challenges in developing a viable market.

“You have to be very cautious about investing in a government-induced market,” Lewis said. “That’s what we did, and it was a mistake.”

Now Lewis is seeing a gradual comeback in what was once a moribund alternative fuels business.

Lewis is one of the few ethanol suppliers in California, and he has been working to expand the market by helping new service station owners get the necessary permits to install ethanol pumps. In exchange for his consulting services, he gets a long-term contract to supply ethanol to the station.

Yesterday, the San Diego ethanol entrepreneur was in Riverside County at groundbreaking ceremonies for two new ethanol fuel service stations in Beaumont and Perris. The day before, he was in Carlsbad for the grand opening of a new alternative fuel station in Carlsbad—the second in San Diego County. A third is expected to open in Oceanside in two more weeks

Next week, he plans to attend similar ribbon-cutting ceremonies at new Chevron stations in the East Bay communities of Concord and Hayward. During the construction of each station, Lewis supervised the permitting and installation of pumps that sell E-85, a mixture of 85 percent ethanol and 15 percent gasoline

By the end of October, there will be exactly five service stations in the entire state that sell E-85 fuel. Pearson Fuels has long-term contracts to supply ethanol for all five, and Lewis is working to get E-85 pumps installed at eight more.

You might think that puts Lewis in an enviable situation. In California, there are an estimated 500,000 “Flex-Fuel Vehicles” that have the capability of running on either E-85 or unleaded gasoline.

But developing this business takes an unusual kind of perseverance.

At the Pearson Fuels station in San Diego, the only station that Pearson owns, Lewis sold 38,000 gallons of E-85 in June, when the alternative fuel was at least 90 cents cheaper per gallon than regular unleaded gasoline.

Since then, gasoline prices have fallen. Now E-85 is only about 20 cents cheaper per gallon. Lewis says he only sold about 18,000 gallons of E-85 last month.

So while soaring gasoline prices have made 2008 the best year ever for alternative fuel sales, Lewis says all that really means is that it’s just been his least unprofitable year—so far.

 

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • David R.

    I work in the fuel distribution business in Sacramento and think it is great that alternative fuels are coming to the area. In addition to Pearson, I’ve heard a lot about another company called Propel Fuels, who is supposedly building ethanol and biodiesel stations around Sacramento this year. Great stuff!

  • Michel

    I hope he pulls it off and starts doing really well for himself. From what I heard, even aside from the article, is that he has put in a really big effort to bring biodiesel and other alternative fuels to the greater San Diego area.

  • Art Gertz

    This alternative fuel needs more promotion.Race santioning bodies need to “get on board”, with E85 fuel classes. Car magazines need to have E85 engine building challenges like they have for gasoline. Engines built specifically for E85 will fair better power/economy-wise than current flex fuel engines, I.E flexfuel engines could be variable boosted,(supercharged), based on fuel in use.On-board computer would take full advantage for power/economy.