A single B&W mPower™ nuclear reactor module inside its own independent, underground containment.

In his State of the Union address, President Obama referred to a “new generation” of nuclear power plants. The President was either exceedingly prescient or he knew more than he revealed because one week later the new generation has arrived–introducing the Babcock & Wilcox reactor. The energy world is taking notice.

Three large utilities, Tennessee Valley Authority, First Energy Corp. and Oglethorpe Power Corp., signed an agreement with McDermott International Inc.’s Babcock & Wilcox subsidiary on Wednesday, committing to get the new reactor approved for commercial use in the U.S.

While the three companies have not yet committed to purchase any of the reactors, their commitment to obtaining regulatory approval for the enterprise is a critical initial step toward implementation.

Approximately one-tenth the cost of conventional nuclear power plants, the newer designs are smaller than a rail car, offer greater flexibility of site location and theoretically can be built in half the time. These advantages, most notably the price, make the Babcock & Wilcox reactor a more attractive nuclear option for energy companies than conventional reactors.

Traditional nuclear reactors may produce more energy than the new “mini-reactors” but they cost many billions of dollars. The Babcock-Wilcox reactor runs closer to $750M. “We think the probability that things will go wrong with these large projects is greater than the probability that things will go right,” said Jim Hempstead, senior vice president at Moody’s Investors Service.

Comparatively, the cheaper reactors offer less risk of financial ruin. The reduced risk translates into a self-fulfilling prophecy for an investing corporation’s financial future. Larger, riskier ventures are more apt to damage a corporation’s credit rating than a more “bite-sized” investment in smaller reactors.

Not every corporation moving toward nuclear power needs to rely solely on strong credit ratings for financing, however. President Barack Obama recently pledged to guarantee 8.3 billion dollars in loans for the construction of large nuclear power plants in Burke, Georgia.

The White House pledge was somewhat groundbreaking for a country that has not built a new nuclear power plant since the Chernobyl meltdown in the Soviet Union several decades ago. It was a particularly surprising development because President Obama is viewed by many as a leader whose primary focus is the environment.

Environmentalists are not happy with the President’s new trend. Between the President’s shifting toward off-shore drilling and nuclear power he seems to be turning on his own political base. The White House’s recent trending toward the right has not passed unnoticed by the left.

Friends of Earth President Erich Pica is not smiling about recent White House decisions.

“Green” enthusiasists like Friends of the Earth president, Erich Pica, feel that Mr. Obama’s recent policy emphasis amounted to “unilateral disarmament.”

“We were hopeful last year; he was saying all the right things,” Mr. Pica said. “But now he has become a full-blown nuclear power proponent, a startling change over the last few months.”

If eco-diehards are disgruntled now, that frustration is likely to build. Some experts believe that introducing small reactors to the industry could pave the way for more pervasive, nuclear power in the U.S. because more utilities would be able to afford them.

“There’s a higher likelihood that there are more sites that could support designs for small reactors than large ones,” said David Matthews, head of new reactor licensing at the Nuclear Regulatory Commission.

The President has gone on record as saying, “the fact is, changing the ways we produce and use energy requires us to think anew, it requires us to act anew, and it demands of us a willingness to extend our hand across some of the old divides.”

That ideology is consistent with the new wave toward mini-reactors.

“If we can’t figure out how to build large plants economically, then small ones may be the way to go,” said Ronaldo Szilard, director of nuclear science and engineering at the Idaho National Lab, part of the Department of Energy.

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As Royal Dutch Shell and other majors increase their investments in Iraq, some oil market analysts argue that Iraq could export over 12 mb/d (million barrels per day) within a decade, significantly shifting global production closer to 100 mb/d from the present 83.5 mb/d inventory supply. Are Iraqi oil production estimates too ambitious or perhaps, not optimistic enough?

The northern Kurdish-governed territory of Iraq situated between Iran, Turkey, and Arab-Iraq is of particular importance to these expected Iraqi oil production estimates. The Kurdistan Regional Government (KRG) publicly claims to possess oil reserves greater than half the cumulative value of all the oil reserves within the Organization of Economic Cooperation and Development (OECD) community. Kurdish-Iraqi production may reach 250,000 b/d by the middle of this year and up to one mb/d before 2012.

As American forces draw down as a part of the U.S. exit strategy, many oil and gas uncertainties remain. Specifically, the KRG possess few incentives to accurately report proved reserves or encourage oil investment while the U.S. hands over political and military control to the Iraqi people—meaning that Kurdish-Iraq could possess even greater reserves than publicly stated.

Kurdistan Sovereignty over Oil Reserves

When some in the U.S. were encouraging partitioning Iraq several years ago, one could only imagine that the Iraqi-Kurds were not exactly disappointed at the prospect of having sovereign control over the future of their nation, including its oil reserves. Thus, one would be rational to assume that many Iraqi-Kurds had little intention and few incentives to cooperate with the Iraqi Central Government after liberation in 2003 from Saddam Hussein’s control of Kurdish territory Iraq.

After 2003, 7.5 million Iraqi-Kurds immediately secured their own perimeter within Iraq and set up a visa system requiring Arab-Iraqis to obtain permission to enter KRG-governed territory. The KRG then asserted themselves as an autonomous international power by establishing diplomatic channels with a number of countries including the US, UK, Germany, France, Russia, and Italy via consulates and representative offices independent of Baghdad. The KRG simultaneously took control of their oil fields and signed Exploration and Production (E&P) contracts with Hunt Oil, Det Norske Oljeselskap AS, SK Energy, and countless other oil companies to explore, develop, produce, and export oil without intending to share profits with the Iraqi Central Government.

The KRG only began to take a real interest in working with the Iraqi Central Government after the U.S. started to focus on stabilizing Iraq, which included the surge as well as encouraging sectarian cooperation and parliamentary coherence. Following the success of the U.S. troop surge in 2007 and the stabilization of Iraqi’s political affairs in 2008, the Iraqi Central Government, now more organized and confident, ruled in June 2009 that all foreign investment oil contracts made directly with the KRG are illegal.

The Iraqi Central Government now takes 83% of all oil export revenue from Kurdish territory. Because the U.S. is drawing down its forces and turning internal conflict matters over to Iraq, the world should expect the KRG to ignore central government authority and revenue-sharing agreements after the U.S. is gone.

Once the Iraqi Central Government is unable to enforce their legal authority over the KRG after the U.S. exits Iraq, the KRG will likely encourage more wildcat drilling, draw soil samples, and collect the data necessary to potentially transition reserve classifications from possible and probable to proved reserves (U.S. Reserve Classification System). The Iraqi-Kurds will then both claim all, or most, of the potential oil profits and potentially increase their commercially recoverable proved reserves estimates.

Geopolitics, Intervention, and Energy Supply Compromises

Some analysts argue that the official establishment of a Kurdistan state could create a domino for anywhere from 21 to 28 million other Kurds to stand up and demand autonomy in Kurdish-dominated regions across the Middle East. Therefore, these analysts argue that Turkey and Iran might take military action to prevent the KRG from asserting autonomy over Kurdish territory in Iraq in order to prevent the dominos from falling. However, it is unlikely Turkey and Iran would undertake such military action for fear of a blowback from Kurds within their own border regions, an outcome that would only emboldened regional Kurdish solidarity. What is more, Turkey and Iran would also be wary of taking responsibility for nation building in Iraq given the very costly U.S. experience. Thus, it is unlikely any outside forces will forcefully intervene in the Kurdish pursuit of sovereign control over northern Iraq.

Moving past the domino fear, economics proves to be the true ruler of Kurdish regional relations. Insofar, Turkey and Iran appear to prioritize investment over fear of this domino theory as both countries continue to send millions of dollars in Foreign Direct Investment (FDI) into Kurdish-Iraq due the neo-liberal nature of the KRG’s economy. In fact, in June 2009, a Turkish oil company investing in Kurdish-Iraq began exporting 40,000 b/d of oil back to Turkey through an agreement with the KRG: an estimated one billion dollars worth of oil per year at $80 per barrel.

In addition to potentially becoming a significant oil import source for Turkey and the rest of the Western world, the KRG also controls strategically located natural gas reserves that could become increasingly valuable to Europe’s diversification strategy. With almost 89% of Iraqi’s natural gas reserves within Kurdish territory—an estimated 2.83 Trillion Cubic Meters (TCM)—the European Union will likely pressure Turkey to work with the KRG—even should it become sovereign—to bring this gas to European consumers.

The KRG may be able to support some of Europe’s greater strategic needs to diversify their gas import sources and supply their fastest growing energy input source—natural gas—over the next two to three decades, particularly due to the increasing use of combined cycle gas turbines to generate electricity. Thus, if the KRG asserts itself as a sovereign country by ignoring Iraqi Central Government authority, Turkey will not cease oil and gas imports from Kurdish-Iraq out of fear of a Kurdish autonomy domino theory, whether this be by dint of personal economic interest or foreign pressure. In fact, such an outcome may induce Turkish leaders to work more closely to resolve internal conflicts with Kurds living in Turkey.

With foreign investment coming into the KRG from all over the world, these nations are sending a subtle message to the KRG: “Our governments prioritize economic development and energy security over politics.” Although regional leaders make speeches discouraging a sovereign Kurdish-Iraq, their investment actions juxtapose their rhetoric, particularly in the case of Turkey. More important than the words in a leader’s speeches are the measurable actions of their government.

Kurdish Nationalism, Oil, and Power

Like Israel after 1945, the KRG have not wasted anytime to ensure they are powerful enough to never be dominated by an occupying culture or military force, including by Arab-Iraqis that once forced on Kurds their language, culture, and rule of law. The Iraqi-Kurds are securing support from the international business community, tapping into economic integration, organizing a loyal and professional military, and developing close ties with liberal nations that prioritize development over ideology.

While Kurdish-Iraq could hold one of the keys to increasing or decreasing the expected Iraqi oil production over the next 10 years, we must remember that asking the Kurds in northern Iraq to remain unified with the rest of Iraq would be like asking Koreans after 1945 to remain unified with their previous Japanese occupiers. Thus, Iraq will not be unified should the Iraqi-Kurds have their day to decide for themselves, and that day may be coming soon.

The issue of incentives for biofuels increasing the demand for grains and thus helping drive up food prices is often called “Food versus Fuel.” There is also an incentive program (Biomass Crop Assistance Program) designed to encourage the use of biomass for heat, power, or biofuels. As is almost always the case, there were unintended consequences:

While it remains unclear whether Congress or the Obama administration will push to revamp the program, even some businesses that should benefit from the subsidy are beginning to question its value.

“It’s not right. It’s not serving any purpose,” said Bob Jordan, president of Jordan Lumber & Supply in North Carolina, even while noting that he might be able to get twice as much money for his mill’s sawdust and shavings under the program.

“The best thing they could do is forget about it. All it’s doing is driving the price of wood up.”

Sounds like “Food versus Fuel” except in this case it is the cost of wood – not food – that is being driven higher. The thing is that there are always trade-offs and always unintended consequences. We have to be wise enough to change policies in cases where the unintended consequences outweigh the benefits. But you have to look at the big picture as well. Were there also unintended benefits? Things like that must be considered.

In this case, I don’t know whether the unintended consequences outweigh the benefits. I think it is too early to know for sure. But in any case, higher cost biomass is something I expect in the future. I made this point in my presentation at the Pacific Rim Summit. If your business model is based on either tipping fees, or just free or very cheap biomass – then I doubt that model is sustainable. I think as more companies attempt to turn biomass into fuel, competition will heat up and free or negative-valued biomass will be a thing of the past.

Therefore, I think the safe bet is to plan for 1). Escalating biomass prices; 2). No government assistance. I have no objections to getting started with government assistance, but if you don’t have a clear plan for operating in a subsidy-free environment, then you may just be wasting taxpayer money up until the point that your business fails because conditions changed (in a way that you should have anticipated).

One of my Top 10 Energy Stories of 2009 involved the actions taken by the EU against U.S. biodiesel producers. U.S. tax dollars had been generously subsidizing biodiesel that was being exported out of the U.S. European producers couldn’t compete against the subsidized imports, so the EU effectively cut off the imports by imposing five-year tariffs on U.S. biodiesel.

This was a big blow to U.S. biodiesel producers, and was one of the factors leading to a disastrous 2009 for U.S. biodiesel production. How disastrous was 2009? Per the National Biodiesel Board (NBB), here are the statistics from the past 6 years of biodiesel production:

2004: 25 million gallons

2005: 75 million gallons

2006: 250 million gallons

2007: 450 million gallons

2008: 700 million gallons

2009: 300-350 million gallons (estimate)

The NBB also reports that domestic biodiesel capacity is now operating at only 15%. There have been a number of stories in the past few days covering these developments:

Bad start to 2010 after ‘rough year’ for entire biofuel industry

A federal tax credit that provided makers of biodiesel $1 for every gallon expired Friday. As a result, some U.S. producers say they will shut down without the government subsidy.

A one-year extension of the biodiesel tax credit was included in a bill that was approved by the U.S. House recently, but it never made it through the Senate.

Politics and Energy Policy

I have often complained about the chaos that political leaders cause with inconsistency on energy policy. I will get into the wisdom of this biodiesel tax credit in a moment, but government policy makers need to send clear, long-term signals so energy producers can plan. This has long been a problem for planning energy projects. Wind and solar developers have lived with this uncertainty for years. It seemed like at the end of every year, there was a tax credit that may or may not be extended. The uncertainty often froze project developers, and created unnecessary delays.

The same has long been true in the oil and gas industry. One of the reasons that it has been difficult to get a gas pipeline built in Alaska was government refusal to commit to long-term tax rates. Imagine that you are contemplating spending $26 billion on a gas pipeline, but the government can’t tell you what your tax rate is going to be. If my state income tax doubles, I can move to another state. But it isn’t like you can pick that pipeline up and move it, so it is important that you know that the government can’t double the tax rate in the event of a budget shortfall.

A different kind of government interference – a tendency to attempt to pick technology winners – resulted in cancellation of what I believe was a promising 2nd generation renewable diesel process. I documented the saga in several posts, but the gist was that because an oil company was involved – my former employer ConocoPhillips – Congress voted to specifically deny the biodiesel tax credit for a process that was both more efficient and more cost-effective than conventional biodiesel production.

By killing the credit, COP was placed at a $42/bbl disadvantage relative to biodiesel producers who received the credit, and thus COP decided to cancel the project. I documented that sorry saga here. I also explained the differences between ‘green diesel’ and biodiesel here.

Where to Now?

So where to go from here? We now have a classic dilemma created by the government. Through government fiat, an industry was created. Investments were made and infrastructure was put in place. The problem is that the particular industry that sprang up had little hope of ever really competing without the subsidy. The reasons are alluded to in the link above:

“By the time you buy the feedstock and the chemicals to produce the fuel, you have more money in it than you get for the fuel without the tax credit,” Francis said. “We won’t be producing any without the tax credit.”

I have long believed that there is no future for 1st generation biodiesel. I wrote in an August 2007 essay: “I have said it before, and I reiterate: Biodiesel’s days are numbered.” Note that the year after I wrote that the U.S. biodiesel industry had their best year ever. But the handwriting was on the wall for very fundamental reasons, and the prediction I made in 2007 is playing out now.

There are multiple problems that will make it difficult for biodiesel to ever compete without subsidies. In a nutshell the key problem is that the feedstock costs are linked to fossil fuel prices. The feedstock is generally a vegetable oil and methanol – an alcohol typically produced from natural gas. A second big problem is that biodiesel is an inferior fuel to hydrocarbon diesel (especially in cold weather). Further, the by-product of the biodiesel process is glycerin, which has limited value (especially at the volumes produced when biodiesel production is ramped up).

But this story is worse than simply a fuel that can’t compete. As evidenced by the opposition of the NBB to the extension of the tax credit for COP’s 2nd generation process, 1st generation biodiesel isn’t even a bridge to 2nd generation biodiesel – it is a barrier. Not only is biodiesel chemically different, but 1st generation producers have pulled out the stops to protect themselves against 2nd generation competition. So now we have a 1st generation industry that was already in trouble even with the subsidies that it was receiving, and a 2nd generation industry that could have been much further along were it not for 1st generation interference (which was aided by Congress).

If instead of picking technology winners, Congress had simply raised fossil fuel taxes, we wouldn’t be in this dilemma. With the high level of embedded fossil fuels, biodiesel would have been unable to compete and an industry with no future would not have been created by the government. Green diesel, on the other hand, would start to look a lot better because of the lower level of fossil fuel inputs (particularly for gasification), and we might find plants starting up to produce green diesel from both hydrocracking vegetable oils (the COP process I described) and gasification of biomass (e.g., the Choren process).

What I expect to happen is that Congress will eventually extend the credit, and it will be applied retroactively. But there are no guarantees, so producers are once again left with uncertainty. What should happen – in my opinion – is announcement of a phaseout schedule. I wouldn’t simply eliminate the tax credit cold turkey. That would be a blow to producers who invested on good faith that government support would be continued. But they also need to receive a message that this tax credit will be phased out over the next 3-5 years. At that point, prospective investors will be fairly warned that projects whose economics hinge on continued government subsidies are to be avoided.

This, by the way, is the sort of metric I try to apply to projects. I am looking for projects that can be viable without government support and can operate with low/no fossil fuel inputs. The first item means that governments have much less ability to wreck my project by withholding support, and the latter means that the project should become more attractive in the higher oil price environment that I expect.

That doesn’t mean that initial government support isn’t often helpful, but unless the underlying economics are sound then government support is a crutch I will never be able to throw away. In my opinion this is the case for most U.S. biodiesel producers, which helps explain why industry capacity is presently at 15%.

Disclosures

I want to make two very clear disclosures. First is that as noted, I worked for ConocoPhillips, and I was very pleased at the efforts we were making to commercialize green diesel. The fact that the government caused the project to be aborted by favoring one technology over another was a bitter pill to swallow. Again, I favor projects that are viable without government subsidies, but in this particular case the competing projects did get the subsidies.

Second, as I announced previously I now work for the company that owns the majority of Choren. I came to work for this company because I believe gasification has a long-term future, and I had written favorable articles long before this job opportunity arose. I have, however, had some suggest potential bias toward green diesel because of my link to Choren. What I say to those who might feel that way is the bias toward green diesel was because of my assessment of the technology. That is what led to my link to Choren, not vice-versa.

I have a project on my desk right now to look at avenues of disposal for sewage sludge in a specific location. There are lots of things you can do with sewage sludge, but it is obviously dependent on a number of factors. There are places where farmers spread it on their fields, there are places where it is incinerated, and there are places that it is land-filled. And there are other options beyond that.

In order to utilize sludge for energy, the water content is obviously critical. Too much water, and any energy you create from the sludge is lost due to the need to dry the sludge. So what I really needed in this specific case was a method of drying that could help generate net energy from the project.

Obviously you could just spread the sludge out in a sunny location, but there are many problems with that. One good rainstorm can ruin a week’s worth of drying and create a brown river to the nearest waterway. Further, as the outside layers dry, the drying slows down unless the sludge is constantly mixed.

I thought that this particular situation could benefit from a solar dryer. I am familiar with solar kilns and solar ovens, so why not a solar sludge dryer? I envisioned a system like a greenhouse that allows the sludge to dry, but also ventilates and removes the moisture. Several of the functions would need to be automated if this has any hope of being economical.

So I thought “Hmm, I wonder if anyone has invented such a system.” Since about 98% of anything that I ever think of has already been invented, I Googled it. Turns out that there are lots of solar sludge dryers to choose from, but one in particular caught my eye. Enter the German robot pig:

German robot pig the star of sludge drying plants

A group of young, up-and-coming German scientists in the late 1990s founded a company that today is the world leader in solar sludge drying. The star of the environmentally friendly drying process is an unusual pig that works all day without food or complaint.

What would a machine look like if it lived in the mud? Well, probably like a pig. Some 12 years ago, Tilo Conrad, together with two of his fellow students from the University of Hohenheim, built the first electrical pig, pioneering a device that is now being used as a solution to waste disposal problems throughout the world.

The stainless steel pigs, which in a sense resemble big beetles, are an important part of a larger solar drying process was patented by Thermo-System GmbH, a company Conrad founded in 1997 in Filderstadt.

Today, nearly 200 mechanical pigs do what normal pigs do: wallow in and shuffle through the mud — only these pigs do it to reduce sewer sludge disposal costs and protect the environment. Conventional drying processes use non-renewable energy, but Thermo-System’s process harvests solar power to dry the mud. It spreads the wet sewage sludge into sheds that are similar to greenhouses and puts the pigs to work.

In the sheds, the sludge absorbs heat from the solar rays and an innovative ventilation system keeps the air inside the shed warm and dry. The electrical pig, which is a fully automated robot complete with stainless steel mixing tools, tills and aerates the microbiologically active sludge, thereby accelerating the drying process. The whole system is fully automatic, uses very little energy and can be easily maintained.

Alas, another invention that someone thought of 10 years before I did. But this system really has many of the characteristics that I am looking for. Whether the economics pan out is still entirely unclear. The company does have an impressive project portfolio, though, having already built over 100 sludge-drying plants worldwide.

But one doesn’t get a chance to work with an army of German robot pigs every day, so I will continue to investigate and maybe this works out. Besides, that sounds so much more interesting than “I am working on sewage sludge.”

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 a gasoline 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.

Update: I have received a note that another BC company is also working on DME: Blue Fuel Energy.

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 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 (the list/description is verbatim from the DOE announcement, but the original DOE link is offline right now). 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.

Earlier this month I was on a flight from Hawaii to Dallas, and the pilot started talking about some of the plane’s statistics. Paraphrasing, he said: “Today we will be cruising at an altitude of 38,000 feet in this Boeing 757. This aircraft burns about 3 gallons of fuel per mile, and is carrying 243 passengers.” I thought “Hey, I better write that down and figure out later on what my share of the fuel was.”

The distance from Honolulu to Dallas is 3,800 miles. Thus, per the pilot the fuel consumption should have been approximately 11,400 gallons. In the Wiki link to the Boeing 757 article above, the Boeing 757 specifications state that the plane only holds 11,500 gallons, so I think it is likely that we were really getting a bit better than 1/3rd of a mile per gallon.

Divided by 243 passengers, my share of the fuel is 47 gallons. This much fuel carried me 3,800 miles, so my pro-rated fuel economy is 81 miles per gallon. In all likelihood, as I said it was probably a bit better than that since I doubt we were landing in Dallas with only 100 gallons of fuel in reserve.

Of course it is important to note that while the fuel economy looks pretty good, the miles traveled are very high relative to automotive transportation. I generally travel less than 5,000 miles per year with my car, so if I drive a car that gets 25 miles per gallon it would only take about 16,000 miles on an airplane to equate to an entire year’s consumption in my car. I estimate that I have probably flown 300,000 miles in the past two years (which was one of the main reasons I left my last job).

One other item of interest to me is my prorated cost for fuel. At $2.00/gallon, $94 of my ticket price goes toward purchasing fuel, and every $1.00 increase boosts my pro-rated fuel cost by $47 for that Honolulu to Dallas trip. That’s actually surprising to me, as I would have guessed that it would have been more.

But that’s not really what hurts the airlines when fuel prices go up. I think what usually happens is that fewer people fly, and instead of pro-rating my share of the fuel across 243 passengers it may be prorated across only 180 passengers. In that case my share of the fuel rises to almost $200 when jet fuel rises to $3.00 per gallon – and thus a $1.00/gal rise in the cost of fuel translates into a several hundred dollar per ticket price increase.

For me, this story dates back to 2006, when an investigative journalist working for Dallas Mavericks’ owner Mark Cuban e-mailed me and asked about the company’s claims. They had announced that thy would “be the first to commercialize cellulosic ethanol” (if I had a nickel for every time I have heard that), and they issued press releases at every opportunity. It worked for a while – at one point their market cap was something like half a billion dollars – despite the fact that there was very little of real value within the company.

Anyway, the investigative journalist published his story (which seems to be offline at the moment), Mark Cuban shorted the stock just before the story was released, and I wrote up something on the company, which I considered to be essentially a scam:

Xethanol Story

Anyway, if you looked into their financials, they were spending money on everything but R&D, while claiming they would be the first to commercialize cellulosic ethanol – which would require a lot of R&D. I continued to follow the story, and predicted in February 2007 that they would eventually go bankrupt:

Xethanol Can’t Deliver on its Promises

Well, about this time last year they went bankrupt – more or less:

Xethanol Now Defunct

I say more or less, because what they did was stop operations as Xethanol, changed their direction, and relaunched as Global Energy Holdings Group Inc. At that point I said I wouldn’t write about Xethanol any more, but there is a final chapter to this saga:

Global Energy Holdings Group Files Chapter 11

Global Energy, formerly known as Xethanol Corp., warned in a recent securities filing that it needed substantial additional capital, but that the credit crunch has made it difficult to sell assets or obtain financing.

Global has had no operating revenue this year and said its sole source of revenue last year was an Iowa ethanol plant that ceased production because of high corn and natural gas prices. The company sold the Iowa plant last week and is also looking for a buyer or partner for a landfill gas project in Georgia.

I do want to make it clear, though, that when Global Energy Holdings Group Inc. was created from the ashes of Xethanol, they did so under new management. Therefore, I don’t attribute the same shenanigans to them as I did Xethanol. As far as I know they were making a legitimate attempt to make a go of it, whereas it appeared to me that Xethanol was just trying to make a fast buck off of very gullible investors. But they were handicapped by previous Xethanol decisions, and the current credit crisis was enough to push them over the edge.

I think that officially closes the book on the Xethanol saga – unless a grandson of Xethanol is born. But with the baggage that comes along with it, I wouldn’t bother reorganizing. If you still want to do business, get a fresh start.