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Can Butanol Be the New Ethanol?

Even as the ethanol industry is wobbling over the Environmental Protection Agency’s decision to cut back on the ethanol mandate in 2014, a new candidate has emerged as an additive to gasoline – butanol.

Virgin Airways founder and CEO Richard Branson has announced that his Virgin Green Fund will be cosponsoring a groundbreaking butanol manufacturing plant in Luverne, Minnesota.  “Butanol is the future of renewable fuel,” said Branson, who is already using renewable jet fuel for his airline.  “It’s hugely versatile and can be used to produce gasoline fuel blends, rubbers, solvents, and plastics, which gives us scope to enter a range of markets,” he said in an interview with Bloomberg.

Corn ethanol now dominates the $26 billion gasoline additive market, drawing the glucose content out of 45 percent of the nation’s corn crop (the protein is fed to animals).  Branson’s butanol would use a similar feedstock – corn, sugar cane or cellulosic biomass – but would produce a fuel that has 84 percent of gasoline’s fuel density compared to ethanol’s 66 percent, although ethanol has a higher octane rating.  The implication is that butanol could be mixed at higher blends, giving it almost the same range as gasoline.

Both butanol and ethanol are made through a process that employs yeasts to ferments the glucose from organic material into alcohols.  Methanol, the simplest alcohol, has one carbon joined to a hydroxyl ion while ethanol has two carbons and butanol has four.  Octane, the principal ingredient in gasoline, has eight carbons without the hydroxyl ion.

As far a butanol is concerned, it’s not as if people haven’t tried this before.  Both BP and Royals Dutch Shell have experimented with producing butanol from organic material but have found the process harder than they anticipated.  “There is certainly a potential, but there have been quite considerable problems with the technology,” Clare Wenner, of the London-based Renewable Energy Association, told Bloomberg.  “It’s taking a lot longer than anybody thought years ago.”

Gevo’s plant in Minnesota, for instance, has been running at only two-thirds of its 18 million gallon-a-year capacity because of a contamination in its yeast fermenting facility in September 2012.  Similar instabilities in the microbial-based process have dogged the efforts to break down cellulose into simple molecules.  There operations can often be performed in the laboratory but become much more difficult when moved up to a commercial scale.

Branson is confident these obstacles can be overcome.  He’s already got Silicon Valley investor Vinod Khosla on board in Gevo and Total, the French oil company, has also taken a stake.  Together they have enlisted big ethanol producers such as Big River Resources and Siouxland Ethanol to commit to switching their manufacturing process to butanol.  Butamax Advanced Biofuel, another Minnesota refiner funded by Dupont and BP, is also in the process of retrofitting its ethanol plant to butanol.  Taken together, these facilities would be able replace 1 billion of the 14 billion gallons of ethanol now being produced every year.

Whether this would be enough to make a bigger dent in America’s oil import budget remains to be seen.  The 14 billion gallons of ethanol currently substitutes for 10 percent of our gasoline and about 6 percent of our total oil consumption.  The Environmental Protection Agency has limited ethanol additives to 15 percent of the blend, mainly to protect older cars.  (In Iowa, newer cars are running on an 85 percent blend.)  Now the reduction in the 2014 mandate is making the ethanol industry nervous about overcapacity.  Butanol is less corrosive of engines and the 16 percent blend could give it an edge.

On another front, T. Boone Pickens’ Clean Energy Fuels announced this week that it may turn a profit for the first time since its founding in 1997.  Clean Fuels is concentrating on supplying compressed natural gas for trucks, signing major contracts with Frito-Lay, Proctor & Gamble, United Parcel Service and Ryder.  It is also attempting to set up a series of filling stations on the Interstate Highway System.  The use of CNG requires an entirely new infrastructure, however, rather than the easy substitution of liquid and butanol.

The dark horse here is methanol, which is liquid and fits easily into our present infrastructure but would be synthesized from natural gas.  Somehow, methanol has not attracted the attention of Branson’s biofuels and Pickens’ CNG.     All of these efforts hold promise, however, and would make a huge dent in our annual $350 billion bill for oil imports, which constitutes the bulk of our $450 billion trade deficit.  So good luck to all and may the best fuel win – or all of them, for that matter.

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.

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.

A Big Year for Natural Gas Vehicles

“The NGV market experienced a growth spurt in late 2013, and that is expected to continue in early 2014, with new engineers and vehicles coming to market.”

That’s the conclusion of a very optimistic report issued by Navigant Research on the progress of natural gas vehicles – particularly NG trucks and buses – in the United States and the world.  (The report, sorry to say, costs $4000 but the executive summary can be seen online at http://www.navigantresearch.com/research/natural-gas-trucks-and-buses.)

“As the cost of oil climbs and emission from large diesel and gasoline engineers garner more scrutiny, fleets and governments are increasingly looking for alternative to fulfill their needs at lower costs and with lower emissions,” says the study.  “At the same time, new drilling techniques and new pipelines make natural gas a significantly more competitive vehicles than a decade ago.  The result is growing markets for medium duty and heavy duty NG trucks and buses.”

Indeed, the Navigant report does not anticipate an expanding market for natural gas vehicles in general but sees growth concentrated in the area of trucks and buses, particularly fleet vehicles for large corporations and municipalities.  The great advantages here are: a) vehicles can be bought in bulk; b) they can be fueled at central depots, and c) fleet vehicles tend to pile up the mileage, which means a quicker payback period from savings over gasoline.

In Palmdale, California, AT&T has converted its utility trucks to compressed natural gas in an effort to save money on fuel and cut down on carbon emissions.  “The vans are large enough to accommodate bulky gas canisters hidden beneath the floor,” reports Robert Wright in the Financial Times.  [http://www.ft.com/intl/cms/s/0/9f06bea8-69ea-11e3-aba3-00144feabdc0.html#axzz2osEhWAna]  The conversion costs $6,000 but operating costs will be reduced 10 cents per mile, meaning the initial investment will be recouped after 60,000 miles.  Most utility fleet vehicles hit that number within two years.

Some municipalities are even finding it worthwhile to switch to natural gas in smaller vehicles.  In Conway, Arkansas, the police department’s Chevy Tahoes are being converted to run on natural gas.  The effort is being promoted by Southwestern Energy, which will be building two CNG filling stations in the area.  Trussville, Alabama is scheduled to make the same conversion next year.

The switch to natural gas will receive a big boost in 2014 when Cummins Westport, a Connecticut company, introduces a 12-liter NG engine that is designed to sell between the existing 9- and 15-liter products.  “This will is expected to provide robust growth for the day cab market in North America,” says Navigant.  Volvo Trucks will also be taking aim at that market niche with a 13-liter LNG dual fuel engine.

Hovering behind all this is the effort by T. Boone Pickens’ Clean Energy Fuels to build a “natural gas highway” across America.  CLNE, which trades on the NASDAQ, plans to sell natural gas at truck stops along the nation’s interstate highway system.  The company is even planning to build its own liquid natural gas terminal in Jacksonville, Florida.

“Natural gas is a better transportation fuel than gasoline,” says the indomitable Pickens, who is engaged to be married for the fifth time at age 85.  “It’s cheaper, it’s cleaner and it’s a domestic resource.”

In fact the market is now getting so crowded that providers are starting to bump up against each other.  In the Northwest, Clean Energy is objecting to plans by Puget Sound Electric, Portland-based NW Natural and Spokane-based Avista Utilities to build filling stations for natural gas vehicles.  “We feel that because of their monopoly status, regulated utilities will have an unfair advantage entering the natural gas refueling market,” said Warren Mitchell, chairman of Clean Energy.   “Choices in the marketplace are a good thing,” responded Ben Farrow, of Puget Sound.  “We don’t want to compete unfairly.”

Nevertheless, despite all this activity in the United States, Navigant actually sees Asia as natural gas’s prime growth market.  By 2020 the report anticipates annual sales of 400,000 medium and heavy-duty trucks and buses, but the Asian Pacific will account for an astounding 76.2 percent of these sales while North America will provide only 12.7 percent and Europe 8.6 percent.  With 1.2 million NGVs on the road by that time, China and the United States will represent a combined 96 percent of the world market.

Compressed natural gas still has its problems.  Even when stored at 3,600 pounds per square inch, compressed gas takes up five times the space of a gas tank holding the same amount of energy.  This means that on a Chrysler Ram 2500 pick-up the tank still occupies nearly half the truck’s rear cargo bay.  Obviously, the bigger the truck or bus, the better it will be at accommodating this bulk.  But when it comes to ordinary passenger cars, finding room for the gas tank will be much more difficult.  That is why there is still only one NG passenger vehicle – a Honda Civic – on the road today.

Converting passenger vehicles to natural gas will probably require a liquid fuel.  Methanol and butanol, both of which can be made from natural gas feedstock, are likely candidates. But that still lies ahead. For now, the progress of CNG among heavy duty trucks and buses is an encouraging sign that we may be able to reduce our dependence on foreign oil.

Are Hydrogen Cars the Future – Again?

The hydrogen car may be on the road to another comeback – again.  At the annual auto show in Los Angeles last week, both Honda and Hyundai unveiled “concept cars” of hydrogen models they expect to be available by 2015.  As a result, the automobile press has been filled with stories its revived prospects.

“For a long time, hydrogen fuel-cell vehicles were seen as a tantalizing technology to help reduce society’s reliance on oil,” Brad Plumer wrote in the Washington Post. “But the vehicles themselves were seen as forbiddingly expensive. Not the pendulum may be swinging back.”

“Toyota made a decagon – the fuel-cell car is going to be a big part of our future,” wrote Bradley Berman in The New York Times, quoting Toyota spokesman John Hanson.  “Today Toyota is not alone,” he continued. “Four other carmakers – General Motors, Hyundai, Honda and Mercedes-Benz – are also promising fuel-cell cars in the next few years.”

The prospect of an automobile running on hydrogen is indeed perpetually attractive.  Hydrogen is the most common element in the universe.  When combined with free oxygen in the atmosphere it “combusts” to produce H2O – water.  There are no other “exhausts”. Thus hydrogen promises transportation absolutely clean of any air pollution.  No global warming, either.

But it isn’t quite that simple.  The question that always presents itself is, “Where do you get the hydrogen?” Although hydrogen may be the most common element on earth, all of it is tied up in chemical compounds, mostly methane and water.  Accessing this hydrogen means freeing it up, which requires energy.

Most of our commercial hydrogen is made by “reforming” natural gas, which splits the carbon and hydrogen in methane to produce carbon dioxide and free hydrogen. That doesn’t help much with global warming.  Another method is to split water through electrolysis. That is a much cleaner process but requires a considerable amount of electricity. Depending on what power source is used, this can produce zero or ample emissions. If it’s coal, the problem is made much worse. If it’s clean sources such as solar or nuclear, then there can be a strong advantage. In the 1930s, John Haldane proposed giant wind and solar farms that would generate hydrogen that could fuel all of society. Such facilities generating hydrogen for transportation would be a step toward such a utopia.

Even then, however, there are problems.  Hydrogen is the smallest molecule and leaks out of everything.  It is very difficult to transport.  Joseph Romm, a disciple of alternative energy guru Amory Lovins, was appointed head of hydrogen car development program under President Bill Clinton and worked for two years on its development.  In the end, he became very disillusioned and wrote a book entitled The Hype About Hydrogen, in which he argued that the idea really wasn’t practical. Romm is now one of the country’s premier global warming alarmists on ClimateProgress.org.

What has apparently brought hyfrohgen cars back to the forefront has been the substitution for platinum as the principal catalyst in the fuel cell process.

A fuel cell produces an electric current by stripping the electron off a hydrogen atom and running it around a barrier that is otherwise permeable to a naked proton.  The proton and electron are reunited on the other side of the barrier, where they combine with free oxygen to form water.  Until recently, platinum was the only substance that could fill this barrier function. This made fuel cells very expensive and raised the question of whether there was enough platinum in the world to manufacture fuel cells in mass production.  But several platinum substitutes have now been found, making fuel cells considerably cheaper and more accessible.

Estimates are now that next year’s Hyundai and Honda FCVs will sell for about $34,000, which puts them in the range of electric vehicles such as the Nissan Leaf and the Toyota Prius.  (The Tesla, a luxury car, is  priced in a much higher range,)  The problem then becomes fueling.  The FCV offers considerable advantages over the EV in that it has a range of 300 miles, comparing favorable to gasoline vehicles.  It can also be refilled in a matter of minutes, like gasoline cars, whereas recharging  an EVs can take anywhere from  20 minutes to three hours. But hydrogen refueling stations have not materialized, despite former governor Arnold Schwarzenegger’s promise of a “hydrogen highway.” At last count there were 1,350 EV recharging stations around the country but only ten hydrogen stations, eight of them In Southern California.

All this suggests that neither hydrogen cars or electric vehicles will be sweeping the country any time soon.  Neither the Chevy Volt nor the Nissan Leaf have sold well and are not expected to do much better next year.  If you read the press stories carefully, you soon realize that the reason the automakers are constantly cycling back and forth between electric and hydrogen cars is that they are trying to meet California’s requirements for low-emissions vehicles that will allow them to continue selling in the state. The problem, as always, is consumer resistance..  The automakers can manufacture all the hydrogen and electric cars they want but consumers are not always going to buy them, especially at their elevated price.  So the manufacturers will end up dumping them on car rental agencies where they will sit on the back lots, as did the first generation of EVs.

There is, however, one type of alternative that succeeded handsomely in California and had widespread consumer acceptance, although it is completely forgotten today.  That is methanol.  In 2003, California had 15,000 cars running on blends of up to 85 percent methanol.  Consumers were extremely happy and did not have to be dragooned into buying them.  Refueling was easy since liquid methanol slots right into our current gas stations. Cars that run on methanol can be manufactured for the same price as cars that run on gasoline.

The experiment only ended because natural gas, the main feedstock for methanol, had become too expensive.  In 2003, natural gas was selling as high as $11 per mBTU, making it more expensive than gasoline.  That was before the fracking revolution.  Today natural gas sells for less than $4 per mBTU and the industry is coping with a glut.  Methanol, which is already produced in industrial quantities, could sell for $1 less than motorists are now paying for energy equivalent in gasoline.  Moreover, methanol can be made from garbage and crop wastes and a variety of other sources that would reduce it’s carbon footprint.

Hydrogen and electric cars each have a future and it is good to see the auto companies keep experimenting with them.  But each has impediments that are going to be difficult to overcome. Methanol, on the other hand, is a technology that could be implemented today at a price that not require subsidies.  Even if it is only perceived as a “bridge” to some more favorable, low-carbon future, it is worth pursuing now.

 

What Do Iceland and Israel Have in Common?

In New York City politics they used to talk about the “three I’s” – the Irish, the Italians and the Israelis, which formed the major voting blocs. Today we can talk about the “two I’s” –two countries that are making significant progress in methanol as an alternative fuel – Iceland and Israel.

Iceland is by far the leader.  The Icelanders are blessed with a string of volcanoes that bristle with geothermal energy. Tapping these vents, they are able to get 25 percent of their electricity from this natural, renewable source – the highest proportion of geothermal in the world. Drawing the other 75 percent from the island’s ample hydroelectric resources, you have a grid running entirely without fossil fuels.

But that’s just the beginning. Blessed with this amplitude of natural resources, the Icelanders have decided to turn it into an auto fuel as well. In 2011 a Reykjavik-based company called Carbon Recycling International set up a unique operation that will capture the small amounts of carbon dioxide and carbon monoxide emitted from geothermal vents and transforming that into an auto fuel as well.

The target ingredient is methanol, the simplest alcohol, made up of a single carbon, three hydrogens and a hydroxyl ion. Methanol is a liquid at room temperature and can be easily funneled into our existing gas-station infrastructure. Methanol burns with about 50 percent of the energy content of gasoline but has a higher octane rating so the real effect is about 66 percent. Methanol functions similarly to the corn ethanol that currently constitutes 10 percent of our gasoline.

Through a simple procedure, CRI takes the carbon dioxide exhaust from the 75 MW Orka geothermal plant and combines it with hydrogen to produce methanol. The hydrogen is obtained through the electrolysis of water, using electricity from the power plant. The outcome is 5 million gallons of methanol per year. In the United States, the Environmental Protection Agency has not yet approved methanol as a gasoline additive but Iceland allows it to be mixed at a rate of 3 percent (although they also have some Fords running on 50 percent). Cars would actually run on 85 or 100 percent methanol – the Indianapolis 500 cars have done it since the 1960s – but government regulators in both countries are reluctant to give it a try (It would require replacing a few elements in the fuel line to avoid corrosion).

Iceland’s experiment has been so successful that the country has now decided to export the product to Europe. This year CRI has begun to send its “green methanol” to the continent to add to Europe’s gas tanks. The Icelanders advertise that the product adds no additional carbon dioxide to the atmosphere. This is because the carbon dioxide that is captured was already headed for the atmosphere. Instead it is burned in gasoline engines, also ending up in the atmosphere, but along the way it has replaced an equal amount of gasoline that would have produced its own carbon emissions.

Icelanders proclaim they are putting into effect what Nobel Prize Winning chemist George Olah called the “methanol economy.”  In his 2009 book, Beyond Oil and Gas: The Methanol Economy  

Olah and his co-authors outline how methanol from a variety of sources – natural gas, coal and any biological material – could serve as the basis of an economy much less dependent on fossil fuels. At the Orka carbon recycling and geothermal plant, they appear to be doing just that.

At the same time, Olah is finding recognition in Israel as well. This month Olah and his University of Southern California colleague G.K. Surya Prakash became the first recipients of the Eric and Sheila Samson Prime Minister’s Prize for Innovation in Alternative Fuels for Transportation, with Prime Minister Benjamin Netanyahu bestowing the first-ever award. The Israelis are also looking for alternatives to gasoline in order to reach their proclaimed goal of reducing dependence on oil by 60 percent by 2025. With the discovery of new gas supplies in the eastern Mediterranean they are in a good position to apply Olah’s proposed technology in transforming natural gas into methanol for transportation.

Nor is Olah standing still. In an October op-ed contribution to the Wall Street Journalhe announced that he has developed a new technology that will allow large quantities of carbon dioxide from power plants to be transmuted into methanol so that carbon exhausts can be “recycled” just as the they are at Orka. The plan could make use of carbon exhausts in the U.S., perhaps rescuing the fading coal industry.

Iceland and Israel are already taking steps toward the vision of a methanol economy. Will Iowa and Illinois be next?

A Thanksgiving Feast of Alternatives

Over the river and through the wood

To grandmother’s house we go.

The horse knows the way to carry the sleigh\

Through white and drifted snow.”

Thanksgiving has come and gone, Christmas is coming, and that makes me think of alternative fuels and finding something to replace gasoline in our engines.

What, after all, was the horse and sleight except an old-fashioned means of transportation?  It had served humanity since the Bronze Age.  It has often been said that Julius Caesar and George Washington used essentially the  same transportation technology in pursuing their wars

All this held through the early days of the 20th century. There is a famous scene Jules Verne’s The Mysterious Island, written in 1875, where the adventurers go to investigate a mysterious submarine – in a horse and carriage!  When people started assembling on the New York docks in 1913 to hear reports of the missing Titanic, half of them arrived in horses and carriages.

We eventually made the energy transformation to the “horseless carriage” of automobiles but it wasn’t easy. People were afraid of the new invention.  They didn’t know how to work it. They fretted over the extraordinary speeds that could be reached – 30 miles an hour!  They did not like the nasty exhausts that some new technologies produced.

Nor was it ever certain which means of propulsion for the new “automobiles” would prevail. There were three contenders – the electric car, the steam car and the internal combustion engine running on any number of fuels.  Gasoline was not the foremost possibility. When Henry Ford built his first model in 1895, called the “quadricycle,” he designed it to run on corn ethanol, which seemed like a reasonable alternative.

The steam car set speed records of 200 miles per hour and the electric showed great promise as a gadabout town car. But the internal combustion eventually prevailed. Why?  The steam car, running on coal, took too long to warm up – about 20 minutes.  The electric car had a very short range, as it still does today. The internal combustion engine was awkward because it required the driver to hand-crank the engine from the front.  There was also a question of whether there would be enough fuel available to run large numbers of cars.  At the time, oil was still a relatively rare commodity, marketed mainly for the “lamps of China.”  But when Spindletop gushed forth in 1901, questions about the oil supply faded.  And when Charles Kettering invented the electric starter in 1912, the battle was over.

Still, Henry Ford didn’t particularly like gasoline and never gave up on the idea that ethanol was a better alternative.  Gasoline had a lower octane rating, was much more toxic (particularly when blended with tetra-ethyl lead to raise its octane rating) and emitted more pollutants. It was also more explosive and required complex refining, whereas ethanol was relatively easy to produce. Ford had roots in farm country and as late as 1925, with the farm belt in a chronic recession, he argued that farmers should be growing their own fuel. “The fuel of the future is going to come from fruit like that sumac out by the road, or from apples, weeds, sawdust — almost anything,” he told The New York Times. “There is fuel in every bit of vegetable matter that can be fermented. There’s enough alcohol in one year’s yield of an acre of potatoes to drive the machinery necessary to cultivate the fields for a hundred years.”

These ideas still resonate today.  Making auto fuel from crops has become a reality since we add 10 percent corn ethanol to our gasoline supplies, cutting our dependence on foreign oil.  There is still talk about using the much larger portions of “crop wastes” to produce cellulosic ethanol, although the technology to do this economically has not emerged yet.  Electric cars are getting another run as battery life and range are extended.  And there is a range of other alternatives – compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen fuel cells and methanol derived from natural gas, coal or any number of organic sources, including garbage, crops and crop wastes.  We have a regular Thanksgiving feast of options before us.  It’s just a question of finding out what works best.

So remember, no technology is forever.  The holiday revelers sleighing toward grandmother’s house for Thanksgiving never dreamed they might one day be making the same trip across 300 miles of countryside at speeds of 60 miles an hour. And today when you’re speeding down the Interstate in a car powered by gasoline from Saudi Arabia, you may not dream that in ten years you could be driving a car running on switchgrass grown on the scrubland of South Dakota or natural gas pumped from the Marcellus in Pennsylvania.  Yet stranger things have happened.  You never know where that path over the river and through the woods is going to lead.

The Principal Impediment to Alternative Fuels Is – Government Regulation?

In their path-breaking study, “Fuel Choice for American Prosperity,” the Energy Security Council carefully outlines the dilemma that our complete dependence on oil for transportation has created.

“It’s not the oil we import, it’s the price,” was the way they summarized it. As I outlined in a previous post the authors show how OPEC still controls the bulk of the world’s oil reserves and has not increased its output since the 1970s. As a result, even though we have increased domestic production dramatically and cut down on consumption, we are actually paying more for our oil imports than we were ten years ago. Why?  Because, OPEC is still able to manipulate the price to keep it at $100 a barrel. It’s not the black stuff we import that crimps our economy, it’s the price of oil we must accept from a monopolistic cartel.

So what to do?  Do we set up protests outside OPEC’s corporate offices in Vienna?  Do we bring an anti-trust suit in some world forum? People have actually tried such things and gotten nowhere. No, the only way to extricate ourselves from this market is to break the monopoly that oil has on our transportation system. If oil had competitors, it will start acting like any other commodity and respond to supply and demand. The key to breaking the OPEC monopoly, says USESC, is to develop alternative fuels.

When it comes to asking why we have not made more progress in developing alternative fuels, however, USESC has a surprising answer: government regulation. Government regulation? How can that be? I thought the government was doing everything it could to foster alternatives and try to lower our oil imports. Well, as usually happens when the government gets involved in manipulating a market, things quickly get complicated and murky. Here’s what has happened:

CAFE standards. When Congress first started setting corporate fleet average standards, responsibility was given to the Environmental Protection Agency. In retrospect, this was an odd choice, since EPA is more concerned with air pollution than reducing oil consumption. The Department of Energy would have been a more logical choice. This didn’t become visible in the 1980s when pollution concerns centered on the combustion products of sulfur and nitrogen. But now that carbon dioxide and global warming have become the principal concerns, the EPA has subtly changed its emphasis. As USESC points out; “CAFE’s initial energy security centric vision has been blurred by the desire to use the law to promote greenhouse gas emission reduction goals.”

In its latest regulatory effort, for example, the EPA will reward auto companies for introducing alternative fuels by applying a “multiplier” to their corporate fleet average beginning in 2017. Every electric and hydrogen fuel cell vehicles will count as two vehicles in the denominator of the corporate average, phasing down to 1.5 by 2021. For plug-in hybrid electric vehicles (PHEVs) and compressed natural gas vehicles (CNG), the multiplier will be 1.6, phasing down to 1.3.

All this seems fair enough. EVs and FCVs use no gasoline and plug-in hybrids are only partially dependent on oil. The real problem, however, is that flexible-fuel vehicles – cars that are designed to burn ethanol, methanol or gasoline – have only been given credit based on how much E-85 they burn in real-world driving. The auto manufacturers have used this to avoid making improvements in car efficiency. This is regrettable because flexible fuel engines burning either ethanol from homegrown corn or methanol derived from natural gas would be the best say to cut down on imported oil. Both methanol and ethanol are liquids and fit right into our current gas station delivery system. Compressed natural gas and electricity, on the other hand, require a whole new replenishing system. Yet the EPA remains wary of both ethanol and methanol because they produce carbon exhausts. CNG also produces carbon exhausts, of course, and EVs drawing power from coal or natural gas will produce exhausts at the power plant. The EPA has tried to compensate for this by adding upstream carbon releases for EVs and other alternative fuels but it does not do the same for gasoline!  In short, the whole multiplier system is a mess. The EPA would do much better just trying to reduce oil dependence rather than bringing carbon emissions into the equation.

Costs of converting to alternative fuels: One of the most important steps in developing alternative fuels is converting existing gasoline vehicles to run on other fuels.

In general, there are three types of conversions – switching a gasoline or diesel car to run solely on another fuel (dedicated), changing a vehicles to run on higher alcohol blends (flex fuel), or installing an additional fuel tank so that the vehicles can burn the competing fuel as well (bi-fuel). In American, however, onerous regulations and staggering costs of conversion has deterred consumers.

The study points out that installing a CNG tank in an American car costs $10,000 while the same tank in Europe can be installed for $3,800. The difference is the strength of the tank as dictated by the EPA. Of course we don’t want to be in a situation such as Pakistan where CNG cars are exploding due to poor tank quality.  But even in comparison to other developed countries, U.S. regulatory requirements are excessive. 

Taxing by volume instead of by energy content: The federal and state governments places taxes on gasoline and any other product used to propel trucks and automobiles. The logic here is that the money goes into special highway trusts that maintain the roads. But the tax is imposed by the gallon rather than by energy content. USESC maintains that this is discriminatory because methanol, ethanol and other non-gasoline products have less energy density and therefore require more volume for the same amount of energy. This is a fine point and might be disputed by the oil industry, which would say if ethanol and methanol have less energy content, that is simply their tough luck. Ethanol, on the other hand, has been exempted from the federal highway tax and most state gas taxes, which is what makes it economical to add to gasoline.

The ban on methanol: Finally, although the USESC report does not even mention it, the biggest regulatory impediment to alternative fuels is the EPA’s failure to authorize the use of methanol in gas tanks. Putting anything in your gas tank requires permission from the EPA because of air pollution considerations. Although methanol actually produces less nitrous oxides and less particulate matter than gasoline, the EPA has never given it an OK. Although methanol made from natural gas might be the best alternative for replacing gasoline, it is does not yet have EPA approval.

Changing any and all of these regulations would require a huge concerted effort by some constituency that had a strong material interest in pushing it through Congress. Unfortunately, there is no such group. The natural gas industry is not yet organized around the issue and is more concerned about defending fracking and opening up natural gas exports. T. Boone Pickens is pushing CNG for trucks through his Clean Energy Fuels but there is no similar effort to promote the use of natural gas in cars. The entire farm bloc is behind corn ethanol, of course, which is why it has been so successful. But there is no similar interest promoting methanol, which may be just as good an alternative or better.

Under these circumstances, the best alternative is to persuade the auto manufacturers to produce flex-fuel vehicles that can run on any fuel – natural gas, hydrogen, biodiesel, E85 (85% ethanol) or M85 (85% methanol). The adjustment would not add significantly to the price of a new car and would open up the field to all the competitors attempting to replace gasoline.

Let the best fuel win.

It’s not the oil we import that makes us vulnerable, it’s the price

The United States Energy Security Council has written a brilliant report explaining why neither increased production nor improved conservation will solve our oil problems or free us from dependence on world events.

The Council numbers 32 luminaries from across the political spectrum, including such diverse figures as former National Security Advisors Hon. Robert McFarlane and Hon. William P. Clark, former Secretary of State Hon. George P. Shultz, Gen. Wesley Clark, T. Boone Pickens and former Sen. Gary Hart. The study, “Fuel Choice for American Prosperity,” was published this month.

The report wades right in, pointing out that even though our domestic production has increased and imports are declining, we are still paying as much or more for imported oil than we did in the past. The report states, “Since 2003 United States domestic oil production has risen sharply to the point the International Energy Agency projects that the United States is well on the way to surpassing Saudi Arabia and Russia as the world’s top oil producer by 2017. Additionally fuel efficiency of cars and truck is at an all-time high. As a result of these efforts, U.S. imports of petroleum and its products declined to under 36% of America’s consumption down from some 60% in 2005.”

Good news, right? Well, unfortunately not so fast. The report adds, “None of this has had any noticeable downward pressure on global oil prices. Over the past decade the price of crude quadrupled; the value of America’s foreign oil expenditures doubled and the share of oil imports in the overall trade deficit grew from one third to about 5%. Most importantly, the price of a gallon of regular gasoline has doubled. Despite the slowdown in demand, in 2012 American motorists paid more for fuel than in any other year before.”

How can it be that all this wonderful effort at improving production still has not made a dent in what Americans pay to fill up their cars? The problem, the study says, is that OPEC still has enough monopolistic market leverage to keep the price of oil where it wants. “While non-OPEC supply has been increasing and while the world economy is growing by leaps and bounds, OPEC, which holds some three quarters of the world’s economically recoverable oil reserves and has the lowest per barrel discovery and lifting costs in the world, has failed to increase its production capacity on par with the rise in global demand. Over the past four decades, world GDP grew fourteen-fold; the number of cars quadrupled,; global crude consumption doubled. Yet OPEC today produces about 30 million barrels of oil a day (MBD) – the same as it produced forty years ago.”

This means that even though we’re doing very well in ramping up supply and reducing demand, the overall distribution of reserves around the world still weighs so heavily against us that we’re basically spinning our wheels as far as what we pay for oil is concerned. The Council sums it up succinctly: “What the U.S. imports from the Persian Gulf is the price of oil much more so than the black liquid itself.”

So, what can we do? The Council says we have to change our thinking and come up with an altogether new approach: “If we are to achieve true energy security and insulate ourselves from countries that whether by design or by inertia effectively use oil as a economic weapon against us and our allies, America must adopt a new paradigm – one that places oil in competition with other energy commodities in the sector from which its strategic importance stems: the transportation fuel market.”

In other words, quite simply, we have to find something else to run our cars. “Although this may appear to be a daunting task, our country — and the globe — is abundant in energy resources that are cost-competitive with petroleum.”

In fact, there are numerous alternatives available. We have natural gas that can be used in a variety of ways, we have biofuels and we have electricity; all of which exist in abundant supply. What prevents us from using many of these alternatives is a regulatory regime and political inertia that prevents them from being employed. “Cutting into oil’s transportation fuel dominance has only been a peripheral political objective over the past forty years with inconsistent support or anemic funding from one Administration to the next. Competing technologies and fuels to the internal combustion engine and to gasoline and diesel have often been viewed as political pet projects by the opposing party. . . . What we must do is relatively simple: level the playing field and end the decades-old regulatory advantage that petroleum fuels have enjoyed in the transportation fuel market. By pursuing a free market-oriented policy that has as its primary objective a competitive market in which fuels made from various energy commodities can be arbitraged against petroleum fuels, the United States can lead the world in placing the best price damper of them all – competition – on oil.”

The Council is particularly critical of the “multiplier” system that has allowed the Environmental Protection Agency to become the arbiter of which alternative vehicles win favorable regulatory approval. The Corporate Average Fuel Efficiency (CAFE) standards have now been set so high — 54.5 mpg by 2025 — that no one realistically expects them to be achieved. But automakers can win “multipliers” by manufacturing alternative-fuel vehicles that are counted as more than one car, thus lowering the fleet average. The value of this multiplier, however, is determined solely by the EPA.

But as the study points out, the EPA has a conflicting mandate. On the one hand, it is supposed to be cutting gasoline consumption but on the other it is concerned with cutting pollution and carbon emissions. (Just why the EPA and not the Department of Energy is administering the CAFE program is a question worth asking.) So the EPA tends to favor cars that do not necessarily improve energy consumption, but cut emissions. Thus, it awards a two times multiplier to electric vehicles and fuel cell cars by only 1.3 times for plug-in hybrids and compressed natural gas. Meanwhile, flex-fuel vehicles, which could do most for reducing oil consumption, get no multiplier at all.

The Energy Security Council has many other good recommendations to make as well. I’ll deal with them at length in a later column. But for now, the takeaway is this: Greater production and improved efficiency will only get us so far. The real key to lowering gas prices and freeing ourselves from foreign dependence is to develop alternatives to the gasoline-powered engine.

Robert Rapier loves methanol

Robert Rapier – “R2” as he calls himself in good scientific notation – is one of the smartest people out there when it comes to energy. A master’s graduate in chemical engineering from Texas A&M University, Rapier is chief technology officer and executive vice president for Merica International, a renewable energy company. He also writes a regular column at EnergyTrendsInsider.com.

And he is a big enthusiast of methanol.

In a series of recent columns, Rapier has made a strong case that methanol is our best option for replacing foreign oil. He believes it can be done cleanly and in a way that also reduces carbon emissions. Unfortunately, one of the biggest impediments, according to Rapier, is the huge political momentum behind corn ethanol, which he regards as an inferior fuel. He is also highly critical of the biofuels effort, which has attracted so much attention in the form of venture capital from Silicon Valley.

“You can buy methanol today for around $1 per gallon,” he said. “This is a big, well-established business that does not receive heavy subsidies and government support as ethanol does. On a per BTU basis, unsubsidized methanol costs $17.61 per million BTUs. You can buy ethanol today – ethanol that has received billions in taxpayer subsidies – for $1.60 per gallon. On a per BTU basis, heavily subsidized and mandated ethanol sells for $21.03 per million BTUs.”

Yes, you read that correctly. We are paying 20% more for ethanol, enabled via highly paid lobbyists, heavy government intervention, taxpayer funds and protectionist tariffs than we are for methanol that has long been produced subsidy-free.

Unfortunately, the decision to mandate ethanol consumption while ignoring methanol has been based much more on politics than on the two fuels comparative advantages. “The fact is, methanol simply has not had the same sort of political favoritism, but is in [Rapier’s] opinion a far superior option to ethanol as a viable, long-term energy option for the world.”

Where biofuels are concerned, Rapier states that the effort has always been predicated on the assumption that we will eventually switch from corn ethanol to much more abundant, non-food cellulosic feedstocks such as switch grass. We just have to wait until somebody comes up with a way to break down cellulose. What investors do not seem to realize is that techniques for breaking down cellulose have been around since the 19th century. They just have proved to be too expensive.

But “high costs have never been a deterrent for Silicon Valley entrepreneurs who wielded Moore’s Law as the solution to every problem. In their minds, the advanced biofuel industry would mimic the process by which computer chips continually became faster and cheaper over time. But advanced biofuels amounted to a fundamentally different industrial process that was already over 100 years old. A decade into this experiment it is clear that Moore’s Law isn’t solving the cost problem.”

(Actually, if you read George Gilder’s latest book, “Knowledge and Power,” you would realize that mathematicians such as Claude Elwood Shannon and John von Neumann have determined that information as an entirely separate entity from energy and matter. Moore’s Law applies only to information, not matter and energy.)

Rapier says biofuels will never succeed until the effort at developing them is redirected into producing methanol rather than ethanol once again:

For methanol, we can produce it from biomass via a similar process to how it is produced for $1 per gallon today. There are numerous biomass gasifiers out there. Some are even portable. They do not require high fossil fuel inputs and they utilize a much larger fraction of the biomass. They aren’t limited to cellulose. They gasify everything – cellulose, hemicellulose, lignin, sugars and proteins – all organic components. And if there is also a heating application, the combined heat and fuel or power efficiency of a biomass to methanol via gasification route is going to put cellulosic ethanol to shame. In any case, the efficiency of biomass gasification to methanol is going to put cellulosic ethanol to shame, because it doesn’t have to deal with all of that water present in the ethanol process.

Altogether, Rapier argues that methanol has a much broader potential feedstock, is easier and cheaper to produce and could be manufactured in much larger quantities than corn ethanol. And this doesn’t even consider the possibility of synthesizing it from our superabundant supplies of natural gas. The problem is that “methanol doesn’t have a big lobby and 42 senators from farm states it can count on for perpetual support.”

At Fuel Freedom Foundation, we believe we should pursue all these options – ethanol, biofuels, compressed natural gas (CNG), liquefied natural gas (LNG) and electric cars. They all offer the possibility of reducing the $350 billion we shell out each year for imported oil. But we can’t help but admire Rapier’s observation that the methanol option is greatly underappreciated. The reasons are: 1) the EPA restrictions that make it illegal to use in car engines and 2) the lack of any large constituency such as the farm lobby that stands to gain from it. For that reason alone we’re very encouraged by Rapier’s writings and look forward to more in the future.