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The Battle Over Ethanol Takes Shape

The decision isn’t scheduled until June but already opposing sides are converging on Washington, trying to pressure the Environmental Protection Agency over the 2014 Renewable Fuel Standard for ethanol.

Last week almost 100 members of the American Coalition for Ethanol descended on the nation’s capital for its annual “Biofuels Beltway March,” buttonholing 170 lawmakers and staffers from 45 states.  The object was to send a message to EPA Administrators Gina McCarthy to up the ante on how many billions of gallons the oil refining industry will be required to purchase this year.

The ethanol program is currently in turmoil.  The latest problem is rail bottlenecks that have slowed shipments and created supply shortages over the winter months.  Record-breaking cold and four-foot snow pack have been partly responsible but the rail lines are also becoming overcrowded.  With all that oil gushing down from the Bakken and Canadian crude now finding its way into tank cars as the Obama Administration postpones its decision over the Keystone Pipeline, ethanol is getting tangled in traffic.  .

“Ethanol for April delivery sold for about $3.02 a gallon on the Chico Board of Trade, an 81 percent increase over the low price during the past 12 months of $1.67 a gallon reached in November,” reported the Omaha World-Herald last Friday  “This weeks settlement price of $2.98 a gallon was the highest since July 2011.”  With only so much storage capacity, some ethanol refineries have been forced to shut down until the next train arrives to carry off the inventory.  As ethanol becomes mainstream, it is becoming more and more subject to market events beyond its control.

But the big decision will be EPA’s ruling in June.  In accord with the 2008 Renewable Fuel Act, Administrator McCarthy must set a “floor” for amount of ethanol refiners will have to incorporate into their blends during 2014.  The program ran into trouble last year when the 13.8 billion gallon requirement pushed ethanol beyond the 10 percent “blend wall” where the auto companies will not honor warrantees in older cars.  Refiners were forced to purchase compensating Renewable Identification Numbers (RINs), which exploded in value from pennies to $1.30 per gallon, forcing up the price of gasoline.  Contrary to expectations, gasoline consumption has actually declined over the last six years, from 142 billion gallons in 2008 to 134 billion in 2013 as a result of mileage improvements plus the lingering effects of the recession.  Last November McCarthy proposed reducing the 2014 from 14.4 billion gallons to 13 billion.  The industry has been crying “foul” ever since.

But there are other ways to fight back.  Last week in Crookson, gas stations were offering Minnesota drivers 85 cents off a gallon for filling up with E-85, the blend of 85 percent ethanol that many see as the real solution to the blend-wall problem.  “We want the public to understand there are different ratios of gasoline and ethanol and how they can save you money,” Greg LeBlac, of the Polk County Corn Growers, told the Fargo Valley News. 

At the annual meeting of the American Fuel and Petroleum Manufacturers (APFM) in Orlando last week, Anna Temple, product manager at WoodMac, made the case that the industry should forego efforts to raise the blend wall from 10 to 15 percent and instead shoot for the moon, leapfrogging all the way to E-85, where ethanol essentially replaces gasoline completely.  (The 15 percent only ensures starts in cold weather.)

“E-15 is a non-starter in terms of market share,” Temple told her audience, as reported by John Kingston’s in Platts.  http://blogs.platts.com/2014/03/25/eight-fillups/  She argued the incremental battle would absorb vast amounts of political capital yet still not be enough to absorb the 15-billion-gallon target for 2021.  Instead, Temple pointed to the growing fleet of flex-fuel vehicles that now numbers around 15 million, headed for 25 million in 2021 or 10 percent of the nation’s 250-million-car fleet.

“If U.S. drivers poured about 200,000 barrels-per-day of E-85 into their flex fuel cars in 2021, that would take care of about 17 percent of the scheduled ethanol mandate,” Temple said.  “It would only require that flex-fuel owners fill a 15-gallon tank eight times a year.”   The remainder would be absorbed in the 10 percent blend and ethanol producers would not have to cut output.

Platts’ Kingston checked the math and found that even this goal would leave ethanol consumption slightly above the blend wall at 10.5 percent.  “Still, the very modest number of eight fill-ups per flex fuel vehicles per year makes the whole blend wall issue seems a lot less daunting,” he confessed.

Of the 15 million people who own flex-fuel vehicles, of course, many don’t even realize it.  (The yellow gas cap or a rear-end decal are the giveaway.)  But the number of gas stations offering E-85 pumps is rising.  The Energy Information Administration now estimates the number at 2,500 with most of the growth taking place outside the Midwestern homeland.  California and New York each have more than 80 stations apiece.

The problem of rail bottlenecks can probably be solved by increasing the number of E-85 outlets and flex-fuel vehicles to bring supplies closer to the place of consumption.  Still, the industry would probably be happy to have a bigger renewable fuel mandate as well.

Can New Catalysts Turn the Corner for Methanol?

The concept of converting our abundant natural gas supplies into liquid methanol in order to replace oil in our gas tanks has had trouble gaining traction for several reasons, all of which are about to face change.

The first reason is that most of the attention towards additives has been focused on ethanol made from corn. Driven by highly specific government mandates, corn ethanol — which now consumes 45 percent of the country’s corn crop — has taken up whatever role industrial methanol might have been chosen to play as a gasoline additive.

Secondly, there’s the problem of the Environmental Protection Agency. Not only has the EPA not approved methanol for gas tanks, the organization actually imposes huge fines on anyone who converts a gasoline engine to methanol without its permission.

The third, and less distinguishable explanation for methanol’s difficult implementation, is that the whole idea has never been very sexy. Methanol has little to do with the “Cutting Edge” or the “New Age Economy.” The manufacturing of methanol is a 60-year-old process practiced doggedly by dozens of industrial facilities around the world. They produce 33 billion gallons a year at the reasonable price of $1.50 per gallon; the energy equivalent of $2.35 gas. Meanwhile, Elon Musk seems to announce a new milestone for the Tesla, or some “breakthrough” in battery technology or cellulosic ethanol emerging from the university laboratories each week, making methanol appear rather plain-Jane and old fashioned. In effect, the solution to our gas tank woes has been hiding before us in plain sight.

Now an announcement from the Scripps Howard Research Institute and Brigham Young University may change everything. In a paper published last week in Science, a team led by Roy Periana of the Scripps Florida Center and Professor Daniel Ess of Brigham Young University say they have found catalysts made from the common elements of lead and thallium that facilitate the conversion of gaseous methane to liquid methanol, potentially making the process even cheaper and more accessible.

The hydrogen bonds in the alkanes (methane, ethane, propane, etc) are among the strongest in nature. To break them involves a heat-driven process invented in the 1940s that is conducted at 900 degrees Celsius. For more than two decades, the Scripps team has been looking for catalysts that would shorten this heat requirement. In the 1990s they came up with a series of catalysts employing platinum, palladium, rhodium and gold, but quickly realized that these elements were too rare and expensive for commercial application. So it was back to the drawing boards in search of something more useful.

Last week in Science they reported success:

The electrophilic main-group cations thallium and lead stoichiometrically oxidize methane, ethane, and propane, separately or as a one-pot mixture, to corresponding alcohol esters in trifluoroacetic acid solvent.
The process reduces the heat requirement to only 200 degrees Celsius, which introduces enormous potential for energy savings. That “one-pot” notation is also crucial. Methane, ethane and propane all come out of the Earth together in natural gas. Currently, they must be separated before the heat-driven process can begin, With the new catalysts, no separation will be necessary. This means that methanol could become significantly cheaper to harvest than it already is. More importantly, these findings signify that methanol conversion will be able to weather the inevitable price increases that will result as demand for natural gas supplies multiplies.

Periana says the process is three years from commercialization. Reports Chemical & Engineering News:
The team is in discussion with several companies and entrepreneurs and would ideally like to jointly develop the technology with a petrochemical company or spin off a startup.

Periana also claims that “Initial targets would be higher-value, lower-volume commodity chemicals such as propylene glycol or isopropyl alcohol directly from propane.” He told reporter Stephen Ritter:

The next target could be to develop lower-temperature processes for higher-volume chemicals, such as converting methane to methanol and ethane to ethanol or ethylene as inexpensive sources for fuels and plastics.

An enormous portion of the world’s energy consumption is still tethered to oil, particularly the transportation sector, where oil constitutes 80 percent of consumption. As oil becomes more and more difficult to find, natural gas use is escalating. In addition, 25 percent of the world’s gas is still flared off because it has been uneconomical to capture. All this could change rapidly if a low-cost conversion to methanol becomes a reality. Reuters grasped the implications of this development when it reported that the new catalytic processes “could lead to natural gas products displacing oil products in the future.”

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.

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.

Tesla Takes It to the Next Level

This will be a week for watching Tesla, not only because the company’s stock had soared to new heights but because Elon Musk seems poised to take it to the next level – manufacturing batteries.

Musk has scheduled a conference call this week and gives every indication is he will be announcing plans for a new “Giga factory” where the Silicon Valley auto company will manufacture its own batteries. “Very shortly, we will be ready to share more information about the Tesla Giga-factory,” Musk told shareholders in his 4th quarter letter last week. This will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation.”

In a way the company has little choice. If Tesla is to move down-market from its current luxury niche – which has always been the plan – it is will need to buy the equivalent of the world’s entire current output of lithium-ion. The easiest thing to do is to go into manufacturing itself.

As usual, Musk will be doing things with a flair. Rumor is that he will be combining with SolarCity, which is run by his cousin Lyndon Rive, to produce a facility running largely on solar power. This will take us way beyond fossil fuels into the kind of world environmentalists imagine, where intermittent solar and wind power are stored to provide the kind of “high-9’s” reliability required by an industrial, digital society. And the key to that will be the same thing that Musk is working on now – batteries.

This kind of convergence is the reason for the number-two rumor of the week – that Tesla and Apple have engaged for a possible collaboration, even a merger. Last week San Francisco Chronicle reporters Thomas Lee and David Baker revealed that Apple’s M&A specialist Adrian Perica met with Musk last spring. What did they talk about?  Obviously a joint venture is in the air. Remarkably, only last October German stock analyst Adnaan Ahmad wrote an open letter to Apple saying it should consider entering the auto business by buying Tesla. The reasoning is as follows:

  • Despite its reputation for cutting-edge products, Apple’s traditional market for personalized devices seems to be reaching its limits. Sales of smart phones and tablets are maturing. Apple’s Next Big Thing is supposed to be a smart watch. A watch?  Is that an appropriate ambition for the world’s most innovative company?  As Steve Jobs did so many times, Apple need to enter an entirely new business and turn it upside down.
  • Apple is sitting on $160 billion in cash. It could literally buy almost any company in the world. Even with a market capitalization that is inflated by high expectations, Tesla is only worth $24 billion. The whole thing is doable.
  • Tesla needs an infusion of cash if it is to break out of its luxury niche and provide a car for the masses. The company’s proposed Gen III would sell for $35,000 and compete with the Chevy Volt and the Ford Focus. But more than half of that cost is in the battery. If Tesla can achieve vertical integration and come up with some new innovations, it may be able to turn a profit. But Apple is in the battery business as well, since most of what’s under the hood in an iPad or iPhone is lithium-ion. There is a convergence taking shape.

Of course there are many things working against this vision. Both Tesla and Apple may deal in lithium-ion batteries but designs aren’t the same and the chemistry is different. Also, when it comes to storing huge amounts of electricity at the factory, lead-acid remains the preferred technology. It’s cheaper in a way that lithium-ion will find if very difficult to duplicate.

Still, there seem to be breakthroughs coming in battery research almost every week. Only two weeks ago, researchers at Harvard announced the invention of a “flow battery” that stores a charge in organic liquids rather than metals. At the University of Limerick, researchers announced the development of a new germanium nanowire-based anode that greatly expands the capacity and lifetime of lithium-ion batteries. And researchers at Stanford said they had developed a silicon anode based on the design of a pomegranate seed that improves lithium-ion storage capacity by a factor of 10. All this is within the space of the last two weeks.

Batteries are hot and Elon Musk will be walking right into the middle of it. He has proved Tesla’s charging system has legs. The first Model S just made the 3,464-mile journey from Los Angeles to New York in 76 hours using Tesla’s new network of supercharger stations. Recharging has been reduced to just over an hour. Model S sales hit 22,500 for 2013, exceeding expectations. With all this success under its belt, the company is preparing to move down-market, where it can really have an impact on our fossil fuel dependence.

Like many Silicon Valley entrepreneurs, Musk is obsessed with space travel. He says he wants to be buried on Mars – “and not on impact.” With Steve Jobs gone, Musk may be the man to take Silicon Valley’s venture into alternative automobile propulsion to the next level.

 

Making the Case for Mars and Methanol

Robert Zubrin is one of those oddball geniuses who prowl around the peripheries of important national issues making suggestions that may seem completely off the wall but on closer inspection are revealed to have penetrating insight.

I first came across him a couple of years ago while writing about space exploration. Zubrin is perhaps the world’s leading advocate of manned trips to Mars. He’s written five books about making the trip to Mars, including How to Live on Mars (2008), which detailed how to establish a permanent colony on the red plant. None of this is going to happen soon, of course, and even though Zubrin is a highly trained aerospace engineer, it’s easy enough to dismiss him as a fatuous dreamer.

Except for one thing: he has also become the most knowledgeable and well versed advocate of substituting methanol from natural gas for imported oil as a way of breaking the back of OPEC.

Zubrin actually wrote his first highly informed book on the subject – Energy Victory – in 2008, before the fracking revolution began producing prodigious amounts of natural gas. At the time he was suggesting we use our abundant coal resources as the feedstock. Now that George Mitchell’s revolution has pumped up gas production to 24 times the level of 2007, the case is even stronger.

Zubrin has just published a 5,700-word article in the current issue of New Atlantis. I won’t do more than summarize it here, but I would recommend tying it up in a bow and giving it to everyone you know as a Valentine’s Day present. Zubrin wraps up all the major arguments for methanol and even manages to illuminate some obscure details about the Environmental Protection Agency’s policy toward methanol that eluded some of us for some time. Here are his major talking points:

  • OPEC still essentially controls the world price of oil. Even though non-OPEC production has increased 60 percent since 1973, 60 percent of the oil traded around the world is exported from OPEC countries and 80 percent commercially viable reserves are still owned by OPEC members. The price of oil is still set in the Persian Gulf.
  • This oligopolistic control has a huge impact on the American economy. Ten of the last 11 postwar recessions were preceded by sharp increases in oil prices. The recent upsurge in shale oil production won’t help much. The Energy Information Administration expects it to level off after 2016. By 2040 we will still be importing 32 percent of our oil.
  • Methanol made from natural gas is the only commodity that can realistically replace oil. “Methanol is not some futuristic dream touted by researchers seeking funding,” writes Zubrin. “Rather, it is an established chemical commodity, with a global annual production capacity of almost 33 billion gallons. It has recently been selling for around $1.50 a gallon.” Methanol’s energy content is only about 60 percent of gasoline, but the bottom line is that “pure methanol can get a car 30 percent farther down the road than a dollar of gasoline.”
  • Methanol has numerous environmental advantages. In fact, when California put 15,000 methanol cars on the road in the 1990s, it was for air pollution purposes, rather than cutting imports or reducing prices to motorists. Methanol burns cleaner, produces virtually no particulate matter or smog components, has none of gasoline’s carcinogenic aromatic compounds and reduces carbon emissions.  On pollution grounds alone, it would be worth making the transformation.

So why don’t we do it?  As Peter Drucker always said, in order to replace a well established technology, an upstart replacement must be 10 times as efficient to clear the institutional barriers. That’s a tall order. But as Zubrin details, there are some specifics that stand out:

  • In terms of sheer market capitalization, the oil industry far surpasses the auto industry. Thus, even though the auto industry might benefit from opening up to new fuels, the oil companies’ interest in maintaining the status quo overwhelms them. Zubrin documents how institutional investors that own large shares of the auto companies are even more heavily invested in oil. Several OPEC sovereign wealth funds also own huge slices of the auto companies. The Qatar Investment Authority owns 17 percent of Volkswagen, which has the highest auto company revenues in the world.  Its vice chairman sits on Volkswagen’s board.
  • The Environmental Protection Agency, through overregulatory zeal, has somehow ended up as one of the major impediments to methanol conversion, even though there would be vast environmental benefits. Although older cars can easily be converted to run on methanol at a cost of less than $200, the EPA no longer permits it. “Since 2002, the only way for a vehicle modification to be deemed lawful is if it receives certification ahead of time from the EPA or the California air-quality board. . . In 2009, the EPA specified massive fines that it may level against any individual or business that modifies a vehicles without advance certification, even if there is clear and compelling proof that no emissions increase had resulted, or even been risked, by such changes. In fact, even the use of unapproved engine parts identical to the certified brands would be considered an emissions violation . . . These fines are set at thousands of dollars for individuals and hundreds of thousands, or even millions, for manufacturers. For example, if a mechanic running his own small business converting cars to flex-fuel in his garage modified just a dozen cars, he would face a crippling fine of more than $105,000.”

In 2011 on National Review Online, Zubrin offered to bet anyone $10,000 he could modify his 2007 Chevy Cobalt (apparently in violation of EPA regulations) to run on 100 percent methanol and get 24 miles per gallon. He did it by replacing the fuel pump seal with a 41-cents replacement made from a synthetic rubber that resists methanol erosion. He also had to adjust the ignition timing for methanol’s higher octane. He would have won the bet but no one took him up.

As a way of moving the ball forward, Zubrin advocates the Open Fuel Standard Act, which has been sitting around in Congress since 2008. The present version would clear up some of the EPA’s restrictions and require at least 30 percent of each carmaker’s new vehicles be flex-fuel by 2016, moving up to 50 percent by 2107. The modification would only add about $200 to the price of the car.

Zubrin is one of those American treasures, an independent thinker operating outside the world of “policymaking” who dares think differently and big. His ideas for colonizing Mars may never get off the drawing boards.  But his proposal for substituting methanol as a domestic alternative to imported oil certainly deserves the greatest attention.

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.

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.

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!

Who Says Cars Have to Fill a Parking Space?

You’ve seen them zipping around city streets or squeezed into some illegal-looking space between a normal car and a fire hydrant.  At first you might have thought they were some kind of joke. Who would drive such a thing?  But the new mini-electrics are catching on and may be on the way to revolutionizing urban driving.

There is now a whole menu of them – the Chevrolet Spark, the MINI E, the Toyota IQ, the Fiat 500. Oddly, many of them are available only in California. That seems like a mismatch because they’re obviously better suited for the densely populated cities of the Northeast than California freeways. But those are the vagaries of state incentives and government mandates.

Most of them have a highly limited range.  125 miles is good and some are as low as 75. (A regular gas-powered vehicle can go 400 miles on a full tank.)  But they’re a niche model, obviously suited for running around town and finding a parking space in the vehicle-choked precincts of places like New York City. They can get up to the equivalent of 125 miles per gallon and with some newer accessories don’t take up to seven hours to recharge. Most important, they are getting down into a price range where they are accessible. Leasing prices are impressive (some of them are only available by lease) and with the incentives that the Golden State is offering, people in California can say they are getting a really good deal.

Here’ a list of some of the contenders:

  • Chevrolet Spark.  Originally produced as the Daewood Matiz by GM’s Korean division, the all-electric Spark went on sale in California and Oregon in 2013.  The car is a 146-inch-long four-door hatchback that sells for $27,000.  With a $7,500 federal tax credit and a $2,500 California rebate, however, it comes in at well below $20,000. The Spark can be leased for $199 a month. With an optional connector, it can be charged up to 80 percent in 20 minutes.
  • Fiat 500e.  An electric version of a car that has been sold in Europe since the 1950s, the 500e went on sale in California last year, selling 645 units. Range is barely 100 miles but it gets the equivalent of 116 mpg. The car is priced at $32,000.  Fiat says it will be available in several more states in 2014.
  • Chrysler’s Smart FortwoThe Smart Fortwo is a model that looks like you could fold it up in your back pocket or park it in your living room. Manufactured in France, it is barely eight feet long. It sells everywhere in the United States. Previously built for gasoline and diesel, the new all-electric model sells for only $12,000 and leases for $99 a month. You’re starting to see them more and more on the streets of New York City.
  • Toyota Scion IQPositioned as a direct competitor to the Fortwo, Toyota’s “city car” sold as a 3-cylinder gasoline engine until the electric version was introduced last year.  Estimated range is only 50 miles with a three-hour recharge, so it’s really limited to city driving. The price is high – $35,000 – and right now it’s only available for fleet purchases and car share programs. The first 30 units were bought by the University of California at Irvine.
  • Mitsubishi i-MIEV EV.  Introduced in Japan in 2008 and soon sold almost everywhere but in the United States, the “i” version was finally brought to these shores in 2011, a slightly larger version with some additional features.  The American version has a range of only 62 miles but was ranked by the EPA as the most fuel-efficient car in America until surpassed by the Honda Fit EV in 2012. It sells for $23,000.
  • Honda Fit EVStill only available on a lease basis, the Fit EV goes for $259 a month. Introduced only in California and Oregon in 2011, it is now available in New York, New Jersey, Maryland, Massachusetts, Connecticut and Rhode Island as well. The car only has an 80-mile range but is highly fuel efficient.

Getting people to accept the proposition of driving around city streets in something that looks like it could be sold on the floor of FAO Schwarz, of course, is an entirely different matter. In test driving a city car for The New York Times, Jim Motavalli reports a neighbor commenting, “It’s adorable, but I’m afraid it would be crushed by a Suburban.” The idea of weaving in and out of traffic in what amounts to a tin can is certainly not for everyone. But electric vehicles have lots of torque at the lower end of the spectrum and can be easily maneuvered. Plus if nothing else, they are loaded with safety features.

To anyone familiar with the dense urban streets of Athens or Buenos Aires, city cars would be a familiar sight. And of course the more there are of them, the less dangerous driving becomes. The progress of mini-cars is slow but you’re seeing more and more of them. In the end, they may revolutionize urban driving.

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.

 

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.