About Marshall Kaplan

Marshall Kaplan is the former Dean of the Graduate School of Public Affairs at University of Colorado and held the Wirth Chair in Energy, Climate Change and Community Development. He also served in the Carter and Kennedy administrations and as an Advisor to Assistant Secretary Floyd Hyde when George Romney was Secretary of HUD. He was a principal in the policy advisory firm of Marshall Kaplan, Gans and Kahn. Marshall has written several books and numerous articles on regional and urban policy, New Towns, poverty, infrastructure, environment and social welfare policy. He was honored by the Colorado ADL for his contributions to the nation and community in the early 1980s.

Take me shopping for eggs, copper and corn starch

corn starch boxGood news for a world often filled with bad news has recently been generated by two major U.S. universities, both in regards to the efficacy of alternative fuels. Maybe the announcements will lend confidence that America can find a way to balance economic growth with environmental concerns. Increasing success over time will mean that (paraphrasing in part, the late Sen. Robert Kennedy) the nation will not have to accept “what is” with respect to the dominance of gasoline as a fuel, but can consider “what could be” concerning the use of alternative, cleaner, safer, environmental-better and cheaper fuels.

Stanford University professors, in a paper co-authored by Dr. Matthew Kanan, assistant professor of chemistry, announced that they have developed a copper catalyst that can efficiently convert carbon monoxide and water into ethanol. Quoting from a recent MIT Technology Review (April 2014), “while the work is still experimental, it’s significant because the group was able to synthesize ethanol and other desired products with so little energy input.” The Stanford researchers envision a “two-step process in which carbon dioxide is first converted into carbon monoxide using either existing processes or more energy-efficient ones that are currently under development. Then, the carbon monoxide would be converted to ethanol or other carbon-based compounds electrochemically. The key to the new catalyst is preparing the copper in a novel way that changes its molecular structure.”

How long will it take to get from idea to market? If the copper-based process survives further lab tests and evaluations, and if it is then converted into a prototype that is able to produce ethanol fuel, a big push to convert the prototype to real-world status from both the private sector and government would be warranted.

Stanford’s “breakthrough” — if the process becomes marketable and can generate lower-priced, environmentally-safe ethanol that is capable of fueling flex-fuel vehicles (FFVs) and older, converted FFVs — will be significant, even perhaps a disruptive technology. With the proper support, hopefully in the not-too-distant future, increased use of the copper catalyst will minimize and maybe even end the food vs. fuel and land-use allocation fights, as well as help resolve GHG emissions and other pollutant issues that have sometimes frustrated the use of corn-based ethanol and muted receptivity to natural-gas-based ethanol. Technological improvements concerning production reflected in recent life-cycle analysis of corn-based ethanol and reasonable assumptions concerning the cost and environmental benefits of natural-gas-based ethanol, combined with the success of Stanford’s copper catalyst approach, could offer owners of FFVs (both converted and new vehicles) a wider variety of alternatives to secure ethanol that, clearly, will be cheaper, safer and better for the environment.

Stanford’s good news was matched by Cornell’s. Dr. Yingchao You and Dr. Hao Chen announced that they had discovered that a component of corn starch and the yolk shell structure of eggs improve the durability and performance of lithium batteries. In this context, they note that lithium-sulfur batteries are a very solid alternative to lithium-ion batteries. Stabilization problems related to its capacity can be resolved by using amylopectin, a polysaccharide (mainly good old corn starch).

Enveloping the battery’s lithium sulfur cathodes, with an encasing resembling the shell of an egg yolk (sulfur coated with an inexpensive polymer) also apparently improves the battery’s durability and performance.

Cornell has initiated a startup company to take the new and improved starch, egg-yolk shell battery to market. Maybe sometime soon, moderate and middle-income owners of electric cars that are less expensive than what is now available will be able to reduce their fear of driving long distances and feel confident about the life and efficiency of the batteries in their vehicles.

I avoided chemistry, physics and engineering in college. I knew I was not destined to become neither city planner nor designer at MIT when my first student-planned bridge went under water instead of over it. While my efforts were applauded by the Malthusians among my colleagues, they were not regarded highly by professors. Since graduation, unless supported by respected colleagues with a background in relevant sciences and engineering, I have been hesitant to suggest approval of science-driven energy innovations. I am a policy and program person. However, after review and discussions with trusted experts, I believe the Stanford and Cornell initiatives have a good chance to see the light of day, or, more appropriate, see the light in the market place. If one or both do, we will all be better off and the number of feasible alternative transportation fuels available to the consumer will grow. Hooray for copper, starch and eggs.

Of myths, oil companies and a competitive fuel market

oil barrelsI do not wish to join the intense dialogue concerning whether or not the government should allow exports of crude oil. Others are already doing a good job of confusing and obscuring the pros and cons of selling increased amounts of America’s growing oil resources overseas.

What I do want to do is just focus on the logic of one of the oil industry’s major arguments for extending the permitting of exports — again, not on the wisdom of exporting policy. Permit me to do so in the context of the industry’s long-standing argument concerning the pricing of gasoline to U.S. consumers. The argument is that more oil drilling in the U.S. will lower the price of gas and put America on the path to oil “independence.”

In somewhat of circuitous manner, oil companies are using the opposite of their domestic advocacy for “drill, baby, drill” policy as a way to keep prices lower at the pump. Their yin is that producing more oil in the U.S. and sending significant amounts overseas, combined with declining vehicular fuel demand, will lower gas prices. Economist Adam Smith would applaud the simplicity if he were alive and well. Their yang presents a bit more complicated set of “ifs.” That is, the industry presumes that fulfillment of the yen (excuse another pun) to export will result in more U.S. oil being drilled because of increased world demand generated by the assumed ability of the U.S. to produce oil at less costs than the world price for oil. It will also help foster infrastructure development in the U.S. to break up current log jams concerning oil transportation. Finally, it will facilitate more efficient refineries, allowing them to specialize in different types of oil. The yin and yang will result in (marginally) lower prices of gasoline — so goes the rhetoric and oil-industry-paid-for studies.

Paraphrasing Dr. Pangloss in “Candide,” the oil companies hope for the “best of all possible worlds.” But, before Americans run out and buy stock, note the price of gasoline does not directly reflect oil production volume. Indeed, gas prices, despite increased supplies, have gyrated significantly and now hover nationally over $4 a gallon. Generally, oil and gas prices relate to international prices, tension in the Middle East and investor and banker speculation — not always or directly domestic costs. Stockholders and executives of oil companies function not on patriotism but on profit and to the extent that the law permits, they will sell overseas to get the best price — in effect, the best dollar over payment for a barrel of oil. Consumers, I suspect, are rarely a significant part of their opportunity costing.

Unfortunately, lack of strong empirical evidence tempers the company’s argument that increased world demand will stimulate good things like refinery efficiency and log-jam-ending infrastructure. Maybe if the price per barrel is right (clearly, higher than it is now) and seems predictable for more than a small period of time, refinery and infrastructure developments will be positive. But, the costs to the consumer, in this context, will be higher. It will also be higher because shale oil is tight oil and more risky and costly to drill.

Oil independence is a myth suggested by oil industry and a non-analytical media. Certainly, the oil boom and less vehicular demand have generated less imports and less dependency. But we still buy nearly 300 billion dollars’ worth of oil every year to respond to need and we still produce far less than demand.

Somewhere in the dark labyrinth of each major oil company is a pumped-up (another pun), never-used, secret justification for franchise agreements impeding the sale of alternative fuels in their retail outlets. To alleviate guilt, it may go something like this: “Monopolies at the pump will allow us to make larger profits. You know we will someday soon want to give back some of the profits to consumers by lowering the price of gasoline.” If you believe this still-secret beneficence, let me sell you the Brooklyn Bridge.

There is another way to steady the gasoline market and lower consumer costs. Inexpensive conversions to allow older vehicles to use safe, cheaper and environmentally better alternative fuels (as opposed to gasoline), combined with expanded use by flex-fuel owners of alternative fuels, would add competition to the fuel market and likely reduce prices for consumers. Natural-gas-based ethanol is on the horizon and methanol, once the EPA approves, will follow, hopefully shortly thereafter. Electric cars, once costs are lower and distance on single charges is higher, will be a welcome addition to the competitive mix.

Hawks Are Out Again: Mistakenly Casting Doubt on Ethanol

The Hawks are out again.  One of my favorite service organizations, the American Automobile Association (AAA), in conjunction with media outlets, has again attacked the use of ethanol in cars.  It’s quite sad. shutterstock_8832595

I will still keep my membership card. The AAA is the Walmart, Costco or Nordstrom of the automobile industry when it comes to service at relatively low costs to its members.  If you get a flat tire on a sparsely traveled road when it’s raining or snowing, the AAA, following the Postal Service norm, “come rain or snow,” will get there reasonably quickly to help you.  Get stuck in your four story garage with a dead battery! Don’t fret or fear, your neighborhood AAA repair truck will be at your side within a relatively short time. It,generally, will “get you to your work on time.” Do I sound like Julie Andrews or the cast in “My Fair Lady?”

 

While I don’t lose sleep over the question (I only get two hours of sleep even without thinking about the AAA), I often wonder why the AAA appears to join with those, particularly in the oil industry, who seem to want to confuse flex fuel vehicle owners and owners of older cars able to convert their engines easily and cheaply, about the wisdom of using ethanol.

Conversion of older cars and extended use of already approved flex fuel cars as well as increased use of ethanol by both sets of vehicles  will result in many benefits, particularly when compared to gasoline.  For example, ethanol according to many, many independent studies by qualified researchers is a safer, cheaper, and more environmentally friendly fuel than gasoline.  While what is and what is not a fact often becomes a metaphysical question and 100% certainty becomes a question often for philosophers more than scientists, trust me — ethanol is a good but is not a perfect alternative fuel. It is better than gasoline.  Right now a perfect fuel does not exist! Remember that the enemy of the present good is often the distant perfect.

Despite AAA’s press releases, EPA studies involving more rigorous methodology, including strategic sampling of a range of cars, indicate that engine damage is almost a nonoccurrence when using E15.  E10 has been around for a long time with no discernable engine impact and E85, after extensive testing, has been approved for flex fuel cars.

Understandably, ethanol, given improvements in new car engines and tighter fuel standards, reflects fewer benefits than   shown in relatively recent studies concerning ghg emissions, and pollutants like SOx and NOx.  But ethanol still provides significantly more environmental benefits and less costs to the consumer now than gasoline.

The differences between ethanol and gasoline will become even more apparent if you assume that Americans use their God-given noggin and opt to convert their older cars to accept alternative fuels.  It’s cheap and safe and can be done with a kit, or with quick software or tuning fix for some cars.  Similarly, there are nearly 15,000,000 flex fuel cars in the U.S. Most owners do not know they have such a car. Look at the sticker in the back of the car or fuel cap.  You probably are the proud owner of a flex fuel vehicle and, once you recognize this fact, you can use ethanol without risk.  Using ethanol, both for flex fuel cars and converted older vehicles will likely lower your gasoline costs and will contribute to a healthier environment.  Tell your neighbors!  Tell your friends! Tell your significant other!  Tell your spouse!

Clearly, you will see the environmental benefits to your community, state and nation, if you abandon the conventional way of measuring emissions and pollutant reductions and use tons. The new graphic will portray a visible and important increase in the actual emissions and pollutants eliminated from the atmosphere.  It also will emphasize the importance of extending the number of vehicles that can use ethanol through conversion of older cars to flex fuel vehicles and the production of increased numbers of flex fuel vehicles.  If the owners of both sets of cars increasingly fuel their vehicles with mostly ethanol (an objective of a number of demonstrations and pilot programs in several states), the President’s desire to wean the nation off of gasoline will come closer to fruition.  The scale up will provide a transition approach to open fuel markets until competitive renewable fuels become ready for prime market time.

 

Khrushchev, Gorbachev, Putin , Ukraine and Oil

How many of you have ever been to Russia? It is a fascinating place filled with fascinating people. While in Russia facilitating an Aspen Global Forum of U.S. and Russian leaders,  I visited Nikita Khrushchev’s grave. He lies under six feet of earth — probably  banging his shoe and confessing that he still wishes he could have incrementally changed Russia.  He was not Gorbachev, but neither was he Rasputin.  51d11910

On top of his grave was a very attractive gravestone. One half was white, the other half black. I asked the workmen what it meant.They explained the contrast by indicating that Khrushchev was part evil doer of black deeds, but also in part a good man who wanted to change Russia.

The gravestone seems to fit the current situation in Russia. It is a place of great thinkers, great writers, great dancers, great scientists and decent people, but it is also the land of Putin whose modus operandi is often dark and destructive. Putin is no Gorbachev!

In the present Ukrainian situation, the dark and dangerous side of Russian leadership is visible. Currently proposed Western sanctions are not persuasive. Paraphrasing, we won’t come to the G8 meeting in Sochi  and we won’t have any more relationships with your military are not earth shattering.Trade limits or sanctions, if announced, may hurt, but Russia’s ability to cut off natural gas to Europe and the Ukraine as a counter measure will marginalize any effort to develop meaningful  responses. Obama and his colleagues do not want to engage in military sanctions in order to counter Putin’s new version of our own Monroe Doctrine.

Speaking of energy, oil, and natural gas, most energy related U.S and Russian executives have not been told to slow down or avoid searching for new businesses in Russia. As a recent CNBC report indicated, “ the U.S. produces more natural gas than any other nation and Russia is now the biggest oil producer.” U.S. firms are seeking an increased stake in  Russian oil, which is light and good for gasoline.  U.S. companies are even building the rigs for Russian drillers. While the U.S. imports relatively little oil from Russia, this could change depending on price. Russia is still among the top five importers of oil to the U.S.  In light of the Russian actions in Crimea, the price of gas at the pump is expected to head up again. The stakes are high, and at the present time, no government leader in either nation has seriously suggested interfering with the export and import trade network between U.S. and Russia.

I suspect that the U.S. and Russia will eventually agree to a deal on some sort of a pullback in Crimea and the possibility of a monitored arrangement concerning Russians living in both Crimea and the eastern part of Ukraine. I could be wrong. Russia could insist on remaining in or even annexing the Crimea and it could invade part of Eastern Ukraine.  I pray neither happens!

Would we react militarily in some form or manner, as we have at times in the Middle East in order to secure oil and gas supplies for the Ukraine and other needy western nations? I think not!  Such a provocation would lead to war and is  beyond the pale  for even ardent proponents of “getting tough” with Russia.  Indeed, because Russia’s military is strong, the U.S. and the West will most likely avoid any significant direct military response to possible Russian occupation/annexation of of the Crimea and even eastern Ukraine.

Possible high impact economic sanctions — different from the ‘I won’t come to your meetings and you cannot come to ours’ brand — would not be favored by most Western European countries or even the Ukraine, as they are dependent on Russia’s natural gas.  At the present time, the real options we have to counter Russia’s nefarious activities are not the best ones. While we could fulfill some of our allies’needs by exporting natural gas and oil, the decision to do so deserves (and I suspect is getting) hard analysis, especially in light of domestic U.S economic, political and security concerns about supply as well as demand and a fear of environmental problems, as well as increased consumer costs at the pump here at home. If shipping overseas passes muster, moving natural gas to our European allies and Ukraine could work both in providing needed gas and in possibly negatively affecting the price of Russian gas. Despite acknowledging the theoretical goal of oil independence, the world, including the U.S., is oil and gas dependent. We are lucky to have natural gas in ample supply, and if sane environmental regulations are applied, we can limit related methane and GHG emissions as well as other pollutants. Finally, we have an evolving and growing alternative fuel sector testing and developing renewable fuels.  Opening up U.S. fuel markets and fuel stations to increasingly available flex fuel vehicles and alternative fuels for consumers, including natural gas based ethanol and methanol, as well as electricity, can make us less dependent.

Progress on Fuel Efficiency: More is needed

Every now and then I will read a White House Blog.  They’re sort of a fun read when you’re depressed about the state of the world and the country.  The content always somehow reminds me of  Gene Kelly dancing in the street in the middle of the rain, or that old (possibly New Yorker) cartoon where the patient tells the psychiatrist that he is not doing well and the good doctor says ‘no you’re just fine, you’re happy and healthy.’  Probably neither is the proper analog to the politically necessary positive nature of the White House blurbs.  I marvel at times at the President’s ability to seek a better America, especially given the politics of the present.  While his optimism and tenacity don’t always come through as “Morning in America,” I believe that his attitude is based on a reasonable outlook about what the nation can do, if it can engage in an honest dialogue about key environmental and alternative fuel issues.  shutterstock_130202789

Last week’s blog focused on the White House’s effort to increase fuel efficiency standards.  It notes correctly that the President’s legislative approach to the environment has resulted in the toughest fuel economy standards in history:

“Under the first ever national program, average fuel efficiency for cars and trucks will nearly  double, reaching an average performance equivalent to about 54.5 miles per gallon by 2025….In                  2011, the President also established the first-ever fuel efficiency and greenhouse gas standards for medium and heavy duty vehicles, covering model years 2014 through 2018.”

More is to come! Increased fuel efficiency standards are currently being addressed by the Administration, and the EPA is hard at work developing Tier 3 rules.

The Administration’s record is a decent one and has benefited the environment, lessened ghg emissions, and strengthened the economy. Regrettably though, fuel efficiency regulations primarily apply to new cars.  They should be matched by a cost efficient and comprehensive federal effort to encourage the conversion of older non flex fuel vehicles; they also should encourage Detroit to continue producing larger numbers of flex fuel cars.

In this context, EPA and Detroit automakers need to reach a consensus concerning effective engine recalibration alternatives, as well as an extension of consumer warranties and related financial coverage of recalibrated vehicles.  Without permitting older cars to achieve the fuel efficiency and environmental advantages of flex fuel vehicles, we will not be able to respond to Pogo’s admonition and Commodore Oliver Perry’s initial statement (paraphrased): that we, as a nation, have met the enemy, and he is us!

To grant primacy to new or relatively new flex fuel cars would increase the nation’s ability to reduce ghg emissions and other environmental pollutants (e.g. NOx and SOx). There are well over 200,000,000 non flex fuel cars in the U.S. that cannot readily use available fuel blends higher than E-15 and will not be able to use natural gas based ethanol that hopefully relatively soon will come on the market.

Lowering the certification costs of conversion kits by the EPA and increasing the number of manufacturers of those kits would bring down their price from around 1,000 dollars to the near 300 dollar level that is common in the “underground” market.  Simplifying legal conversion could  —and indeed would —-make an important environmental difference.  Such action would also open up the fuel market to competition, and likely lower the price of gas at the pump for consumers. Finally, such actions would also support the President’s objective to wean the nation off of oil and gasoline.  Oh Happy Day!  Go for it Gene Kelly and the American Association of Psychiatrists!  It might be time to show some real love for environmentally and efficiency neglected and needy older vehicles.

Can Sochi Lead To A New Alternative Energy Coalition?

During the late 1980s, I had the good fortune, thanks to the Rockefeller Foundation, to lead and facilitate an Aspen Global Forum between Russian and U.S. leaders in Sochi; the site of the present Olympics. The subject was economic development in the then already fragmenting, Soviet Union. shutterstock_151278764

Sochi was beautiful but back then was a relatively small resort city for vacationing Russian nomenklatura. I have three memorable funny stories (at least for me) related to Sochi. I will try linking them, for better or worse, with the need for alternative fuels.

Getting to Sochi at the time provided a unique experience. The U.S. delegation which included a former U.S. Senator, several Wall Street titans, the editor of a major national newspaper, leading members of the Denver business community and myself (I was a Dean at the University of Colorado at the time) were told when we arrived at the Moscow airport in a snowstorm, we had to fly out of Moscow’s second smaller airport. We all dutifully were taken by shuttle, very slowly given the snow, to what seemed like an old, a very old facility. We quickly boarded what appeared to be a jet plane on its last legs. It was late at night and the snow was still blowing strong. The plane’s seats were broken and the bathrooms didn’t work. The cabin crew was nice but spoke only in difficult to understand broken English. Not an auspicious start to the trip. Two members of our delegation asked the pilot for 10 minutes to go into the terminal (an exaggeration of the term) to buy two or three bottles of vodka to give us courage and calm our nerves. They did get permission. It turned into a fun flight.

After we checked into the Intourist Hotel in Sochi, we all went to bed. One of the members of our delegation was a smart, tough, but very funny reporter and op-ed writer for the Rocky Mountain News. She came down the next morning and indicated most of her winter clothes were stolen from the room, while she was sleeping. I went up to the Manager of the hotel and told him what had happened. He was dutifully contrite. Every day while we were there, the reporter received a nice gift of new winter clothing to wear in the snow. At the end of the week, I thanked him and said, next time, have them take my clothes!  He laughed. I was serious!

The Russian delegation hosted us in the summer home of an apparently famous Russian oligarch, whose name I forget, about 100 or so miles from Sochi. They took us there in big Army helicopters. We flew over and between the mountains and valleys of the Caucasus. The mountains were covered with much snow and looked gorgeous. One of the Russian guides opened the door so we could get a closer view. A big mistake! A member of the U.S. delegation, a well-known war experienced woman journalist, based I believe at the time in D.C, shouted close the f….n door. “I have covered many wars and been shot at. I survived. I don’t want to go down in a helicopter. We can look at the snow through a window.” She was right. At that point the helicopter seemed tilted at a significant angle to please us. We all were a bit scared but didn’t want to hurt our Russian hosts. She had no such fear. The door was closed.

If anything, except fuzzy memories, ties these stories together, it’s the snow and the mountains and a thought about building a coalition around alternative and renewable fuels to save the beauty of both and to the jobs they provide both up and down stream.

Based on the over 50 degree temperatures in Sochi during the current Olympics and the lack of abundant snow, The New York Times indicated that Daniel Scott, a professor of global change and tourism at the University of Waterloo in Ontario, was stimulated to project the future of winter sports. He noted that with a rise of global temperature possible by 2100 of 7 degrees Fahrenheit, there might not be many snowy regions left to hold the Winter Olympics.  He concluded “that of the 19 cities that have hosted the Winter Olympics, as few as 10 might be cold enough by midcentury to host them again. By 2100 the number will shrink to six.”

Of the 960,000 winter sports industry jobs are supported by winter sports in the U.S. 27,000 have already been lost because of lack of snow, according to a recent NRDC report. More will be gone next season if snow fall totals continue to decline.

If we can easily check the box on one or more of the following: concern for the health of the economy, concern for the environment, concern for the quality of our water supply and the availability of water, concern for the future of the ski industry and winter sports off and on mountains, then even if we don’t ski, and even if greenhouse gas is not a top priority for some , we should be able to foster a strong coalition between environmentalists, business, nonprofits,  natural gas and renewable fuel  advocates. Its mandate would be to work on speeding up use of alternative natural gas based transitional fuels  and helping place electric cars on a faster and cleaner track to market acceptance. The strategy is not perfect by any stretch of the imagination but it will at least get the country started on a path that will reduce harmful environmental impacts of gasoline including significant GHG emissions and other pollutants. It may also help slow down the browning of our mountain areas and the closure of winter resorts and the manufacturing and retail sectors that serve them.

America needs a good dose of pragmatism and probability curves to guide its fuel policies. Advocates of natural gas based fuels and renewables should be able to coalesce around the President’s agenda with respect to weaning the nation off gasoline (one of the biggest carbon emitters) and gasoline only vehicles.

Assuming electric utilities continue to switch from coal to cleaner natural gas; scholars suggest that electric cars will be of help in reducing total carbon emissions. But EV’s are not yet ready for prime time for most low, moderate and middle class households, in light of the relatively low mileage secured on a single battery charge, the absence of retail distributers, the small vehicle size and price. When they are, let the competition begin, remembering all the while that real change in emissions and reduction of pollutants, will come after the conversion of large numbers of existing cars to flex fuel vehicles and their ability to use natural gas based fuels. Back to Sochi and indeed to the mountains throughout America, when we are asked every Christmas whether there is a Santa Claus, lets us be able to look up at magnificent snow-capped mountains and collectively say, yes there is a Santa Claus and then sing loudly, Let it snow, Let it snow, Let it snow.

 

No Sex-Just Smirking; No Lies-Just No Strategic Thinking; No Videotapes- Just Lots Of words And Ideology

According to several well-known writers of blogs and columns, based on a recent study by North Carolina State University, EDV’s (electric cars, hybrids and plug ins) are not all they are cracked up to be. Because they may be powered by a coal or natural gas utilities, they spew pollutants, because hybrids may use gasoline, they emit ghg and other pollutants, because their production processes are “dirty,” they generate more pollutants than gasoline. shutterstock_126279698

Electric cars in China have an overall impact on pollution that could be more harmful to health than gasoline vehicles…  EDVs ghg reduction will not make a big difference because the total number of vehicles in the U.S. only produces about 20 percent of all carbon emissions.”

I have seen higher numbers than stated by the writers concerning carbon emissions by cars and trucks fueled by gasoline. It is not clear whether the North Carolina study compared general supply chains to supply chain specifics. For example, EV engines use a proportionately large share of aluminum. Its mining probably emits more ghg than materials used in non evs. Yet, its use in cars, given its lighter weight, produces less emissions.

More relevant, perhaps, while recently there has been some retreat because of rising natural gas costs compared to coal costs, in the long term future, (perhaps aided by government regulations of carbon emissions,) conversion of coal based power generation to natural gas will  again trend upward and lower the total ghg allocated to EDVs.

The bloggers and columnists as well as the North Carolina scholars seem to believe in the theory that if you build it they will come.  Indeed, the most frequent comments on the models used in the study relate to one model, that is, a 42 percent EDV market share by 2050. It presumes a government cap on emissions.   Apparently, according to this model, any ghg reductions caused by EDVs will soon be filled up by other emitters. According to the study’s author, Joseph DeCarolis, ( interviewed by Will Oremus, a critic of the paper in his article in Future Tense, Jan. 27),   “It’s that there all this other stuff going on in this larger energy system that effects overall emissions.” I would add based on the study, DeCarolis presumes ghg emissions are fungible and equilibrium will result in 2050.

Diminishing the ghg importance of  EDVs ,  more than three decades out,  shifts  issues and initiates arguments over whether or not government should have a tougher cap; whether or not other sectors of the economy will illustrate more or less ghg emissions; whether or not technological advancements focused on ghg reduction across the economy will remain almost static; whether or not businesses will accept ghg reduction as a must or as part of  “conscientious capitalism” both to sustain profits and quality of life.

The continued development and increased sales of edvs are important to the nation’s long term effort to reduce ghg and other pollutants. But, until evs among edvs increase mileage per charge to remove owner fear of stalling out in either remote or congested places like freeways and until the price comes down and size increases for families with children, they will at best constitute a relatively small share of the new market for cars in the  near future. Even if the total numbers of edvs significantly increase their proportion of new car sales, many years will pass before they, will collectively, play a major role in lessening the nation’s carbon footprint.

Perfectibility not perfection should be a legitimate goal for all of us concerned with the environment. Individuals and groups concerned with the economic and social health of the nation should drop their ideological bundling boards. (Some of us are old enough to remember the real origins of the bundling board. Because of a shortage of space in many homes, it was used to separate males and females who often slept together before they were married in revolutionary days. I am not sure it was abandoned because mores changed, houses got bigger or people got splinters. I have no videotapes!)

2014 should witness the development of a non-partisan,non- ideological coalition of environmental, business, non-profit, academic  and government leaders to embrace  the need for an effective transitional alternative fuel strategy for new and existing cars and EDVs.  The embrace should respond to national and local objectives concerning the environment, the economy, and security and consumer well-being.   A good place to start would be to extend the use of natural gas based fuels, including ethanol and methanol.

Simultaneously, the coalition should encourage Detroit to expand production of flex fuel cars and the nation to implement a large scale flex fuel conversion program for existing cars.  Added to the coalition’s agenda should be development of a more open fuels market and support for intense research and development of EDV’s, particularly EVs.  Hopefully, evs will soon be   ready for prime time in the marketplace. Succinctly, we need both alternative fuels and evs.

Oil and Natural Gas Prices and the Future of Alternative Fuels

I love Vivaldi’s Four Seasons, especially the music from the spring. I love the optimistic line from the poem by P.B. Shelley, “if winter comes can spring be far behind.”  The unique cold weather, the Midwest, East Coast and even the South, has been facing this year will soon be over and spring will soon be here. Maybe it will be shorter. Perhaps, as many experts indicate, we will experience a longer summer, because of climate change. But flowers will bloom again; lovers will hold hands without gloves outside, kids will play in the park… and natural gas prices will likely come down to more normal levels than currently reflected. shutterstock_98607857

Last Friday’s natural gas price according to the NY Times was $5.20 per thousand cubic feet. It was “the first time gas had crossed the symbolic $5 threshold in three and half years, although (and this is important) the current price is still roughly a third of the gas price before the 2008 financial crisis and the surge in domestic production since then.”

Why? Most experts lay the blame primarily on the weather and secondarily on low reserves, a slowdown in drilling, and pipeline inadequacies. The major impact so far has been on heating and electricity costs for many American households, particularly low and moderate income households and the shift of some power plants from natural gas back to coal.

I wouldn’t bet more than two McDonald’s sandwiches on where natural gas prices will be in the long term. But I would bet the sandwiches and perhaps a good conversation with a respected, hopefully clairvoyant, natural gas economist-one who has a track record of being reasonably accurate concerning gas prices- that come cherry blossom time in Washington, the price of natural gas will begin to fall relatively slowly and that by early summer, it will hover between 3.75 to 4.25 per thousand cubic feet.

Natural gas prices over the next decade, aided by growing consensus concerning reasonable fracking regulations as reflected in Colorado’s recent regulatory proposals, and EPA’s soon to be announced regulations, should be sufficiently high to reignite modest drilling passions, improvements in infrastructure and increased supplies at costs sufficient to maintain an advantage for natural gas based fuels when compared to oil based fuels at the pump.

The present relatively low price of oil (Bent Crude $107 a barrel; WTI $97.00 a barrel) and its derivative gasoline ($3.30 a gallon) may impact the cost differential between gasoline and natural gas based fuels. But the impact could go both ways. That is, if the price of oil per barrel continues to fall and translate into lower costs for gasoline, the price differences between natural gas based fuels and gasoline would narrow. Conversely, if the price of oil goes lower than $90 a barrel, its present price, it likely will impede future drilling, particularly in high cost, hard to get at environmentally sensitive areas. This fact combine with renewed economic growth in the U.S., Europe and Asia, as well as continued tension in the Middle East and continued speculation could well result in a return to higher gasoline prices.

Clearly, the relationship between the cost of natural gas based fuels (CNG, ethanol and methanol) and gasoline is a critical variable in determining consumer behavior with respect to conversion of existing cars to flex fuel cars and the purchase of new natural gas cars (Based on the national pilot involving 22 states lead by Governor Hickenlooper(D) and Governor Fallin(R), as well as interviews with carmakers, creation of a deep predictable market for CNG fueled vehicles will bring down the price of such cars and give them competitive status with gasoline fueled vehicles).

The odds are that the lower costs of natural gas based fuels will serve as an incentive to buyers and existing owners to use them. That is, assuming problems related to fuel distribution as well as access and misinformation concerning the affect alternative fuels have on engines are resolved by public, non-profit, academic and private sectors. Maybe I will up my bet!

Altruism Aside, Is Ethanol A Competitive Alternative Fuel?

I was a bit under the weather this past weekend. I thought it would be a good time to catch up on some reading; something assumedly simple- the relatively recent literature concerning the ability of ethanol, particularly E85, to compete with gasoline and the capacity of consumers to make rational decisions in their choice of alternative fuels. shutterstock_1049539

By Sunday night, apart from watching the Denver Broncos happily beat New England on TV, and the amusing dialogue and extensive media time generated by Seattle’s cornerback, Richard Sherman, concerning his athletic and his academic prowess; I spent about 10 hours reviewing several well cited pieces concerning the price relationship between ethanol and gasoline. I also read the intense, often seemingly less than civil debate in papers authored by two professors at Iowa State (Dermot Hayes and Xiadong Du)  and two at MIT (Christopher Knittel and Aaron Smith) concerning methodology associated with defining the relationship between ethanol and gasoline prices. (The Iowa and MIT faculty vigorously attacked each other, sometimes personally, over mistaken attribution of research funding sources. More important, the Iowa folks generally argued that their data suggested a link between ethanol production and the price of gasoline. They indicated that, as ethanol production increased the price of gasoline decreased relative to the price of crude oil.

The MIT folks poo poo’d their distant colleagues’ findings. They indicated that their empirically based models illustrate only a statistically insignificant set of relationships concerning ethanol, gasoline and crude oil prices. They also opined that the Iowa writers misapplied the crack ratio –the relationship of gasoline to crude oil prices- and did not use or mistakenly used the crack spread ratio (the weighted average of the gasoline and distillate products produced by a barrel of crude oil minus the cost of crude). Put in another way, what the Iowa writers recorded was correlation not causation. (I know the etymology but we need to help the economists among us find a better set of terms than crack spread and crack ratio. For a minute, I thought that the texts described a line up at a police station or FBI statistics about drug use.)

What can we learn from recent literature about the effect of ethanol production and gasoline prices at the pump?

1. Most independent experts, not affiliated with advocacy groups, seem willing to support as fact that increased ethanol use, at times, will lower the price of gasoline or slow the increase in the price of gasoline. But the caveat is “somewhat.” They disagree on how much on either side of zero. The recent conventional wisdom, stimulated by the Iowa study that ethanol has and likely will reduce the wholesale price by $.89 cents to $1.09 per gallon seems wrong. It appears to reflect an overstatement based on analyses and models that do not accommodate the many complex variables affecting price and costs (e.g. costs of refining, rapid changes in the costs of corn, the costs of distribution, the lack of infrastructure, the unanticipated increases or decreases in costs of crude oil based on investor speculation, escalation or de-escalation of tension in Middle East, uncertain federal policy, etc.). If I were a betting person, I would place my bet on Knittel and Smith’s conclusions that, over time, the price impact of ethanol at the pump on gasoline prices is likely marginal at best.

2. However, to be fair, some scholars and practitioners in the energy business believe that if gasoline is blended with a larger proportion of ethanol (e.g. E85), the price of a gallon of fuel could well drop, given the idiosyncrasies of the present market.  If this occurs and the reduction appears to consumers as beneficial, a number of observers think that owners of flex fuel vehicles (new or converted) could be enticed to switch to E85. What they generally don’t know, is the cross over point where alternative fuels like E85 become a viable option to drivers because the prices seem to be a good deal. A smart and astute participant in a recent forum on alternative fuels indicated that “people drive to COSTCO or Wal-Mart to save 5-8 cents a gallon on gasoline. Why wouldn’t they switch to E85 blends, if they reflected similar or indeed larger savings and fuel stations were accessible?”

Maybe they would, maybe they wouldn’t! If the price is low enough, many drivers will likely engage in personal opportunity costing. But what is low enough? Getting gas at Wal-Mart and Costco is different from getting E85. Gas is a familiar product to most drivers. Consumers of E85 will have to surmount doubts over product safety, stimulated, I believe erroneously, by groups such as the AAA. Further, because E85 will get fewer miles per gallon, drivers will probably think about perceived price savings in the context of miles per gallon and extra trips to the fuel station (If they forget to do the personal math, they will be reminded to do so by oil companies).

3. Uncertainty exists concerning how much consumers will pay for ethanol based on personal preferences or commitments to societal well-being, what I call the altruism thing.

As one author put it, “ …the demand for ethanol (E85) as a substitute (E10) is sensitive to relative fuel prices: a  $.10 per gallon increase in ethanol’s price relative to gasoline leads to a 12-16% decrease in quantity of ethanol demanded. Price responses are considerably smaller, however, than they would be if households had identical willingness to pay for ethanol as a gasoline substitute and… results imply that some households are willing to pay a premium for ethanol.”

Why? Maybe to improve the environment, provide support for farmers, to express concern over national security, etc. A recent report from Brazil indicates that some Brazilians are willing to pay more for alternative fuels because of what seem to be altruistic reasons. Before we say hallelujah, I should note that we don’t really know the numbers seeking salvation. They are not your average household but rather as one economist notes they are likely “marginal” households in terms of numbers. Further, several respected survey firms in the U.S. doubt that goals related to the larger community or nation, even if consumers articulate them in their living rooms, will overcome large differences between the price of E85 and gasoline, if they occur.

Similarly, altruism or civic values will not overcome fear of engine damage or the need for relatively long trips to fuel stations to secure alternative fuels. The pews, at least until we know more, probably will remain filled with a proportionately large share of guilty drivers on Saturday or Sunday.

The Fuel Freedom Foundation is involved in three state pilot projects aimed at converting existing cars to flex fuel cars; cars that will permit their owners to use natural gas based fuel such as ethanol and, when it is legal, methanol. Hopefully the pilot projects, combined with strategic federal, state, foundation and private sector supported research, will expand knowledge concerning consumer decisions and variables such as the importance of price differentials, altruism, distance, access, etc.

A study supported by Fuel Freedom Foundation recently completed by the respected independent Resources for the Future optimistically noted that “…we see alternative pathways for bring a lower-cost E85 to the pump. If and when ethanol produced by the newly patented, NG-driven Celanese process becomes available, owners of FFVs could realize substantial cost savings, up to $0.83/gge in 2015. If and when cellulosic ethanol becomes available at projected cost for full-scale productions, owners of FFFs could realize similar cost savings.”

Sleep easy! Good Times are coming for the nation and the consumer.

Nostradamus, Predictions, Oil, and Alternative Fuels: 2014

NostradamusPhotoEveryone’s doing it, doing it, doing it. Probably the last good prediction maker was Nostradamus and even he was probably more lucky than clairvoyant. Last year’s political predictions in retrospect did not turn out to be confidence builders.  Predictors of less, or indeed more, tension in the Middle East seem to have run up against the unpredictability of events and the actions of leaders. So called experts, who predict the ups and downs of the stock market, were seemingly immune to history and many times seem to provide more entertainment than accurate crystal balls.

Permit me to go where some angels seemingly have feared and still fear to tread; where only humans who claim absolute wisdom or clairvoyance and more often than not reflect neither function repetitively, if they still have income. Permit me to make a few 2014 predictions about energy and alternative fuels. I claim no special advantage concerning knowledge of the future than most, if not all, of my colleagues, friends, family, significant others, other Americans, Israelis, Saudis, Iranians, Chinese and my next door neighbors and their children etc. I only claim the time to think about recent studies by respected analysts and to participate in conversations with bright folks concerned with America’s energy policies (or non-policies) and the development of alternative fuels to compete with gasoline.

Here I go-no safety net!

1. Despite pleas from environmentalists and many in the energy business, because next year is an election year, efforts to make sense of the current hodgepodge of policies and programs affecting America’s energy future and to develop a comprehensive energy natural policy will likely go nowhere.

2. The president will continue to speak about the need to wean the U.S. off of oil and gasoline.  His speeches will frame issues in terms of reducing dependency on foreign oil, lessening greenhouse gas (ghg) emissions and other pollutants, increasing America’s security, improving the economy–fewer dollars spent oversees for oil will mean jobs here at home– providing lower priced fuel for consumers.

3. Many political, business, environmental and academic leaders will increasingly see natural gas and natural gas based fuels like ethanol and methanol as worthy alternative transitional or bridge fuels until electricity based and or hydrogen fuels are ready for prime time.  They are not perfect but they are better for the environment, the economy, America’s security and you and me than gasoline. Opening up the fuel market from constraints imposed by the oil companies and by, sometimes, little examined government regulations will become, for some, a nonpartisan leadership and diverse constituent battle cry.

4. Recent efforts by states such as Colorado, working with the environmental community and industry, to strengthen drilling, storage, refinery and distribution regulations responsive to ghg, methane and pollutant leakage will be exported to other states. Governors and state legislatures will use lessons learned to respond strategically to fracking and other environmental concerns.  The Federal government will encourage states to look at Colorado and other states with similarly strong but fair regulations. Based on Colorado and the experience of other states, EPA will consider amending and strengthening their regulations.

5. Oil prices will likely hover around present levels in the short term. But assuming modest economic growth in the U.S.(2-2.5 percent gnp) and Asia as well as renewed tension in the middle east associated with difficulties in securing a final agreement with Iran on its nuclear program and an agreement between Palestinians and Israelis, oil and gas prices will again trend upward around mid-2014.

6. The gap between natural gas and oil prices when converted to fuel-gasoline, ethanol and methanol, at the pump, will increase but only slightly.  Put another way, the price of oil during the latter part of the year will increase a bit faster than the price of natural gas.

7. Electric cars will continue to reflect modest growth and increased market penetration.  But the scale up will be relatively small. EV’s will constitute approximately 1.5 to 2 percent of the new car market by the end of next year.

Hopefully, by year’s end, electric car makers will have extended the miles per charge based on modified lithium batteries or a newly designed battery with alternative chemistry.  Tesla joined by the larger auto companies will increase the range and lower the overall costs of electrically powered vehicles.

Hydrogen fueled cars will likely not register concerning market penetration.  Hybrids of one form or another will secure a larger market share than electric vehicles.

8. Detroit will increase its production of flex fuel automobiles, but the number compared to the total number of cars produced will be relatively modest.  Detroit’s wariness to clearly make customers aware of the advantages of flex fuel cars concerning choice of alternative fuels will limit the ability to easily expand consumer options at the pump.

9. Conversion of existing cars to flex fuel vehicles using relatively inexpensive conversion kits will increase this year.  But the anticipated number of conversions related to the total number of older cars will not generate sufficient competition with gasoline to lower its price, reduce ghg and other pollutant emissions.  What will be required to stimulate use of alternative fuels in older cars, and may come this next year, will be federal government certification of more than one conversion kit.  Approval of a number of kits will reduce the price considerably and expand consumer fuel choices. Eliminating oil company restrictions that impede the sale of alternative fuels at most gas stations  will probably take more time and require concerted advocacy by consumers, business , natural gas and environmental groups, and government. Maybe we will see progress by the end of 2014.

2015 is just around the corner.  Invite me back next year to do 2016?    Predictions of what likely will be can help us, if we understand at least some of the variables involved, think through what can be done, even if limited by our own actions as citizens, by the organizations we respect and work with, and by our government to influence outcomes.

Happy New Year! May the projections of your life be only good ones!  May you and yours build some wonderful memories in 2014!