Critical Policy Recommendations
Flex Fuel GEM Mandate – 50% of gasoline powered vehicles by 2011 reaching 100% by 2013. Check possibility of faster 100% implementation. It is essential that the mandate will be for all types of alcohols, not just for ethanol (GEM = Gasoline, Ethanol Methanol).
Every car stays on the road 16.8 years. We must produce cars that can run on multiple fuels now so we will not get stuck with gasoline only cars but without oil. It is a known technology that costs less than $100 per car.Increase the Alternative Fuel Infrastructure Tax Credit to 50% for three years going down to 30% for additional two years and 15% for the last two years (total seven years). This should encourage gas station owners to perform the pump conversion faster.
We must provide drivers with places the fuel their cars. The market will take care of the rest. The pump must support Methanol blends as well as Ethanol.Plug-in Hybrids – tax incentives to consumers and other incentives to car companies to produce and buy Plug-in Hybrids. This should be part of a ladder of incentives to cars that will be running “not on oil” (partially passed as part of HR 1424 – the emergency economic stabilization bill).
80% of the cars are driven less than 20 miles per day. Plug-in Hybrids that can run 20-40 miles on electricity and charge at night are a winner on all fronts. We should push them as fast as possible.Mandate ALL federal and local government vehicle purchases to be either GEM flex fuel cars or plug-in hybrids.
Increase the current “weak” mandates. The market needs an aggressive starter.Mandate government (federal and local) use of bio-diesel in ALL its diesel vehicles.
Increase the current “weak” mandates. The market needs an aggressive starter. DOD is the prime user.
HR-1476 (the Open Fuel Standard Act), requires that starting in 2012, 50% of new automobiles powered by an internal combustion engine, and starting in 2015, 80% of such new be warranted to operate on biodiesel. The 2011 and 2013 goals are too ambitious for the automakers to comply with.
The Dorgan-Voinovich National Energy Security Act of 2009 requires 100% flex fuel penetration by 2017. This is a more realistic pace.
Enter your comment here In order to use market forces to reduce our dependence on oil, it is necessary to put a very large tax on oil consumption. So far, this has been politically impossible. Other sources of energy to replace oil will make only very slow inroads until oil cost more than alternatives. This is not likely to happen for a very long time unless there is a very large tax on oil.
A majority of our Representatives and Senators must be convinced that it is a national security issue as well as a global climate change issue to cut down on our need for petroleum-based fuels. A national security focus might make it feasible to pass a $0.50 per year increase in the per gallon tax on petroleum-based fuels until the tax reaches $5.00 per gallon. This would enable the public as well as corporations to plan vehicle replacement over a few year period, while giving the US auto manufacturers time to build up production capacity on smaller, more fuel efficient cars and light trucks, and on alternate-fueled heavy trucks. Long-haul truckers could be given a tax credit that partially offsets the fuel tax, but not completely so that shipment of goods by rail would become more advantageous economically.
Have a look at America’s Achilles Heel: The Hidden Costs of Imported Oil by Milton Copulos. It’s a bit dated (2003), but he tried to put some quantification to some of the costs that could be attributed to U.S. use of oil.
To get to the level of education that you are suggesting, someone is going to have to do the economic analysis heavy lifting to put real numbers on these costs. Obviously the climate change costs will be soft (and if Stern proved anything, it’s that it’s extremely difficult to quantify the cost on a widely accepted basis), as will some of the other costs, but it would at least provide a baseline to start working from.
This is right on target. I’m just about through with my “white paper” on this subject which you can then post for all OurEnergyPolicy participants. Perhaps the five major points of my present analysis are that (1) neither H.R.2454 nor its Senate counterpart, S.1733, contain any goals, timetables, or specifics about reducing imported oil in spite of their claims to improve national security (2) all major technical analyses [those of the Energy Information Administration, the EPA analysis of H.R. 2454, and the National Academy of Sciences' "America's Energy Future"] project high levels of petroleum imports for decades, even with significant improvements in the efficiencies of light duty vehicles, and other major conservation improvements. Such high levels of petroleum imports are inconsistent with petroleum availability projections from other studies, such as those from the International Energy Agency (3) burning this much petroleum…assuming you could even get it and afford it… would lead to exceeding the greenhouse gas (GHG) limits in these proposed energy bills likely in the 2025 to 2030 time frame and (4) the reason that these energy bill GHG limits would be exceeded is because of our projected national transportation needs which still would consume too much petroleum, even after vehicle performance was greatly improved and (5) there is a great opportunity for bipartisan cooperation on energy legislation. Every group has something the other groups need…but few realize that today.
Unfortunately, I am not in position to do the economic analysis rightly called for by Mr. Hinckley. It is also questionable whether any such study would be enough to convince lawmakers to take more money from their constituents via a tax on petroleum products, given the importance of so many other local and national issues, especially high unemployment and the budget deficit, at present.
However, the question I raised is whether Senators and Representatives can be convinced to recognize the huge national security benefit of reducing in the near future and, eventually, eliminating our need to import oil. That is about the only path by which it is possible for me to imagine their passing a gradually increasing tax on petroleum products. The wars with Iraq were clearly national security “events” and were, to my mind, largely over access to middle-eastern oil. Oil embargoes and withholding of production to increase prices, and the economic effect of the resulting increased prices in both cases, are clearly threats to our national economic security. The third national security issue is conjectural and controversial: the huge cost to the US and all nations of a rise in average sea level of even just 1 meter as a result of global warming/climate change. If the predictions are correct, the resultant world-wide movement of people could be extremely difficult politically, and very expensive to accomplish peacefully or otherwise.
There is no doubt that convincing US lawmakers that raising taxes on gasoline, etc., will be tough even if it is couched as a national security issue. Perhaps one possible way to make an increasing petroleum products tax acceptable on national security grounds is to use the funds for greatly increasing the US stocks of oil in the National Petroleum reserves so that we could better weather supply disruptions. Perhaps a fraction of the tax revenues could be returned to shipping companies as an income tax credit (but not all, as there should be some residual incentive to shift appropriate shipments to more energy efficient means of transportation, such as railroads and barges). Using some of the funds for improving public transportation infrastructure is an obvious thought, as is using some of the money for advanced energy research.
Perhaps other contributors to this site can come up with more compelling and imaginative ideas that could be used to make the national security argument worthy of taking to the Halls of Congress. We also need more compelling “trade-offs” that could make tax legislation more palatable. I am looking forward to additional contributions in the near future.
I think that’s right on the mark. Even if you can establish a price that reflects externalities and assorted subsidies you still have to provide certainty that that building those costs into the price is a better result in the aggregate than leaving them out (I was really just pointing out there is a bit of a gap with respect to firm data in this area from which to build a position—pro or con).
And this, I think, dovetails with your point that doing this against an uncertain economic landscape is (at best) quite tricky. If 7 of the last 8 recessions that have followed a spike in the price of oil how do we ensure that the de facto increase caused by [pick your mechanism for pushing up the cost of consumption] will not undermine a fragile economic recovery. And there are still lots of other factors that will need to be addressed (e.g., impact on relations with oil exporting nations caused by a targeted plan for eroding the market of a specific resource).
Perhaps an approach based on some type of artificial price floor (this idea has been raised before) might work—some combination tax and/or increase to the strategic petroleum reserve in the event prices drop below some price. This would be a way to at least give a clear baseline to work from for anyone trying to develop alternative fuel or vehicle technologies, which is very clearly absent in today’s marketplace (and I think it would have to be a commitment of at least ten years to be effective at getting really significant investment focused on these technologies).
A federal tax on oil consumption is clearly justified to pay for the national social costs incurred that are not accounted for in the direct costs paid by consumers. These social costs include the costs of future global warming, the opportunity costs that could be captured from reduced oil imports and reduced world oil prices, and other costs such as the military costs of defending Persian Gulf oil.
For such a tax to be acceptable to the general public, there are two key requirements. First, consumers mush have effective alternatives to substitute away from oil-powered automobiles and airplanes as they are faced with higher prices. Second, they must believe the government is using the oil tax revenues effectively — the best way to do that is for these tax revenues to be used by the federal government to provide solutions for the energy/environmental crisis.
In the article, “Creating an American Infrastructure Investment Strategy” posted at http://ourenergypolicy.org/docs/3/American_Infrastructure_Investment_Strategy.doc I roughly quantify the major net economic benefits to the U.S. of an overall infrastructure strategy that would provide a foundation for these solutions. This strategy proposes three new classes of infrastructure be developed: electric power infrastructure, transportation infrastructure (including alternative-fuel vehicle plants and service stations, and public transportation) and advanced telecommunications infrastructure. The oil consumption taxes (along with other carbon taxes) could be used to provide funding necessary for a federal government infrastructure investment corporation to partner with the private sector in developing these infrastructure solutions. For example, a $1 per gallon tax on oil consumption could provide about $300 billion per year in revenues to fund this infrastructure investment organization. The investment in infrastructure solutions with these tax dollars would yield long-run economic dividends for the country that would far outweigh the higher immediate oil costs consumers would have to bear.
Mr. Goldberg, I enjoyed your brief paper outlining this policy concept. The timing is good, since not only is our energy strategy being debated, but a federal transportation infrastructure investment program that is widely recognized as broken and going broke is also being debated. Investments in infrastructure pay huge dividends, and should lift our GDP and jobs trajectory. I urge you (and others here) to take a look at, and consider joining, a new coalition started by the Institute for Analysis of Global Security to push for oil-saving reforms in transportation infrastructure investment programs. Go to http://www.mobilitychoice.org or http://www.facebook.com/MobilityChoice/ for more information and to enroll as a supporter.
Mr. Lovaas, thanks very much for your comment on my article and for suggesting enrollment in mobilitychoice.org. I signed up for it and am very interested to hear about what steps the federal government is considering to invest in new transportation infrastructure.
Is there serious discussion in the federal government of an oil consumption tax to fund investments in new public transportation systems and alternative-fuel vehicles and service stations? As I mention in my comment on this, I believe there are strong reasons to move in this direction.
I believe en energy tax specifically on oil is terribly counter productive and takes our eye off the ball; the demand for energy worldwide, especially as China and India develop their economies cannot be met by the US using less energy; we need every energy source we can find and use and for the transportation sector a required flexible fuel standard for all new cars sold in America will bring about the ability to provide alternative fuels whether biofuels, methanol, electric cars, deisel, or current oil supplies. This wouuld add $100 to the price of vehicles which over a 3 year note would cost $3 month with interest included.
One should not single out Plug-in Hybrids as the only alternative to liquid fueled vehicles. Pure battery electric vehicles deserve equal treatment. While many automakers have PHEV plans, some prefer the pure BEV approach. BEVs with fast charging are very competitive with PHEVs. One leaves the garage with a full “tank” every morning, and if additional charge is needed in a particular day, one visits a special charging station that charges much faster than overnight charging.
Electrification of transportation could displace oil, diversify energy inputs and reduce GHG. Fleet purchases by the federal government would jump start and leverage industry development. H.R. 4399, The American Electric Vehicle Manufacturing Act, introduced by Reps. Jose Serrano (D-NY-16) and Lee Terry (R-NE-2) would authorize replacement of the U.S. Postal Service’s aging fleet of long-life vehicles with electric and plug-in hybrid vehicles and recharging vehicle-to-grid infrastructure. Stop and go deliveries in non-attainment areas with plug-in hybrids would maximize reductions in fuel use and pollution.
–> excerpt submitted by the Offices of Rep. Roscoe Barlett. Op-Ed, “OPEC would benefit from ongoing failure by lawmakers to act,” published in The Hill on 2/22/2010. Read the full text here: http://thehill.com/special-reports-archive/757-energy-a-environment-february-2010/82917-opec-would-benefit-from-ongoing-failure-by-lawmakers-to-act
Roscoe Bartlett (R-Md-6) is Co-Chairman of the Energy Efficiency and Renewable Energy Caucus as well as a member of the Energy and Environment Subcommittee of the Committee on Science and Technology.
I suspect Rep. Bartlett understands that the U.S. has only a tiny fraction of the oil reserves it needs to sustain its current demand, much less the growing demand many energy observers forecast. To “drill baby drill” would be a disastrous direction for us to take at this time. The oil we have will only grow more valuable. We should not use it while we are wasting so much of it. Our vehicle fleet is grossly inefficient compared to our competitors.
We need to keep our oil for future use while at the same time increasing the efficiency of our fleet.
The electrification of our vehicles is the single best method of increasing efficiency. Cars, trucks and SUVs that run on electricity are orders of magnitude more efficient and run on 100% domestic energy. We can affect three of our biggest national problems by electrifying our fleet.
National security is upper most in many patriot’s minds. While we are dependent on foreign countries for much of our oil, we cannot assume that they will have our best interests in mind. On the contrary, the Middle East is replete with regimes hostile to our way of life. For every EV that replaces an internal combustion engine (ICE), we stop some of our money from going to support those regimes. According to a recent RAND study, we spend $70-$80 billion per year protecting our access to oil around the world.
Our economy, as stated by Rep. Bartlett, is bleeding over a billion dollars a day for foreign oil That is a huge percentage of our national debt. That money would go a long way toward strengthening our weak economy. For every EV that replaces an ICE, our economy gets stronger.
The environment is being heavily impacted by the extraction, shipping, refining and burning of oil. In the U.S., tens of thousands die prematurely from the pollution associated with these activities. Hundreds of thousands are made sick, but don’t die. The costs to our society are enormous. Yet, when we buy a gallon of gas, we pay for none of these costs. Those who suffer and die pay with their health and their lives.
I, along with several hundred others, have been driving production EVs made by Toyota and Ford almost a decade ago. In my case, I’m driving a Toyota RAV4 EV. We charge it using kWh generated by sunlight falling on our roof. Our electric bill averages about $100 per year for both the house and the car. We haven’t been to a gas station since December 2002. None of our money goes to the Saudis. None of our money leaves the country. And we don’t pollute your air, your kid’s air or anyone else’s.
H.R. 4399, The American Electric Vehicle Manufacturing Act, is a great first step. So are the $7,500 tax credits for those who buy electric vehicles. We are within a few short months of tens of thousands of production EVs coming from the likes of Nissan, GM, Ford, Mercedes, Volvo, Tesla, BYD, Mitsubishi and many more. To the greatest extent possible, we need to buy American cars, but I’ll state right up front that I’d rather buy a foreign car that ran on American renewable energy than a domestic car that ran on foreign oil. The best, of course, is to buy American cars that run on American electrons.
While EVs may not be for everyone, they are perfectly good for tens of millions. Each EV that replaces a gas burner makes our country safer, stronger and healthier.
E-Drive Bill — HR 4399 Electrification of the Postal Fleet
USPS operates the largest commercial fleet in the country with 142,000 local delivery vehicles. These “LLV” model vehicles average 9 MPG, have an average age of 17 years, and need to be replaced or retrofit in the near future. The fleet is an ideal test bed for large scale electrification because of its predictable routes, frequent stops and starts, range of weather and terrain conditions, and high visibility. Post offices could provide the public easy access to EV charging stations.
The E-Drive bill provides $2 billion to fund electrification of 20,000 postal delivery vehicles over 3 years. It builds upon the $2.4 billion investment in American battery and electric vehicle component manufacturing capacity in 2009. The industry is now at the point where it needs a major customer to provide demand for large scale deployment. With strong Buy American provisions, the bill will create high-paying American jobs and help revitalize the automotive industry as it shifts from internal combustion engines to electric drive.
The E-Drive bill addresses national security concerns by reducing our dependence on oil imports. Seventy percent of the oil consumed in 2008 went to the transportation sector. The E-Drive bill will prove that wide scale deployment of EVs is not only possible but desirable, and thus accelerate the nation’s movement toward alternative fuels. Electrification of the postal fleet will reduce carbon emissions of the country’s largest fleet by up to 75% and lower annual fuel purchases by hundreds of millions of dollars. The E-Drive program capitalizes on both the Department of Energy’s expertise in batteries and electric vehicles and the Postal Service’s experience in fleet management. The bill:
> Has two phases: (1) production, deployment, and assessment of 10,200 vehicles and 12,000 charging stations, and (2) subsequent award of 10,000 vehicles and 12,000 charging stations for the “best” solution(s) of Phase 1.
> Emphasizes competition among suppliers and between technologies, without dictating a winning technology. Areas of interest include: “off the shelf” e-Trucks, new highly efficient e-LLVs; PHEVs; new all-electric and PHEV powertrains for conversions of existing LLVs; and charging stations.
> Lays the foundation for smart grid infrastructure by setting standards, funding seven regional deployments across the nation, and building teams of power companies, ISOs, aggregators, and fleet operators. The batteries in the test fleet will make intermittent alternative energy sources, like wind, more valuable by enabling connection to the grid at night.
This is an excellent idea. Battery Electric transportation has higher performance and cheaper lifecycle costs for traveling requiring less than ~100 miles in a single trip. Mail carriers typically only drive 20 miles per day, with lots of starts and stops gaining significant contribution from regenerative breaks, and all the mail trucks are often parked in the same place at night facilitating recharging infrastructure. Please see my two publications below for a more thorough analysis.
Mathew Werber, Michael Fischer, Peter V. Schwartz, Journal of Energy Policy, 2009, 37, 2465-2468 Michael Fischer, Mathew Werber, Peter V. Schwartz, Journal of Energy Policy, 2009, 37, 2639-2641
As a 7 year EV driver, I can attest to the rationality behind HR 4399. When I give talks about the viability of electric vehicles, I inevitably get comments that the technology isn’t going to work for Americans because we drive such long distances, or more commonly, they say that they could never use an EV because they drive a long way for vacations, etc.
It’s never been about who can’t use the technology, but about who can.
Those of us who champion the use of electricity instead of oil have always said that these cars are not for everyone. But, those who find that their daily driving needs are indeed adequately handled by a car that has a range of 100 miles or so number in the tens of millions.
For most fleet applications, this is especially true. The postal fleet averages about 18 miles per day. A vehicle capable of 100 miles per day is clearly able to work for this duty cycle. To do so without polluting our air, or adding to the din of millions of internal combustion vehicles, is particularly beneficial to society.
Adding to the benefits is the ability to use 100% domestic energy. Sending over a billion dollars out of the country for oil every day, as we do now, is severely hurting our economy. For every kWh that replaces oil, we strengthen our economy. We should further use some of these savings to invest in solar energy to generate those kWh.
Many postal properties have excellent roofs and parking lots that could accommodate photovoltaic systems. The costs of these systems have dropped to the point that, in all regions, they are cheaper than grid electricity, if amortized for the warranteed life of the system. In other words, if the facility has the roof for it (not all do), then it is cost effective to add solar PV to the property to offset the additional energy required by the vehicles. This makes an even stronger case for electrifying the postal fleet as additional renewable energy is added to the grid to offset dirty energy and jobs are created in the process.
There are several companies that are working on electrification of fleet vehicles. One of my favorites is Bright Automotive of Anderson, IN. I have driven their Bright “Idea”, a van designed from the ground up to be light weight and aerodynamic. The all-electric range is 30 miles, and it has an internal combustion engine for range extension. This heartland-America company is comprised of some of the brightest minds in the electric vehicle world. I strongly recommend that this company be given consideration for development of the next iteration of the postal vehicle. (*I have no vested interest in this company.)
The financial savings coupled with the benefits of reducing environmental degradation and improving our national security combine to make HR4399 a must-pass bill.
Let’s put the model ( http://ourenergypolicy.org/docs/10/Exec_Sum.pdf ) to the stress test. An international security event forces our hand. We have to reduce our oil usage (not just import) by 50% as fast as possible. Let’s say 10 years or less. How would you go about it? With/without GHG consideration.
Colleagues: In response to Yossie’s question, if we were under pressure to reduce petroleum use, we could replace an awful lot of oil in a decade by aggressively building out a biofuels industry based on cellulosic biofuels and somewhat more corn ethanol. The attached presentation gives you some idea how this might be done while maintaining food supplies and reducing greenhouse gases significantly.
To the inevitable question: “if this is so easy, why aren’t we doing it now?” The answer is: it is not easy, but would require significant changes to agriculture and the way we feed animals. What is lacking is the political and social will to make the big changes necessary to achieve large reductions in oil use. Technically this approach is challenging but no research breakthroughs are needed.
As my friend Lee Lynd likes to say: “Business as usual is a fantasy, not a baseline.” So much analysis starts with the premise that we can get to a sustainable and secure future by making small changes to business as usual. Frankly, that is absurd. I am delighted to see that Herschel’s analysis starts with the premise that large changes are needed.
I agree with Dr. Dale — up to a point. The sad truth of the matter with regard to the Transportation Sector, which is 98 percent dependent upon oil, is that we are likely to get caught with our pants down, regardless of how much bio fuel we can produce (or import) and how many EVs, PHEVs or multi-fuel Hybrids we can put on the road within the next 10 years. The sheer size of the U.S. auto and light truck population — approaching a quarter billion vehicles, each with a 10-13 year lifetime, and the relatively low market share of electric, hybrid and bio fuel-capable vehicles among the 10-17 million new cars and trucks sold or leased annually in the US, virtually guarantees that.
It is only when faced with dramatically escalating prices and supply interruptions (witness the late ’70′s and 80′s) that mass changes in the marketplace begin to occur. Thus, barring a fundamental breakthrough in liquid fuels (e.g. — algae?) with the necessary and adaptable production and distribution infrastructure already in place (refineries, pipelines, storage tanks and gasoline service stations), the logical thing to do is to plan for such a contingency — or rather, a series of such contingencies — with a fuel rationing program, police and national guard training, increased telecommuting, and joint government-industry planning and cooperation. (Is that possible??) If we are fortunate enough to experience a series of relatively brief marketplace tremors ahead of “the Big One,” i.e., – the international security event (ISE) that Yossie foresees with [implied] protracted consequences, then we undoubtedly would have sufficient market demand — but not necessarily the production capacity (which typically requires a three-year ramp-up) — to accelerate electric-based and bio fuel solutions. But we would have to reach unheard-of vehicle production and financing levels on a time scale not seen since the WWII government-industry partnership that transformed the U.S. auto industry into a tank, airplane and war materiel juggernaut, in order to minimize the impact of this scenario. Again this points to joint government-industry scenario-planning and cooperation, including both the automotive and financial industries.
There also may be some micro-approaches to blunt the impact of an ISE, including incentives to create satellite (in the physical sense) telecommuting office facilities on major commuting corridors and mass transit hubs surrounding metropolitan areas to reduce driving distances. Such facilities could include vehicle recharging and bio fuel stations as well as utility energy storage capacity consistent with the emerging Smart Grid. Vehicle-to-Grid or “V2G” two-way charging is a strong possibility here.
I hope that you will forgive my ranting and long sentences. But Yossie has laid out a realistic scenario that encourages brainstorming. Surely there is brainpower in this discussion group that is vastly superior to mine, and I gladly yield the bully pulpit.
Dave makes a good point, and one that my previous email failed to make clear.
The market for oil is global. Therefore, if you believe, as I do, that the US will not have energy security until the rest of the world does also, then we need to take measures here that will help the rest of the world achieve energy security. Perhaps the most cost effective way ($100 per vehicle) to do this is to require that all new vehicles in the US be flex fuel…compatible with gasoline, methanol, ethanol and any other gasoline compatible fuel we can supply. Since the US is a huge market for autos, this would immediately start forcing the introduction of flex fuel vehicles around the world, driving an increased market for alternative fuels. Then when the ISE comes both the US and the rest of the world would have increased flexibility to fuel their vehicles, and alternative fuel supply systems would also be encouraged to grow in the meantime. This is why the flex fuel mandate is the number one policy recommendation coming out of the area that I lead. We need to start making our vehicle fleet more flexible…right now.
I happen to fully support hybrids and BEVs, but we need to be really hard headed here. The cost alone of these vehicles virtually guarantees that they will not get market penetration anywhere but the US, Japan and parts of Europe for a long time. Thus they are not going to provide meaningful energy security for the world in the foreseeable future.
Bruce makes the point about the prices of Li-ion batteries for electric cars that is generally accepted among analysts. See NY Times article ( http://ourenergypolicy.org/docs/9/Study_Raises_Cost_Estimate_for_Electric_Cars_-_NYTimes.com.pdf ). Even the “pessimistic” analysis predicts a 64% drop in battery prices from 2009 to 2020, still making the vehicles very expensive to purchase.
Oddly, the introduction of electric cars might actually guarantee that oil will not rise to hundreds of dollars a barrel, ironically insuring that gasoline power cars will be more economic for many years to come.
We are working on, but have not yet completed, the parallel analysis for batteries, but in thinking through resource scarcity and innovation in the solar materials area, this paper ( http://ourenergypolicy.org/docs/30/WadiaAlivisatorsKammen-ES_T2009.pdf ) highlights the wide (and widening) range of candidate solar materials.
I have not located the Boston study, but it does not make sense:
The cost of materials as a portion of the price of the battery is less than 5%. There is a lot of improvement in costs that would be realized by mass production. It is a chicken and an egg situation.
I don’t know how they drive their car life time cost difference estimates and I don’t know what assumptions they are using. Did they eliminate oil change, reduce breaks wear? What is the price of oil/electricity assumed? Do they clculate the cost of the gear (the Volt and the Fisker don’t have one).
Most importantly, they assume that our technology will remain the same. There are already new gasoline based engines in advanced testing that are built to charge a battery and not to drive a car (good for the Volt and Fisker PEHV model). The gasoline savings from such move would be substantial.
The real problem is capacity – we need to increase WW battery production capacity 4,000 time – it is going to take time.
On the other hand, their forecast for the penetration of electric cars by 2020 is too high – not enogh battery building capacity around. I do not know how they reach that number.
Yossie,
I agree with you. There is something not quite right about that pessimistic Boston Consulting Group study. For one thing (and please correct me if I am wrong,) they don’t identify who is paying for this big study. I noticed that they have a Michigan office, which strongly implies that they do studies for the Auto Industry, which historically talks out of both sides of its mouth on EVs and Hybrids, showing Green vehicles at auto shows and making vague promises about production in a few years, which never seems to come.
Recently, a group of Auto execs descended upon the White House, seeking more assurances and incentives for their “risks” in producing these vehicles. This seems like chutzpah after the billions of dollars in R&D, production incentives and buyer incentives (up to $7,500) that have already been invested by the Administration in EVs, PHEVs and batteries. And it underlies the fact that the Autos remain unwilling to do their part. It would not surprise me if they pulled out the Boston study to bolster their arguments.
There has also been a study (also by Boston group?) predicting that there will be an advanced battery glut in a few years, which I take to mean that the autos do not expect to produce a lot of EVs or PHEVs, but will continue token production with a wait-and-see strategy to see if another “more Auto-friendly” administration will be in power then.
As for battery costs, there are many complicated factors in predicting costs and volume, as there are at least five fundamental types of Li-Ion batteries, each with a different combinations of materials (e.g., — some use Cobalt; others do not) and a wide range of opinions as to the percentage of costs attributable to the materials used. One opinion that I read recently, quoted but not validated in an Argonne Labs report, was “75 percent,” although that seems amazingly high to me.
EPRI predicts that battery production costs will fall to $250/Kilowatthour from their present range of $800-$1,000/kWh, i.e. — about 1/4 of today’s costs, in quantities of 200,000 or more, which surely cannot depend upon the vagaries of commodity costs. Assuming roughly 1 kWh per battery, that would be an annual production rate of roughly 12,500 GM Volts (“EREV” 16 kWh pack), 8,000 Nissan Leaf EVs (est. 25 kWh pack) or 3,850 Tesla Sports Cars (~52 kWh).
Assuming that we reach a halfway point on battery costs — say $500/kWh — a Leaf EV pack would cost $12,500 to produce. It would likely be marked up at least 20 percent for consumer use or ~ $15,000 for the battery pack. This could be amortized over a 6-10 year period, depending upon how much confidence the auto manufacturer has in the useful life of the battery, or roughly $2,000/year. That would be mitigated by ~ $1,000/yr in avoided ICE maintenance costs (which is great for consumers, but not so great for the Autos – which is one reason why they tend to oppose EVs.)
Assuming $4/gal gasoline, and 10,000 miles per year, a Leaf owner would avoid 400 gallons of gas (@25 mpg, US average) or $1600 in fuel, subtracted by 2500 kWh (4 mi/kWh) @12.5 cents/ kWh or roughly $315 worth of electricity, for a net fuel savings of $1,285 annually. Thus, there would be a slight reduction – not a premium — in the vehicle cost of approx $285 annually, which could go towards amortizing the vehicle charger. But it gets better . . .
At end-of-life, (i.e., — battery degraded to ~85%) the battery would have a trade-in value, above and beyond the salvage costs of its valuable materials (e.g., – including Lithium and Cobalt) because it could still be used in UPS, solar and wind applications. And we haven’t even gotten into the potential value of V2G (vehicle to grid.)
Considering that the base cost of the vehicle (minus batteries) in volume production would be lower than a conventional ICEV, because it would not need a fuel system, exhaust, large radiator or transmission (a simple gear reduction will do), then the net cost of owning and operating an EV like a Leaf could easily be lower than an equivalent ICEV!
Market penetration? If we hit the minimal production levels of 10-20K vehicles for say, five or six leading manufacturers, (~100,000 vehicles annually) there should be more than enough Li-Ion battery capacity. There are some 40 battery companies gearing up right now and we are not resource-constrained on Li-carbonate, according to my good friend Gal Luft of IAGS (Institute for the Analysis of Global Security) who has studied this subject extensively.
What could spoil this moderately rosy picture? (i.e.,- lower costs, government production and consumption incentives, ample resources and a limited capitulation by the Autos to electric transportation, but only 100K-200K EVs and PHEVs annually, not enough to make a dent in the 11-17 million conventional ICEVs sold annually in the US?) The answer: It all comes down to the price of gasoline and diesel fuel . In EVA/DC, a consumer-based educational organization, we’ve seen this before. When the price of gas hit $4.00, our phones and emails were ringing /writing “off the hook.”
As the price lowered, interest began to taper off, although we have gained quite a few new members. But the price of oil and gasoline does not move in any predictable fashion and often confounds the experts and the speculators. Within the context of Yossie’s original question, a major incident could easily drive the price of oil to $200-300/bbl. Gas ? $8-10/gal is not out of the question.
Range anxiety is certainly a factor. But what we have learned is that gas price anxiety easily trumps range anxiety. IOW, people’s values change. PHEVs will also blunt that concern, providing a bridge to the battery EV. But it normally takes an auto manufacturer – as well as a battery manufacturer, about 3 years to ramp up.
If I am correct about this, then a logical policy direction is to encourage and invest in flexible manufacturing, including first and second tier suppliers, allowing a factory production line to integrate EVs and PHEVs in the same assembly line, which can then be “retuned” to meet changing product demands. I believe that Nissan and some other Japanese companies are leaders in this effort, but only on certain product lines.
Failure to encourage our domestic auto manufacturers to adopt these methods will virtually guarantee that we will be buying Chinese batteries and Chinese-built EVs in a matter of years – as Warren Buffett predicts, having invested in Chinese battery, EV and PHEV manufacturer BYD. Warren also believes that by 2030, virtually all cars sold in America will be electric or hybrid-powered. Apparently, he is voting with his pocketbook on a “Chinese invasion” of America, in the same manner as the Japanese small car invasion of the 1970’s – which brought about a significant decline in American car manufacturing from which Detroit has never fully recovered.
Will this be a “good” thing or a “bad” thing? It is hard to tell. China could become the “wild card” that rescues us from our profligate ways and helps us to respond to the next oil emergency. But . . .
If we truly want to invest in the Green jobs of the future, as President Obama envisions, then we are going to have to break old habits – beginning with “Government Motors” ;O) – and invest in new manufacturing methods, including flexible and batch manufacturing, in which, ironically, GM experimented with on the EV1 in their now-closed Lansing (MI) Crafts Center. It only took 50 workers to assemble the high tech, fiberglass and composite materials into a finished EV1, producing them in batches of a few hundred at a time. GM only built 1,100 EV1s, the minimum required under California clean air regulations, and ignored thousands of customer inquiries and a three-year waiting list. Although GM declared the car a “failure” and a “disaster,” it was a disaster of their own making and they threw away an opportunity that could have saved the company and positioned themselves as a high-tech global leader, ahead of Toyota and the Prius.
So much for the Boston study. ;O) Maybe we should tell those auto execs who descended upon Washington, that it is time to stop looking for excuses and government handouts, and to accept responsibility and risk if they intend to succeed against the coming oil emergencies and the Chinese juggernaught. They will not have a second chance.
I’m not a defender of the Boston Consulting Group study by any stretch and Dave Goldstein makes many persuasive points. Here is an article about a similar study by another management consulting company, PRTM. It also says that the price of batteries will come down by only half by 2020. But at least that study is available at:
http://www.prtm.com/strategicviewpointarticle.aspx?id=3777&langtype=1033
One other point that I have not heard mentioned is the more favorable economics that should accompany the building and operating of electric power plants. Charging vehicle batteries at night could mean a great deal of new income and a substantial smoothing out of the load over the course of a day. Electricity usage during off-peak hours could be a win for consumers too if utilities permit reduced rates on evenings and weekends. The average cost of electrical energy could be less that the 12.5 cents/ kWh in David’s calculation. In NJ, PSE&G already offers a residential load management program whose off-peak rate is about 8¢ /kWh in winter and 8.5¢/kWh in summer (offset by peak rates of 17¢/kWh).
Our analysis ( http://ourenergypolicy.org/docs/9/LemoineKammenFarrell-ERL2008.pdf , http://ourenergypolicy.org/docs/9/Lemoine-Kammen-ERL-2009.pdf ) is consistent with much of what dave g. says.
however, while nobody can really predict, my assessment from talking to Coda, BYD, Nissan, etc … is that the volume that really starts to push down battery costs could be reached fairly quickly if just a few states set up incentive plans that partner with the (currently) very attractive federal rebate.
Hi Dan, a number of states have rebates or tax credits for PEVs (e.g., California’s is up to $5,000, Colorado’s is up to $6,000, and Maryland’s is up to $2,000). Do the suppliers think that is all that is necessary to get decent market penetration or do they think a combination of a push for the consumer and support for a public infrastructure are necessary? — Nick
I agree with Dave on the necessity to plan. Here are a few additional random thoughts. Incentives to carpool, for example, could be actively encouraged BEFORE the disruptive event (or series of events) occurs so that people have become used to the idea that we can keep up our personal economies while using less fuel. Governments (state and federal) can continue to provide incentives for the development of plug-in electric vehicles and higher energy density batteries so that both infrastructure and manufacturing capability to build the vehicles will already be entering a rapid growth phase by the time the disruptive event occurs. Since the disruptive event would likely be seriously economically disruptive, the federal government should have a plan for rapidly building up employment opportunities in mitigating industries (including infrastructure development), much as we did in WWII, as Dave pointed out.
And we should not ignore a federal tax on transportation fuels that would be instituted starting now that would increase at a rate of 25 cents per gallon per year to provide an increasing incentive to buy more energy efficient vehicles.
I remember 1973-74 as a time when we probably burned more fuel waiting in line to buy gasoline than was saved by the odd-even (by license plate number) buying limitation that was instituted Therefore, real rationing is probably going to be needed. One could imagine a market developing for the ration coupons and all of the people who carpool and drive electric vehicles becoming insufferably smug.
We could do this, in principle, mostly by one simple thing: raising the price of gas at the pump (a lot)
the rest would take care of itself
people would buy smaller, more efficient cars and drive less and plug-ins and hybrids, etc.
that’s what we should have probably done after 9/11 for example, using the extra funds so raised to really bring on clean energy programs nationwide as well as lessen our oil dependency
we had a great opportunity to do it then and there but didn’t seize the moment
in this case, I think that it isn’t about arguing for a technology flavor of the month (batteries or biofuels or the like) but to deal with the problem, as you posed it, seems like the clear answer is the above
now if you had said eliminate all oil usage, or even 80%, then price signals alone won’t suffice; we need technology development as well, for example biofuels or other ways of making liquid fuels (artificial photosynthesis, or the like) for transportation uses where there is no credible substitute (aircraft, heavy-duty vehicles, ships).
Wouldn’t you have to raise the price by quite a bit to change behavior? People won’t make a Uturn to get gas at a station that is not their own for the difference of a few pennies.
sure
it needs to be raised until.. it makes a difference…
kind of circular/by definition/assumption
to cut usage by 50% might take raising it to European price levels, but regardless, in the end, it is circular, the price needs to go up until demand gets less, one way or the other…
It was a bit of a rhetorical question. We didn’t do it when we had the perfect opportunity so I wouldn’t expect it any time soon.
I just don’t understand, with all of the mandating demands being made, that we don’t mandate that 30% or more of workers whose jobs are ‘teleworkable’ just leave their cars parked and use the information super highway insteat of the asphalt and cement highways.
I am totally with you. There are several general problems: 1. telecommunication is not as efficient as face to face talk. 2. the working environment are often optimized for higher productivity. 3. Serendipitous bumping among people triggers new ideas. I actually believe that providing better telecommunication interface is a crucial step to a less energy intensive future.
Bruce,
I read through your paper, “Biofuels Done Right”( http://bit.ly/hN96OG ), and know that if I knew more, I would appreciate it even more. So please excuse my ignorance and allow me to ask a simple modeling question. When your model calculates that a certain amount of carbon ends up sequestered in the soil, are there eventual saturation issues? Can the soil continue to absorb this carbon year after year? Similarly, if some border plants have the function to absorb excess nitrogen, can this be done year after year?
Best,
Herschel
Herschel:
In answer to your questions:
1) Yes, soil will eventually saturate with carbon. However, that time is very far out. We have degraded our soils so much with 300 years of row crop agriculture that there is enormous storage potential. For example, it is estimated that Iowa, on average, has lost about half of its original endowment of topsoil…. roughly 4% carbon by mass, or many, many billions of tons.
2) The border plants will continue to absorb excess nitrogen also as they grow each year, up to a point. There are also saturation issues there. However, my plan would be to harvest those border plants on a regular basis, thereby removing that nitrogen, and renewing the nitrogen absorption potential. Hope this helps.
Bruce
Bruce,
Thanks for your reply. In my quick read of your paper two thoughts we have previously talked about did not appear to be there. They are the assumption of a four fold increase in ethanol production over time from pasture land (perhaps through genetic engineering and other productivity increases similar to those that have been used to increase corn production over the past years) and the thought that the pace at which ethanol production increase might be set by infrastructure limits, e.g., by the ability to build large numbers of bio-refineries. Perhaps these thoughts are in your Supplemental Information section, which I did not read.
I am interacting with Eyal Aronoff on the whole issue of energy security. There seems to be a growing consensus that we will face a serious world shortfall of oil in just a few years and the enormous difficulties that such events entail. Therefore I have two interests in your work: The long-term (next 20 to 30 years) capability of ethanol to replace oil and decrease GHG releases and the short term (next five years) ability to do the same.
I’m under the impression that relatively little can be done in just five years, except for a large-scale demonstration/proof of principle effort. I’d love to learn that I have been too pessimistic about this. All this leads into a different line of thinking. Back on the farm, don’t farmers experience nature converting biomass into alcohol, such as within their corn silos? If so, particularly if we are to grow far more corn, would it be possible to encourage this natural generation of alcohol to the point that all the liquid fuel needs on the farms would be met this way? Call this microrefineries or moonshine stills, can it be done?
Best,
Herschel
Herschel:
I have taken some time to think through a good answer to your question about how fast we could roll out a much larger ethanol industry. Such an industry would have to be based on cellulosic materials. We just don’t have enough “spare” grain to make a big difference without making grain prices go through the roof. That is a political nonstarter.
There are two parts to the cellulosic ethanol problem: 1) the construction of new conversion facilities for cellulosic materials (“biorefineries”) and 2) the development of the supply chains to provide large amounts of cellulosic biomass to the biorefineries. If we made better use of our existing infrastructure and co-located biorefineries with coal burning power plants, and also perhaps with nuclear plants, and if we got aggressive and required all new cars to be flex fuel (the sooner we do this the better), then depending on the size of the oil shortfall, we might be able to make up most if not all of the shortfall by ramped up cellulosic ethanol production. It might not be pretty, but we could probably significantly reduce the impacts of lost oil by taking these measures.
The fact is that we already have a lot of proof of principle for cellulosic ethanol. For example, the Russians made lots of ethanol from wood by acid hydrolysis (using crude technology) during WWII. What we are working on now is to find out what technologies and systems are best and how we can improve the most promising technologies. We could just choose a couple of the “best” ones and implement them aggressively.
In my view, the bigger problem might be how we would assemble the huge amounts (hundreds of millions of tons) of biomass required to provide the feedstock for large-scale cellulosic ethanol. Roughly we need 150 million tons of cellulosic biomass to replace 10 billion gallons of gasoline lost. This is a lot of “stuff” to grow, harvest and move around. Farmers could do this, but they currently have little or no financial incentive to grow extra cellulosic biomass. We would really have to ramp up our agricultural production to do this, but not many people are thinking about this problem or how to solve the logistics issues. I think the issues are solvable, but not without effort. It is where I am spending most of my time right now. There is nothing technologically difficult here, it is a matter of applying what we know how to do…very rapidly and on a very large scale.
To recap, I think we could ramp up quickly (five years or so) to produce 10 billion gallons per year of additional cellulosic biofuels. But “someone” would have to impose some decisions and make this happen. I don’t think it will happen that fast without a national program that demands the biofuel. A key part of this system, probably neglected, is the logistics and infrastructure by which we would grow, harvest and transport enormous amounts of cellulosic biomass.
Hope this helps.
Bruce
Thanks for this Bruce. I converted your 10 billion gallons per year into 0.65 million barrels/day (please check me out on this). One thing that I was not sure of is whether the gallons you are talking about are gasoline equivalent gallons. Based on your wording, it looks that way. If not, I would have to reduce the 0.65 MB/D to about 0.40 MB/D of gasoline equivalent. I have not attempted to deal with differences between the octane numbers of ethanol vs. gasoline when tying to establish gasoline equivalence.
We are talking about a shortfall of perhaps 5 MB/D in perhaps 5 years. Unless my arithmetic is off, 0.65 MB/D would not be enough to meet this shortfall.
Herschel:
I forgot to answer your other question. Yes, 10 billion gallons per year of gasoline is roughly 0.65 million barrels of gasoline per day. But since 1 barrel of oil (42 gallons) only gives about 20 gallons of gasoline, then for our transportation needs, we may get a bit more than 0.65 million barrels of oil imports replacement from this much ethanol.
They are gasoline equivalent gallons. Any crash program over five years that I can think of probably could not make up a 5 million barrel per day shortfall.
A 5MB/D shortfall would be difficult, to say the least.
A few comments:
1. We will not be short of 5MB. The world will be. We will get our oil (all strong nations will). Others will suffer.
2. The question will be price. Oil price will skyrocket and therefore what is now a political non-starter will reverse. We will look for the shortest way for cheap domestic supply.
3. More corn ethanol and natural gas/methanol play will be the way, but the question is how many FFV we will have on the road. The sooner we mandate it the better.
Thanks,
Yossie
Hi Yossie:
I wonder how strong we will be at that point, given our imploding currency and debt burden, but I take your point. And I agree that the sooner we mandate flex fuel vehicles the better. The second priority I have after mandating flex fuel is to interject some stability into the price of oil. After all, the recent $140 a barrel oil price did not lead to a flood of investment for alternative fuels. I think the price volatility scares away investment in oil alternatives…the investment required must be paid back over a period of 30 years or so. Who wants to predict oil prices out that far? A floor domestic price for oil might do it but it would run directly against the current trend opposing new taxes.
Bruce
The Chinese used a floor a few years back. It is not realistic in our current political system. However, I think that opening the blenders monopoly is the second most important thing. If we mandated that they have to buy any alcohol until 50%, the investment market would explode. Right now, if you invest there is no buyer.
Yossie
This is a most valuable discussion.
There are several parts to this:
(1) How much of an oil shortfall might there be world wide and in the United States? When might this happen? How might this affect different nations?
(2) What might we be able to do to mitigate the effects of such a shortfall?
(3) What policy actions are needed now?
With regard to (1), a key statement that appeared in the JOE/2010 report was their prediction of a 10 MB/D world oil shortfall by 2015. I do not recall that any explanation was given to justify this grim figure. If anyone can shed further light on this, it would be very valuable. Eyal Aronoff, Gal Luft, and I have “kicked around” the shortfall issue and while there are a number of uncertainties in both in the margin the world has between supply and demand and when this margin might go to zero, what is clear is that we need a best estimate of the time of zero margin so that we can make plans to prepare for this. Eyal and I have proposed a U.S. shortfall of about 5 MB/D by 2015 for planning purposes, based on a number of considerations. My original thinking was that many countries will look to the United States to cut back further on its petroleum consumption because we are and have been the world’s largest consumer of petroleum. I believe that we might expect little relief from China because they appear to have already locked in supply agreements with Saudi Arabia, Venezuela, Iran, Sudan and others, i.e., when the shortfall hits the so called free market for oil may degenerate into source nations preferentially serving favored customers. I therefore assumed that, because much of our present imported oil comes from Mexico and Canada, our piece of the JOE/2010 shortfall might be in the range of 5MB/D by 2015. Other analyses that I did, based on a recent IEA prediction of world oil demand, are generally supportive of a world shortfall in the 2015 time frame, but less severe than 10MB/D. Eyal, I believe, has come to similar conclusions.
This estimate of 5 MB/D shortfall that the U.S. might experience by 2015 may be somewhat conservative in that the beginning of a shortfall may start by 2015 and would not reach 5 MB/D immediately, giving us a bit more breathing room. It takes time for demand to grow as new gasoline consuming vehicles are sold, particularly in developing countries. Yossie’s point that we likely won’t experience a physical shortfall of oil because we are a strong nation and that the most severe burdens will fall on weaker nations, seems plausible to me and, at the least, is a huge moral dilemma. How can we drive our SUVs while others are starving, largely brought on by economies broken by their energy import bills? However, again as Yossie argues, oil prices would skyrocket. One only has to go back a few years when the margin between oil supply and demand hit zero and oil prices briefly rose to $147/barrel, precipitating a great worldwide financial crisis. So whether or not the U.S. sees “out of gas” signs at our service stations or has gasoline that few can afford, resulting in back-to-back severe recessions, there is a fundamental need to deal with this energy security issue, i.e., make some reasonable estimate of the time we have left before the next wave of high economic stress and develop a policy to deal with this. If we do not avoid such back-to-back severe economic stresses, we may never have the money and other resources to deal with developing alternatives to oil or to mitigate the effects of climate change.
With regard to (2), I have sought out the advice of a number of experts, such as Professor Dale and Dave Goldstein, on how much oil shortfall relief we might hope for in terms of ethanol from biomass and from electric vehicles by 2015. I believe that it is appropriate to summarize both of their conclusions with the words “not much”. From what I can tell, both significant amounts of ethanol and large numbers of electric vehicles (and electrified transportation in general) are longer-term solutions that we should pursue vigorously. I support flex fuel vehicles and this capability should be an immediate requirement for all new cars. The key though, is where do you get the alternative fuels to put into these flex fuel cars? It appears that the pace that these technologies might proceed is only partially determined by technological constraints and that the dominant pace-setting issues are ones of infrastructure and/or price. One cannot build the supporting infrastructures, like a huge number of bio-refineries, or replace several hundred million vehicles with electric vehicles, in just a few years. Yes, we should get some help from ethanol and from electric vehicles, but we must do far more to immunize the country from the price shocks and/or physical unavailability of an impending world oil shortfall. As described in my August, 2010 draft paper, we can mitigate the effects of a world shortfall with “no tech” and “low tech” actions, such as greater use of buses and car-pooling, but we have to prepare for this. Dr. Fontana has helped me here by pointing out some limitations to even these more rapidly implementable solutions.
Not all the news is negative. The fact that South Korea and China appear to be able to build nuclear plants for about half the capital costs that other countries report is encouraging. The other piece of good news is that it may be economical to convert CO2 generated by coal and gas plants into methanol. This conversion process would take advantage of low cost nuclear electricity and/or hydrogen production, such as using South Korean type nuclear plants built in the United States. At this time I have made some back-of-the–envelope estimates of the amount of methanol that might be produced by converting the CO2 waste streams from coal and gas plants and the results look suspiciously large. I am seeking help from others to review my analyses.
All of the above will appear in the final version of my energy paper “A Call to Action”.
With regard to (3), I confess that I am angry. Do any of our government leaders deny that we have an energy emergency? The history of Congressional energy legislation done and then undone by successive political parties has left us weak and vulnerable. Does anyone disagree that you cannot expect large long-term energy investments or steps to limit climate change when there is such uncertainty? Is in not beyond shameful that this great nation does not have an energy policy as we enter 2011?
I have suggested that, with all the turmoil in Washington, holistic integrated energy legislation may not be possible. What may be possible is a series of limited pieces of legislation, but all based on a core document so that a de facto consistent and comprehensive energy policy might be put in place.
Let me close by thanking all of you that have helped me develop my thoughts.
Best,
Herschel
Colleagues:
It seems we might get much more traction to advance a coherent, effective national energy policy if the public, and our political leaders, were able to connect the current recession with the run up in oil prices a few years ago, and continuing historically high oil prices. Instead, it appears that the public, pundits and policy makers blame the current recession mostly on poor lending practices. The fact is that it is the cost and availability of energy, particularly petroleum, which determines economic growth more than anything else. It seems like this is the right time to make a strong, coherent, clear case (did I forget to say “simple!) for the link between energy and economic growth—and a rational policy to ensure economic growth (or stability at the least) by ensuring energy supplies at reasonable cost.
Best,
Bruce
P.S. the moral argument mentioned by Herschel above is absolutely true, but probably not very effective in motivating change. Politicians and the public will change when they are motivated to do so by self-interest—I think it is relatively easy to connect this self-interest to having abundant, affordable energy, thus the need for an energy policy.
Dear all:
I strongly support what Bruce has said. There are a few themes that I believe that we can and should communicate to our political leaders, et al. First, we can have significant long-term gains in national employment. Reindustrializing the United States is such a huge and long-term effort it would keep millions of people employed at decent wage jobs. Central to such a reindustrialization would be implementing a coherent, effective national energy policy, using Bruce’s words. Building a new energy future would put many people back to work with long-term good jobs. This employment message must be conveyed to our political leaders.
I am quite optimistic about our long-term ability to solve our energy/liquid fuel challenge and am equally optimistic about our long-term prospects for dealing with climate change. I am not overly concerned about the trillions of dollars it would take to implement a coherent, effective national energy policy. There are a large number of possibilities to make this nation more energy efficient, but even more important, the trillions we would save directly and indirectly on imported oil would be enough to build an excellent and secure future for this country.
I am not concerned about sacrificing one energy goal for another, i.e., giving up on limiting the effects of climate change because of GHG releases in order to have energy security or vice-versa. We can accomplish both, but the sequence you choose to do this is crucial.
I am very concerned about shorter term, oil related, issues; specifically when the margin between world supply of oil and world demand for oil goes to zero, as it effectively did when oil hit $147 dollars/barrel just a few years ago. The major reason that we are not at that point now is because demand is down due to a global recession, creating a temporary margin. This margin is being eroded rapidly and a growing chorus of people are beginning to make estimates of when a zero margin will reappear; some estimates are as short as next year. The country has to immediately prepare for this eventuality and take steps to immunize itself against a repeat of the $147/barrel (or higher) experience. If we have back-to-back deep recessions we may never have the funds to have a secure future or work on controlling climate change. The world will belong to the countries that have the “deepest pockets” and that is not us. So we need a plan now to deal with the short-term challenge; one where short-term actions fold into the longer-term strategy.
Because Congress and others don’t seem to be able to implement a cohesive energy policy and keep at it year after year, we may have to adapt a few special political strategies to overcome this. Bruce’s comment, which I fully agree with, is that you must appeal to the self-interests of our political leaders. Since these self-interests vary from one legislator to another, I believe we need to break down our coherent energy plan to smaller, bite sized, pieces of legislation. Coherence might be still maintained if these separate pieces of legislation all track back to a core document which integrates these various legislative actions and is based on sound engineering. Perhaps a series of legislative “horse trades” might work: “I’ll vote for your methanol-from-coal program if you support my program to build a transmission line from my wind farms in South Dakota to the load centers many miles away.” Congressmen from “coal states” might not attack the science of climate change if they were informed that the coal not burned in shutdown coal plants would instead go to making methanol. With the help of others, we may need to assemble a series of legislative packages, each containing a “horse trade”. In addition to “horse trades” there may be common ground between the two major political parties because our energy future might be more regionalized than we usually think of. For example, many Congressmen, Republicans and Democrats alike, from Texas to New York might support some shale gas legislation or a supporting DOE program because the shale gas seam stretches across this swath of the country. Republicans and Democrats alike might support offshore wind power, if it is built off of their states. Finally, one energy constituency might support another energy constituency if they are mutually supportive. For example, legislators who come from areas where biomass is grown might support nuclear power, especially if there were a specific program to build small (refrigerator sized) passive nuclear plants that would supply input energy for bio-refineries. Perhaps, someday, our political leaders will learn that there is scope for just about everyone if we are to transition to a post-petroleum future.
We need to convince politicians that unless we come up with a short-term energy strategy to deal with a zero oil margin world, they are out of a job, just like most everyone else.
Best,
Herschel
Colleagues:
To reinforce what Herschel has written below, I would like to share what a good friend of mine in the biofuels business has written below about the barriers to cellulosic ethanol.
+++
Bruce – here’s my take…
1. Market uncertainty is number one. Without E15 or a combination of FFVs/Blender Pumps there is no market for additional ethanol.
2. Financial uncertainty is number two. Linked to number one – but severely impacted by the global economic mess.
3. Absence of feedstock focus is number three. Corn and wood residue/co-products are the only feasible feedstocks for the next ten years (at market levels). Talk around energy crops is misplaced and confuses the investing community. They are not ready for prime time. Also the noise around drop in fuels is another diversion and confuses the market. Drop ins will not be ready if at all for another 10+ years and then a minimum of a ten year roll out to get to 1% of fuel.
4. Technology challenges remain a concern…at number 4. Much of this uncertainty is solved through the operation of commercial scale demonstration plants.
+++
What I would like to emphasize about the above points is that the barriers to greatly expanded cellulosic ethanol have very little to do with technological readiness…which I believe most people assume is the case, or even about the cost of ethanol production. They are about access to the transportation fuel market, finances (strongly affected by market access) and lack of feedstock focus. In other words, they are mostly political, informational and leadership issues…. and they need to be solved in that way. We need the political will to make some decisions and better information to the public and policymakers—which will help with the political will.
Best,
Bruce
Here is an interesting paper written by the EIA about the relationship between GDP growth and oil prices:
http://www.eia.doe.gov/oiaf/aeo/otheranalysis/aeo_2006analysispapers/efhop.html
They are estimating a long-term decline of GDP (or headwind to GDP growth) of -0.5% for every $10 increase in oil price. The paper was written in 2006 when oil was at $30 bbl, today at $80, oil represent a whooping -4% headwind to GDP growth.
Here is Roubini’s paper from 2004 on the economic impact of oil price rising showing similar results:
http://pages.stern.nyu.edu/~nroubini/papers/OilShockRoubiniSetser.pdf
BTW, I have a call in to the EIA to see if they have an updated tracking of the relationship between GDP growth and oil prices. I will let you know what they come back with.
Eyal
The image I’ve posted above is DoE graph. I superimposed on it the amount of money we spend every year on each energy supply source. I had to guess a couple of numbers here but the numbers for petroleum, natural gas and coal are pretty good.
As you can see, fighting coal is really hard as we spend 4% of our energy budget ($30B) on it to get 48% of our electricity. The elephant in the room of course is petroleum.
Many people out there expect that market forces by themselves will move us away from petroleum. If that was true, why wouldn’t those forces worked by now? After all, everyone of the replacement fuels (natural gas, ethanol, methanol, electricity) are less expensive than gasoline. Yet we are unable to deploy those in any scale.
The reason that market forces are ineffective in replacing petroleum is that there are three monopolies that have to be overcome to enable us to move forward. We should break the monopoly of petroleum on the car platform. We should break the monopoly of the blenders (refiners) on the dispensing stations. Last we should rationalize emission regulations and warranty rules to enable more innovative solution and open the market for competition. It is extremely hard to break one monopoly let alone 3. Modern free market theory acknowledges that there is no natural market force that can break a monopoly only government with such laws as the anti-trust law can get it done. This is perhaps the most compelling reason why the government has to intervene here.
I have made a PowerPoint presentation on these topics, please contact me if you are interested in a copy.
Herschel,
I don’t know how to quantify an oil shortfall. Does market theory even recognize the concept of a shortfall in any formal sense? Supply and demand must always match — by definition! Supply and demand are functions of price, and market price is whatever it takes to make the two balance. The only meaningful way to talk about a shortfall (to an economist, anyway) is as an estimation of the difference between actual consumption and what consumption might have been in the absence of any change in price.
This isn’t just a matter of words and definitions. It goes to the heart of perhaps the issue for out time: the relationship between oil and energy supplies and the world economy. Because of the recession, “demand” for both electricity and oil in the U.S. are down significantly. In fact, the recession-induced “surplus” in electrical generation capacity has caused many utilities to back away from plans for new nuclear plants. If one posits no connection between oil prices and the state of the economy, then one can shrug off the supply situation. “Shortfall? What shortfall? The economy tanked and demand is simply down because of that.”
On the other hand, if one believes that $147 / barrel oil was at least one of the triggers for the recession, then we are already experiencing a shortfall. But it’s very hard to sort out, because of time lags and all the other factors that unquestionably contributed to the current mess.
I think the important thing is that the mental model that most of us have for how supply shortfalls will play out is likely wrong. Prices may spike, but long-term prices won’t necessarily be pushed through the roof by competition (with China et. al.) for finite supplies. Demand will be limited not by high prices directly, but indirectly, by economic depression. And economic depression itself is not happening in quite the way that most of us had pictured it. It’s not so much a matter of everything slowing down, but rather a shrinkage of the part that’s doing “just fine, thank you.” Depression throws its casualties to the outside, where they have no voice and no longer matter.
That last point, I believe, is at the root of our dysfunctional national energy (non-policy). Policy largely belongs to those with a focused interest and ability to influence what gets heard and what gets enacted. Those are established interests that have nothing to gain, and often a great deal to lose, in policies that the nation as a whole desperately needs.
I wish I knew of a solution for that problem. But I don’t.
Regards, Roger
Dear Roger,
Thank you for this thoughtful post. Perhaps classical economics does not met our needs, i.e., supply and demand must match, when there is a difference between actual consumption and what consumption might have been in the absence of any change in price, as you put it. I guess that classical economics would not recognize that there are physical limits to supplies, such as oil, and might treat two different situations as being equal: (1) 100MB/D of supply and 100 MB/D of demand and (2) 100 MB/D of supply and 105 MB/D of demand of which 5 MB/D would go unfulfilled. Yet these two situations result in vastly different societal circumstances. In 1975 I was in my office in Vienna, Austria as a staff member of the International Atomic Energy Agency. A gentleman from India stopped by for a visit and we both reflected on how the recent world oil situation affected our two different countries. I “complained ” that shortages of gasoline resulted in long lines to the gas station where very limited amounts of gasoline were doled out. He said that when there were petroleum shortages in India they didn’t have enough energy to run all their irrigation pumps and people starved to death. The energy content of a barrel of oil is fairly constant the world over, but not its “social worth”.
There are other defects in “classical economics” of supply and demand in that many important effects are not captured in extreme situations when there is no surplus supply to readily draw from. For example, when people are standing in line to get their ration of oil they are not being productive. When businesses do not get the energy they need, they become less productive or even go out of business. If an economic model only captures the dollar value of goods bought and sold it completely misses the economic consequences of decreases in productivity. Which economic model takes into account the lost years of recent college graduates who cannot find a job because the economy has tanked or the wreckage on families and communities on home foreclosures brought on, in part, by high energy prices?
Stating the above a bit differently, even in cases where supply and demand do come into equilibrium, this may occur only after a significant delay. For example, the demand for oil can increase rather rapidly as more cars are put into use in China and India. However, new oil supplies do not come on line quickly, if at all. Therefore there is a time period during which some would-be users of oil will not be able to get the oil they wish. This may be a temporary situation for some (stronger nations) and it may be a very long duration problem for others (weaker nations). The impact on weaker nations can be profound and much of the energy effort we are all working on is to prevent the U.S. from slipping into the weaker nation status.
I’m still reworking my first estimate of the number of barrels of oil might be displaced if all the CO2 from our coal and natural gas plants were converted to methanol, without any losses, and will send you a second version when done. Unless I’ve made another math goof, the results are huge. My initial results are about 15.3 MB/D of crude oil equivalent per gigatonne of CO2 perfectly converted to methanol. Coal plants alone release about 2.125 gigatonnes/yr of CO2. I’m beginning to read up more on the methanol economy and the work of Nobel prize winner George Olah who says forget the hydrogen economy and forget the ethanol economy and move on to the methanol economy. Lots of stuff on this via the internet and wikipedia. My personal prescription emphasizes diversity and would be an assembly of all three economies, along with lots of energy storage.
Best,
Herschel
Roger,
I tend to agree that compared to historical norms and the state of the economy current oil prices are high. So to that extend one can say that we are experiencing “shortage”. However, I would argue that this shortage is not “real” rather it is an artifact of very low interest rate that enables traders to leverage up their oil positions “on the cheap”. It is also a reflection of the weak dollar that is too the result of the artificially low interest rate environment. However, if you look at the global picture, there is no doubt that there are at least 2-3mbpd spare capacity (which is oil that can come online within 30 days and last for at least 90 days thereafter). Most analysts put the amount at 4.5-5.5mbpd. However, if the trend that we have been seeing over the last 3 years of global demand growing at 2-3mbpd per year continues, the spare capacity will disappear faster than new production can be brought online. This will create a true resource constraint market, which of course means higher price, but also means that the weaker players may be completely priced out of the market. A lot was written about the possible mayhem that climate change might cause. However, without transportation modern society could not function – from farming to food distribution, to policing, it all relies on transportation.
One more point to note here. The US economy is particularly vulnerable to oil price spikes. We are the larger consumer of oil and since oil is denominated in dollars our fiscal policy of increased liquidity in the face of hard economic time weaken the dollar, causing oil prices to go even higher. So to that extent I agree with you that all this will result in demand destruction through depression. And with that depression, the chance of an armed conflict increases.
Herschel,
What do you think about the US ability to add methanol capacity? All the natural gas we produce goes through gas processing plants that desulfurize it, dry the gas and remove any NGLs and CO2. That same process could relatively easily be augmented to produce methanol. It is already at very large scale. It is just that today there is no market for methanol.
Eyal
I agree with Roger that supply and demand always meet via price. However, this is not a free market. China India, Indonesia, Brazil, etc. will continue to grow (although the growth may slow because of the cost of oil). However – they will get their oil (either by force or cash). We will get our oil (and sink into recession again). Sub-Saharan Africa will not (and we will still drive our SUVs).
Yossie
Yossie,
Regarding your last sentence, I need to take issue with that, and with the total omission of travel and fuel demand from this discussion.
This is very frustrating because it directly affects the issue of “scalability” which has been debated here. I am getting tired, for example, of the analogy with Brazil’s pro-alcohol program, since it is of limited utility given the contrast between their and our fleets and vehicle miles traveled. Brazil has fewer drivers, of course, but their fleet is also smaller and more efficient, and I would wager Brazilians don’t have to drive as much to meet daily needs.
All of which yields a demand for transportation liquids of just 2.52 mbd, about one-eighth our own massive level.
Demand moderation helps address the scalability issue, and it is just plain dumb to set it aside (especially when sedans have actually made a comeback in recent years).
Thanks,
Deron
P.S. I would like to learn more about methanol’s potential to cut carbon emissions, given my organization’s focus on environmental protection.
In a related subject, many of us have been concentrating on getting petroleum out of our transportation sector, as we should. However, about a third of all the petroleum we use goes into petrochemicals. Domestic oil production is too small, and likely to get smaller, to even supply these non-transportation applications. Additionally, the production of petrochemicals also produces GHG. While not the dominant source of GHG today, it would become the major source of GHG in the longer term. What this means to me is that we need to start thinking about this one-third piece right now and begin to build the industries that will deal with this.
Lastly, I have a totally undeveloped idea that I want to share with you in spite of its incomplete status. This deals with national security. Just like we have a Strategic Petroleum Reserve (SPR), we should have a Strategic Methanol Reserve (SMR). An extrapolation of the article I referenced in my letter to Roger on converting seawater into jet fuel is to use offshore wind farms to make methanol which would then be collected into the SMR located offshore or at the shore. Making methanol requires CO2 and H2O. The concentration of CO2 in seawater is many times greater than in air. Such an arrangement would eliminate the need to have offshore wind farms run expensive underwater transmission cables to the onshore grid and would eliminate concerns that wind power might cause instabilities in the present electric grid. Again, just an early idea.
Herschel,
From cost to the economy point of view the industrial use of oil are the byproducts of transportation fuels. Hence I am guessing that more than 90% of the dollars spent on petroleum products go to transportation fuels.
Industrial use have two main paths. Short molecules and long molecules (such as tars and lubes). The short molecules industry is switching to NGL because it is less expensive. Once we start producing biomass based synthesis gas in any scale and for a faction of the price of petroleum, the industry will switch to it very quickly. The long molecules products are a small fraction of the costs to the economy (I tried once to estimate and it seems that it is $10B-$15B a year, but this is a rough estimate).
Eyal
Herschel:
If I read your email correctly, you state that about one third of the mass of petroleum ends up at higher value products (lubricants, plastics, etc.). I think that is incorrect. I am not certain of the source of your data, and would be interested in seeing those numbers, but my understanding has always been that less than 5% by mass (more like 3%) of the petroleum is converted into higher value products. I can readily believe that one third of the value of petroleum products in value added is due to plastics, solvents, etc., but not by mass. There is a very strong industry already developing around converting renewables to bioplastics, solvents, lubricants, etc.
Best,
Bruce
Dear Bruce,
Thank you for your note. It is clear that I need to tighten up on the words that I used. Based on EIA data, about 72% of the 6.85 billion barrels of oil that were used in 2009 were used to make transportation related fuels: Gasoline 48%,Diesel Fuel 17% and Jet Fuel(Kerosene) 7%. The remaining 28% were spread out on some 14 different end uses. According to the EIA petrochemical feedstocks listed at 3%, right in line with your number. My point, which I believe is still valid, is that domestic sources of oil would not be able to supply even this 28% sometime in the future. Your point that there already exists a strong industry effort to deal with remaining 28% through renewables is well taken.
My oil use numbers come from http://www.eia.doe.gov/ask/crudeoil_faqs.asp
There may be a bit of an ironic twist here. Certain replacements for gasoline, like methanol, will create new CO2 when burned. Other uses of methanol, such as to make plastics, may not end up returning their CO2 input to the environment because they end up as plastic bottles that are not biodegradable. This also raises GHG questions about biodegradable plastics. Perhaps we end up with conflicting environmental issues: landfills loaded with used plastic bottles versus biodegradable plastic that releases CO2 when going to a more environmentally benign end point. Life is getting complicated.
Best,
Herschel
Enter your comment Colleagues:
I have thought about Roger’s comments below in terms of my earlier post. I am not an economist, just a humble (
) chemical engineer, so please pardon my simplistic approach. The empirical evidence connecting energy use and economic growth seems overwhelming. So why not think in reverse? There is an equally strong connection between constrained (by cost or physical availability) energy supplies and lack of growth…or painfully slow growth as in this recession. The supply and demand argument from most economists in this case seems almost silly. Of course supply and demand will balance, just at the point where the host (the oil consuming world) is not quite killed off by the parasite (the oil producing world). That’s a hell of a bargain.
Most of us have limited economic resources, the more I spend on energy, the less I have to spend on everything else…including employees in the case of a business. (Travel Delta to get a look at this truth close up.) So why not spend some of our time making this connection for our fellow citizens?
Best,
Bruce
Hi Herschel, I am interested in your coal plant CO2 to Methanol idea, utilizing nuclear power to provide the reduction source. Due to the complexity of coal gas, various particles/sulfur containing compounds toxifies catalysts, etc., the process may be relatively hard to scale up. I am wondering whether biofuel from coal plants may be a viable solution, microbes may be more robust in dealing with different conditions.
On March 30, 2011, President Obama announced his Administration’s goal to cut foreign oil imports by one-third over the next ten years. Text of speech: http://bit.ly/fNt4qA
The Administration’s plan follows two primary strategies:
• Find and produce more domestic oil. Encourage offshore oil exploration and production, including oil and gas development from Alaska, the Gulf of Mexico, and the Mid-Atlantic. • Reduce oil dependence by encouraging the development of cleaner alternative fuels, including natural gas and biofuels, and improved vehicular efficiency.
In the speech, the President argued that oil imports should come from friendly nations such as Canada, Mexico, and Brazil. He also highlighted the Administration’s goal of a Clean Energy Standard, which would mandate an 80% clean energy portfolio by 2035.
Is a 33% reduction in foreign oil imports over the next 10 years a realistic and worthwhile goal? If not, why not? If so, are the strategies outlined above sufficient to accomplish it?
What impacts might such a shift have on the American economy? What secondary technologies or markets might be impacted, positively or negatively?
Yes, I think this is an achievable and laudable goal. However, in terms of economics it misses the point. Even if we cut oil imports this much, especially if we did so mostly or entirely my increasing production, we would remain price-takers in a huge global oil marketplace. The UK has been throttled by global price fluctuations in the past decade in spite of fact that until very recently it was a net-oil-exporter thanks to North Sea production. Canada produces a lot more than it consumes, and it has massive reserves mostly due to the tar sands, yet it’s fuel prices have also tracked global crude prices and consumers are angry there as elsewhere about high fuel prices.
Jobs one and two for the U.S. should be efficient use of oil, and substitutes in transportation. This insulates us from sustained oil price increases by driving down oil-intensity of our economy and transportation system, and allows us to be more nimble should prices unexpectedly spike (allowing us to save oil in a hurry).
And of course we get the added benefit of reducing imports. But should be a salutary byproduct of a more efficient, flexible transportation system, not the main goal.
I’ve heard this so many times by American Presidents that it has become meaningless. If President Obama thinks he is going to accomplish this with biofuel, solar or wind power (these latter two do not even contribute the same energy sector as oil), he is living in a dream world. I can suggest one way to accomplish it: a nice big fat depression.
Wallace Manheimer
Sorry, Mr. President, but you are simply wrong. There is a “quick fix” that can massively reduce U.S. oil consumption, and make our vulnerability to price spikes in the foreign oil market a relic of the past. To draw that solution into focus, we need to understand that 70% of the oil the industrialized world uses is needed for transportation and nearly none for generating electrical power. So, shocking as it may seem coal, nuclear, solar, wind, hydro, and geothermal all have nothing to do with our dependence on oil.
What really matters is the amount of gasoline and diesel we use in cars, trucks and buses. We could reduce that amount cleanly and economically by turning natural gas to methanol and by turning non-food crops and cellulosic waste to ethanol or to synthetic gasoline and diesel – and then use these as a substitute to oil-based fuels. But that won’t happen until we put in place THE ONE POLICY THAT COULD CREATE A MARKET FOR THESE ALTERNATIVE FULES AND SPUR THE INVESTMENTS NEEDED TO BRING THEM TO MARKET: an “Open Fuel Standard” for autos.
To learn more about the Open Fuel Standard and how it could change the way in which we fuel transportation, I invite you to visit our website at http://www.ea-21.org. The Open Fuel Standard is the “quick fix” to America’s dependence on foreign oil.
I suppose different people have different notions of what constitutes a “quick fix”. I’m very much in favor of flex fuel standards, but let’s not overpromise.
If the suggested Open Fuel Standard were passed tomorrow, it would optimistically be three years before a majority of new vehicle models could offer the feature, and at least seven years before flex fuel vehicles represented even 30% of the national fleet. Changes in the auto industry typically run through a five-year pipeline before making it into showrooms. To introduce a change more quickly often means scrapping parts and materials already in the pipeline. Fleet turnover has traditionally been about 12% per year, but has lately been lower. In this economy, people are hanging on to their old vehicles as long as they can.
The quickest fix available is telework. A car that stays parked burns no fuel. Estimates indicate that 50 million workers telecommuting 2 days a week would save some 10 billion gallons of fuel a year–all while increasing productivity, saving energy used in offices, reducing air pollution, and improving worker satisfaction.
Per Roger’s point, a fairly quick and cost-effective fix is converting existing fleet vehicles–buses, trucks, etc.–to use LP or natural gas. At current fuel prices, payback of the conversion cost may be on the order of 6-12 months.
I agree with Roger Arnold. I totally support an open fuel standard but it is not a “quick fix” and the President was right. There is very little anyone can do in the extremely near term to manage high oil prices — oil is a global commodity, we do not control it.
I had a most pleasant day on Friday April 1 at the University of Maryland where I gave a seminar on my almost completed revised draft of “A Call to Action”. It was well received and a very interesting set of related questions came up on liquid fuels. People were concerned about some of the practical issues with using methanol and ethanol…many of the well known issues of toxicity, affinity to water, attacks on gaskets, ability to be shipped in pipelines, etc. Some wondered if ethanol and methanol production went far enough, i.e., wouldn’t it be better to make butanol or something called synthetic gasoline. [ I am aware that in Brazil they have vehicles that run on 100% ethanol and that whole infrastructure seems to be working just fine.]
I’m not nearly knowledgeable enough to answer the questions that the students brought up, but one thing that struck me was whether or not pursuing an Open Fuel Standard is the right strategy. I find the idea of a universal replacement to gasoline an appealing concept, especially if this universal replacement is similar to today’s gasoline. Perhaps this universal replacement is what is generally called “Synthetic Gasoline”. Rather than having flex fuel vehicles that can accept gasoline, ethanol, and methanol and mixtures thereof, would it be better to have all liquid fuel chains end up with the same liquid fuel (Synthetic gasoline??) to minimize not only changes in vehicles, but everywhere else in the fuel distribution chain, such as minimizing what needs to be done at present gasoline service stations? If there is to be a standardization of the end point liquid fuel, what should this liquid fuel be?
This is way over my head, so your thoughts on this are most welcome.
Another question that came up was my assumption that replacing gasoline in light duty vehicles with an energy equivalent amount of methanol ( I didn’t deal with methanol’s higher octane number) would be essentially GHG neutral. Would you agree? If not, please explain.
In view of the President’s goal to cut petroleum imports questions/answers/concepts like these are most timely.
Thank you for your thoughts.
Best,
Herschel
As I remember, gasoline has a greater energy density than methanol, but methanol was used in race cars because it had a higher octane rating and the engines could use a greater compression ratio, pack in more air, and end up with more power (but at the penalty of using more fuel). I understand that formula one racers use a carefully blended gasoline that has to last an entire race without refueling. The fuel would run in normal street cars, but I wouldn’t want to pay for it
It is interesting that just over the last few weeks this topic have really gained momentum. I got this question now from several people. At this point I would venture to say that there is no clear answer. The main reason in my mind is that there is still a lot of missing data and conjectures.
1. Butanol is a great fuel. However, all the research I have seen so far only deals with low to medium blends of butanol. From my understanding butanol in high concentration like Bu85, will still require fuel flexibility [I don’t have citation for this, I am making a conjecture].
2. With regards to water contamination of pipes. Natural gas pipes run dry. Even small amount of moisture in natural gas pipes can condensate into hydrate solids which could eventually block the pipe. So this problem is solvable. Also in Brazil they pipe ethanol as you mentioned. The issue is one of capital investment which will not happen until there is a market for the fuel.
3. I understand that adding some heavier oil to the methanol/ethanol will help protect it in transport. Those heavier oils can be separated at the destination (by the blenders) then it could be trucked back for reuse. Because the heavy oil is a small fraction of the flow, trucking is a much smaller issue.
4. With regards to toxicity. Both ethanol and methanol are readily biodegradable (even very large spills will degrade in days). Moreover, they appear in every day products without any restriction. For example, methanol is the active ingredient in Windex. I don’t know much about biodegradability of butanol.
5. Several people told me that methanol in the car does nothing to improve GHG emissions. This may be true if methanol is created from coal compared to traditional light oil refining. But new processes that create methanol from natural gas are very efficient and on the other hand, our oil is getting heavier and dirtier (tar sands). So I don’t really believe that the old edict of methanol for transportation is the same as gasoline is true. Moreover, eventually we will be able to make methanol from CO2 and water directly from the environment.
So back to Melanie Kenderdine’s comment on another thread: In the end the issue is one of cost and scalability. From my understanding, butanol and synthetic gasoline (which I take to be a “dirty” mix of butanol and other similar length chains) are significantly more expensive at this time than methanol/ethanol. So the question is this, what will produce the best results: use simple fuels but make the investment in distribution and in new car technology or use a more complicated fuel and keep the existing distribution and car technology.
The advantages of maintaining the existing infrastructure are self-evident. However, there are also advantages to simplifying the fuels:
1. I think that the car engine technology will go through some major revamp to increase its efficiency anyway (variable timing, independent piston action, variable compression, etc). If we are going to invest in that technology we may as well make it available for all fuels. Particularly for the light fuels that have higher octane and could yield higher efficiency.
2. Since we are looking for solutions that could roll out globally, simple fuels could be made locally pretty much anywhere around the world.
3. One of the results of the use of lighter fuels is reduced urban air pollution. I don’t know how butanol compares.
As I said, I have not seen the data yet to be able to take a firm stand one way or another.
Sorry for adding to the confusion.
Eyal
I’ve been interested in the trade offs among various liquid fuels for some time. For starters, I agree with pretty much everything Eyal writes below. In terms of energy policy, I think the key point is simply that with newer and more efficient microprocessor-controlled engine technology in the pipeline, flex-fuel capability is almost trivially easy to support. It opens a range of options and enables markets to resolve the most attractive approaches. I can’t think of anything — beyond a covert desire to shield current gasoline producers from competition — that would argue against it.
In terms of scalability and long term social good, I would put my own money (if I had it to bet) on synthetic gasoline and diesel from Fischer-Tropsch micro-channel reactors. That’s a gamble, since FT-micro channel reactors have yet to be demonstrated on a true commercial scale. Also, the 500 pound gorilla in the synthetic fuels arena (Shell Oil) is on record as saying that for synthesis, “small” can’t compete. They’ve said that synthetic fuel production requires the scale economies of very large plants, like the Pearl GTL plant they recently built in Qatar. If that’s so — rather, if it remains so — it’s bad news for synthetic fuels from biomass. The cost of harvesting and transporting biomass largely rules out giant central plants.
It’s rash to disagree with folks with demonstrable expertise who clearly know their business. However, I’ll hazard that Shell’s position is incorrect. Or maybe correct for now, but likely to be overturned by technology trends over the coming years. The scale economies that they’re concerned with are not fundamental — not rooted in the physics of the chemical processes. Rather, they have to do with complexity and the economics of plant construction. A small synthesis plant is not significantly less complex than a large one, and for that reason can be nearly as expensive to build. Given that, the way to minimize capital cost for production capacity is to make the plant as large as possible. But that strictly holds only for plants that are custom-built as one-off construction projects. When large numbers of similar plants can be assembled easily from factory-produced modules, the scale economies are quite different. Small plants operated in proximity to the sources of biomass become economically viable.
As to renewable liquid fuels in general, I find it useful to distinguish two broad categories: (1) those produced biologically, and (2) those produced via chemical synthesis. The first category (biologically produced) divides into two subcategories: (1a) those produced as waste byproducts by heterotrophic organisms consuming biomass (e.g., fermentation of sugars to produce ethanol); and (1b) those produced internally by autotrophs. The latter include vegetable oils that can be pressed from various seeds and nuts, as well as oils produced from cultivated strains of algae. Biological approaches generally have the advantage of low up-front capital costs. They can usually operate in low-tech environments. For that reason, they’re favored among those who see a new dark age looming. But they don’t scale well, have relatively low per-acre liquid fuel yields, and high O&M costs.
Liquid fuels produced via chemical synthesis all have a common middle point, which is synthesis gas. That’s a mix of H2 and CO2 in controlled proportions. Competing processes differ both on the front end — in how the synthesis gas is produced — and on the back end — what’s done with the synthesis gas.
There are lots of ways to produce synthesis gas. The two dominant methods at present are gasification of coal and steam reforming of natural gas. Gasification of coal yields an initial product that is dirty and requires rather expensive clean-up before it’s usable for synthesis. Steam reforming of natural gas is cleaner, and the initial product is easier to polish into clean synthesis gas. But neither is renewable.
For sustainably produced synthesis gas, there are four categories I distinguish: (2a) mid-temperature pyrolysis of biomass with co-production of “bio-char”; (2b) full gasification of biomass by partial combustion with oxygen; (2c) full gasification of biomass by steam and external energy; and (2d) reduction from CO2 and steam. Method (2a) is carbon-negative and primarily intended for sequestration of carbon. It also enhances soil fertility. Production of synthesis gas is secondary, and (2a) is not a path one would choose if production of liquid fuels is the sole goal.
Methods (2b) and (2c) may sound similar, but are quite different in detail. They also differ in their yields of liquid fuel per ton of biomass. In (2b), the energy to drive the production of synthesis gas is supplied by oxidation of a portion of the biomass itself. Almost half of the carbon in the biomass may end up as CO2 waste from the partial combustion. In (2c), there is no CO2 waste. Essentially 100% of the carbon in the biomass is converted to CO in the synthesis gas. The yield can be double that of (2b), at the cost of supplying external energy or greater than the energy that would have been supplied by partial combustion. That’s generally a good trade off, in terms of liquid fuel yield per acre; biomass is not a very efficient energy source. It’s better to use it as a carbon source, with energy supplied from sources with a lower land footprint.
Method (2d) doesn’t use biomass directly. It takes its carbon from captured CO2 from any of a range of sources. The reductions of CO2 and steam can be done in one step or two. For the one-step approach, CO2 and steam are reduced together in a type of high temperature electrolysis cell. It’s pre-commercial experimental approach, but efficient and promising. The two-step approach is conventional, using well-known reactions. Hydrogen is produced by electrolysis of water, and then a portion of the hydrogen is used to reduce CO2 to CO via the reverse water gas shift reaction (RWGS). In either case, the need to reduce carbon from CO2 makes the external energy required even greater than for method (2c). However, the synthesis gas comes out very clean and directly usable in subsequent reactions. There’s no H2S, tars, or metal carbonyls that have to be scrubbed. If one has cheap energy from advanced solar or nuclear power, this method could be quite economical.
My above classification scheme isn’t complete. There’s at least one important approach that doesn’t fit. That’s flash pyrolysis of biomass to produce a sort of “liquefied biomass” or “bio-oil”. Bio-oil can be burned for heating in place of fuel oil, but isn’t directly usable as a liquid fuel for engines. It’s a colloidal suspension of unstable particles that would quickly clog any fuel injection system. Just sitting in a tank, my understanding is that it will turn into a gummy mess in a matter of a few days to a week or so. But it captures a high fraction of the energy from its biomass input in the form of a relatively dense liquid that’s easy to transport. There’s active research into ways to stabilize it, or to refine it into forms that can be used as transportation fuels. We’ll have to wait and see how that turns out.
Roger Arnold
Silverthorn Engineering
There are strong incentives for flex fuel vehicles. The current gasoline standard is an historical artifact of the properties of Texas crude oil. If it had a larger kerosene fraction, we would have kerosene powered cars. There is no reason to believe it’s the right fuel for the future. Flex fuel standards ultimately let the market find the range of liquid fuel for the future. It enables alternative fuels today to compete—that has both economic and national security benefits. Most of the problems with flex fuel are artifacts of having a single fuel standard for so many decades. Many tractor and other engines in the 1920s and 1930s were flex fuel—start on gasoline but could run on kerosene that was used for home lighting. With the use of a single fuel for decades, the system forgot flex fuel options.
Flex fuel today is more attractive today because with computer engine control, the engine system changes its behavior to match the fuel. That capability is a consequence of California air pollution regulations that forced the auto manufactures to rethink engine control. In the end, computer control implies higher mileage and lower air pollution. Because of this, flex fuel is a cheap option—otherwise it would expensive.
As a side note, the Brazilian car fleet is flex fuel—not gasoline or ethanol. That decision was made because the relative price of ethanol and gasoline vary across Brazil as well as availability. All the big auto companies are in Brazil and have no problem making flex fuel vehicles for Brazil. Just about every Brazilian car has a conversion sheet so when you see the price of ethanol and gasoline on the oil station sign, you know which fuel implies the lowest cost per mile and which fuel you want to buy today.
All of these energy goals are promised to be met well after the term of any incumbents are over and past history.
This statement sounds similar to those echoed by each U.S. president since Dwight Eisenhower. But today we’re using more foreign oil than ever. So, what is it that makes you believe he might have a degree of success this time? Remove the barriers from drilling on the north slope, in the shale oil beds from ND to WY and CO, and offshore, and then let the laws of economics take over.
Conflict with food production is widely believed to sharply limit the potential of biofuels. This belief rests on several, usually unspoken, assumptions that are either outright wrong, or badly incomplete. These major tacit assumptions are:
• People are starving and therefore biofuels are immoral.
Counterpoint: People do go hungry, but not for lack of productive agricultural capacity. Farmers worldwide produce more than enough food for everyone, but political instability and poverty limit access to this abundance of food. Also, increased demand for biofuels can potentially increase the price of agricultural products enough to lift many millions of people out of poverty.
• We lack the land to produce large amounts of biofuels.
Counterpoint: Actually, over 1 billion acres of abandoned lands exist worldwide which were formerly in agricultural production and which are potentially available for biofuel production—even if we were to do nothing to increase the productivity of existing crop and pasture lands to support biofuel production.
• Agriculture cannot change.
Counterpoint: Agriculture has changed significantly in the past and it can change again depending on crop prices, available technology and policies. Since all three of these factors are in a state of intense flux, the potential to change agriculture in the direction of enhanced biofuel production while maintaining food production certainly exists.
• Biofuel production and food production are inherently in conflict.
Counterpoint: This may be the biggest mistaken assumption of all. Human beings actually use most land to grow animal feeds, not human foods directly. There are many opportunities to integrate animal feed production and biofuel production to their mutual benefit.
Battery-powered vehicles will play an increasingly important role in transportation. However, it is physically impossible for batteries to power jets, heavy trucking and shipping, in addition to a significant fraction of light duty vehicle transport. We must have energy dense liquid fuels and biofuels represent the only sustainable alternative for liquid fuels. So we need to figure out how, not if, biofuels can be coproduced with food and animal feeds if we are to achieve a sustainable transportation sector.
1. Farmers grow three types of crops: food, feed, industrial raw materials. Lets look at cotton for example: why the question isn’t “food vs cloths”?
2. It now costs $120 to fill a pickup truck in Nairobi. It is so expensive that the farmers leave the trucks at the farm and take the horse and buggy to the market. Because of that only 1/3 the food gets to the city. That is how you get food riot. Those farmers don’t not know anything about the price of corn in the NYMEX.
3. Most of the food riots are in areas that do not use corn as a staple of their food. In the Middle East it is wheat, rice and beans. In the Far East it is mostly rice. None of these commodities are used for fuel production.
The bottom line is that the question is wrong, it is not “bio-fuels vs food”, it is “oil-fuel vs food!”
As recently as May 2nd, 2011, the national average price for a gallon of gasoline hit $3.96, more than a $1.06/gallon than it was on the same date just one year ago (Source: EIA) and over twice the cost compared to early 2009. The price of gasoline has consumed policymakers and commentators in Washington yet we seem no closer to what many consider a rational energy policy than we were when President Nixon announced Project Independence in response to the oil energy embargo of 1973.
Why is this? For over a decade we have forced ourselves to live within the confines of a Kyoto-based, global warming framework which cuts energy production and consumption, increases prices, twists market forces into government run boondoggles, just at a time when the world desperately needs plentiful, affordable and flexible energy supplies. Kind of a “Very Big Oops” (otherwise known as a VBO).
Washington is paying attention for good reason, however. Nearly every significant economic indicator – from new hires to home foreclosures to the price of a gallon of milk – correlates with gas prices, and so do politicians’ reelection chances. And US economic recessions are directly correlated with dramatic spikes in the price of gasoline. This was recently and vividly explained in a piece by Robert Zubrin on National Review online.
The reaction of some is that US production options are not sufficient to change the price of oil. The argument is we are stuck with such a small portion of the world’s conventional oil reserves that producing more here doesn’t make sense. This is also part of a narrative that sees US oil consumption as somewhat immoral—we are 4% of the globe’s population but use 8 billion barrels of oil annually which is somewhere around 20-25% of the annual worldwide production of petroleum.
From that follows the idea that high energy prices are our due. And as a top Chinese official said not too long ago, “it is time we work to get the Americans out of their cars!” This is also part of a narrative that says high energy prices, such as European prices for gasoline, will be good for us because it will force us to choose alternatives.
Problem is: what alternatives? One cannot turn over the fleet of hundreds of millions American cars overnight. One cannot simply trade in a car on which a lot of money is owned, especially as the value of cars does not equal the remaining loan on the car. In addition, our society was designed to drive cars. One can dream of being a grand architect and change all that, but residential and business development patterns cannot be undone over night. And that of course brings us back to square one: high energy prices can swamp economic activity, throw people out of work, and bankrupt the country. Another example of a VBO.
Our priority should be to put 30 million Americans to work over the next 10 years including those now unemployed and underemployed. Part of that should be to stop the process of bringing in millions of new consumers who are here illegally as they displace Americans born here who do not or cannot work. Since the oil Utah says provide guest worker arrangements that do not lead to massive movements of new immigrants and permanent residents but temporary guest workers in return for really getting serious about border and over–stay security. This is called real immigration reform.
But then we come back to supply and the novel idea of “choice”: an open-fuel standard where Americans would actually be able to choose their liquid fuel. We could also speed the offshore drilling permitting process, (and not give out leases and then stop the permits), open ANWAR to oil exploration and get its 28 billion barrels of oil to the TAPS (Trans Alaskan Pipeline) only some 70 miles away; provide better incentives, lower market barriers and begin to establish infrastructure for electric vehicles; and end the Federal Reserve’s “Quantitative Easing”, (lowering the value of he dollar increases the price of imported petroleum).
But of critical importance: pass the recently newly introduced Open Fuel Standard Act (HR 1687). And we could open up our unconventional oil resources—shale and tar sands—to development. After all we have more of this stuff than Saudi Arabia has conventional oil. Why have we passed laws and regulations forbidding its development? Another VBO.
True, oil prices are determined in part by complex international forces, and the international landscape has changed (and continues to change, rapidly). Forget the recent “instability in the Middle East” to explain everything. Remember through a decades long war between Iran and Iraq prices first went up and then they plunged. The real problem is that we no longer set the global demand curve for oil or have a say in enough production.
Remember, OPEC produces 30 million barrels of oil today, the same as in 1973. The same after 40 years! The rest of the world? It produces 45 million barrels compared to 25 million barrels a day in 1973.
What does that say? We have to break the lock OPEC has on oil and we have to break the lock oil has on the transportation infrastructure of the industrial world.
But we should know the demand function is changing in an unprecedented way as well. China is gobbling up oil supplies at an unprecedented rate, and India is soon to follow. If China and India start using energy like the Czech Republic or the Republic of Korea, worldwide consumption of energy would have to increases six-fold. Recent actions by Russia ( http://www.hudson-ny.org/1191/overcharged-when-you-fill-up-your-tank-this-summer ) suggest that Moscow is not exactly interested in lowering the price of oil. And too many terrorist sponsoring nations fund the war they are waging against us with the cash we send them whenever we fill up. Another VBO.
My question to this group is “How much can Congress do?” As Annie Korin and Gal Luft detail in their book “Turning Oil Into Salt”, it is time we thought strategically. In 1980, Chile changed its social security system into a private system. They now enjoy returns 4-5 times what current social security recipients can expect even though their investment climate was identical to ours. Chile’s economy just concluded a 15% growth rate for the past year!
But we had a failure of imagination and our political elites liked spending the social security surplus AND no-one wanted to admit they were wrong!
Brazil, some 15 years ago, decided to use its sugar cane resources to produce alternatives to oil. They did. We are now providing them loan guarantees and off-shore oil drilling platforms to drill for some 30 billion barrels of oil off their coast which they will export, while we prohibit such work here at home and get inline to buy their oil. Well, looks like another VBO!
As former DCI Jim Woolsey explains, the Korin books is a “small masterpiece — right on the money both strategically and technically.” My friend , Robert C. McFarlane, former U.S. National Security Advisor to President Reagan, predicts it will become “the Bible for everyone who is serious about energy and national security.”
What does it propose we do? Choice, folks. Like choosing to arm yourself if you want; choosing the right kind of retirement plan or health care policy; like choosing to work without having to join some organization and choosing freely where you send your children to school.
For example, we can make methanol from natural gas, coal, and biomass. But we cannot put it in our cars. A flex-fuel vehicle or open-fuel standard would allow that. At a cost of $100 a car, we can produce Methanol from resources here at home.
At a cost of $100 per new car, we can enable a vehicle to run (in addition to gasoline) on Methanol made from a variety of energy resources the US is blessed with.
Although Methanol gets half the MPG as gasoline, it is half the cost of regular. Yet it has the octane of premium and it was the fuel of choice for INDY 500. Congress can open ANWR and stop sending at today’s price some $500 billion overseas every year. Wherever our energy may come from in the future, we have to drive the price of petroleum down to $30 a barrel or 70 cents a gallon wholesale. In short, turn oil into salt. Bankrupt the terror masters. Gain control over our own destiny. And grow the economy and give back to the American people the pursuit of the American dream.
We should let prices rise, and add a tax to internalize the external costs of petroleum.
We have subsidized the oil industry with government support for far too long, which has put us in this position. Patterns cannot be undone overnight. However, if we “protect” the American people from the natural impact of the costs of the American Automobile abusive relationship, there will be no reason for each person to change, and we can be sure that this problem behavior will become worse. Maybe people can’t just overnight get another car. However, they can carpool, telecommute, bicycle, take public transportation. I understand this isn’t convenient, but neither is the economic, environmental, and political consequences of not making this change. The American people have time and time again proven themselves to be profoundly adaptable – but only when they need to be. We need to be now, and the government should facilitate this adaptation by internalizing the costs of fossil fuel use (increasing the cost to the consumer to be the true estimated cost to society of the consumption) and not anymore subsidize consumption.
I am an entrepreneurial Electrical Engineer with an MBA, several startups and 32 years of experience in LED and Display Technology under my belt. I have been following Oil Shale development since the Arabs turned off the Crude Oil in ’73-‘75 and feel there is a preponderance of evidence that the US could become self sufficient at its current rate of consumption without putting its environment at risk, thru the development of its Oil Shale Deposits starting with the Piceance Basin.
1. the USGS has recently upgraded the reserves contained within the Piceance Basin to 1.2 Trillion barrels (bbl) of crude oil, equal in quality to Libyan Crude, with over 800 million bbl recoverable 2. The Piceance Basin is Federal land under the BLM and part of the Navy’s Strategic reserves….i.e. it is owned by the people of the United States and could be a Global source of revenue to fund technological and social needs of the nation 3. Shell Oil has developed an In-Situ process for converting the Kerrigan precursor to crude contained within the oil shale to a Libyan quality Crude Oil that would be profitable with crude at $30/bbl. Shell has over 200 patents on the process and the Mahogany Test Site has proven the process step feasibility. 4. There are 4 – 6mile x 6 mile tracts defining a 12 mile square area with a combined total of 285 million bbl of which over 220 million ostensibly, would be recoverable using the Shell In-Situ process. 5. Several recent Federal Gov reports in addition to a Fortune Magazine article referenced below, drill into the detail and derive political, economical, environmental, social ramifications of “Oil Shale’s” successful development to meaningful production. The most notable RAND and Strategic reports were issued prior to Crude reaching $100+ / bbl plus… and China & India moving Crude from Supply push to Demand Pull. 6. Personally, I would advocate the US Gov taking an OPECess approach to control and derive revenue from exploiting the Oil Shale deposits on Federal Land that represents 80% of the known resource. For Example: a. Fund & Contract Shell and a few others with In-Situ processes to bring the Oil Shale to volume production levels > 1 million bbl/d. Including multiple paths in parallel to select the optimum to expand. b. Reward the two best producers with rights to 10% of their process yield at market price less 10% c. Every 1 million bbl/d we don’t import @ $100/bbl is $36.5 billion annually, we don’t pay to OPEC. Or $365 billion if we eliminate foreign oil at 10 million bbl/d. 7. If Shell Oil is correctly stating what they can achieve, one has to question Ken Salazar’s lack of urgency in validating Shell’s process claims and moving the development forward with incentives and funding from private and public and Gov sources. 8. I believe an article on Shell Oil and others in developing Oil Shale as a Practical, or Not, method of solving our near term energy problem a. If the article’s conclusion was that the process was indeed validated and Crude from Oil Shale was possible at $30 i. Many readers so informed would feel a little less helpless ii. More would question the government’s lack of promotion and development of the resource
The SEC takes a dim view of companies like Shell Oil publishing mis-leading speculative information. If Shell is correct, an article from you and Popular Science could both inform its readership and give them cause to demand the Federal Government do more to exploit Oil Shale.
Both the RAND and the Strategic Significance of America’s Oil Shale Resources conclude that a $5 /bbl decrease in OPEC Crude price for the first 1 million bbl/d Oil Shale Crude produced another $5 /bbl reduction just for starting the program etc. OPEC would begin to produce as rapidly as possible since the US could supply most of the world from its Oil Shale deposits and Canada and Russia rendering the volatility of the Middle East a non-seqyitur.
References: 1. Oil shale development in the United States – James T. Bartis A RAND – INFRASTRUCTURE, SAFETY AND ENVIRONMENT report Preparred for the National Energy Technology Laboratory of the U.S. Department of Energy issued 2005 TN859.U5O35 2005 622’,3383’0973—-dc22 2. Strategic Significance of America’s Oil Shale Resource Volume 1 – Assessment of Strategic Issues march 2004 Preparred for – Office of Deputy Assisstant Secretary for Petroleum Reserves Principle Authors _ harry R. Johnson – INTEK, Inc., Peter M. Crawford – INTEK, Inc. and James W. Buncer – JWBA, Inc. Oil shale may finally have its moment In a dusty corner of northwestern Colorado, an energy of the future is beginning to look like the real thing. Can oil shale work? Fortune’s Jon Birger reports.
By Jon Birger, Fortune senior writer November 1 2007: 11:12 AM EDT