Keep Your Eye on DME
Submitted by R-Squared Energy Blog
Di-methyl-ether (DME) is a fuel that I have been talking about since at least 2006. I have blogged about it, and I have classified it in several of my presentations as a “Sustainable Contender” (including in a slide at last year’s ASPO conference). I want to use this post to explore DME in a little more detail, and explain why I think you should keep an eye on it as an attractive renewable replacement for diesel.
DME is a pretty simple compound. Methane, the least complex hydrocarbon, has the chemical formula CH4. That is one carbon atom bonded to four hydrogen atoms. When methane is burned - which is to say reacted with oxygen - it produces carbon dioxide (CO2) and water (H20).
DME can be thought of as a couple of methane molecules with an oxygen separating them. It looks like this: CH3 - O - CH3. This is an ether; in fact the simplest ether (characterized by the oxygen separating two hydrocarbon groups). Note that each methane (methyl) group is missing one hydrogen, which allows it to form the bond with oxygen. But when DME is burned, you still end up with carbon dioxide and water.
DME is produced from methanol, the simplest (and cheapest) alcohol. The current price for methanol as listed by Methanex is $1.10/gal, compared to a national average rack price of $2.26/gallon for ethanol and a national average spot price of $1.83/gallon for gasoline.
Methanol works fine as a transportation fuel, but has some disadvantages. While methanol is cheaper to produce than ethanol, the energy content per gallon is even lower than for ethanol (and methanol is more toxic). Ethanol has about 2/3rds of the energy content of gasoline, but methanol contains only half the energy content of gasoline. As a transportation fuel, this is a disadvantage (but not a knockout) because it limits the range of your car.
As a fuel, DME can be used in either an internal combustion engine or a diesel engine. That makes the potential market huge. DME is a gas at room temperature, but compresses to a liquid under mild pressures. It is currently used as a propellant in many consumer products, and is classified as non-toxic and non-carcinogenic. (Granted that if you stand around in a room filled with nothing but DME, you will die due to oxygen deprivation. The same is also true of nitrogen, which makes up 79% of our atmosphere).
DME is completely miscible with LPG, and can be used as a supplement/replacement in either transportation or heating applications. When combusted, DME burns very cleanly. There are no associated sulfur or particulate emissions (even in a diesel engine).
DME can be produced from biomass, coal, natural gas, or essentially any source of carbon. Unlike many ‘next generation’ biofuels, production from biomass is a straightforward route and not especially complex. You gasify biomass to produce syngas, react syngas to produce methanol, and then dehydrate the methanol. Each of these steps takes place every day at large scale at chemical companies around the world.
There are some specific disadvantages from DME, but this is true for just about any fuel. First, the fact that it is a gas at room temperature means that if there is a leak, it can form an explosive mixture in the air. The same is true for natural gas or LPG. Second, the energy density of the fuel is lower than for gasoline or diesel. The volumetric energy density lies between that of ethanol and methanol.
So why aren’t we using it in North America? Like many other fuels, it is a chicken and egg problem. We don’t have the infrastructure in place in the U.S. Some vehicle modifications would be required to accommodate it as well. But these are not insurmountable problems, as the continuing roll-out of E85 vehicles and service stations has shown.
The Chinese have embraced DME for years, and are increasing their DME capacity. This allows them to convert their coal into something much more desirable for them - transportation fuel.
The Swedes are also at the forefront of rolling out DME. The Swedish company Chemrec has been converting pulp mills into biorefineries that produce DME. Volvo has announced that they are conducting studies on the performance of DME in 14 of their heavy trucks over the next two years. (Here is another story on that at Green Car Congress).
In North America, I know several people or groups who have expressed interest in, or are dabbling with DME. My expectation has been that at some point there will be an entry into the market here, but it will be slow due to the aforementioned lack of infrastructure. What prompted me to write this essay was I spotted a story yesterday about a Canadian company that is going to give it a shot:
Dimethyl ether: The unknown fuel that’s gaining fame
A clean fuel that’s already gaining traction in Asia could be getting a toehold in Canada, just in time to help northwest B.C.’s hard-hit forest industry. Dimethyl ether, or DME, is almost unknown in North America but may soon get a big boost here from new tough emission standards coming to the U.S.
DME is a mixture of hydrogen and carbon monoxide that can be produced from biomass, natural gas or coal. It is now used as a propellant in aerosol spray cans because it is non-toxic and breaks down. But DME also has the potential to replace diesel fuel because it produces 95 per cent fewer greenhouse gases, no soot, low levels of nitrogen oxide and no sulphur dioxide.
Calgary-based GV Energy is proposing to build a biorefinery to produce DME in Terrace, B.C.
While some of those details are slightly inaccurate, the article is a good read on how DME can fit into the fuel mix and add jobs in an area with the right resource base. Especially interesting to me is to view the comments from readers. I find it amazing at times the emotional attachment some people have to trees. I can understand opposition to the conversion of forest to pasture or agricultural land. I can understand the opposition to clear-cutting and not replanting. But it seems that to some people, cutting down a tree is just wrong. Period. This coming from people who are living in houses made from wood.
If we use managed forestry to produce DME, then that has the potential to be an improvement over the status quo. Like anything else, there is a right way and a wrong way. But just because a wrong way exists doesn’t mean that you don’t try at all. We (my company) are not going stop trying to responsibly manage and use forest assets just because some aren’t doing so. We will just continue to do things in the most sustainable way we can, and hope that the proper incentives are in place to make sure others do so as well.
But I digress a bit. To learn more about DME, see this presentation put together by Europe’s BioDME project. Note especially the slide that shows the land usage efficiency of DME relative to competing fuels.
The market for DME is bound to continue growing due to its versatility as a fuel and because it can be produced relatively easily from a wide variety of starting materials. The question is whether North America will continue to watch that growth occur in Europe and China.
Platts Survey of Top Energy Stories of 2009
Submitted by R-Squared Energy Blog
As I compile my year end list of the biggest energy stories of the year, I have just gotten an e-mail from Platts that is very helpful. As they have done in previous years, they have a survey up so readers can rank the top stories:
Platts wants to know: the biggest oil stories of ‘09
They will publish the results shortly after Christmas. Scanning the list and comparing to my rough draft of the Top 10, I see one story that isn’t currently on my list that I missed: The Valero Foray into Ethanol. Other than that, all of the stories that I have tentatively in my Top 10 are on their list except for two (and I bet people who take the survey will suggest both of them).
I will post my list prior to Christmas, and hope that we don’t see another big year end story like the XOM acquisition of XTO. That is a Top 10 story that came in right at the end of the year. Here is how I ranked the stories Platts had listed, but this was off the top of my head and very subjective. I may decide later on that #3 should really be #8, or that something that didn’t make the list should really be on there. My Top 10 will be a bit different because I have combined some topics that they treated separately.
1. Prices (basis WTI) comes roaring back to the $80 level after almost hitting $30
2. Full-year decline in demand heads toward biggest drop since 1981
3. Natural gas-crude spread in US blows out to unprecedented levels
4. Refinery woes: Valero shuts Delaware City , Sunoco shuts Eagle Point, Repsol shuts Cartegena, Japan cutbacks underway (RR: related to Reliance news)
5. Valero makes big foray into ethanol with multiple ethanol plant purchases; Sunoco follows on smaller scale
6. EU slaps duties on US sales of biodiesel into Europe
7. OPEC holds to its 24.845 million b/d ceiling all year
8. US EPA rules greenhouses gases are a threat to public health, plans on using authority to regulate them
9. ExxonMobil gets into bidding war with Chinese, others over Ghana stake (RR: more for what it signals for the future).
10. Exxon buys XTO for $41 billion
Biomass Is Not Crazy Logic
Submitted by R-Squared Energy Blog
I saw a story about a week ago that I flagged to comment on when I got caught up. I suppose I am caught up enough now to do so. The story is:
Burn a Tree to Save the Planet? The Crazy Logic Behind Biomass
The author is listed as Joshua Frank, described as an environmental journalist and the author of Left Out!: How Liberals Helped Reelect George W. Bush.
The article is confusing from the start:
It might seem crazy that anyone would even consider the incineration of wood and its byproducts to be a green substitute for toxic fuels such as coal. Yet that’s exactly what is happening all over the country, and it has many environmentalists scratching their heads in disbelief.
I find those comments baffling. Why would it seem crazy to believe that burning biomass - which utilizes CO2 when it is growing and helps sequester carbon in the soil through the root systems, leaves, and slash - would be greener than burning a fossil fuel like coal that has a long list of potentially undesirable environmental impacts? Do you know what happens to waste biomass that isn’t utilized? It decomposes and ends up as the same CO2 it would end up as if you burned it.
While it is true that emissions controls on coal-fired power plants are much improved in recent years, it is also true that burning coal has resulted in acid rain and increased levels of mercury in our waterways. Burning coal also increases the concentration of CO2 in the atmosphere. To suggest that burning trees isn’t greener than burning coal is one of the most ludicrous things I have ever heard. From the tone of the article, it sounds as if the author believes that forestry and the harvesting of trees is by definition bad.
Now it is true that if you cut down an old growth forest and inefficiently turn it into a liquid fuel, that isn’t environmentally responsible. I could certainly envision any number of schemes to make the burning of biomass come out with a higher environmental impact than from burning coal. If I cut down a chunk of the Amazon, displace the people and the wildlife living there, ship the wood halfway around the world, and combust it in an old, inefficient boiler - then yes, the environmental impact of that would be higher than from burning Powder River coal. But such exceptions aren’t the norm. This article, however, paints with a very broad, one-sided brush and acts as if all usage of biomass is by definition bad:
NASA’s James Hansen says that the burning of coal is the single largest contributor to anthropogenic global warming, so any alternative fuel source must decrease the amount of carbon dioxide (CO2) released into the atmosphere if we are to put the breaks on climate change. Biomass, despite its label as a renewable energy source, does not solve the problem because burning trees actually emits a large amount of CO2.
That is another very odd comment. Burning coal releases ancient CO2 that was sequestered away. Burning biomass releases recently recycled CO2. That’s why it is renewable. If the author is concerned about CO2 emissions - and he clearly is - then coal and biomass are night and day. And while they acknowledge in their next paragraph that this is what “proponents counter with”, Frank quickly tries to shoot that one down:
An article in Science released last October attempted to debunk the myth that biomass is a good alternative to traditional coal and oil burning. The study, authored by climate scientists, claimed that when an existing forest is chopped and cleared to produce fuel, the ability of those harvested trees to absorb CO2 is eliminated entirely while the amount of greenhouse gases in the atmosphere actually increases.
This entire article seems bent on the notion that the biomass we utilize will come from old growth forest that is slashed, burned, and left fallow. The people interviewed for the article must envision a scenario like turning the Amazon into biofuels - and this is the future they must foresee for biomass to come up with these sorts of conclusions. Such a notion isn’t remotely indicative of the future of biomass. Biomass will be grown for purpose (as I explained in Don’t Weep for the Trees), and it can definitely be grown responsibly and sustainably.
“The game is up,” stated biomass skeptic Ellen Moyer, a principal of green engineering firm Greenvironment, after the release of the report. “The problem has been identified, and the clarion call for course correction has rung out around the world. The days of biomass burning … are numbered and pending legislation needs to be corrected before perverse incentives to burn our forests are enshrined in law.”
You will have to show me the laws that incentivize the burning of our forests. If you mean laws that incentivize the usage of biomass for energy - well that isn’t the same as burning our forests. You first grow the forest, and while that is taking place everything you are complaining about when you burn it is running in reverse. Oh, there can be particulate emissions from improper burning, but it is also true that proper forest management can result in improved soil and increased carbon sequestration in the soil.
Another problem with biomass is that it is typically mixed with substances like coal to produce energy. In Nevada, for example, NV Energy is set to use a mix of coal and wood at its Reid Gardner coal-fired power plant. As a result, the company hopes to qualify for the state’s renewable energy credits.
The first problem is that this isn’t true. That is not how biomass is typically used. It can only be blended with coal in small amounts due to differences in chemical and physical properties, and it requires a substantial investment in the coal plant to allow such mixing. There is a technology called torrefaction that has the potential to allow much greater mixing, as it converts biomass into something like bio-coal. But torrefaction is still mostly at a pre-commercialization stage.
If a coal-fired power plant receiving energy credits isn’t mind boggling enough,…
Why is that mind-boggling? You just wrote that they were going to use wood to displace coal. Why wouldn’t they qualify for the same energy credit anyone else gets for using biomass? Or do you prefer that they simply continue to use 100% coal?
“They are burning more than trees because wood is simply not a good energy source,” said Jeff Gibbs, who resides in Michigan and is fighting the state’s six operating biomass plants. “Look, wood produces 50 percent more CO2 than coal, for the same amount of energy output. We have to stop this before more plants begin to pop up.”
I am sorry, but that’s another ludicrous statement. I would really love to see the analysis that provided that figure.
Not only is biomass not a good source of power, claims a 2007 paper presented at the European Aerosol Conference, it’s also not a healthy alternative to coal. The paper claimed that particulate matter (particles, such as dust, dirt, soot or smoke) was actually higher for a 7 megawatt wood gasification plant than it was for a large coal-fired power station.
There’s that broad brush again. While it is true that wood gasification plants can have lots of particulate emissions, that is not an inherent quality. You can put the same pollution controls on them that you can on coal plants. So once again a bad starting assumption leads to a sweeping, but false conclusion.
In summary, this was a very one-sided view that presented the worst extremes as more or less the status quo for biomass utilization. It is true that you can do things a right way or a wrong way. Water is healthy and I need it to live, but if I drink too much it can kill me. Taking a page from this article, I suppose I should avoid water from now on, as it has the potential to kill me.
For those quoted in the article, I hope they don’t freeze to death in the dark as the biomass they are so opposed to rots and releases its CO2 anyway. As I tell people sometimes, if you are opposed to everything, then prepare to be happy with the status quo.
Osmotic Power
Submitted by R-Squared Energy Blog
Did you ever wonder why the skin on your hands sometimes shrivels when you have them in water for too long? The underlying reason is called osmosis (a simple explanation in more detail below), and the same driving force is now being utilized as a power source.
Occasionally I encounter an energy story that catches me by surprise because it is so far under the radar. This morning I got one of those from a friend who e-mailed and referred me to this story:
The world’s first osmotic power plant opened!
My immediate reaction was skepticism that you could really make osmotic power work as a viable energy source. But first a bit of background before readers’ eyes glaze over at the usage of unfamiliar terminology. Students of chemistry or biology will have encountered the concept of osmosis, and most people have heard of reverse osmosis for the production of fresh water from saline or otherwise contaminated water.
In a simplified nutshell, water that is separated from a salt solution by a semi-permeable membrane (like a cell wall) will have a potential to migrate across into the salt solution - creating a pressure difference on the two sides of the membrane. (Lots of systems can create an osmotic pressure, but for illustration let’s focus on salt water and fresh water).
Osmosis is a very important concept in biology, as it is the mechanism by which water moves in and out of cells. A blood cell, for instance, will lose water and shrink if it encounters an outside environment that is more saline (saltier) than the internal environment. Water moves through plants by this process as well.
But to illustrate what is going on in the press release above, let’s talk about reverse osmosis. In reverse osmosis, a pressure is applied to the high salt concentration side to force fresh water back across the membrane - leaving the salt behind. The applied pressure must be greater than the osmotic pressure, or the fresh water will migrate to the saline side.
Now imagine that system in reverse. There is a saline solution on one side of the membrane, and it is allowed to build pressure from the migration of the fresh water across the membrane into the salt water. The build up of pressure - in this case osmotic pressure - could in theory be utilized for energy.
Imagine the way a dam works. Water pressure forces the water through a turbine, which generates electricity if it is coupled to a generator. If the osmotic pressure is likewise allowed to relieve through a turbine, then yes, in fact it could be used to produce electricity. Such a system would indeed produce osmotic power.
However, until this morning’s e-mail I had never heard of anyone actually building a system to do this. And I am skeptical that anyone can actually produce cost-effective electricity this way, because to generate a substantial pressure is going to require a lot of membrane surface area. A little bit of digging shows that the system above has a power output of only 4 kilowatts.
To put that into perspective, there are numerous power plants with outputs greater than 1,000 megawatts - which is 250,000 times the size of this osmotic power demonstration unit. So while this is perhaps newsworthy due to the novelty, they must prove that they can economically scale-up, and that is always a big hurdle.
One thing I wondered about as I read this article is whether it might not be more cost-effective to put in pipelines of fresh water to regions that are doing reverse osmosis of salt water. The idea being instead of using the fresh water in one location for osmosis and the salt water in the other for reverse osmosis, bypass the osmosis all together (reverse osmosis is very energy intensive).
Update: A reader just sent a link that says that IBM is looking into this as well: Energy From Sea Water? Consider IBM Intrigued
Footnote: I Googled the term “osmotic power” to see if that term had ever been used in this blog. My expectation was that it hadn’t, but I see that a reader linked to a story on this a couple of weeks ago in the comments following the story on OTEC (which I should be updating soon).
The DOE Funding Recipients
Submitted by R-Squared Energy Blog
I am so far behind on the things that I have been intending to write. It is hard to believe that it has already been over a week since the most recent US DOE biorefinery grants were announced. I have been meaning to list them and comment, but I have finally decided just to list them without too much comment. Let’s just say that some of these names have been around for a while and have issued a lot of press releases, but they haven’t produced any biofuel.
The reason for keeping my comments to a minimum is that I have potential conflicts of one sort or another with several of these companies or projects. Sometimes it is just that I know some of the people involved; in other cases it is more complicated than that. But I don’t want to be accused of possible conflicts of interest by getting into some of the names/technologies that I am surprised to see listed. I know that there were also a number of high profile companies (i.e., they issue a lot of press releases) who did not make the cut.
It is probably worth a future post to check into the six prospective cellulosic ethanol plants funded by the DOE in February 2007 (see the list at the bottom of my post here). As far as I know only one - Broin/POET - has completed a project from those funds that is producing cellulosic ethanol.
Below is the list of recent award recipients, from A(lgenol) to Z(eachem), as compiled by Biofuels Digest. I embedded links to all of the companies. There were nineteen projects awarded, for a grant total of up to $564 million.
And if you ever wondered how the DOE determines the winners and losers, the New York Times did an interesting story on that a few days ago:
How DOE Dealt With a ‘Tsunami’ of Clean-Tech Applicants
The outpouring of grants — and the preponderance of unsuccessful applicants — has stirred curiosity and some complaints over the DOE rating process.
The review involved a series of screening steps that included technology capability, job creation, likelihood of success, and ability to generate matching funds, DOE says.
Rogers was asked whether DOE would make public the winners’ applications and the review teams’ analysis, to shed more light on the decision-making.
“Our plan is not to make that public. First off, all of the [private-sector] reviewers are doing this as a matter of public service, and we don’t need to draw them into getting interviewed about every application.”
The Winners
Bluefire Ethanol
DOE Grant: $81,134,686
Non-fed funding: $223,227,314
Fulton, MS: This project will construct a facility that produces ethanol fuel from woody biomass, mill residue, and sorted municipal solid waste. The facility will have the capacity to produce 19 million gallons of ethanol per year.
Demonstration Scale
BioEnergy International
DOE Grant: $50,000,000
Non-fed funding: $89,589,188
Lake Providence, LA: This project will biologically produce succinic acid from sorghum. The process being developed displaces petroleum based feedstocks and uses less energy per ton of succinic acid produced than its petroleum counterpart.
Enerkem
DOE Grant: $50,000,000
Non-fed funding: $90,470,217
Pontotoc, MS: This project will be sited at an existing landfill and use feedstocks such as woody biomass and biomass removed from municipal solid waste to produce ethanol and other green chemicals through gasification and catalytic processes.
INEOS New Planet BioEnergy
DOE Grant: $50,000,000
Non-fed funding: $50,000,000
Vero Beach, FL: This project will produce ethanol and electricity from wood and vegetative residues and construction and demolition materials. The facility will combine biomass gasification and fermentation, and will have the capacity to produce 8 million gallons of ethanol and 2 megawatts of electricity per year by the end of 2011.
Sapphire Energy
DOE Grant: $50,000,000
Non-fed funding: $85,064,206
Columbus, NM: This project will cultivate algae in ponds that will ultimately be converted into green fuels, such as jet fuel and diesel, using the Dynamic Fuels refining process.
Pilot and Demonstration Scale FOA – Pilot Scale
Algenol Biofuels
DOE grant: $25,000,000
Other funding: $33,915,478
Freeport, TX: This project will make ethanol directly from carbon dioxide and seawater using algae. The facility will have the capacity to produce 100,000 gallons of fuel grade ethanol per year.
American Process
DOE grant: $17,944,902
Other funding: $10,148,508
Alpena, MI: This project will produce fuel and potassium acetate, a compound with many industrial applications, using processed wood generated by Decorative Panels International, an existing hardboard manufacturing facility in Alpena. The pilot plant will have the capacity to produce up to 890,000 gallons of ethanol and 690,000 gallons of potassium acetate per year starting in 2011.
Amyris Biotechnologies
DOE grant: $25,000,000
Other funding: $10,489,763
Emeryville, CA: This project will produce a diesel substitute through the fermentation of sweet sorghum. The pilot plant will also have the capacity to co?produce lubricants, polymers, and other petro?chemical substitutes.
Archer Daniels Midland
DOE funding: $24,834,592
Other funding: $10,946,609
Decatur, IL: This project will use acid to break down biomass which can be converted to liquid fuels or energy. The ADM facility will produce ethanol and ethyl acrylate, a compound used to make a variety of materials, and will also recover minerals and salts from the biomass that can then be returned to the soil.
Clearfuels Technology
DOE funding: $23,000,000
Other funding: $13,433,926
Commerce City, CO: This project will produce renewable diesel and jet fuel from woody biomass by integrating ClearFuels’ and Rentech’s conversion technologies. The facility will also evaluate the conversion of bagasse and biomass mixtures to fuels.
Elevance Renewable Sciences
DOE funding: $2,500,000
Non-Fed funding: $625,000
Newton IA: This project was selected to complete preliminary engineering design for a future facility producing jet fuel, renewable diesel substitutes, and high value chemicals from plant oils and poultry fat.
Gas Technology Institute
DOE funding: $2,500,000
Non-Fed funding: $625,000
Des Plaines, IL. This project was selected to complete preliminary engineering design for a novel process to produce green gasoline and diesel from woody biomass, agricultural residues, and algae.
Haldor Topsoe
DOE funding: $25,000,000
Non-Fed funding: $9,701,468
Des Plaines, IL. This project will convert wood to green gasoline by fully integrating and optimizing a multi?step gasification process. The pilot plant will have the capacity to process 21 metric tons of feedstock per day.
ICM
DOE funding: $25,000,000
Non-Fed funding: $6,268,136
St. Joseph, MO. This project will modify an existing corn ethanol facility to produce cellulosic ethanol from switchgrass and energy sorghum using biochemical conversion processes.
Logos Technologies
DOE funding: $20,445,849
Non-Fed funding: $5,113,962
Visalia, CA. This project will convert switchgrass and woody biomass into ethanol using a biochemical conversion processes.
Renewable Energy Institute International
DOE funding: $19,980,930
Non-Fed funding: $5,116,072
Toledo, OH. This project will produce high quality green diesel from agriculture and forest residues using advanced pyrolysis and steam reforming. The pilot plant will have the capacity to process 25 dry tons of feedstock per day.
Solazyme
DOE funding: $21,765,738
Non-Fed funding: $3,857,111
Riverside PA. This project will validate the projected economics of a commercial scale biorefinery producing multiple advanced biofuels. This project will produce algae oil that can be converted to oil based fuels.
Honeywell’s UOP
DOE funding: $25,000,000
Non-Fed funding: $6,685,340
Kapolei, HI. This project will integrate existing technology from Ensyn and UOP to produce green gasoline, diesel, and jet fuel from agricultural residue, woody biomass, dedicated energy crops, and algae.
ZeaChem
DOE funding: $25,000,000
Non-Fed funding: $625,000
Boardman, OR: This project will use purpose grown hybrid poplar trees to produce fuel-grade ethanol using hybrid technology. Additional feedstocks such as agricultural residues and energy crops will also be evaluated in the pilot plant.
Copenhagen Suggests Climate Issue Not Going Away
Submitted by R-Squared Energy Blog
I have mentioned that I think ClimateGate will end up being one of the top stories of 2009. A number of people have commented or e-mailed me and said that the story will soon be forgotten. I don’t think so. I don’t think they realize the energy this gives to those who were skeptical. In my opinion, this will galvanize the opposition and make it much harder to get any legislation passed on climate change. (I am reading through a very comprehensive examination of the raw data and the nature of the temperature adjustments now at Watt’s Up With That?: The Smoking Gun At Darwin Zero)
Regardless of whether that view is accurate, I would be remiss if I didn’t have an essay devoted to the Copenhagen Conference. Prior to the Copenhagen conference, the Great Plains Institute, an energy-focused NGO that was going to delegates to Copenhagen, asked if I would be interested in receiving dispatches from their policy analysts about what’s happening in real-time inside the convention hall.
Here is one of those dispatches:
Copenhagen Suggests Climate Issue Not Going Away
Copenhagen, Denmark
Rolf Nordstrom, Wednesday, December 9, 2009
I arrived in Copenhagen on Monday afternoon and am still suffering a little jet lag, but I am awake enough to give you a glimpse of what the climate change conference taking place here these next two weeks looks and feels like, and how you might expect it to impact your life.
First, to give you a sense of scale, I want you to imagine that the vast Mall of America is filled not with shops of every kind, but with hundreds of booths from different organizations, temporary offices for delegates from 192 countries, vast meeting rooms set up with microphones and video screens, cafes, the mother of all cloak rooms, huge banks of computer stations (many with Skype and video capability built in), and the whole place teaming with people.
To get into this global “town hall” meeting, I waited in line with hundreds of others in order to get my picture taken and go through several security check points. Indeed, the elaborate airport-like security system rivals any major airline hub, complete with scanners and sniffing dogs. And all this only hints at the scale of this gathering.
If you don’t follow the climate change issue closely, it may seem like this conference in Copenhagen is coming out of thin air. But the international negotiating process on climate change has been going on for a long time and takes place through a series of meetings, each called a “Conference of the Parties to the United Nations Framework Convention on Climate Change” (or COP for short). This one, COP15, is my first and by all accounts the very largest of them all, suggesting that concern over the world’s climate has grown dramatically over the past 17 years; and of course the issue of climate change has been studied by scientists for decades prior to that.
High-level ministers and negotiators from all over the world meet every year to review the implementation of the overall Convention, which was signed back in 1992 in New York (including by the U.S.). Its objective is “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”
If you are a climate skeptic, being at this conference would prompt you to ask yourself, “if the science behind climate change is not compelling, then how is it that essentially every major country in the world—and many you’ve never heard of (think Tuvalu or Comoros), is convinced that climate change is a real and urgent challenge? Have their scientists and elected leaders all be hoodwinked?
We tend to be a bit isolated in our thinking in the U.S., but a lack of strong action on climate change has led to demonstrations in some 4,500 locations in 170 countries, and more are taking place here in Copenhagen. An example yesterday featured people convincingly dressed as trees being followed around by a scrum of reporters with cameras and sound booms as the tree people called for a halt to deforestation and the preservation of forests in the push for new forms of energy production.
No matter what happens here, you can expect there to eventually be an international agreement that places legally-binding limits on the emission of greenhouse gases. If I were a business, I would ask myself two questions:
1) Do I think this issue will go away? In other words, can we just wait it out (like a war of attrition) and hope that climate change goes away? If your answer is “yes”, what is the evidence for this view? What leads you to believe that the world will forget about climate change?
2) If the issue is not going away, then what can I do as a business (or an individual for that matter) to position myself to flourish in a carbon-constrained world?
At a minimum, you may want to stay informed. One good way to do that is to follow the proceedings and the U.S. government’s positions here in Copenhagen through this official Web site: http://cop15.state.gov/uscenter/multimedia/index.htm
Rolf Nordstrom is executive director of the Great Plains Institute, a Minnesota-based nonpartisan, nonprofit working with Midwestern States and Canadian provinces to accelerate the transition to a sustainable and prosperous low-carbon economy.
Hidden Gems? Why Green Investors Should Look at Daewoo Shipbuilding And Ener1 (Pt. 2 of 2)
Submitted by EnergyTechStocks.com
Neither Daewoo Shipbuilding & Marine Engineering Co. Ltd., which trades OTC under the symbol DWOTF, nor Ener1 Inc., which trades on NASDAQ under the symbol HEV, is an obvious candidate for having hidden potential.
Heck, Daewoo isn’t even a green energy stock. Or is it?
Lost in the hubbub of Copenhagen and Congress, there’s been important news about both these companies that strongly suggests – at least to me – that each has plenty of undiscovered potential that will really start paying off over the next 18 to 24 months.
South Korea’s Daewoo Shipbuilding was just awarded a contract by German utility RWE AG’s (Symbol: RWEOY) renewable energy unit for up to three vessels specially designed to install offshore wind farms. The contract reportedly could be worth upwards of half a billion dollars, depending on whether RWE picks up the option on the second and third ships. The first ship is scheduled to be completed in 2011.
A couple things: at present, offshore wind power is going gangbusters thanks to healthy project returns that one European investment bank puts at around 15%. But installing the new large wind turbines under often harsh conditions requires a special kind of vessel. Daewoo’s reportedly will be the first – quite possibly the first of many. (Simultaneously, Daewoo just said it may build a wind power equipment plant in China.)
As for Ener1, seasoned green investors may think they know everything about this lithium-ion battery manufacturer. If Pike Research is correct, the future is bright for all li-ion battery manufacturers, Pike having just forecast that the global li-ion transportation battery market will total nearly $8 billion by 2015, compared with $878 million in 2010.
But the big li-ion winners should be those companies whose batteries also meet the critical need of providing energy storage for power grids. The really big winners should be those companies whose li-ion batteries also go into cars whose manufacturers can provide the rapid recharging infrastructure that consumers have indicated they want.
Tuck this away: Ener1 is the battery supplier in the world’s first project linking grid storage, electric vehicles, rapid recharging infrastructure and solar power. Other participants in the just-announced Japanese project include Mazda Motor Corp. (Symbol MZDAY) and Kyushu Electric Power, which trades in Tokyo under the symbol 9508.
Footnote: in Part 1 of this series, we explored the undiscovered potential of PFB Corp. (Symbol PFB), Vodafone Group (Symbol VOD), and Telefonica S.A. (Symbol TEF). For more please see: Hidden Gems? Why Green Investors Should Look at PFB, Vodafone And Telefonica (Pt. 1 of 2).
The Questions I Didn’t Ask
Submitted by R-Squared Energy Blog
I have been asked to submit a video question on ethanol policy that will be potentially answered in a video blog by someone who is very well-known in the energy business. I will keep the details quiet for now, including the question I did submit. (I thought I would be able to record my question with stunning Hawaiian scenery in the background, but alas it has been raining for two days).
I really had to brainstorm on exactly which question I would ask. I made a short list, and finally honed it down to one that I think is fair, but tough. But I had a number that I decided not to ask, either because I already knew how it would be answered (even if I disgreed with the expected answer) or the questions/answer to the question was so complex that it couldn’t be answered in a short video clip.
Here I discuss what I didn’t ask, but it really gets to the heart of the issues I have with U.S. ethanol policy. First, a bit of framework. I believe that I am, and have always been objective, and a realist. I don’t believe that we are ever going to have a moment where government leaders say “Let’s abandon this ethanol pathway.” We had an example of that with MTBE, but there was clear evidence that MTBE was getting into groundwater and lingering.
The issues around ethanol are more complex. Corn ethanol has been U.S. policy for the past 30 years, and it will be policy for the next 30 years. It is too embedded in agriculture policy, and I think it would be devastating for Midwestern economies if we changed direction on corn ethanol. Thus, I think we continue down that path, for better or worse.
I am not pro-ethanol nor am I anti-ethanol. In one of my earliest essays in this blog, over 3.5 years ago, I talked about some of the things I would like to see happen in the grain ethanol industry, mostly aimed at improving the energy balance. I came out in favor of the approach of E3 Biofuels, who were trying to build a highly integrated ethanol complex that minimized fossil fuel inputs. I have endorsed such approaches on multiple occasions.
My concerns are, and have always been: What are the long-term consequences? I don’t limit this to ethanol; this is a question that I ask of all energy options. Dependence on oil has some significant long-term consequences. The most serious of which, for me, is the potential for building a world that is only sustainable as long as oil production continues to expand. I see significant risk there, so it has always been my position that we need to reduce our dependence on fossil fuels in general.
With respect to ethanol, consider this thought experiment that I posed following one of my previous essays: Would you consume 2 BTUs of natural gas to produce 1 BTU of ethanol? I think most people would conclude that this would be foolish; that your natural gas supplies would stretch much further if instead you simply use the natural gas in CNG vehicles (acknowledging of course that there are lots of things you have to evaluate in that scenario). For those who would answer “Yes” to that question, I would argue that your view of ethanol is entirely one-dimensional. You probably only care that it is homegrown, and you don’t worry much about the long-term consequences.
Of course the truth is more complicated than the example above. It doesn’t take 2 BTUs of natural gas to produce 1 BTU of ethanol. Estimates vary, but it is still safe to say that most ethanol operations in the U.S. continue to have substantial fossil fuel inputs. That is the way they were built, and that is the way they will continue to operate. Over the long-term, there is potential to change that equation by using biomass boilers, but those are more expensive to operate than a standard natural gas boiler.
So on average the ethanol industry does still have a heavy fossil fuel dependence, albeit largely domestic coal (for electricity) and domestic natural gas - with some petroleum inputs for trucks, tractors, etc. (One thing to note is that more than 50% of our fertilizer supplies - derived from natural gas - are in fact imported). So what if the question was “Would you spend 1 BTU of natural gas to make 2 BTUs of ethanol?” If you are doing a holistic analysis, the answer should be “It depends. What are the other impacts?”
There are those who wrap U.S. ethanol policy in patriotism and the American flag, and who would rather not get into those questions. These questions are hand-waved away with clichés like “I would rather support American farmers than Saudi sheiks.” I try to look at it from the perspective of an engineer, a scientist, and an environmentalist. I want to stack the columns up and figure out what is really happening as a result of our ethanol policy and subsequent rapid expansion of corn production. I want to look at it from the perspective of “What is going to be the impact on the world my children will inherit?”
Just a few of the key questions for me are the following:
In a nutshell, I want to know if we are compromising the future relative to other options, and/or relative to the status quo. These sorts of issues are generally ignored by most advocates. They believe our ethanol policy is the right thing to do, and then nothing else matters. I have debated people like this before, and they are simply not interested in the holistic picture. Often, it is because they are vested interests.
Chief ethanol lobbyist Bob Dineen isn’t going to be at the forefront, trying to determine the answers to these questions. His job is to promote ethanol, period. He will get involved when one of these questions becomes persistent enough and loud enough, and his position will typically be that of defense attorney: Deflect the question if you can, and try to raise doubts that the question even matters.
But I am not a vested interest dug into a bunker. If our ethanol policy is better than the status quo, then I am all for it. But you can’t know that unless you take a really comprehensive look. I would like to see an independent analysis of all of these issues, now that we are some 11 billion gallons per year into this experiment.
The problem is finding an independent agency to do such an analysis. The ethanol lobby hires their consultants, who conclude, “It’s all good.” Big surprise there. (By the way that is the same guy who wrote a paper stating that ethanol with the energy value of 64 million barrels of oil displaced 206 million barrels of oil).
Energy policy in general is a complicated issue, and it is wrapped up deeply in politics. I doubt we will ever get the independent review I would like to see - and even if we did the lobbyists would immediately go to work trying to discredit the study. But I hope you can see why I decided not to ask that question. It might take 10 minutes to ask it, and then an hour to answer it - and I don’t think the answer would really get into the fine details that I am interested in.
You will have to stay tuned to see the question I did ask.
The Questions I Didn’t Ask
Submitted by R-Squared Energy Blog
I have been asked to submit a video question on ethanol policy that will be potentially answered in a video blog by someone who is very well-known in the energy business. I will keep the details quiet for now, including the question I did submit. (I thought I would be able to record my question with stunning Hawaiian scenery in the background, but alas it has been raining for two days).
I really had to brainstorm on exactly which question I would ask. I made a short list, and finally honed it down to one that I think is fair, but tough. But I had a number that I decided not to ask, either because I already knew how it would be answered (even if I disgreed with the expected answer) or the questions/answer to the question was so complex that it couldn’t be answered in a short video clip.
Here I discuss what I didn’t ask, but it really gets to the heart of the issues I have with U.S. ethanol policy. First, a bit of framework. I believe that I am, and have always been objective, and a realist. I don’t believe that we are ever going to have a moment where government leaders say “Let’s abandon this ethanol pathway.” We had an example of that with MTBE, but there was clear evidence that MTBE was getting into groundwater and lingering.
The issues around ethanol are more complex. Corn ethanol has been U.S. policy for the past 30 years, and it will be policy for the next 30 years. It is too embedded in agriculture policy, and I think it would be devastating for Midwestern economies if we changed direction on corn ethanol. Thus, I think we continue down that path, for better or worse.
I am not pro-ethanol nor am I anti-ethanol. In one of my earliest essays in this blog, over 3.5 years ago, I talked about some of the things I would like to see happen in the grain ethanol industry, mostly aimed at improving the energy balance. I came out in favor of the approach of E3 Biofuels, who were trying to build a highly integrated ethanol complex that minimized fossil fuel inputs. I have endorsed such approaches on multiple occasions.
My concerns are, and have always been: What are the long-term consequences? I don’t limit this to ethanol; this is a question that I ask of all energy options. Dependence on oil has some significant long-term consequences. The most serious of which, for me, is the potential for building a world that is only sustainable as long as oil production continues to expand. I see significant risk there, so it has always been my position that we need to reduce our dependence on fossil fuels in general.
With respect to ethanol, consider this thought experiment that I posed following one of my previous essays: Would you consume 2 BTUs of natural gas to produce 1 BTU of ethanol? I think most people would conclude that this would be foolish; that your natural gas supplies would stretch much further if instead you simply use the natural gas in CNG vehicles (acknowledging of course that there are lots of things you have to evaluate in that scenario). For those who would answer “Yes” to that question, I would argue that your view of ethanol is entirely one-dimensional. You probably only care that it is homegrown, and you don’t worry much about the long-term consequences.
Of course the truth is more complicated than the example above. It doesn’t take 2 BTUs of natural gas to produce 1 BTU of ethanol. Estimates vary, but it is still safe to say that most ethanol operations in the U.S. continue to have substantial fossil fuel inputs. That is the way they were built, and that is the way they will continue to operate. Over the long-term, there is potential to change that equation by using biomass boilers, but those are more expensive to operate than a standard natural gas boiler.
So on average the ethanol industry does still have a heavy fossil fuel dependence, albeit largely domestic coal (for electricity) and domestic natural gas - with some petroleum inputs for trucks, tractors, etc. (One thing to note is that more than 50% of our fertilizer supplies - derived from natural gas - are in fact imported). So what if the question was “Would you spend 1 BTU of natural gas to make 2 BTUs of ethanol?” If you are doing a holistic analysis, the answer should be “It depends. What are the other impacts?”
There are those who wrap U.S. ethanol policy in patriotism and the American flag, and who would rather not get into those questions. These questions are hand-waved away with clichés like “I would rather support American farmers than Saudi sheiks.” I try to look at it from the perspective of an engineer, a scientist, and an environmentalist. I want to stack the columns up and figure out what is really happening as a result of our ethanol policy and subsequent rapid expansion of corn production. I want to look at it from the perspective of “What is going to be the impact on the world my children will inherit?”
Just a few of the key questions for me are the following:
In a nutshell, I want to know if we are compromising the future relative to other options, and/or relative to the status quo. These sorts of issues are generally ignored by most advocates. They believe our ethanol policy is the right thing to do, and then nothing else matters. I have debated people like this before, and they are simply not interested in the holistic picture. Often, it is because they are vested interests.
Chief ethanol lobbyist Bob Dineen isn’t going to be at the forefront, trying to determine the answers to these questions. His job is to promote ethanol, period. He will get involved when one of these questions becomes persistent enough and loud enough, and his position will typically be that of defense attorney: Deflect the question if you can, and try to raise doubts that the question even matters.
But I am not a vested interest dug into a bunker. If our ethanol policy is better than the status quo, then I am all for it. But you can’t know that unless you take a really comprehensive look. I would like to see an independent analysis of all of these issues, now that we are some 11 billion gallons per year into this experiment.
The problem is finding an independent agency to do such an analysis. The ethanol lobby hires their consultants, who conclude, “It’s all good.” Big surprise there. (By the way that is the same guy who wrote a paper stating that ethanol with the energy value of 64 million barrels of oil displaced 206 million barrels of oil).
Energy policy in general is a complicated issue, and it is wrapped up deeply in politics. I doubt we will ever get the independent review I would like to see - and even if we did the lobbyists would immediately go to work trying to discredit the study. But I hope you can see why I decided not to ask that question. It might take 10 minutes to ask it, and then an hour to answer it - and I don’t think the answer would really get into the fine details that I am interested in.
You will have to stay tuned to see the question I did ask.
The Questions I Didn’t Ask
Submitted by R-Squared Energy Blog
I have been asked to submit a video question on ethanol policy that will be potentially answered in a video blog by someone who is very well-known in the energy business. I will keep the details quiet for now, including the question I did submit. (I thought I would be able to record my question with stunning Hawaiian scenery in the background, but alas it has been raining for two days).
I really had to brainstorm on exactly which question I would ask. I made a short list, and finally honed it down to one that I think is fair, but tough. But I had a number that I decided not to ask, either because I already knew how it would be answered (even if I disgreed with the expected answer) or the questions/answer to the question was so complex that it couldn’t be answered in a short video clip.
Here I discuss what I didn’t ask, but it really gets to the heart of the issues I have with U.S. ethanol policy. First, a bit of framework. I believe that I am, and have always been objective, and a realist. I don’t believe that we are ever going to have a moment where government leaders say “Let’s abandon this ethanol pathway.” We had an example of that with MTBE, but there was clear evidence that MTBE was getting into groundwater and lingering.
The issues around ethanol are more complex. Corn ethanol has been U.S. policy for the past 30 years, and it will be policy for the next 30 years. It is too embedded in agriculture policy, and I think it would be devastating for Midwestern economies if we changed direction on corn ethanol. Thus, I think we continue down that path, for better or worse.
I am not pro-ethanol nor am I anti-ethanol. In one of my earliest essays in this blog, over 3.5 years ago, I talked about some of the things I would like to see happen in the grain ethanol industry, mostly aimed at improving the energy balance. I came out in favor of the approach of E3 Biofuels, who were trying to build a highly integrated ethanol complex that minimized fossil fuel inputs. I have endorsed such approaches on multiple occasions.
My concerns are, and have always been: What are the long-term consequences? I don’t limit this to ethanol; this is a question that I ask of all energy options. Dependence on oil has some significant long-term consequences. The most serious of which, for me, is the potential for building a world that is only sustainable as long as oil production continues to expand. I see significant risk there, so it has always been my position that we need to reduce our dependence on fossil fuels in general.
With respect to ethanol, consider this thought experiment that I posed following one of my previous essays: Would you consume 2 BTUs of natural gas to produce 1 BTU of ethanol? I think most people would conclude that this would be foolish; that your natural gas supplies would stretch much further if instead you simply use the natural gas in CNG vehicles (acknowledging of course that there are lots of things you have to evaluate in that scenario). For those who would answer “Yes” to that question, I would argue that your view of ethanol is entirely one-dimensional. You probably only care that it is homegrown, and you don’t worry much about the long-term consequences.
Of course the truth is more complicated than the example above. It doesn’t take 2 BTUs of natural gas to produce 1 BTU of ethanol. Estimates vary, but it is still safe to say that most ethanol operations in the U.S. continue to have substantial fossil fuel inputs. That is the way they were built, and that is the way they will continue to operate. Over the long-term, there is potential to change that equation by using biomass boilers, but those are more expensive to operate than a standard natural gas boiler.
So on average the ethanol industry does still have a heavy fossil fuel dependence, albeit largely domestic coal (for electricity) and domestic natural gas - with some petroleum inputs for trucks, tractors, etc. (One thing to note is that more than 50% of our fertilizer supplies - derived from natural gas - are in fact imported). So what if the question was “Would you spend 1 BTU of natural gas to make 2 BTUs of ethanol?” If you are doing a holistic analysis, the answer should be “It depends. What are the other impacts?”
There are those who wrap U.S. ethanol policy in patriotism and the American flag, and who would rather not get into those questions. These questions are hand-waved away with clichés like “I would rather support American farmers than Saudi sheiks.” I try to look at it from the perspective of an engineer, a scientist, and an environmentalist. I want to stack the columns up and figure out what is really happening as a result of our ethanol policy and subsequent rapid expansion of corn production. I want to look at it from the perspective of “What is going to be the impact on the world my children will inherit?”
Just a few of the key questions for me are the following:
In a nutshell, I want to know if we are compromising the future relative to other options, and/or relative to the status quo. These sorts of issues are generally ignored by most advocates. They believe our ethanol policy is the right thing to do, and then nothing else matters. I have debated people like this before, and they are simply not interested in the holistic picture. Often, it is because they are vested interests.
Chief ethanol lobbyist Bob Dineen isn’t going to be at the forefront, trying to determine the answers to these questions. His job is to promote ethanol, period. He will get involved when one of these questions becomes persistent enough and loud enough, and his position will typically be that of defense attorney: Deflect the question if you can, and try to raise doubts that the question even matters.
But I am not a vested interest dug into a bunker. If our ethanol policy is better than the status quo, then I am all for it. But you can’t know that unless you take a really comprehensive look. I would like to see an independent analysis of all of these issues, now that we are some 11 billion gallons per year into this experiment.
The problem is finding an independent agency to do such an analysis. The ethanol lobby hires their consultants, who conclude, “It’s all good.” Big surprise there. (By the way that is the same guy who wrote a paper stating that ethanol with the energy value of 64 million barrels of oil displaced 206 million barrels of oil).
Energy policy in general is a complicated issue, and it is wrapped up deeply in politics. I doubt we will ever get the independent review I would like to see - and even if we did the lobbyists would immediately go to work trying to discredit the study. But I hope you can see why I decided not to ask that question. It might take 10 minutes to ask it, and then an hour to answer it - and I don’t think the answer would really get into the fine details that I am interested in.
You will have to stay tuned to see the question I did ask.
The Questions I Didn’t Ask
Submitted by R-Squared Energy Blog
I have been asked to submit a video question on ethanol policy that will be potentially answered in a video blog by someone who is very well-known in the energy business. I will keep the details quiet for now, including the question I did submit. (I thought I would be able to record my question with stunning Hawaiian scenery in the background, but alas it has been raining for two days).
I really had to brainstorm on exactly which question I would ask. I made a short list, and finally honed it down to one that I think is fair, but tough. But I had a number that I decided not to ask, either because I already knew how it would be answered (even if I disgreed with the expected answer) or the questions/answer to the question was so complex that it couldn’t be answered in a short video clip.
Here I discuss what I didn’t ask, but it really gets to the heart of the issues I have with U.S. ethanol policy. First, a bit of framework. I believe that I am, and have always been objective, and a realist. I don’t believe that we are ever going to have a moment where government leaders say “Let’s abandon this ethanol pathway.” We had an example of that with MTBE, but there was clear evidence that MTBE was getting into groundwater and lingering.
The issues around ethanol are more complex. Corn ethanol has been U.S. policy for the past 30 years, and it will be policy for the next 30 years. It is too embedded in agriculture policy, and I think it would be devastating for Midwestern economies if we changed direction on corn ethanol. Thus, I think we continue down that path, for better or worse.
I am not pro-ethanol nor am I anti-ethanol. In one of my earliest essays in this blog, over 3.5 years ago, I talked about some of the things I would like to see happen in the grain ethanol industry, mostly aimed at improving the energy balance. I came out in favor of the approach of E3 Biofuels, who were trying to build a highly integrated ethanol complex that minimized fossil fuel inputs. I have endorsed such approaches on multiple occasions.
My concerns are, and have always been: What are the long-term consequences? I don’t limit this to ethanol; this is a question that I ask of all energy options. Dependence on oil has some significant long-term consequences. The most serious of which, for me, is the potential for building a world that is only sustainable as long as oil production continues to expand. I see significant risk there, so it has always been my position that we need to reduce our dependence on fossil fuels in general.
With respect to ethanol, consider this thought experiment that I posed following one of my previous essays: Would you consume 2 BTUs of natural gas to produce 1 BTU of ethanol? I think most people would conclude that this would be foolish; that your natural gas supplies would stretch much further if instead you simply use the natural gas in CNG vehicles (acknowledging of course that there are lots of things you have to evaluate in that scenario). For those who would answer “Yes” to that question, I would argue that your view of ethanol is entirely one-dimensional. You probably only care that it is homegrown, and you don’t worry much about the long-term consequences.
Of course the truth is more complicated than the example above. It doesn’t take 2 BTUs of natural gas to produce 1 BTU of ethanol. Estimates vary, but it is still safe to say that most ethanol operations in the U.S. continue to have substantial fossil fuel inputs. That is the way they were built, and that is the way they will continue to operate. Over the long-term, there is potential to change that equation by using biomass boilers, but those are more expensive to operate than a standard natural gas boiler.
So on average the ethanol industry does still have a heavy fossil fuel dependence, albeit largely domestic coal (for electricity) and domestic natural gas - with some petroleum inputs for trucks, tractors, etc. (One thing to note is that more than 50% of our fertilizer supplies - derived from natural gas - are in fact imported). So what if the question was “Would you spend 1 BTU of natural gas to make 2 BTUs of ethanol?” If you are doing a holistic analysis, the answer should be “It depends. What are the other impacts?”
There are those who wrap U.S. ethanol policy in patriotism and the American flag, and who would rather not get into those questions. These questions are hand-waved away with clichés like “I would rather support American farmers than Saudi sheiks.” I try to look at it from the perspective of an engineer, a scientist, and an environmentalist. I want to stack the columns up and figure out what is really happening as a result of our ethanol policy and subsequent rapid expansion of corn production. I want to look at it from the perspective of “What is going to be the impact on the world my children will inherit?”
Just a few of the key questions for me are the following:
In a nutshell, I want to know if we are compromising the future relative to other options, and/or relative to the status quo. These sorts of issues are generally ignored by most advocates. They believe our ethanol policy is the right thing to do, and then nothing else matters. I have debated people like this before, and they are simply not interested in the holistic picture. Often, it is because they are vested interests.
Chief ethanol lobbyist Bob Dineen isn’t going to be at the forefront, trying to determine the answers to these questions. His job is to promote ethanol, period. He will get involved when one of these questions becomes persistent enough and loud enough, and his position will typically be that of defense attorney: Deflect the question if you can, and try to raise doubts that the question even matters.
But I am not a vested interest dug into a bunker. If our ethanol policy is better than the status quo, then I am all for it. But you can’t know that unless you take a really comprehensive look. I would like to see an independent analysis of all of these issues, now that we are some 11 billion gallons per year into this experiment.
The problem is finding an independent agency to do such an analysis. The ethanol lobby hires their consultants, who conclude, “It’s all good.” Big surprise there. (By the way that is the same guy who wrote a paper stating that ethanol with the energy value of 64 million barrels of oil displaced 206 million barrels of oil).
Energy policy in general is a complicated issue, and it is wrapped up deeply in politics. I doubt we will ever get the independent review I would like to see - and even if we did the lobbyists would immediately go to work trying to discredit the study. But I hope you can see why I decided not to ask that question. It might take 10 minutes to ask it, and then an hour to answer it - and I don’t think the answer would really get into the fine details that I am interested in.
You will have to stay tuned to see the question I did ask.
Hidden Gems? Why Green Investors Should Look at PFB, Vodafone And Telefonica (Pt. 1 of 2)
Submitted by EnergyTechStocks.com
Looking for alternative energy stocks with undiscovered potential?
Who isn’t?
Here are three possibilities (with three more to come next week). You can decide for yourself whether they are worth further investigation.
First up: PFB Corporation, which trades on the Toronto Stock Exchange under the symbol PFB. Calgary-based PFB is an energy efficiency play. The company makes insulating building products that it sells under branded names in commercial and residential markets in North America and Japan.
The company most recently reported third quarter net income of $1.6 million or 24 cents vs. $1.1 million or 16 cents, and nine months net of $2.5 million or 38 cents compared $1.1 million or 17 cents. Earnings rose significantly despite lower sales, a reflection of the difficult economy faced by all construction-related businesses.
What would seem to make PFB a hidden gem is management’s demonstrated ability to control costs (and maintain the regular 6-cent-a-share dividend payout) in tough economic times. With energy efficiency – especially in buildings – increasingly being recognized as by far the most cost-effective way to start greening the economy, PFB has hidden potential that might really blossom as the overall economy improves.
Next up: Vodafone Group Plc, whose ADRs trade on NASDAQ under the symbol VOD, and Telefonica S.A., whose ADRs trade on the Big Board under the symbol TEF.
Although they’re already telecom giants, what gives Vodafone and Telefonica hidden potential is the role they appear destined to play in Europe’s smart grid build-out.
By 2020 the British government plans to have a smart meter in every home under a program whose cost is expected to top $11.5 billion. (The rest of Europe may not be far behind.) This will require enormous amounts of data to be wirelessly transmitted from those smart meters back to Britain’s energy companies. Vodafone and Telefonica (through its O2 unit) reportedly are negotiating to be the carriers of all that data, quite possibly through a new joint-venture firm.
While the payoff for investors won’t be immediate, Vodafone and Telefonica could become huge long-term beneficiaries of the smart grid, which a number of communications experts now think will become as big as or bigger than the Internet.
Catching Up
Submitted by R-Squared Energy Blog
Back home now, just trying to catch up on the energy news of note. Four stories that I want to highlight. First was POET’s announcement on their progress on cellulosic ethanol:
Poet hits ‘long shot,’ cuts cellulosic ethanol costs
WASHINGTON - The head of the world’s largest ethanol producer, Sioux Falls-based Poet, said Wednesday that his company has drastically cut its cellulosic ethanol production costs.
It is a breakthrough that will allow cellulosic ethanol to compete with gasoline within two years.
Jeff Broin, Poet chief executive, told reporters during a roundtable discussion that the company has reduced its cellulosic ethanol production cost during the past year from $4.13 a gallon to $2.35 a gallon.
Andrew Leonard of Salon asked me for some comments, which he included in a story on the news:
Who cares about peak oil when you have corn cobs?
In addition to what made it into the story (and those comments were specifically about the kinds of risk factors POET faces), I said that I thought the guys at POET had done a nice job on this (that comment did make it into the follow-up story at Salon). One thing that isn’t clear to me is whether the production cost includes any capital recovery. If not, then they still have some distance to go to get that $2.35 into an economic range with ethanol presently trading at about $2.00 a gallon. [Edit: A comment from Nathan Schock of POET over at Green Car Congress indicates that this is in fact the total production cost - including depreciation]. Another question I would have is how their version of the process performs with other sources of biomass.
One other thing I said to Andrew (that didn’t make it into the story) is the really big challenge is in getting those ethanol titers up. Low titers mean lots of energy is spent in getting the water out. This is why I have always favored gasification technologies over hydrolysis technologies: You don’t have water to deal with, and thus the BTU efficiency is potentially going to be higher. (Probably your capital costs as well will be higher for gasification - depending on what you are producing from the syngas). If biomass costs rise in the future - as I expect them to - then there will be added incentive for maximizing BTU efficiency.
The second story was sent by a reader. In light of the amount of corn we produce, this could have significant ramifications:
A team of scientists led by The Genome Center at Washington University School of Medicine in St. Louis published the completed corn genome in the Nov. 20 journal Science, an accomplishment that will speed efforts to develop better crop varieties to meet the world’s growing demands for food, livestock feed and fuel.
The United States is the world’s top corn grower, producing 44 percent of the global crop. In 2009, U.S. farmers are expected to produce nearly 13 billion bushels of corn, according to the U.S. Department of Agriculture.
The next story is about a trend that I think will continue. In my presentation in Orlando, one of the trends that I pointed out is that more refineries are being built closer to the source of the oil. Saudi produces crude, but would like to capture more of that value chain by refining it as well. There are a number of very large refinery projects underway - especially in Asia and the Middle East - and in a world with stagnant oil production that means some refineries are going to shut down. In the U.S., our refining capacity is more than three times greater than our oil production rates. I see a dismal outlook for refining in the U.S., with a lot of refiners going out of business in the U.S. Valero just announced another refinery closing:
Valero refinery in Delaware City to close permanently
DELAWARE CITY, Del. — Valero Energy said this morning it plans to permanently close its Delaware City Refinery, eliminating hundreds of high-paying jobs, because of weak economic conditions, high local costs and chronic troubles at the 210,000 barrel-per-day complex.
Company spokesman Bill Day said that a plantwide maintenance shutdown, announced late last month, was already under way, and will convert to a final closing. Plant employees will continue on the payroll for 60 days under federal rules for large-scale layoffs.
Day said the plant — which produces about 70 percent of the gasoline sold on the Delmarva Peninsula— has lost $1 million a day since the start of 2009.
About 550 full time workers will be put out of work by the decision. Valero (VLO) also has notified companies that work closely with the refinery, Day said, but effects on those operations were not immediately available.
People forget that refining is a very tough business. They remember when refiners make money - as they were doing a couple of years ago - but forget that most of the time they aren’t making money. Plus, when they do make money they are subjected to accusations of gouging and calls from politicians to tax their windfall.
Finally, readers know that I have consistently avoided wading into the debate over global warming. It takes enough of my time just trying to keep up with the latest energy news, and I decided long ago to sit out the debate on climate change. It is far too politicized and people get too emotional over the issue. However, I do think it is important that the debate takes place, and I don’t like to see people trying to shut it down. Attaching labels like “denier” to people who question the science is an attempt to shut down debate, and I don’t care how right you think you are - in my view the debate needs to go on.
A couple of days ago it was announced that some e-mails from a climate research outfit in England had been hacked:
Global Warming Research Exposed After Hack
I have to say that some of the e-mails I have seen posted are troubling. Whatever history ultimately shows, some of those e-mails appear to be agenda-driven and not science-driven. There is no place for that.
Let the debate carry on, and let science - not agendas - determine the outcome.
Thinking of Itron, EnerNOC and MYR Group as Possible Takeover Candidates
Submitted by EnergyTechStocks.com
Last week Warren Buffett bought the rest of Burlington Northern Santa Fe (Symbol BNI) in part because of railroads’ inherent ability to transport goods more energy efficiently than trucks. Meanwhile, for a still-to-be-published magazine article, I interviewed a noted information technology consultant who said there will be a number of mergers and acquisitions among IT firms engaged in improving the energy efficiency of America’s electrical power system, to the benefit of both utilities and their many millions of residential and business customers.
Could the theme of energy efficiency spark an M&A boom? It’s at least worth thinking about with regard to companies that seem to occupy the sweet spot of being pure plays that aren’t yet very big which might easily attract the eye of a corporate behemoth.
Let me emphasize: this is all speculation.
While you probably have your own, here are three of my top “logicals” – Itron Inc. (Symbol ITRI), EnerNOC Inc. (Symbol ENOC) and MYR Group Inc. (Symbol MYRG).
Why Itron? There is a worldwide surge in smart meter installations that is only going to grow over the next several years. Pike Research just forecast that 250 million smart meters will be installed by 2015, creating a market worth nearly $4 billion. As one of the world’s leading smart meter firms, Itron would seem perfectly positioned to ride this boom.
Why EnerNOC? “Demand response” is expected to be the smart grid’s first killer app, turning energy efficiency and conservation into a new low-cost, non-polluting, base-load power source (negawatts as opposed to megawatts). The Cleantech Group recently forecast that demand response will generate $8 billion a year in revenue by 2014, compared with $1.8 billion in 2008. EnerNOC appears to be as well positioned in demand response as Itron is in smart metering.
MYR Group, meanwhile, is a nuts-and-bolts play on the pressing trillion-dollar need to repair and upgrade transmission and distribution systems all over the world. MYR walks among the industry’s giants, such as Siemens AG (Symbol SIE) and ABB Ltd. (Symbol ABB), who might well want more manpower as they aggressively pursue t&d upgrade projects all over the world.
Next week: three more “logicals.”
Interview With an Algae CEO
Submitted by R-Squared Energy Blog
So I am finally back home for the next 10 days, and slowly catching up. I had a good trip to Panama and then to Stanford. I had my luggage sniffed by dogs when I connected in El Salvador, and then when connecting in LAX Gwen Stefani and her husband walked by within 3 feet of me. I told my wife that I probably could have touched her, but then I might have been delayed by a trip to the L.A. County Jail. I also read Oil on the Brain
One of the things I did on the trip was take a tour of an algae farm. I spent some time with the CEO, and got to ask numerous questions. He had some very interesting comments, which I will capture below. Because he has to work in this industry, I am not going to identify him or his company. Below I will indicate his comments as CEO and mine as RR.
RR: Talk about some of the challenges of growing algae.
CEO: The list is exhaustive. It takes a lot of water. It takes a lot of electricity. Solar penetration is only about an inch into the water, so we really have to keep the ponds mixed well. One thing people never mention is the phosphorous requirement. Phosphorous is a limited resource, but a critical one for the algal growth. If you are trying to make oil, then you have stress the algae and push it into a lipid production mode. But that causes growth rates to stall. If you engineer algae for higher growth rates, they can’t out-compete the native species in the ponds.
RR: I talk to John Benemann on a fairly regular basis, and he has said much the same. He likes algae for the potential, for the water treatment possibilities, and as something that should continue to get funding for lab research. But he is pretty harsh on the uber-optimists.
CEO: Yes, I know John as well. He has done some good work in the field. Have you seen his latest paper?
RR: (He shows me the paper, and I acknowledge that I do in fact have that one).
RR: I was looking at those open ponds and wondering if the evaporation rates wouldn’t be problematic. That could create seriously high water usage, especially for those schemes that propose to use open ponds where the solar insolation is high (like in the Arizona desert).
CEO: Yes, those open ponds require a lot of fresh water. You should see our water bill.
RR: What about photobioreactors? Some people envision them as a solution to some of the problems (evaporation, contamination) of the open pond system.
CEO: They are ungodly expensive relative to how much algae they can produce.
RR: So how do you foresee the future of algal fuels?
CEO: There is no future. Look, some of these guys are out there committing fraud with their yield claims. Nobody is making fuel except for small amounts in the lab. I just don’t see how anyone will ever make cost-competitive fuel from algae.
RR: How about fermentation approaches like Solazyme? I haven’t written that off yet.
CEO: Yes, but they are using sugar, and sugar is food. They say they won’t always use sugar, but who knows?
RR: I could see their model working in Brazil as sugarcane ethanol does. Instead of fermenting to ethanol, they could ferment to oil. I also recently had someone write to me and claim they were using a feedstock other than sugar.
CEO: Maybe cellulose?
RR: If it is cellulose, I am on the next plane to go see them. That would indeed be a tremendous breakthrough, presuming their conversions are reasonable. I presume you get a lot of phone calls from aspiring algae fuel producers wanting to do a deal?
CEO: Oh yeah. All the time. Someone with a business plan and no appreciation for the scientific challenges wants to form a company and go after investors. It used to happen every other day, but has tailed off some now.
RR: So you see the main barrier to commercialization of algal fuel as cost?
CEO: Yes, but it is important to note why the cost is high. I don’t see much hope of dramatically cutting those costs. For algae that has other uses - like in the nutraceutical market - the economics are sometimes there because the product is much more valuable. I can make 4-5 times as much revenue per acre growing algae for the supplements market, and at a lower cost than it would take to make fuel.
RR: How about if you extracted oil as a byproduct of the nutraceutical market? I could see that working if you had a much higher value product carrying the costs. On the other hand, you probably aren’t going to get a whole lot of oil.
CEO: Exactly. You could produce oil in that scenario, just not in bulk.
RR: OK, many thanks for your time.
CEO: My pleasure.
Interview With an Algae CEO
Submitted by R-Squared Energy Blog
So I am finally back home for the next 10 days, and slowly catching up. I had a good trip to Panama and then to Stanford. I had my luggage sniffed by dogs when I connected in El Salvador, and then when connecting in LAX Gwen Stefani and her husband walked by within 3 feet of me. I told my wife that I probably could have touched her, but then I might have been delayed by a trip to the L.A. County Jail. I also read Oil on the Brain
One of the things I did on the trip was take a tour of an algae farm. I spent some time with the CEO, and got to ask numerous questions. He had some very interesting comments, which I will capture below. Because he has to work in this industry, I am not going to identify him or his company. Below I will indicate his comments as CEO and mine as RR.
RR: Talk about some of the challenges of growing algae.
CEO: The list is exhaustive. It takes a lot of water. It takes a lot of electricity. Solar penetration is only about an inch into the water, so we really have to keep the ponds mixed well. One thing people never mention is the phosphorous requirement. Phosphorous is a limited resource, but a critical one for the algal growth. If you are trying to make oil, then you have stress the algae and push it into a lipid production mode. But that causes growth rates to stall. If you engineer algae for higher growth rates, they can’t out-compete the native species in the ponds.
RR: I talk to John Benemann on a fairly regular basis, and he has said much the same. He likes algae for the potential, for the water treatment possibilities, and as something that should continue to get funding for lab research. But he is pretty harsh on the uber-optimists.
CEO: Yes, I know John as well. He has done some good work in the field. Have you seen his latest paper?
RR: (He shows me the paper, and I acknowledge that I do in fact have that one).
RR: I was looking at those open ponds and wondering if the evaporation rates wouldn’t be problematic. That could create seriously high water usage, especially for those schemes that propose to use open ponds where the solar insolation is high (like in the Arizona desert).
CEO: Yes, those open ponds require a lot of fresh water. You should see our water bill.
RR: What about photobioreactors? Some people envision them as a solution to some of the problems (evaporation, contamination) of the open pond system.
CEO: They are ungodly expensive relative to how much algae they can produce.
RR: So how do you foresee the future of algal fuels?
CEO: There is no future. Look, some of these guys are out there committing fraud with their yield claims. Nobody is making fuel except for small amounts in the lab. I just don’t see how anyone will ever make cost-competitive fuel from algae.
RR: How about fermentation approaches like Solazyme? I haven’t written that off yet.
CEO: Yes, but they are using sugar, and sugar is food. They say they won’t always use sugar, but who knows?
RR: I could see their model working in Brazil as sugarcane ethanol does. Instead of fermenting to ethanol, they could ferment to oil. I also recently had someone write to me and claim they were using a feedstock other than sugar.
CEO: Maybe cellulose?
RR: If it is cellulose, I am on the next plane to go see them. That would indeed be a tremendous breakthrough, presuming their conversions are reasonable. I presume you get a lot of phone calls from aspiring algae fuel producers wanting to do a deal?
CEO: Oh yeah. All the time. Someone with a business plan and no appreciation for the scientific challenges wants to form a company and go after investors. It used to happen every other day, but has tailed off some now.
RR: So you see the main barrier to commercialization of algal fuel as cost?
CEO: Yes, but it is important to note why the cost is high. I don’t see much hope of dramatically cutting those costs. For algae that has other uses - like in the nutraceutical market - the economics are sometimes there because the product is much more valuable. I can make 4-5 times as much revenue per acre growing algae for the supplements market, and at a lower cost than it would take to make fuel.
RR: How about if you extracted oil as a byproduct of the nutraceutical market? I could see that working if you had a much higher value product carrying the costs. On the other hand, you probably aren’t going to get a whole lot of oil.
CEO: Exactly. You could produce oil in that scenario, just not in bulk.
RR: OK, many thanks for your time.
CEO: My pleasure.
Catching Up
Submitted by R-Squared Energy Blog
Folks, I know it has been almost a week since I posted anything new, and it will still be a couple more days. I have had a productive trip to Central America, and am at Stanford this morning to give a talk on sustainability. It will be the first time I have presented my new company’s plans in public (although that is a minor component of the presentation). I fly back to Hawaii on Wednesday, and then should start catching up on a backlog of correspondence.
The title of my presentation today is “Toward a Sustainable Bioenergy Platform.” I am well aware that the word sustainable has lost almost all of its meaning. It is like “being green.” I remember seeing an interview with a Hummer owner a couple of years ago who said he was “becoming green” by putting E85 in his Hummer. I see the same sort of logic being applied toward the concept of sustainability.
Anyway, below is the outline of the talk that I will deliver in two hours at the First Nations’ Futures Program at Stanford. I will host these slides somewhere following the presentation.
Sustainability Basics
A Higher Standard
- Case Study: Sugarcane Ethanol
Caveats
Contenders
Has Brazil Paved the Path?
- Brazil versus U.S. consumption statistics
Building a Sustainable Platform
- Merica Overview
- Strategy
Political Risk Factors
Solutions
Attention Green Investors: Get Over Your Hatred of Coal – Carbon Capture & Storage Here to Stay
Submitted by EnergyTechStocks.com
Why should any self-respecting “green” investor invest in companies developing carbon capture and storage (CCS) technology?
Because whether or not you hate coal, and whether or not you believe that CCS is a scam perpetrated by the fossil-fuel industry, if you want to make money, CCS looks like a very good sector to be in.
Fact is, governments around the world hope to clean up the atmosphere by spending many billions of dollars on the commercialization of CCS.
As Reuters news agency reported two weeks ago, “The world will need to have 100 large-scale carbon capture and storage (CCS) projects by 2020, with thousands more built over the following three decades, the head of the International Energy Agency said. . . . The IEA estimates $56 billion of investment will be needed in CCS globally from 2010-2020, followed by $646 billion from 2021 to 2030.”
Add it up: the world may spend $702 billion on CCS in just 20 years. Moreover, with all that pressure on governments to control their coal-generated carbon emissions before global warming’s so-called “tipping point” is reached, the first company or companies that look like they really can commercialize CCS will be in line to make an absolute killing.
So who’s at the head of this line, at least as of today?
There are several big names that appear to provide investors with a good entry point. Alstom SA (Symbol ALO) has some 10 CCS demonstration projects underway in several countries, including the U.S., where the Obama administration also appears to have drunk the CCS cool aid, having authorized several federally-funded projects to launch next year. Siemens AG (Symbol SIE) is another CCS technology leader, while Fluor Corp. (Symbol FLR) is heavily involved in project construction.
Among utilities on the frontier of CCS commercialization, the payoff could be big for Duke Energy (Symbol DUK) Spain’s Endesa SA (Symbol ELEZF), and Italy’s Enel S.p.A. (Symbol ENEL). Companies providing chemicals, gasses and other components could also do well, including Dow Chemical, (Symbol DOW), Air Products & Chemicals (Symbol APD) and Praxair (Symbol PX).
Other potential winners include the giant oil and gas companies, led by Royal Dutch Shell (Symbol RDS.A) and ConocoPhillips (Symbol COP). Ironically, both are raking in billions in goverment grants to capture CO2 in order to produce more carbon-emitting oil (through secondary oil recovery).
Attention Green Investors: Get Over Your Hatred of Coal – Carbon Capture & Storage Here to Stay
Submitted by EnergyTechStocks.com
Why should any self-respecting “green” investor invest in companies developing carbon capture and storage (CCS) technology?
Because whether or not you hate coal, and whether or not you believe that CCS is a scam perpetrated by the fossil-fuel industry, if you want to make money, CCS looks like a very good sector to be in.
Fact is, governments around the world hope to clean up the atmosphere by spending many billions of dollars on the commercialization of CCS.
As Reuters news agency reported two weeks ago, “The world will need to have 100 large-scale carbon capture and storage (CCS) projects by 2020, with thousands more built over the following three decades, the head of the International Energy Agency said. . . . The IEA estimates $56 billion of investment will be needed in CCS globally from 2010-2020, followed by $646 billion from 2021 to 2030.”
Add it up: the world may spend $702 billion on CCS in just 20 years. Moreover, with all that pressure on governments to control their coal-generated carbon emissions before global warming’s so-called “tipping point” is reached, the first company or companies that look like they really can commercialize CCS will be in line to make an absolute killing.
So who’s at the head of this line, at least as of today?
There are several big names that appear to provide investors with a good entry point. Alstom SA (Symbol ALO) has some 10 CCS demonstration projects underway in several countries, including the U.S., where the Obama administration also appears to have drunk the CCS cool aid, having authorized several federally-funded projects to launch next year. Siemens AG (Symbol SIE) is another CCS technology leader, while Fluor Corp. (Symbol FLR) is heavily involved in project construction.
Among utilities on the frontier of CCS commercialization, the payoff could be big for Duke Energy (Symbol DUK) Spain’s Endesa SA (Symbol ELEZF), and Italy’s Enel S.p.A. (Symbol ENEL). Companies providing chemicals, gasses and other components could also do well, including Dow Chemical, (Symbol DOW), Air Products & Chemicals (Symbol APD) and Praxair (Symbol PX).
Other potential winners include the giant oil and gas companies, led by Royal Dutch Shell (Symbol RDS.A) and ConocoPhillips (Symbol COP). Ironically, both are raking in billions in goverment grants to capture CO2 in order to produce more carbon-emitting oil (through secondary oil recovery).
A High School Senior Asks About Peak Oil
Submitted by R-Squared Energy Blog I tend to get a lot of e-mails, and I try to make a point to answer them all. Sometimes, the e-mail is a question that I can quickly answer. Sometimes it is a request for comments on a specific technology. But sometimes I get one that someone put a considerable amount of time in, and it warrants a very detailed and thoughtful response. I just received one like that that I felt was worth sharing with readers. I asked the writer for permission to publish it, and she agreed in the hopes that it can help others struggling with these questions, and hopefully spawn some fruitful discussion.
This letter was written by a high school senior, and it is the sort of letter that makes me hopeful for the future. The letter resonated strongly with me, because I have been through some of the same thought processes as I worked my way through the implications of peak oil. I will insert my comments in the text as [RR: Comment].
————————–
Dear Mr. Rapier:
Thank you for posting your email address at TOD! I apologize in advance for the length of this letter, but I just can’t seem to express my thoughts succinctly on this topic. I know you are a busy man, but I would greatly appreciate it if you could read and respond to my message and help put my mind at ease.
I am writing to you to ask you some questions about peak oil. I am in my last year of high school and discovered peak oil by accident a few months ago. Like many people, I found Savinar’s site first, and of course my first reaction was one of terror. I stopped reading about the subject immediately to preserve my sanity. However, I knew I had to be honest with myself and keep investigating. Thankfully I found you and Stuart Staniford and all the others who believe that while some trouble may be coming, doom is not.
[RR: There are a couple of things bound to frighten many people new to peak oil. One is is you find Matt Savinar's site and read through it before you have read through anything else. Another is if - like me - the first book you read on Peak Oil is Jim Kunstler's The Long Emergency.
On the other hand, if your introduction to peak oil is Peak Oil Debunked (which I often recommend to people who have become depressed over peak oil), you may come away with the impression that the post-peak world will be smooth sailing all the way. I don't believe that (and I don't think JD at Peak Oil Debunked does either). What I believe is that peak oil will present some upheavals and personal hardship for many people. Even if we have lots of coal and natural gas, the transition will be costly. I think what you are seeing in the economy right now is a taste of what a post-peak world will initially look like: Spiking energy prices that put a burden on people and keep us flirting with recession for many years.]
However, I still have some concerns. Though I do not want to believe in doom, the doomers’ arguments tend to keep resurfacing in my mind and bothering me. On my good days I think, “We can pull through. It won’t be fun, but we can do it.” But on my bad days I think, “What if we can’t?”
[RR: Over the years, I have gone through the same thought process. My undergraduate training is as a scientist, and one thing you learn as a scientist is to continually challenge your conclusions. In other words, conclusions are tentative. You have to be willing to ask yourself what kind of data it would take to cause you to change your position. If you find yourself fitting the data to the conclusion, or rationalizing away evidence that doesn't seem to fit the conclusion, you have slipped from serious inquiry into dogma. In my view, many doomers are guilty of the latter.]
In other words, I sound like you in your article “My Worst Fears”: doom is my worst fear, but not my expectation. Scenarios, like oil production, fall on a bell curve, with heaven on earth at one end and hell on earth at the other, and in a world in which many factors play into any given situation, it seems simplistic to me to just say, “Well, it’s absolutely gonna be the worst-case and we’re all gonna die.” In real life, the worst-case scenario almost never plays out and reality lands somewhere in the middle. However, that worst-case scenario has a habit of captivating the mind, especially when you’re like me and have no real ability to prepare for it. So I thought I’d write to someone who knows a lot more than me to get my questions answered. (I’m also including, at the bottom, a few of the reasons why I think the doomers are most likely wrong.)
Who exactly are the doomers? Obviously, Kunstler, Heinberg, and Savinar are doomers. However, I had questions mainly about TOD in general and Simmons and Hagens specifically. Simmons, in most places, is called a doomer. However, I have heard him quoted as saying that humanity will “muddle through” peak oil. Does this mean that he is just a super-negative non-doomer? Or is he a doomer trying to tone down his position for the public?
[RR: I am going to be quite critical of Simmons here. Fans of his shouldn't consider this Simmons-bashing; I just think this needs to be said. I definitely consider Simmons a doomer. I also consider him to be alarmist much of the time. I understand very clearly his desire to have people take this issue seriously, but lately he has latched onto some pretty skimpy evidence and run with it. (I thought it extremely ironic that he recently accused others of running off on a tangent based on skimpy data). The problem is that he takes a little bit of information - which he sometimes doesn't understand very well - and then draws sweeping conclusions. Many - even some of his allies - acknowledge the contribution of Twilight in the Desert,
An example of that - which I have discussed before - was his talk at last year's ASPO conference. He claimed in his presentation that we don't have a good idea of our gasoline inventories, and were just beginning a gasoline crisis that could bring the entire country to a halt. He spun quite a frightening tale, and I could see the shock on some people's faces. Such shock tactics may work to get people's attention, but if you cry wolf a few times they backfire.
Contrary to Matt's argument, the evidence was just the opposite. Even as he was speaking, refineries were coming back online from hurricane outages and inventories were recovering. I was asked about Matt's comments on a later panel session, and I said I thought gasoline inventories were beginning to recover and that they would be higher in a month. They were. Further, I noted that I was previously in the group that submitted weekly gasoline inventories from our refinery to the Department of Energy, and that we actually have a pretty clear idea of what gasoline inventories looked like from week to week.
Another example is his argument about the $100 trillion corrosion issue in the oil industry. The gist is that he argues that the oil industry is full of rusting infrastructure, and he questions whether we have the money or even the iron resources to fix the problem. Further, he questions aloud how it is that he - Matt Simmons, investment banker - has 'discovered' this problem that the oil industry has missed. I won't go into all of the reasons that Matt is way off the mark on this, as that would be an essay in itself. A corrosion engineer at The Oil Drum has weighed in on this issue, and explains that corrosion is well-understood, and not actually something that Simmons just discovered. Oil companies are full of corrosion engineers who work to replace corroded equipment as needed. There was actually a lot of behind the scenes discussion on how hard to rebut Matt on this, as many felt like this warranted a sharp rebuttal. In the end - because he is considered to be a friend of TOD - he was treated much more gently in public than he was in private.
I did not attend this year's ASPO conference, but I did get an e-mail from someone who saw his presentation. This from a friend and long time acquaintance of Matt: "Matt Simmons was NOT worth seeing. he seemed a bit crazy - not much new."]
Obviously you and Staniford are not doomers. I have also seen Kjell Aleklett and Robert Hirsch distance themselves from the doomers. You mentioned that Nate Hagens was not a doomer, and that he wanted to use the term “resource depletion” rather than “peak oil” because peak oil was virtually copyrighted by doomers. However, when I read some of Nate Hagens’ articles at TOD, they sounded remarkably doomerish! I thought, since you know the man, you could tell me what his position was (since, as a student, I have no time to sit on my computer all day and read nothing but peak oil articles).
[RR: Nate is a friend of mine, and I feel like I know him fairly well. His big interest is in human psychology as it relates to peak oil - and I have suggested to him that he distance himself from the phrase "peak oil" because of some of the connotations it has taken on. Nate doesn't expect people to collectively do the right thing, and as such he is more doomerish than I am. Funny story about Nate is that his original moniker at TOD was "The Last Sasquatch." I liked a lot of his writing, and talked him into posting under his real name. I told him that he would be taken more seriously that way. He ultimately did start posting under his real name, and gained a lot of credibility as he continued to write. Nate talks about that decision here. But on a scale of 1 to 10, with 1 being extreme doomer, I would consider Nate to be about a 3 or 4. I consider myself to be about a 6 or 7 - fairly optimistic, but also realistic that it won't be a piece of cake. Five years ago I was a 5.
By the way, I got to spend some time with Bob Hirsch at last year's ASPO. I can definitely relate to his thinking. He considers the problem very serious, but something we can painfully work our way through if we get busy. That pretty much reflects my own thoughts.]
TOD in general seems to be a semi-doomer site. It sounds as though it used to be balanced, but shifted at some point. Consequently I only read a few contributors, and rarely touch the comments, which usually degenerate into debate about very fine points that I don’t understand or turn into “when you’re starving to death you’ll see that I’m right.” Which of the main contributors over there are doomers? Because sometimes it’s hard to tell. (By the way, I define “doom” to basically mean “die-off and/or Industrial Revolution reversal scenario.”)
[RR: I don't want to name names, but very few of the 'staff' there are doomers. But two of the most frequent contributors are, and that may make TOD staff seem more doomerish than we really are on average. The readership, I think, does tend toward the doomerish end of the scale, but you have people all over the spectrum. And I can tell you through my own experiences that some doomers feel personally affronted if you challenge some of their views, and are vocal about it. This was also Stuart's experience right before he stopped posting. He posted some articles forecasting that the future might not be complete doom and gloom, and he got some venom thrown his way. That is why I post there infrequently.]
Source of Aleklett/Hirsch/Simmons statements (dated May 2005, from attendee at Uppsala peak oil conference): [Simmons, Aleklett, and Hirsch] think Peak Oil is a very grave issue, but they also think the doomers are wrong. On a specific question they said Richard Heinberg was very much too pessimistic. They meant Heinberg was too pessimistic on technology and society. They didn’t believe that the end of the world was near, but that we would, and I quote, “muddle through.” They said we might have a few rough decades but that world will not end. For example, Aleklett was asked if he believed airborne mass tourism would continue in the future. He answered that sailing boats are very nice.
Is there any mathematical possibility of world decline rates approaching 8-12%? Doomers seem to throw these numbers around as though they are gospel truth. However, I have never seen a doomer actually lay out the math behind their enormous decline rates. I have only ever seen people in comments confuse field decline rates with world decline rates. Also, I have never heard any leading peak oil expert (except Simmons) predict anything worse than maybe a 6% decline rate. In fact, JD worked out Aleklett’s latest release and found that he was predicting a .5% annual world decline rate!
[RR: As you mention, individual fields can decline at those rates, but as prices rise different technologies can come into play that allow more oil to be extracted and so observed decline rates may be less than what would be observed in a constant oil price environment. But this may also accelerate the decline when it really begins in earnest. I was at the annual Energy Information Administration conference last April and in one of the presentations a slide was presented that showed that decline rates are climbing. See Slide 6 here.]
There is also a more specific question I want to ask you on this same topic. Freddy Hutter (at the Trendlines website) posts innumerable graphs and checks peak predictions and such. While I disagree with his “superabundant” scenario, his site is useful for getting the lastest predictions from leading people. He stated this (on the right side of the page under “worst-case scenario”):
Using the lowest recognized estimate of All Liquids (2021-Gb by EWG/LBST 2008), and assuming 2008 (85.4-mbd) as Peak Year, this projection depicts the Avg Decline Rate of 4.6% required mathematically to exhaust this conservative URR. The significance is that half of this year’s volume will still be available in 2035, and flow won’t dip below 10-mbd until 2055. Finally, All Liquids exhausts in 2083. A post-peak production decline rate higher than 4.6% “strands URR”…and that phrase is an oxymoron. Ignore all pundits that suggest a post-peak average extraction decline rate of over 4.6% in their musings. And please read their alarmist TEOTWAWKI forecasts with these hard numbers in mind.
Is this anywhere close to true? What is “stranding” URR and why is it an oxymoron? Since I agree with Staniford’s assessment that the decline rate is largely what determines the severity of the scenario, I would much rather side with Hutter and the “cornucopians” (a word I hate due to its pejorative application to anyone who is not a doomer), but I need to know if this is really true or not before I do that.
[RR: I think what he means is this. URR is the amount of oil that is ultimately recoverable with current technology. Assume for a moment that URR is estimated to be 100 units. Assume what has been produced is 50 units, and 10 units are being produced in the current year. Now assume for the purpose of illustration that the presumed decline rate is 50%. So then your cumulative recovery based on that decline rate might be something like 50 at the beginning of Year 1, 60 in Year 2, 65 in Year 3, 67.5 in Year 4... We already said that URR was 100, but it doesn't look like we can get there with that presumed decline rate. So what has happened is too high of a decline rate was presumed which results in a cumulative production rate that will ultimately fall short of present URR estimates. Hence, the oxymoron.]
What is Hubbert Linearization and what is it good for? Some people seem to hold up HL as though it can work miracles, and some people seem to throw it in the trash heap. However, I have noticed that it seems to be used two different ways: to either predict a region’s peak, or predict the post-peak decline rate. You have come out against its use to predict a peak, but Staniford’s article on a slow world decline rate was based entirely on the second usage of HL. Since JD linked to this article as one of the main arguments in favor of a slow decline, I’d like to know if HL can be properly used this way, or if it useless here too.
[RR: And I can tell you that Stuart definitely agrees with me on the issue of using it to predict peak. He has stated this publicly and we have corresponded about it a great deal privately. What has happened here is something I often see. Someone has a theory. They think their logic is impeccable. They start using the theory to make predictions. But they never bothered to validate that theory by plugging in known data to see if it gives the right answer. In the case of HL, I did that and showed that it gave wrong answers more often than not. Hence, using HL to predict a peak is akin to astrology as far as I am concerned.
I have seen this before with relatively inexperienced engineers. They build a model, and start to use it without validating it. But models must be validated. That's the only way you can have some confidence in the model predictions. (Then there are those who hear the word "model" and they immediately discount the results. That is also the wrong approach).
Because that article by Stuart was written very early on - and Stuart did modify his views on HL as time went by - I can't really say whether HL gives reasonable and consistent answers on decline rates. I can't say I have done those checks.]
Vis-à-vis Staniford’s article, how will world economic troubles affect peak scenarios? I am of the opinion that it is very possible that a major depression is looming sometime in the next decade, what with the credit contraction and stock market losses. Obviously a depression would kill oil demand, which might soften peak initially. However, it would also kill funding for alternative energy projects and other mitigation efforts. While I am still not convinced this necessarily spells doom, it could make the transition much more painful. I wonder if the initial depression (economically-induced and having nothing to do with energy or oil) would kill the demand and funding, and we would then stumble our way through recession after recession as peak “ripples through” until suitable alternative technology is developed. Does this sound even remotely accurate? Because the “worst fears” part of me is deathly afraid that a depression now, at the “critical moment,” could trigger the doom scenario. Staniford did not seem to think this, and neither did any of the commenters (early on, at least; I didn’t read the whole thread).
[RR: I think it all ties together. A sharp peak will cause an initial supply shortfall that will result in spiking prices which can cause recession/depression - as well as a drop in funding for renewables. This will cause demand to fall, which will cause prices to fall. Demand then picks back up, and we repeat the cycle. Due to reduced funding for alternatives in troubled economic times, the longer term mitigation options are endangered. This is how I foresee peak oil. It will cause economic troubles, which will feed back into demand. The ultimate impact is that oil will last longer than had the peak not resulted in economic difficulties. This was my premise in The Long Recession.]
Reasons I think the doomers are wrong/suspicions about doomers (in no particular order):
1) The track record/statistics of doom. People have always made doomsday predictions. Since civilization still exists, they obviously did not come true. First it was a global ice age earlier this century, then it was nuclear holocaust, then it was Y2K, etc. Now it is peak oil, or by extension resource depletion. While I understand the gravity of the concerns behind this latest doomsday “fad,” I am just not convinced that doom will play out, due to both their track record and to the mere probability of the event. The bigger and more severe the event, the probability necessarily goes down (like the probability of a major Gulf Coast hurricane vs. the probability of a meteor hitting the earth tomorrow). And doomsday is of necessity a very large and very severe event, pushing the chances down into the realm of the highly improbable. However, I do understand that statistics must be weighed against reality.
2) The lack of presented mathematical evidence for huge world decline rates.
3) The strange distribution of professions amongst the major voices of peak oil. Most of the more optimistic voices in the community seem to have been connected to energy at some point. They are either geologists or in some oil- or energy-related profession. However, the major doomers seem to be either journalists or lawyers, neither of which are energy-related jobs. I question the expertise of these people, especially when their predictions seem to flop so often and so spectacularly. They strike me, overall, as the sort of “annual prophets” who make negative predictions like clockwork, and whose followers seem to get yearly amnesia when their hero’s predictions are totally off the mark.
[RR: Geologists are pretty well-represented in the doomer camp. Think of people like Ken Deffeyes and Collin Campbell. And of course many doomers gain strength in their convictions from Hubbert himself, who was also a geologist.]
4) The “dark side” of peak oil. You don’t have to dig too far into any issue related to resource depletion before you find these people. The people who post things like “only the fit in our society should be allowed to have children” and “we should euthanize the handicapped” and “it’s cruel to be altruistic because it props up the weak,” etc. Obviously these people are all doomers, though not all doomers fall into this category.
[RR: While I view those people as a tiny minority, it has always bothered me that so many doomers can casually talk about billions of people worldwide dieing off as a result of peak oil. My mind can't even comprehend such a horror, yet people toss that around as casually as if they were debating whether to have a second helping of lunch.]
5) Large amounts of other fossil fuels to “ease us into” the transition. There have now been huge natural gas discoveries under Texas and Louisiana, and if they turn out to be anywhere near as big as they say, it is, as one of your commenters put it, “nearly unalloyed good news.” Coal is even more abundant. From the EIA Coal Reserves page:
As of January 1, 2008, the DRB (Demonstrated Reserve Base) was estimated to contain 489 billion short tons [of coal]. In the United States, coal resources are larger than remaining natural gas and oil resources … Worldwide, compared to all other fossil fuels, coal is most abundant and widely distributed across the continents. Estimates of the world’s total recoverable reserves of coal in 2004 were about 998 billion short tons. The resulting ratio of coal reserves to production is approximately 164 years, meaning that at current rates of production (and no change in reserves), coal reserves could in theory last more than one and one-half centuries.
From Wikipedia’s coal article (not sure if this information is reliable - it’s Wikipedia):
At the end of 2006 the recoverable coal reserves amounted 800 or 900 gigatons. The United States Energy Information Administration gives world reserves as 930 billion short tons. At the current extraction rate, this would last 132 years. However, the rate of coal consumption is annually increasing at 2-3% per year and, setting the growth rate to 2.5% yields an exponential depletion time of 56 years (in 2065). At the current global energy consumption of 15.7 terawatts, there is enough coal to provide the entire planet with all of its energy for 37 years (assuming 0% growth in demand and ignoring transportation’s need for liquid fuels).
Of course, I do recognize that burning that much coal would result in a very bad spike in pollution (I am not yet convinced of the science behind global warming). However, it seems like more than enough to help us “limp along.” (One question about the coal, though: on my first and only visit to the Energy Bulletin website, I saw Richard Heinberg saying that a new study said that we only have 15 years of coal. I wonder if this is true - it is Richard Heinberg, after all. Have you heard of this?)
[RR: I had not heard Heinberg say this, but if he did I think he is wrong. I think one thing that is really going to help us transition away from oil is that we do seem to have substantial natural gas reserves. Natural gas is far more fungible as a transportation fuel than are things like coal, biomass, wind, or solar power, so it should buy us time. Hopefully we don't squander that time. Of course if our coal reserves are as significant as is often claimed, CTL is a longer-term option for producing liquid fuels, albeit at a higher price point than we are accustomed to.]
6) All major doomers seem to be Americans. Now I am an American, so this is not American-bashing. However, it does make me wonder if, by living in this country, these doomers have a slightly lopsided view of the world (as regards usage and perceived “needs”), since no doomers seem to be coming out of “emerging” countries like China or India or even out of Europe. Notice also how almost all peak oil discussions seem to degenerate, often unknowingly, into “Americo-centric” scenarios (”the U.S. economy will implode,” “the U.S. dollar needs oil,” etc.).
[RR: I had never made this observation, but that does seem to be generally correct (although I do know of doomers who are European or Australian). Maybe this is because we Americans use so much oil, and our way of life is more dependent on oil than is much of the rest of the world. I have always felt like this makes us more vulnerable to oil shortages and oil price shocks. So perhaps it is just that we see the implications of peak oil as being more serious, because for us they may very well be more serious.]
Sorry again for the length of this message. I hope you can help me sort through my confusion. By the way, I love R-squared Energy Blog. It is a voice of moderation in a corner of the interent gone mostly mad, and it is nice to hear that not everyone is a doomer.
[RR: Thank you for your e-mail. As I said, it gives me hope for the future that you are so thoughtfully weighing these issues. Good luck on your quest for the truth. Just keep in mind that ultimately none of us know how the future is going to play out. Personally, I consider a number of possible scenarios, and I plan accordingly. Some of those scenarios including asking questions like "What if Matt Savinar is right?" Ultimately, I think you have to plan for some of the scenarios you think are low probability in the same way that you buy homeowner's insurance for a house that you don't believe will ever burn down. You do have to draw a line somewhere, though.]
‘Clean’ Energy Investors Can’t Afford to Overlook ‘Dirty’ Companies Like Statoil, Mitsubishi, Cemex
Submitted by EnergyTechStocks.com
There are at least two axioms EnergyTechStocks.com believes alternative energy investors should follow. The first is to have an investment horizon of at least three to five years, in order to be able to take advantage of several upcoming sea changes – such as global cap-and-trade and the mass introduction of plug-in electric hybrid vehicles – that are expected to power the sector higher.
The second is to pay close attention to companies that look more “dirty” than “clean,” because in this new carbon-constrained environment, many are launching clean initiatives that within three to five years could make them alternative energy powerhouses.
Three such companies are Norway’s StatoilHydro (Symbol STO), Japan’s Mitsubishi Heavy Industries (Symbol TYO:7011 and MHVYY), and Mexico’s Cemex SAB de CV (Symbol CX).
Statoil today is a “dirty” oil and gas firm, but in three to five years it could emerge as a key player in the area experts are calling “the Saudi Arabia of wind,” otherwise known as offshore Maine. It’s been estimated that the Gulf of Maine has about 150,000 megawatts of harvestable wind energy, and StatoilHydro, in partnership with the University of Maine and others, is currently testing its wind energy technology, the same technology it already uses off the Norwegian coast.
Mitsubishi Heavy Industries makes oil tankers, helicopters, tractors, torpedoes and more. But what alternative energy investors should know is that it also has developed a rooftop solar unit reportedly capable of supplying 65% of the energy needs of a Japanese household. The unit reportedly combines photovoltaic generation and solar heat recovery, the latter usable for household heating and hot water. Commercial sales are expected to ramp up in 2010.
Meanwhile, Cemex’s U.S. unit just got a contract from the U.S. Department of Energy to develop technology for carbon capture and storage (CCS). The project, which involves designing a dry sorbent capture and compression system, could become an essential way of dealing with one of the biggest sources of this greenhouse gas, namely, the production of cement. Like all cement manufacturers, Cemex could pay a hefty financial penalty under cap-and-trade, but technology like this could turn the company’s (and the cement industry’s) future around.
A Massive Decline in Carbon Emissions?
Submitted by R-Squared Energy Blog
A couple of years ago, I wrote an essay that ultimately turned out to be very controversial:
Why We Will Never Address Global Warming
That same essay published at The Oil Drum received 560 comments, and was until recently the most-commented upon post in The Oil Drum’s history. Global Warming/Climate Change is a topic that people get very emotional about, and the idea that I claimed that we would never address it didn’t sit well with a lot of people.
Now I know that I have some global warming skeptics here. And I have said many times that I am fine with that, but I don’t want to engage in that debate for multiple reasons. And in the hopes that I can focusing this essay, let me say what I really mean: We won’t stop rising atmospheric carbon dioxide concentrations. If you want to argue that increasing carbon dioxide is not resulting in climate change, fine. But I think we can all agree that carbon dioxide concentrations are steadily increasing in the atmosphere. In fact, one of the key monitoring stations is here in Hawaii at Mauna Loa, which I can see clearly from my house.
The reason I don’t believe we will stop accumulating carbon emissions is that this is a global issue, and people around the world are going to generally gravitate to the cheapest source of fuel they can find. So many of the world’s countries can sign a well-intentioned protocol in Kyoto, but then China plans to build 562 new coal-fired power plants. Carbon emissions continue unabated, despite Kyoto.
This week I saw a new article by Lester Brown - author of the “Plan B” series, the most recently published version of which is Plan B 4.0: Mobilizing to Save Civilization.
U.S. headed for massive decline in carbon emissions
For years now, many members of Congress have insisted that cutting carbon emissions was difficult, if not impossible. It is not. During the two years since 2007, carbon emissions have dropped 9 percent. While part of this drop is from the recession, part of it is also from efficiency gains and from replacing coal with natural gas, wind, solar, and geothermal energy.
The U.S. has ended a century of rising carbon emissions and has now entered a new energy era, one of declining emissions. Peak carbon is now history. What had appeared to be hopelessly difficult is happening at amazing speed.
For a country where oil and coal use have been growing for more than a century, the fall since 2007 is startling. In 2008, oil use dropped 5 percent, coal 1 percent, and carbon emissions by 3 percent. Estimates for 2009, based on U.S. Department of Energy (DOE) data for the first nine months, show oil use down by another 5 percent. Coal is set to fall by 10 percent. Carbon emissions from burning all fossil fuels dropped 9 percent over the two years.
All of that may very well be correct. But China and India continued to build new coal plants. Demand for oil around the world remained high. And the result so far is that the monitoring station on Mauna Loa shows absolutely no sign that global carbon emissions have been impacted:
This is one of the reasons I have chosen for not focusing my time on carbon emissions. In the global picture, I can’t see that anything the U.S. does or that I can advocate is going to really impact things. Sure, we may reduce our carbon emissions. But there is a long line of countries waiting to use that fossil energy that we don’t use. So what I think will happen is that the best we could hope for is to slow the accumulation rate. But I think the atmospheric concentration will continue to rise until fossil fuels start to run out. That’s the only thing I think will permanently rein in carbon emissions.
Let me be clear that this has nothing to do with what I would like to see happen. The reason the essay was so controversial at The Oil Drum was because some people perceived my attitude as “I don’t care about climate change.” That’s not it. This is just the way I see things playing out.
I have instead chosen to focus my efforts on changing the forms of energy we use. There is of course some synergy with those who are working to reduce carbon emissions. We both would like to see expanded use of alternative energy. For me, this is about energy security. Increasing the locally produced energy should help insulate against future energy shocks. This would also reduce localized carbon emissions.
But I don’t expect this to impact the global carbon emissions picture. If that was my goal, I think I would be very frustrated by that Mauna Loa graph. I see no reason to believe that picture will change in the next few years. But I am optimistic that we can continue to develop some alternative energy options that enhance energy security for specific locations that have limited fossil fuel resources. I think those countries with ample fossil fuel resources will continue to burn them, though, which is why I think the focus on carbon emissions is ultimately futile.
Ethanol and Petroleum Imports
Submitted by R-Squared Energy Blog
This is the concluding post in a series looking at the impact of increased ethanol production on petroleum imports. Previous posts concluded that there has been little measurable impact on our petroleum imports as a result of increased ethanol production. In this post, I provide a spreadsheet to all the data and graphics used, and delve a bit deeper into the issue.
Previous posts in the series were:
Does Ethanol Reduce Petroleum Imports?
Ethanol, Imports, and the MTBE Effect
The spreadsheet that was used to tabulate all of this information is archived here:
Oil Imports Versus Ethanol Production
(For some reason the graphs don’t show up in the Google Documents link. However the data and calculations are all there).
Audacious Claims
One of the most frequently cited reasons for our U.S. ethanol policy is that it will reduce our dependence on foreign oil. Some of the more audacious claims actually suggest that one barrel of ethanol will displace more than one barrel of foreign oil. Here is a sampling of some of the claims. From the Renewable Fuels Association’s (RFA) “Energy Facts”:
FACT: The production and use of 9 billion gallons of ethanol in 2008 displaced the need for 321.4 million barrels of oil. It also saved American consumers and taxpayers $32 billion, an average of more than $87 million a day. This is the equivalent of eliminating oil imports from Venezuela for 10 months, or looked at another way, it would mean that the U.S. would not have to import ANY oil for 33 days.
The RFA’s page on industry statistics shows that ethanol production in 2006 was 9 billion gallons, which is 214 million barrels. Once refined, a barrel of oil will turn into products with an average BTU value of 126,000 BTUs/gal, versus 76,000 BTUs/gal for ethanol; therefore 214 million barrels of ethanol contain the BTU equivalent of 129 million barrels of oil. (Source: ORNL). The claim then is that ethanol with an energy equivalent of 129 million barrels of oil (BOE) displaced more than twice that much oil - 321 million barrels!
The RFA’s source on that was the consulting firm LECG, where director John M. Urbanchuk consults for the Renewable Fuels Association and the National Corn Growers Association. Thus, Urbanchuk is expected to spin a positive ethanol story, but one would hope he could do so without completely sacrificing his credibility. He has also been quoted:
The production of nearly five billion gallons of ethanol means that the U.S. needed to import 206 million fewer barrels of oil in 2006, valued at $11.2 billion. This is money that stayed in the American economy.
Source: Contribution of the Ethanol Industry to the Economy of the United States in 2006 (PDF download)
Even grander claims have been made by the U.S. Government. From DOE Assistant Secretary Alexander Karsner’s keynote address to the RFA’s National Ethanol Conference (link now dead) in Tucson, Arizona:
Last year, we contributed something on the order of a displacing 500 million barrels of oil, oil that we didn’t have to import from regimes that are hostile to our interest or might leverage energy economics over our future.
Here’s the same claim (that link has also been taken offline) by Paul Dickerson, Chief Operating Officer at the DOE’s Office of Energy Efficiency and Renewable Energy:
Over 6 billion gallons of ethanol were produced in the United States last year, and we have an additional 5 billion gallons of refining capacity under construction.
That effort means 500 million fewer barrels of oil that we have to import from the Middle East.
That’s from the U.S. Department of Energy. Those are pretty bold claims. How on earth are people coming up with these numbers? More importantly, can we go to the data and actually see this impact?
Probing the Data
The import situation is complicated by several factors, the biggest of which is the rapid run-up in petroleum prices over the past few years. The increase in prices caused overall demand to fall, which can be seen in Figure 1 below:
It is important to note that “demand” includes all crude oil, natural gas liquids (ethane, propane, butane, etc.), ethanol, fuel gas (offgas from the refinery used as fuel or feedstock), and asphalt. (See the full list of products covered here). This is important to understand, because if ethanol displaces petroleum, it has no impact on overall demand - since it is already included. What you would see in that case is merely a shift between ethanol and gasoline, for instance, with total demand remaining constant (actually it would have to go up a little due to ethanol’s lower BTU content).
The conclusion one draws is also influenced by the time period over which one looks. In the first post in this series, I looked at imports, demand, and ethanol production over the time period 2002 through 2007. The reason for choosing that particular time period was that this was when ethanol was ramping up sharply.
I left off 2008 because of the very sharp drop in demand due to the recession. However, as one reader pointed out, since ethanol is included in the demand number, it doesn’t really matter whether demand went up, down, or stayed constant. If ethanol is displacing imports, we should see that effect even if demand drops sharply. For example, if demand fell by 1 million barrels a day, then all else being equal I would expect imports to fall by 1 million barrels a day. Now add in expanding ethanol production, and I expect imports to fall by more than 1 million barrels a day.
What I observed was that between 2002 and the end of 2007, our petroleum imports do not appear to have been impacted at all by the increase in ethanol production. But that time period is complicated by a couple of things. First, the largest increase in ethanol production took place in 2008. Thus, the largest impact would be expected to show up in 2008 - a year I left off because of the recession effect.
Second, the phase-0ut of methyl-tertiary-butyl-ether (MTBE) took place during this time. I went into detail on how this would have impacted the issue in the second post in this series. The bottom line was that even when MTBE was taken into account, it still did not appear that ethanol production had a measurable impact on petroleum imports.
However, the MTBE phase-out was completed in the first half of 2006. So for the rest of this post, I want to focus on 2007 and 2008. (And as I write this, I don’t know what the answer is; I will work it out as I put the rest of this post together).
During 2007 and 2008, total demand fell by 434 million barrels. Domestic production fell by 74 million barrels. (You can see all of the data in this spreadsheet; there are comments indicated where different data originated). So then all else being equal, I would expect imports to fall by 434 million barrels, but then they also need to make up for the 74 million barrel domestic production deficit. That modifies the expected import change to (-434 million + 74 million) = - 360 million barrels.
Over that two-year time period, net imports actually fell by 466 million barrels. This is the first time period I have looked at over which the import change was less than the demand change, which is what I would expect to see if ethanol was displacing imports. The change certainly isn’t the often exaggerated 200 million or 500 million barrels, but over the course of 2007 and 2008 imports did fall by 106 million more barrels (53 million barrels per year) than would be expected on the basis of demand and domestic production changes. Over the longer time frame of 2002 through 2008, the cumulative increase in imports (+207 million barrels) is very close to what would be expected based on changes in demand and domestic production (-225 million barrels), still implying no measurable impact from ethanol.
How much ethanol was produced over that period of time? Per the RFA’s ethanol statistics, a total of 15.5 billion gallons of ethanol was produced in 2007 and 2008, which amounts to 369 million barrels. On an energy equivalent basis, this is equal to about 215 million barrels of finished petroleum products. Yet the measured fall in imports was less than half that value.
One of the problems here is that we may be looking for a needle in a haystack. By that, I mean that the contribution of ethanol is so small relative to that of overall demand, that any actual displaced imports would be lost in the noise. Figure 2 illustrates:
For this graphic, I have put ethanol production on the same scale as total demand to show the relative contribution. The production for ethanol in 2008 amounted to 0.59 million barrels per day of a total demand of 19.5 million barrels per day. For people who claim that the oil companies are threatened by the ethanol companies, that graphic puts things in perspective.
One could argue that the ethanol impact should show up most strongly in a comparison with gasoline demand. Figure 3 shows that effect:
In fact, gasoline demand* did dip in 2008 by 300,000 bpd. Ethanol may have been part of the reason, but the increase in ethanol production was quite a bit less than the fall in gasoline demand. Corrected for energy content, the ethanol increase was less than half the drop in gasoline demand (which can be mostly explained by higher prices and recession, as shown below).
One thing Figures 2 and 3 show is the dip in demand in 2008, which followed a flattening of demand for a few years prior. Recall that since ethanol is included in the demand number, ethanol can’t be a cause of the drop in demand. Figure 4 shows part of the culprit:
As crude prices began to climb in 2004, crude demand flattened. As the price skyrocketed in 2008, we were also entering a recession. The combination caused a sharp drop in demand. One interesting thing to consider is that since ethanol is mandated in increasing volumes each year, it is not impacted by the drop in demand. While total demand fell by 1.2 million bpd in 2008 relative to 2009, “demand” for ethanol actually increased by nearly 200,000 bpd - because the mandated increase has no allowance for overall drops in demand.
Conclusions
What to conclude from this exercise? The easiest conclusion is that the claims of petroleum import displacement have been at a minimum grossly exaggerated. It may even be that ethanol hasn’t backed any petroleum imports out, or that the impact is so small as to be unnoticeable.
All of these conclusions, however, point toward a common theme: Even our biggest source of alternative fuel is taking very little bite out of our petroleum consumption. Much more effective has been high prices and recession. In fact, I believe it unlikely that any combination of biofuels will ever replace even 50% (net) of our present petroleum consumption. That points toward the need for conservation as a critical component of any major effort to wean off of fossil fuels. Perhaps some combination of conservation, electrification, mass transit, and biofuels can make a significant impact on our fossil fuel consumption. But the graphics above should demonstrate that it isn’t a trivial matter to significantly impact our petroleum consumption.
*Total gasoline demand contains the ethanol contribution. Therefore, Figure 3 shows gasoline after subtracting out the ethanol volumes.
Special thanks to the Energy Information Administration for answering some of my questions about the data.
What Would Ron Wyden Do?
Submitted by R-Squared Energy Blog
The refining sector has been in the news a few times this week, and not in a good way:
A Fine Mess For U.S. Refineries
HOUSTON — Excess capacity, weak demand for fuels and rising product inventories continue to squeeze margins for U.S. oil refiners.
Sunoco, the second-largest refiner in the country that doesn’t produce its own oil, said late Tuesday that it will soon shutter its Eagle Point refinery in Westville, N.J., which has a capacity to handle 145,000 barrels of oil per day. During the second quarter, Philadelphia-based Sunoco lost $77 million in its refining business and told analysts Tuesday that the third quarter could be worse.
A point that I have tried to stress is that for the most part, refining is not a lucrative business. It is a risky business. You may have five poor years and then one or two really good years. And then when you have a good year, you are accused of gouging and everybody wants a bigger piece of the profits - while sharing none of the risk. You can’t find those people during the bad years; they only show up when times are good.
I couldn’t help but think of Oregon Senator Ron Wyden when I read about the shuttering of the Sunoco refinery. You see, Senator Wyden has devoted a lot of time to investigating these sorts of “shady” practices, where refiners shut down refineries just to limit capacity and boost profits. He produced a comprehensive report on this a few years ago:
The Oil Industry, Gas Supply and Refinery Capacity: More Than Meets the Eye
Two excerpts from the report:
Specifically, the documents suggest that major oil companies pursued efforts to curtail refinery capacity as a strategy for improving profit margins; that competing oil companies worked together to subvert supply; that refinery closures inhibited supply; and that oil companies are reaping record profits, yet may benefit from a proposed national energy policy that would offer financial incentives to expand refinery capacity.
The major oil companies had a financial interest in seeing the closure of independent refineries. By reducing the overall supply of oil and gas and reducing the number of companies involved in producing it, the major oil companies can have tighter reins on the supply and the price.
You see, Senator Wyden believes that when refineries shut down, it is some sort of organized attempt by “the industry” to reduce capacity and boost prices. When prices are sky high, this may seem like a plausible explanation. When a refiner is losing millions quarter after quarter, it no longer seems so plausible. It looks like someone exiting a business they no longer find profitable.
I documented some of Wyden’s silliness in Gasoline Prices Part II: Long-Term Factors. The bottom line is that refiners may eventually once again benefit as excess supply is shut down. And that’s the way it works in any business. If you are producing too much of something, the price is low and marginal producers go out of business.
A lot of refiners are in trouble right now. Sunoco won’t be the last one to shutter a refinery. Maybe two or three years from now, we will once again see a short burst of profitability as the supply/demand balance tightens back up. But maybe Sunoco’s Eagle Point refinery has lost half a billion dollars by then. This is the calculation they have certainly gone through, and their conclusion is that they will be better off to shutter the refinery.
But what would Senator Wyden do if he owned Eagle Point? I have to conclude, based on his report above, that he would continue running it so prices remained low for everyone. In fact, I wouldn’t be surprised to see him expanding capacity. He might end up losing a few hundred million dollars each year, but hopefully he has a big pile of money to draw upon. It reminds me of the joke about the farmer who won the lottery. When asked what he would do with his winnings, he replied “I’m just gonna keep farming until the money is all gone.”
Senator Wyden - and a great many others who think as he does - would apparently keep refining until the money is all gone.
Book Review – Power of the People
Submitted by R-Squared Energy Blog
I will finish up my long-promised concluding post in the recent series on ethanol and oil imports. I have been traveling for ten days, and inadvertently left all of my graphics for that post on another computer. I am back home now, and will try to tidy it up and post it in the next few days.
On the long plane ride back to Hawaii, I read Power of the People: America’s New Electricity Choices.
America is as addicted to electricity as it is to oil. Our electricity usage increases every year, yet we still use the same transmission grid that was constructed in the middle of the last century. The grid is stretched to the limit, creating the potential of future black-outs like the one that brought the Northeast to its knees in 2003. Meanwhile, some of our most abundant and affordable generating fuels have become major culprits in global warming.
Power of the People explores in a nontechnical, conversational way some of the clean, green, 21st-century technologies that are available and how and why we should plug them into our national grid. This important essay explores our failure as a country to adopt these “no regrets” technologies and policies as swiftly as the rest of the world, and why it matters for the future of every American.
The author, Carol Sue Tombari, works for the National Renewable Energy Lab (NREL). Despite trying, I can’t find out what her exact position or qualifications are. Here biography says:
Carol Sue Tombari has specialized in energy and environmental policy and programs for more than 25 years. She directed the State of Texas’s energy efficiency and renewable energy programs, served as natural resources advisor to the lieutenant governor, and helped found the National Association of State Energy Officials.
In addition, she was appointed to federal advisory posts by two Federal Secretaries of Energy, chairing a Congressional advisory committee on the subject of renewable energy joint ventures and serving on the U.S. Department of Energy’s (USDOE) State Energy Advisory Board. Tombari is employed at the USDOE’s National Renewable Energy Laboratory, where she works on local and rural economic development. Ultimately, it is her love for the next generation that continues to drive her work to protect the future of our planet and the lives of those yet to come.
While I found myself learning more about the sector, many things she said left me puzzled. For instance, she claimed that the U.S. uses more energy per GDP than anyone else in the world. This is exactly the opposite of Jeff Rubin’s claim in Why Your World Is About to Get a Whole Lot Smaller. Rubin claimed that countries like China use a lot more energy per GDP, which was the basis of his argument that carbon tariffs could work in favor of countries like the U.S., who are more energy efficient at producing GDP. In fact, if you look at the EIA data on energy usage per dollar of GDP, you can see that the U.S. is on the low end of the scale. According to the EIA data, China, compared to the U.S., uses about four times the amount of energy per dollar of GDP. (Thanks to reader Clee for that reference).
The book is pretty anti-nuclear, and makes the claim that renewables are “considerably more affordable” than nuclear power. She seems to rely on Amory Lovins and Tom Friedman for these sorts of claims. The book is pretty realistic about coal, however, concluding that we will be relying on coal for a good many years. She did claim, though, that there have been no major technological innovations in coal-fired central station power plants since the 1950’s. I don’t consider that accurate, as Integrated Gasification Combined Cycle (IGCC) seems like a dramatic improvement in the efficiency of the usage of coal for power production. Several of these IGCC plants will be coming online in the U.S. over the next decade, and a number have already been built in China. (You can see some of the plants that have been completed or are in progress around the world here).
There were some things I found annoying about the book. For instance, it had no graphs. However, on a number of occasions the author said “picture a graph in which the Y axis represents one variable, and the X axis another variable.” Why not just show a graph? Or if for some reason you are limited to no graphics, find another way to make the point.
There were some calculations that just didn’t make sense to me. For instance, she once calculated the required size of a PV system to run a household in Phoenix “if PV cells were 100% efficient.” Why not just do the actual calculation with typical PV efficiencies? She also commented that NREL had done a calculation in which they concluded that “100 square miles that constitute the Nevada Test Site” covered in PV arrays could meet the needs of the entire U.S. (without addressing storage). I did a similar calculation in which I tentatively came up with an area of about 100 miles by 100 miles. So I wonder if she didn’t mean that the NREL calculation concluded that a 100 mile square (10,000 square miles) would suffice.
She also spent a good deal of time talking about how a terrorist could bring down the transportation system or the electrical grid. I don’t think those are the kinds of ideas we want to plant in people’s heads.
One thing that isn’t clear to me is just how utilities benefit from efficiency improvements of their customers. She spent some time discussing various utility programs to improve the efficiency of the end user so they don’t have to construct new power plants. But utilities make their money selling electricity, don’t they? If customers improve efficiency, they just means they are selling less electricity to that customer. But there is apparently something to this model that I don’t fully understand, because I know that utilities are always pushing for – and even subsidizing – these sorts of programs. In Hawaii, the utility will pay for part of a solar hot water installation. So how do they benefit? Perhaps the utilities are compensated by various governments for pushing these efficiency programs. Otherwise, it seems that as consumers become more efficient, the utilities would have to charge more money for the electricity.
One other thing that was discussed – but that has always puzzled me – is the economic multiplier theory. She gave one example about how the benefits of a local Midwestern project ended up contributing three times the income generation to the local economy. Now I can see how a multiplier should work in theory. Pay a guy $100 in salary, and then he pays his taxes and turns around and spends that $100 in the local economy. That merchant then pays his taxes and spends some of it in the local economy, such that the initial $100 supports more than $100 in taxes and spending. In practice, it seems like if it really worked that way, we would subsidize everything. Why would we want to get any autos from Japan? Subsidize U.S. consumers for 50% of the cost of a domestic car, and then let the local multiplier give back 3-4 times that amount to the local community. But in reality, I don’t quite think it works out that way.
In summary, while it seems like I found a lot to nit-pick in the book, I did find a lot of useful information in there. Even the things I found puzzling caused me to think and to do additional research, which was helpful. The author spends a lot of time laying out the present situation with respect to electricity, and talking about the changes that need to happen. The author is peak oil aware, citing Matt Simmons and Tom Whipple (among others) with respect to a projected future energy crunch. I think the anti-nuclear stance was misguided, and I think she overestimates the ability of renewables to fill in for growing demand and the phase-out of older coal-fired power plants. In my view, it is hard to imagine how we are going to get by without building more nukes in the next few decades.
