Welcome to the new R-Squared! Our goals here are to provide a place to engage in respectful and thoughtful debate about the very important issue of energy.

I thought it might be a good idea to summarize my positions on a wide variety of energy issues. Here I will attempt to briefly cover my views on oil, coal, ethanol (cellulosic, corn, and sugarcane), renewable diesel (green and biodiesel), nuclear power, solar power, wind power, and then climate change. I don’t intend to cover a lot of ground explaining my positions in detail; I will save that for future essays.

The most important thing to note is that I try to let the data determine my position. But that also means that as new data come in, my position may shift. Therefore, my positions shouldn’t be viewed as being etched in stone.

I try to take a scientific approach in which data have to constantly be sifted through, categorized according to level of credibility, and incorporated into the position as appropriate. Of course the categorization step is important, because there are studies that are funded by interest groups that I put into a vastly different category than independent, peer-reviewed research.

To put my positions into perspective, let me explain how I see the world. First, I view energy as one of the most critical underpinnings of our society. Without energy, modern society falls apart. Thus, I think energy policy is a critically important – and very underrated – issue.

I believe renewable energy is critical to our future. Development of renewable energy is what I do for a living. But I am also an advocate of responsible use of taxpayer money. But what I see a lot of in the world today is taxpayer money flowing to companies that are just out hyping their technologies. I don’t want to see energy policy influenced by gross exaggerations, and yet that is the situation I see today. That is what motivates me to write.

Here is a rundown, with the briefest of explanations, on where I see the world of energy today. I will break this up in transportation fuels, electricity, and then a word on climate change. This list is by no means comprehensive, but I have tried to include the major contenders/pretenders.

Transportation Fuels

Corn ethanol – My position on corn ethanol is often distorted by supporters of U.S. ethanol policy. I am not against corn ethanol. What I am against are some of the policies that we have put in place, such as subsidies on top of mandates. The benefits of corn ethanol are typically exaggerated by various interest groups, and what I try to do is sift the real from the hype to understand what corn ethanol is actually delivering for the taxpayer investments we are making. That usually runs afoul of the hype, and thus I am painted as anti-ethanol. What I would like to see corn ethanol do is get the fossil fuels out of their operations.

Sugarcane ethanol – Has some distinct advantages over corn ethanol. Two of the key challenges for producing ethanol are logistics of getting low-energy-density biomass in, and the energy required to convert to ethanol and purify. These issues aren’t much of a factor for sugarcane ethanol, because clean waste biomass is already at the plant as a result of the sugarcane processing. So they essentially have free boiler fuel, which minimizes the fossil fuel inputs into the process. That enables ethanol production that is relatively cheap, and that is largely decoupled from the impact of volatile fossil fuel prices.

Cellulosic ethanol – More hype than substance. This was the topic of my graduate school research in the early 90’s, and even then there was a very long history. In fact, cellulosic ethanol has been commercialized multiple times around the world, beginning in 1898 in Germany. The U.S. built two plants during World War I and shut them both down after the war due to poor economics. Another was built in the U.S. during WWII in Oregon, never produced ethanol during the war, and was closed down after the war. During the past decade there has been a race to reinvent the wheel and become the “first” to commercialize cellulosic ethanol. Worse, groups doing gasification to mixed alcohols started calling their product cellulosic ethanol. But there are very fundamental differences.

Renewable diesels – There are two major types, biodiesel and green diesel. There are two different ways to make green diesel; gasification and subsequent Fischer-Tropsch or hydrocracking vegetable oils or animal fats. Biodiesel relies heavily on methanol, almost exclusively fossil-fuel derived, and will never in my opinion be viable without subsidies. The green diesels are expensive to produce, but have more long-term promise in being able to make a real contribution to the energy mix.

Algal fuel – A subset of renewable diesel. As with cellulosic ethanol, more hype than substance here. There are a couple of possible routes that could work, but right now algal fuel is a very long ways from the market. Beware of those who promise $2 or $3 fuel from algae.

Petroleum – While I have a background in the oil industry, I don’t wish to see the world continue to rely on petroleum. There are many reasons that I will detail in a future post, but I think we have built a society that is far too dependent on oil. The consequences of oil shortages in a petroleum-dependent world are severe, and that is a risk that I don’t believe we can afford in the long run. On the other hand, I recognize the reality that the world has long run on cheap petroleum, and we will need petroleum for many years to come. Thus, I don’t favor punitive legislation that causes artificial shortages while demand is still high.

Natural gas – Much cleaner than coal for the production of electricity, and the U.S. is in a pretty good position with respect to supply. Can be used to produce electricity, heat homes, or even fuel cars. A key question for me in the corn ethanol debate is whether it makes more sense to directly fuel cars with natural gas instead of converting the natural gas into fertilizer for the corn and then steam for the distillation of the ethanol.

Electricity

Wind power – Cost effective in some locations, but hindered by the intermittent nature of the source. Some issues with bird kills and noise, but my overall impression of wind has always been favorable.

Solar power – I love the idea of solar power, but costs and intermittency are a problem at present for solar PV. Solar thermal may be a more cost-effective option, and it also has the advantage of being able to produce power after the sun sets (up until the temperature of the thermal mass gets too low).

Geothermal – One of my favorite clean electricity technologies. In the right location, geothermal can be a very cost effective and clean producer of electricity. Deep geothermal is another matter, as it has been linked to triggering earthquakes.

Hydropower – Same class as geothermal for me. While there are some issues, this is the case with all energy sources, and hydropower’s issues are mild compared to some other energy sources. Comparatively, hydropower ranks very high on my list.

Coal – Very similar situation to oil. We have created a society that is very dependent on coal, and there are numerous environmental issues associated with coal. On the other hand, it is easy to see why we are so coal-dependent: It is very cheap relative to other fuel sources, and it provides reliable power. In the minds of consumers, cheap and reliable has historically won out over environmental concerns.

Nuclear – If you look at the projections for the growth of electricity demand – combined with the desires of many to see coal plants phased out – there is no other option than nuclear that can deliver the desired amounts of electricity. So I think we are going to need to expand nuclear power in the years ahead.

Climate Change

This is really too complex to summarize briefly, and in doing so I am afraid my position may be misunderstood. Whether you accept the idea that man is contributing to climate change, I don’t believe it is a good idea to conduct such a grand experiment on the atmosphere because the ultimate consequences can’t be predicted. However, I can’t see any trajectory that will result in a global decline in CO2 emissions. Despite all of the best efforts (e.g., Kyoto Protocol), global CO2 concentrations continue to increase. As China and India continue to industrialize and improve their standards of living, they will demand cheap power. Any way I look at it, global CO2 concentrations will continue to head up until we start to run short of fossil fuels.

None of that is to imply that I don’t think it is very serious issue. My position has long been that I am not an expert in the field, and so I defer to the experts. The consensus has always seemed to me that atmospheric scientists believe that the activities of mankind are contributing to climate change.

On the other hand, I also believe that the issue should continue to be debated. There is far too much rancor over climate change, with each side hurling accusations and insults. Let the debate take place in a respectful manner, and let’s not try to shout down the other side, or suppress information. But at the end of the day, it just seems to me that our efforts to stop rising carbon emissions are futile.

I have certainly left out a lot, and major details are missing. Most of the energy options I mentioned above will be expounded upon in future essays. Or, if you don’t want to wait, feel free to start that conversation yourself.

DOE’s CCPI Helps Commercialize Process That Also Reduces Costs and Potentially Harmful Emissions

Washington, D.C. — An innovative coal-drying technology that will extract more energy from high moisture coal at less cost and simultaneously reduce potentially harmful emissions is ready for commercial use after successful testing at a Minnesota electric utility. The DryFining™ technology was developed with funding from the first round of the U.S. Department of Energy’s Clean Coal Power Initiative (CCPI).

The United States has about 280 power stations burning high-moisture coal, generating more than 100 gigawatts of electricity, which equates to about one-third of the electric power generated by coal in the country.

Great River Energy of Maple Grove, Minn., has selected the WorleyParsons Group to exclusively distribute licenses for the technology, which essentially uses waste heat from a power plant to reduce moisture content in lignite coal. Great American Energy, a 50-50 joint venture of Great River Energy and the North American Coal Corporation, will also market the technology, whose first user will be the utility’s Spiritwood Station under construction near Jamestown, N.D.

In addition to using power plant waste heat to reduce moisture, DryFining also segregates particles by density. This means a significant amount of higher density compounds containing sulfur and mercury can be sorted out and returned to the mine rather than oxidized in the boiler. The end result is more energy can be extracted from the coal while simultaneously reducing emissions of mercury, sulfur dioxide, and nitrogen oxides, major potential pollutants that result from coal-based combustion.

As part its CCPI-funded project, Great River Energy tested a 115-ton prototype dryer in the company’s 546-megawatt Coal Creek Station Unit 2 in Underwood N.D. Following a successful increase in boiler efficiency and reduction of emissions, Great River Energy expanded the project by building full-scale dryer modules for the entire Coal Creek Station. The Office of Fossil Energy’s National Energy Technology Laboratory manages the CCPI program.

Lignite is one of four major coal types produced in the United States, accounting for about 7 percent of annual production, and is an important energy source for electricity generation. In general, lignite has a higher moisture and ash content, resulting in a lower power efficiency and higher rate of emissions than coals with less moisture. Great River Energy’s innovative technology reduces the cost of drying coal by using the waste heat and segregating particles by density, thereby generating energy with less coal while reducing emissions and emission-control costs.

At the Coal Creek Station, the technology increased the energy content of the lignite from 6,200 to 7,100 Btus per pound, thereby reducing fuel input into the boilers by 14 percent. At the same time, sulfur dioxide and mercury emissions were reduced by more than 40 percent, nitrogen oxide by more than 20 percent, and carbon dioxide by 4 percent.

These results are important to energy consumers because the United States has about 280 power stations burning high-moisture coal, generating more than 100 gigawatts of electricity, which equates to about one-third of the electric power generated by coal in the country.

Release: National Energy Technology Laboratory

One of the triumphs of modern life is our ability to distance ourselves from the simple facts of our own existence. – Jeff Goodell

Big Coal by Jeff Goodell is a book I have had on my reading list for a long time, but I only got around to reading it during my recent trip to Europe. It has taken me a very long time to finish this review for a number of reasons, but one is that I had a hard time deciding what to write. Normally, when I read a book I will dog-ear the pages that I want to revisit either because 1). There was something significant that I did not know; or 2). I want to reference a particular point in the book review. By the time I finished reading this book, I probably had 50 pages dog-eared.

My introduction to Jeff Goodell came a couple of years ago when he was writing an article for Rolling Stone about ethanol. He contacted me and we talked a few times, I got to know him a bit, and he published a pretty scathing article during the early days of the ethanol euphoria. For more on that episode, see Rolling Stone Article, Jeff Goodell Debates the Rolling Stone Article on CNBC, or Bob Dinneen Responds to Rolling Stone.

I wish I could write like Goodell. I really enjoy his writing style. I sometimes disagree with particular points, but in Big Coal he makes a very compelling argument that we don’t come close to paying the societal costs of coal usage when we pay our electric bill.

Even though we don’t often see it, coal is a part of daily life for most of us. It produces a great deal of our electricity. But we don’t spend a lot of time thinking about the implications. As Goodell notes on the first page, “We love our hamburgers, but we’ve never seen the inside of a slaughterhouse.” Isn’t that the truth? I have always imagined the number of people who would become vegetarians if they ever saw the inner workings of a slaughterhouse.

When we fuel up our cars, we don’t think (much) about the ramifications of our oil dependence. When we flip a light switch, we do not associate that with the coal-driven mountaintop removals in West Virginia. In this book, Goodell thrusts those associations right in your face.

The book is divided into three parts: Extraction, conversion to power, and the resulting emissions. He covers the history of the industry, tells the stories of the people in and around the business, and while most of the book is based on U.S.-happenings, he does spend a chapter on China.

I would imagine the coal industry was none too pleased with Big Coal, because it paints a really ugly picture of the industry.  Goodell contrasts the coal industry with the individuals whose lives have been negatively impacted by coal in one way or another. He details corruption and politics that allowed the industry to delay implementation of pollution control equipment. And on a big picture level, he argues that continued usage of coal poses a serious threat to the earth’s climate.

This book will leave you shaking your head, wondering why we use coal at all if the overall picture is as troublesome as Goodell suggests. I found myself wondering as well, which was actually what led to my post on the cost of various energy sources. There at the top of the list for the cheapest source of energy was Powder River Basin coal, which is why we continue to heavily use coal despite the issues Goodell spells out.

We humans aren’t very good at willingly making sacrifices today in order to potentially improve the situation a few years down the line. We want instant gratification and coal fits the bill. (I would argue this is also why the U.S. is so deeply in debt and our personal savings rate is so low.)

I noted in my book review of Crude World that Peter Maass didn’t present a balanced picture of the oil industry; it was all bad. His book was intended to highlight the negative aspect of our oil dependency. Big Coal is the same in that respect. It is hard to argue that coal hasn’t improved the lives of a great many people around the world, and I know a number of people who would argue that these improvements outweigh the negatives. Further, it is fair to say that the coal industry has come a long way in cleaning up their emission profile over the past few decades.

But it is clear which side of that argument Goodell would come down on. To be honest, I come down on that side as well. I would like to see us limit our coal consumption and boost electricity generation from other resources. I know a great number of people who feel this way, but coal is like oil in that replacing it will likely entail economic sacrifices that individuals don’t like to make. Coal produces half of the electricity in the U.S., and I would have a hard time arguing that anything – outside of nuclear power – can scale up and take on the role that coal currently plays.

The realist in me thinks that we will eventually use up all of our coal, as will China, Australia, India, and all of the other major coal producers. This is primarily why I sit out the debates on climate change; I can’t realistically envision anything that will get the world to collectively NOT burn up all the coal. In an energy-constrained future, prices will rise and people who feel morally opposed to coal will suddenly find their moral fiber weakening as high energy prices bite into their budgets.

I don’t discount that renewable energy can eventually make a bigger impact (I hope so, because that’s what I am doing for a living), but it is starting from a very small basis compared to electricity generated from coal. While coal produces about half of the electricity in the U.S., renewables other than hydropower account for only about 3.5% (per the EIA).

So I think Big Coal will continue to be a very big part of our lives for many years to come – although with a strong political commitment the nuclear option could put a dent in our coal dependence.

Last year I saw a presentation that projected very strong growth in wood pellet shipments from Canada and the U.S. into Europe. My first thought was “That doesn’t sound very efficient. Why don’t we just use those here in North America?”

It didn’t take very long for me to find out the answer to that. It is because wood pellets are much more expensive than natural gas in North America. On top of that it takes more effort to use wood for energy than it does natural gas. That combination means that wood has a tough time competing with natural gas in North America.

When I was looking into that issue, I compiled a list of the price for various energy types on an energy equivalent basis. The price is as current as possible unless noted. I have converted everything into $/million BTU (MMBTU), and the sources are listed below.

My preference is to use EIA data over NYMEX data because the former is an archived, fixed number. I have included energy for heating and for various transportation options. For comparison I also included the cost of electricity and the cost of the ethanol subsidy/MMBTU of ethanol produced.

Current Energy Prices per Million BTU

Powder River Basin Coal – $0.56
Northern Appalachia Coal – $2.08
Natural gas – $5.67
Ethanol subsidy – $5.92
Petroleum – $13.56
Propane – $13.92
#2 Heating Oil – $15.33
Jet fuel – $16.01
Diesel – $16.21
Gasoline – $18.16
Wood pellets – $18.57
Ethanol – $24.74
Electricity – $34.03

Observations

It isn’t difficult then to see why wood pellets have a difficult market in the U.S. For people with access to natural gas, they are going to prefer the lower price and convenience of natural gas over wood. For Europe, their natural gas supplies aren’t nearly as secure, so they have more incentive to favor wood as an option.

The cost of the ethanol subsidy is interesting. We pay more for the ethanol subsidy than natural gas costs. However, if you consider that we are paying a subsidy on a per gallon basis – and a large fraction of that gallon of ethanol is fossil fuel-derived, the subsidy for the renewable component is really high.

For instance, if we consider a generous energy return on ethanol of 1.5 BTUs out per BTU in, that means the renewable component per gallon is only 1/3rd of a gallon. (An energy return of 1.5 indicates that it took 1 BTU of fossil fuel to produce 1.5 BTU of ethanol; hence the renewable component in that case is 1/3rd). That means that the subsidy on simply the renewable component is actually three times as high – $17.76/MMBTU. Bear in mind that this is only the subsidy; the consumer then has to pay $24.74/MMBTU for the ethanol itself.

Sources for Data

Petroleum – $13.56 (EIA World Average Price for 1/08/2010)
Northern Appalachia Coal – $2.08 (EIA Average Weekly Spot for 1/08/10)
Powder River Basin Coal – $0.56 (EIA Average Weekly Spot for 1/08/10)
Propane – $13.92 (EIA Mont Belvieu, TX Spot Price for 1/12/2010)
Natural gas – $5.67 (NYMEX contract for February 2010)
#2 Heating Oil – $15.33 (EIA New York Harbor Price for 1/12/2010)
Gasoline – $18.16 (EIA New York Harbor Price for 1/12/2010)
Diesel – $16.21 (EIA #2 Low Sulfur New York Harbor for 1/08/2010)
Jet fuel – (EIA New York Harbor for 1/12/2010)
Ethanol – $24.74 (NYMEX Spot for February 2010)
Wood pellets – $18.57 (Typical Wood Pellet Price for 1/12/2010)
Electricity – $34.03 (EIA Average Retail Price to Consumers for 2009)

Conversion factors

Petroleum – 138,000 BTU/gal
Gasoline – 115,000 BTU/gal
Diesel – 131,000 BTU/gal
Ethanol – 76,000 BTU/gal
Heating oil 138,000 BTU/gal
Jet fuel – 135,000 BTU/gal
Propane – 91,500 BTU/gal
Northern Appalachia Coal – 13,000 BTU/lb
Powder River Basin Coal – 8,800 BTU/lb
Wood pellets – 7,000 BTU/lb
Electricity – 3,412 BTU/kWh

U.S. Fossil Fuel Resources: Terminology, Reporting, and Summary

The primary reason is our huge coal reserves. While we are 12th in oil reserves (Table 5 of the report), our coal reserves are by far the largest in the world. All together, the fossil fuel reserves (oil, natural gas, and coal) of the U.S. are reported at just under one trillion barrels of oil equivalent (BOE). The global total is reported at 5.6 trillion BOE.

While I think you have to take data from some of the listed countries with a grain of salt – especially when talking about categories like “undiscovered technically recoverable” oil and natural gas – it does point to the importance that coal will play when oil reserves start to seriously deplete. I have said this before, but when gasoline is $5/gallon, most objections to coal as a fuel will disappear. At that point I think you will start to see coal-to-liquids (CTL) plants moving forward.

Also from the report, at first glance this chart may seem ridiculous:

But I am also reminded of my amazement at a U.S. oil statistic I once came across. In 1982, U.S. reserves were 27.9 billion barrels. In 2005, U.S. reserves were 21.8 billion barrels. But over the course of that 24-year period we produced 57 billion barrels of oil and pulled our reserves down by only 6 billion barrels. So the graph above seems far-fetched, but so does the evolution of our reserves over past quarter century.

Of course it goes without saying that government policies will heavily influence which resources are developed, and over what time period. My guess is that over the next few years we will favor policies that are intended to wean us off of fossil fuels. While I applaud good intentions – and in fact my new job is all about moving developing fossil fuel replacements – I expect we are going to see more than a few unintended consequences. The one I am most concerned about is heavily disincentivizing domestic production, but not having an adequate answer for the domestic production shortfall. In this case, while more alternative energy may be the target, more oil imports may be the unintended consequence.

This coal ash spill had people up in arms which is leading to the EPA's proposed plan.

It was announced today that the EPA intends on broadening the rules applied to coal-fired power plants to include toxic metal discharge limits. This move would, for the first time, regulate the millions of pounds of arsenic, selenium, mercury, lead, and other pollutants that are released each year – typically, into the waste water ways that are there for this specific purpose. The issue appears because of findings that suggest these metals are seeping into drinking water.

“Current regulations, which were issued in 1982, have not kept pace with changes that have occurred in the electric power industry over the last three decades,” the agency wrote in an announcement.

Traditionally, the EPA only policed the amount of emissions released by the smoke stacks of these coal-fired power plants, but since it’s very easy for the plants to transfer the wastes from the smokestacks to the water, little is being done to aid the environment.

“Treatment technologies are available to remove these pollutants before they are discharged to waterways, but these systems have been installed at only a fraction of the power plants,” the agency went on to say.

According to Federal Law, the EPA can change their rules every year, but has not since 1982 saying that “they are reviewing it.” Now that the reviewing process is complete, they will impose the rule change by 2012 forcing companies to use the technologies readily available to them to clean the water before releasing it.

To speed up the rule-changing process, the Environmental Integrity Project are suing the EPA because of the lack of rules. The EIP stated that if rules were not released within sixty days, they would act on the lawsuit. Although these results are pleasing for the EIP, the want to ensure that the rules get enacted as soon as possible.

There are so many ways to achieve renewable energy.

According to a study conducted by the environmental group Greenpeace and the European Renewable Energy Council (EREG), clean energy will create more jobs than coal. By 2030, there will have been 2.7 million more jobs created than if countries were to stay on their current paths of burning coal and other fossil fuels for energy. These findings are the ammunition needed to urge countries around the world to agree to a new United Nations pact in which the nations combat global environmental issues. They are using employment as a way of steering people towards the pact.

“A switch from coal to renewable electricity generation will not just avoid 10 billion tons of carbon dioxide emissions, but will create 2.7 million more jobs by 2030 than if we continue business as usual,” the report said.

If strong policies for renewables pan out, it is projected that the number of jobs in power would rise by 2 million to 11.3 million by 2030 which would be helped by a large increase in renewable energy jobs: 6.9 million from 1.9 million. That same study found that if governments were to stay on coal as their predominant energy provider, there would be a loss of half a million jobs resulting in about 8.6 million jobs in energy.

Although the cost of labor would rise for companies that use these renewable energies, their cost of production would be reduced, so there would actually be more money made. In the wind industry alone, the report suggested, there could be as many as 2.03 million people employed by 2030, up from half a million in 2010.

The report also suggested that for the first time in 2008, the European Union and the United States produced more energy from renewable sources than from conventional sources such as nuclear, gas, coal, and oil. This has environmental proponents happy. With this study, more attention will be paid to renewable energies from an environmental perspective, but also, more importantly to governments, from an economical perspective.

A natural gas plant.

Politicians on both sides of the aisle say that the new technology being developed to capture the carbon emissions and bury them is a better tactic to employ than the use of natural gas. There is a lot of money that is riding on the coal industry, money that aids many politicians to get elected. It’s because of this that there is a large mixture of science, business, politics, and environment that is making the energy bills going through the House and Senate worth debating.

People are dismayed that an issue that should be so simple is causing such apathy in Congress. The current House bill that was passed in June provided some support to natural gas, but majority power landed in coal once again. They were provided tens of billions of dollars in pollution credits. Because of this, the savings will be passed on to the consumer. Environmentalists are frustrated about this because all of these billions of dollars in pollution credits are not doing a single thing to ensure that the environment is being protected from this overload in greenhouse gases.

A lot of people in the coal industry are arguing that the technology of capturing and burying the emissions in the ground is a great way to ensure that the emissions aren’t getting into the air. The natural gas people are arguing that natural gas is a sure way to reduce greenhouse gases unlike an “untested technology.” Because of this, the battle is continuing over which is the better method of providing both the necessary energy in the United States, but also ensuring that the environment doesn’t get destroyed more because of all these greenhouse gases.

In the end, officials are saying that, although it may be nice to have benefits to coal and natural gas, but also a decrease in greenhouse gases, there is little way to benefit both parties. There will have to be a choice.

How long till the lights go out?

North Sea gas has served Britain well, but supply peaked in 1999. Since then the flow has fallen by half; by 2015 it will have dropped by two-thirds. By 2015 four of Britain’s ten nuclear stations will have shut and no new ones could be ready for years after that. As for coal, it is fiendishly dirty: Britain will be breaking just about every green promise it has ever made if it is using anything like as much as it does today. Renewable energy sources will help, but even if the wind and waves can be harnessed (and Britain has plenty of both), these on-off forces cannot easily replace more predictable gas, nuclear and coal power. There will be a shortfall—perhaps of as much as 20GW—which, if nothing radical is done, will have to be met from imported gas. A large chunk of it may come from Vladimir Putin’s deeply unreliable and corrupt Russia.

Many of Britain’s neighbours may find this rather amusing. Britain, the only big west European country that could have joined the oil producers’ club OPEC, the country that used to lecture the world about energy liberalisation, is heading towards South African-style power cuts, with homes and factories plunged intermittently into third-world darkness.

For more background on Britain’s situation, see also The looming electricity crunch.

I thought about these issues a lot when I lived in Scotland. Britain is clearly facing a crisis, and how they address it will be instructive to those of us who are concerned about energy shortages. I always said that Britain will ultimately conclude that they have to have a lot of new nuclear power, but it looks like that recognition won’t come in time to help them. So what’s the answer? They start ramping coal back up – breaking those green promises – or they start to suffer power outages. What do you think they will do? As I have said before, when the power starts to go out, environmental concerns will fly out the window. Sure, people like the idea of not burning coal. But will they give up power 6 hours a day to achieve that? I don’t think too many of them will.

Of course there is still natural gas from Russia, and I think they are going to have to roll the dice in the short term and hope Russia doesn’t hold them hostage. Longer term, LNG terminals would seem to make sense to me, but they don’t seem to be a part of the discussion here.

Ultimately, I think Britain will behave as the rest of the world will behave when faced with energy crunches. They will find that renewables can’t step up and fill the gap, and so they will roll out conservation measures and make do with whatever it takes to avoid crippling power outages: No matter if it takes coal, natural gas, or the blubber from baby seals. This is how I expect the world to respond when renewable dreams meet the reality of power shortages.

Benny wrote: Arlington researchers’ work could lead to $35-a-barrel oil. Any chance of making oil from lignite? At these prices? Or are they just some guys who want research money? Answer

takchess wrote (and Doug also asked about): Thought this was interesting. If cost and technically feasible this would be cool.

Rive Technology Working to Increase Oil Refining Efficiency 7-9% by 2011 Answer

DDHv wrote: The new ionic liquid technique allows easier extraction of cellulose. Do you know if we have enough information yet to do energy and/or economic balances? If so, what are the present results? Improvements are likely, given the novelty of the technique. Answer

John asked: What do you think of pyloric conversion to make “green gasoline”? What are it’s peak lite and environmental ramifications? Specifically referring to an article in the Boston Globe RE: Anellotech and UMAss on July 13th: The greening of gasoline Answer

PeteS asked: How likely is money spent today on renewables to be wasted in retrospect because of “grey swans”? Obviously nobody can predict the future, but I’m thinking more in terms of, say, a plan to completely power a country from wind turbines, versus low-to-medium-probability dramatic improvements in wind-power within a decade or two. Answer

SamG wrote: I hear many theories about electricity consumption and the utility business model (sell more make more). Do you see any mechanism that puts suppliers in the loop for the reduction of consumption (not just demand reduction via passing through higher prices)? Answer

takchess asked: Any comments on this Urea fueled entry into the XPrize auto race?

Alternative Fuel Sciences Answer

John wrote: Americans are being “taxed” at a rate of 200 billion bucks a year to fund the U.S. Military to “baby-sit” the Strait of Hormuz and other oil company interests in the mid-east, etc.

Factor that in and the bio-fuels look good, as do CNG, electric vehicles or bio-fuel-electric hybrids. Imagine that…. a bio-fuel-electric hybrid. That completely shuts out the oil companies and their little “gasoline forever” game. The fact that bio-fuels, CNG and electricity are already cheaper than gasoline must be giving the traditional oil companies nightmares already. Answer

LovesoiL wrote: 1) What is a reasonable pace towards commercialization of ‘1st generation’ alternative fuels, e.g., cellulosic. Many ethanol advocates (DoE, USDA, EPA, US Congress) assume that while only 1 commercial scale facility is currently in construction (Range), somehow 1 billon gallons of annual capacity will get built during the next 3-5 years, and then we’ll build that much (30-40 plants) every year for the next decade?

4) Ask POET what they think of cellulosic from corn stover. They seem to say that stover has too many collection and handling problems (dirty, low density, etc), and that is one reason they are concentrating on cobs only. Many others assume corn stover will be the primary source of cellulosic feedstock. Answer

Anonymous wrote: While you’re in Alberta, ask about Iogen and when they’ll finally get their cellulosic plant started in Sask. Also, Enerkem has been making news lately, both with a 10 mgy MSW plant and their just-released plans to construct a $100 million R&D facility in Edmonton. EnerkemR&D EnerkemMSWPlant Answer

bts asked: Comments on this partnership between Venter and Exxon?

Exxon to Invest Millions to Make Fuel From Algae Answer

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You always have to read between the lines. Sometimes people talk about where costs might be “in a few years” or “with technical breakthroughs” – as is often the case with algal biodiesel (and has been the case with oil shale for 100 years). Not that this is necessarily the case here, but those are the kinds of things I look for as I read these press releases. Is it possible to make oil from coal? Sure, it just traditionally takes a lot of energy. Coal into oil is essentially what you are doing with CTL, and there are several variations of the process (including non-gasification options). South Africa has been doing it for a while now.

So what the UTA researchers are describing is a chemical process for turning coal into oil. Such processes do exist, so the question is whether this is novel, cheaper, more efficient, etc. That will require peeling a few more layers of the onion than what one finds in a press release – where the best you may get is caveats. Generally speaking, press releases tend to over-simplify things a lot. If even a tenth of the press releases on “the next big thing” had turned out to be true, we would be living in a very different world. My favorite pasttime might be loading the family up in my cold fusion-powered hovercraft for a family outing. Or knocking out essays on my DNA-based computer (I remember in 1995 or so when this was going to put Intel out of business).

People have all sorts of motives for these press releases. Some are to announce something truly revolutionary. Those are a tiny fraction. More often, it is as you say; someone is trying to catch the eye of someone who might fund them. I have been in a position many times to issue just such a press release, and sometimes I think about that when I see one of these.

For instance, in 1994 at Texas A&M I had an idea to create a cellulose reactor based on the contents of termites’ stomachs. To my knowledge, I was the first person to attempt such a thing. The experiment didn’t turn out very well. My analysis detected only a small amount of butanol in the product. Had my imagination been big enough, here was the press release: “A&M Researcher Turns Trash into Fuel.” For the story, I could project increases in yields, renewable butanol bringing Arab sheiks to their knees, and an actual use for those pesky termites. Of course as my yield projections go up, my cost projections go down, and I could predict that this “may soon lead to sub-$1/gal fuel.” In reality, I considered it a failed experiment, stopped work, and wrote up my dissertation. But that is the sort of experience that always has me looking at these press releases in a pretty skeptical light.

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Jim, this is along the lines of my last answer. People are working on these catalysts all the time. I have spent time in the lab working on gasification catalysts, and sometimes you come across something that looks pretty interesting. Then you try to scale it up and find that it isn’t stable in a larger reactor because the temperatures are hotter than they were in the lab.

Again, without peeling the onion and having a look at what everyone else is doing, it is impossible to tell whether this really amounts to something special. It could be that their competitors have already achieved these milestones and just didn’t issue press releases. Most organizations don’t. I was awarded several patents from my days at ConocoPhillips, but we never issued a press release even though the potential implications of some of them were pretty interesting.

One thing I will say is that from my time in a refinery, there wasn’t 7-9% efficiency gain to be had. We were already pushing the maximum possible conversion efficiency of oil into liquid products, and while you might have squeezed out another 2-3%, no way could you get up into the 8% range. There may be some really inefficient refineries out there that could benefit from this, but we will have to wait a couple of years and see if they actually start penetrating the market. Then you will know that they indeed invented something with a distinct advantage over the competitors.

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There are a couple of developments in cellulose chemistry that I have been watching pretty closely: The ionic liquid techniques that you mentioned, and supercritical cellulose chemistry with either CO2 or ethanol.

Both of these techniques are energy intensive, so a lot of work needs to be done around the economics of these processes relative to competing technologies. A number of questions arise, such as “What other components are extracted along with the cellulose?” Or “What does it take to separate the cellulose from the component used to extract it?” That isn’t to say that these technologies aren’t well-worth further exploration. From an academic standpoint, they are very interesting. In the end, I think they will be hard pressed to compete with gasification if the intent is production of fuels. However, specialty chemicals might turn out to be a good niche application for these techniques.

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Building on the previous answer, I think the more interesting developments in lignocellulosic chemistry are in chemical processing, as opposed to biochemical processing. I discussed this in an essay a couple of years ago, which was about Vinod Khosla’s investment into KiOR. This is their approach as well; to use catalytic processes to produce fuel.

The challenge is that biomass isn’t very energy dense, and these processes require elevated temperatures and pressures. So a key question is how much energy (and in what form) it takes to transport one BTU of biomass and process it into one BTU of fuel. Presently I think the processing energy is a pretty high fraction of the contained energy. Those energy inputs are going to have to come down before these sorts of technologies make much of an impact. The research is certainly promising, and I favor continued government funding. Would I invest in a company based on this concept? Not at this stage of development.

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Generally speaking, I think we are going to look back and see that we wasted tremendous money, time, and resources chasing dead ends. As you say, nobody knows what developments are in front of us. But many are betting that there are revolutionary developments that will transform the energy sector. As a result, they are throwing a lot of money in a lot of different directions. I don’t have a big problem with this if the proper due diligence is done, especially if private money is being used to fund these various ventures. I do agree with Vinod Khosla’s philosophy of spreading his bets across many different technologies. What I find annoying is that often the proper due diligence is not done, and often taxpayer money ends up funding these dead ends. That is money that is truly wasted.

However, one thing to keep in mind with respect to your “grey swans” is that they also have entrenched lobbies to contend with. It may turn out that the grey swan finds itself in a difficult fight to penetrate the market. One particular example I am thinking of is the decision of Congress to kill support for more efficient 2nd generation green diesel production because the inefficient 1st generation producers argued that it would put them out of business. Add in the fact that it was an oil company involved in the 2nd generation technology, and we find that grey swan struggling to survive.

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Sam, I don’t see an easy answer to that. Utilities are in the business of making money. When people reduce consumption it costs them money. Is there a way that they can benefit from that? I suppose in a world in which we are taxing carbon emissions, the savings from lower emissions would partially offset the loss of the sale of the electricity. But truthfully, that will be a small fraction at best. I always had the same issue when I was in the oil business. I wanted to see lower consumption, and I couldn’t see any way the oil companies could benefit directly from that. I think an effective mechanism for enabling suppliers to benefit from lower consumption would really be a game changer. If you think of something, let me know.

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When I first saw this, I thought “That’s one of the strangest energy-related stories I have ever seen.” It reminded me of my reaction to a recent story: Greenland shark may become new source of biofuel. I like the wild and wacky, and both of these fall into that category. But can it make an impact? The problem with the urea idea is that the fuel is actually ammonia and hydrogen. Where do those come from? Mostly from natural gas. If you look at the efficiencies of the processes involved, you would be far better off just to burn the natural gas. So I don’t see it going far in its current form, but I applaud the creativity. Who knows, maybe this will evolve into something more promising.

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John, while I agree that we are spending dollars in the Middle East because of oil, I disagree with several of your points. First, we aren’t spending that money to guard oil company interests. It is being done with the intent to keep cheap oil flowing to the American consumer. So the key interest here is that of the U.S. government, so the voting public is kept happy. Not that there is no benefit to the oil companies, but the government views a military presence there as an important issue of national security – not one of oil company security. If the oil did get cut off, the average person is going to bear the consequences.

I also disagree with your comment that biofuels are cheaper than gasoline. There are some exceptions – like sugarcane ethanol from Brazil – but for the most part gasoline is cheaper based on energy content. For instance, at today’s close ethanol on the CBOT for September delivery was trading for $1.65 a gallon. Gasoline on the NYMEX today was trading for $2.07/gal. However, because of the difference in energy content, the cost of this ethanol was $21.71/MMBTU and the gasoline was $18/MMBTU. With rare exceptions over the years, this has always been the case – and at times the differences have been quite large.

Further, you are kidding yourself if you think the oil companies are running scared. As I have pointed out before, it is a matter of scale. If corn ethanol started to look like a viable, long-term business model for them, the oil companies would just buy their way in as Valero recently did. Oil companies won’t sit around and go extinct because some fancy new biofuel put them out of business. They have big R&D budgets, and their efforts likely cover every biofuel you ever heard of (and many options you probably haven’t).

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1. Put me down as someone who believes that the one currently under construction – Range Fuels – is going to see their schedule continue to slip, and I believe they are going to have a difficult time meeting production goals. Multiple sources are telling me that they have some issues.

Further, the national projected ramp-up in cellulosic ethanol – if it happens at all – will be a fraction of what has been projected. Right now there isn’t even a clear pathway. It’s like marking out the road map for curing various cancers over the next few years. It is great to have such a road map, but you are assuming technological breakthroughs that may not happen. Right now cellulosic ethanol still looks to me like a niche, and not a scalable, mainstream fuel.

2. That’s a good question, because I am aware of just such a situation now. Investors are dragging their feet on Plant #2 because Plant #1 is still not producing per the plan. In general, I think if a 1st gen facility comes online and starts to deliver per expectations, money will start to flow pretty quickly. I would think within 6 months of delivering, investors will be ready to jump in. But it is going to take more than 6 months to optimize production to optimize one of these next generation plants once it starts up. There isn’t a blueprint for success, and novel problems are going to be encountered and have to be solved.

3. No, the schedule for Range will slip because they still have kinks to work out. Write it down and hold me to it.

4. Here is what POET said about stover: “The yield of cobs is 0.65 tons/acre, and we can collect them commingled with grain with a modified combine. Or we can collect them with stover coming out of the back of the combine. The bulk density for cobs is higher than for stover, and that makes them easier to separate. We make sure sufficient stover is left on the field for erosion control and nutrition. We are focused on cobs because the bulk density for cobs is better than for stover, and cobs have 16% more carbohydrates than the stover. We don’t have to leave all stover in the field necessarily over soil depletion issues; we have just chosen to focus on cobs. How much one can remove depends on soil type, location, and tillage practice. Cobs take those variables away.”

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I did ask about both Iogen and Enerkem while I was in Alberta. My hosts were quite skeptical that Iogen will ever build a commercial plant. I will say that they have enough demonstration level experience that it is suspicious that they don’t have plants sprouting up everywhere. After all, they have been producing cellulosic ethanol at small scale for 5 years. There are people that have been producing it for 0 years who are in the process of building plants. Given that governments are throwing money at anything looking like cellulosic ethanol, I think this puts a big question mark over their true commercial viability (at least at the present state of their technology).

There was less talk about Enerkem, and frankly before the trip I didn’t know much about them. The talk I did hear was that Enerkem is really only focused on the front end of a GTL plant (the gasification step). Enerkem’s view is that their post-gasification steps are flexible, and they can produce a variety of chemicals. They have announced that one site will produce ethanol (this is not the most efficient usage of syngas, by the way). Enerkem’s Press Release page certainly implies that they are busy with projects.

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I think there are two approaches to algal fuel that might work. One is if algae can be made to naturally excrete oil. If so, then it may be possible to let the oil layer build up and then skim it. This avoids the materials handling nightmare of separating the algae from the water, and then the oil from the algae. This is apparently the focus of the research. Still, it is a long shot. Exxon’s VP for R&D was quoted as saying “I am not going to sugarcoat this — this is not going to be easy. Any large-scale commercial plants to produce algae-based fuels are at least 5 to 10 years away.” I think that is a realistic assessment. If the breakthrough came tomorrow then you are still looking at piloting and finally commercialization. I don’t think that is likely to happen in 5 years. So first you have to have some technical breakthroughs – and those aren’t a given – and if you pass through that gate then you won’t see this on the market for 10 years. I believe that is a realistic assessment.

The second approach that might work is if a valuable product – such as a pharmaceutical – is being produced as the primary product, and oil is being produced as a co-product. The expense of collecting and processing algae is just too great for oil to be the primary purpose of the operation.

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