By admin | March 26, 2010
Submitted by Energy Answers Blog
CRP is the Conservation Reserve Program. The government pays farmers to maintain certain fields in grasses or trees. Often, this is land that is too steep for row cropping without extensive erosion. At first glance, you would think that removing biomass from these fields every year would reduce soil fertility. Actually, this is not necessarily so. Some plants, including most grasses, are stimulated to grow more strongly by mowing or grazing. This greater biological activity leads to tapping more nutrient reserves from deep in the earth and from the air. Bacteria and fungi work in symbiosis with plant roots to extract nitrogen from the air and from certain soil particles. These nutrients are translated into plant mass and greater organic matter in the soil.
Estimating Ethanol Yields from CRP Croplands / March 19, 2010 / Newsfrom the USDA Agricultural Research Service: “This extensive study also shows that CRP lands in the northeastern United States with a high proportion of tall native prairie grasses have the potential to produce more than 600 gallons of ethanol per acre. This energy can be produced while maintaining the ecological benefits of CRP grasslands.”
By admin | March 26, 2010
Submitted by Energy Answers Blog
Estimating Ethanol Yields from CRP Croplands / March 19, 2010 / Newsfrom the USDA Agricultural Research Service: “This extensive study also shows that CRP lands in the northeastern United States with a high proportion of tall native prairie grasses have the potential to produce more than 600 gallons of ethanol per acre. This energy can be produced while maintaining the ecological benefits of CRP grasslands.”
By admin | March 17, 2010
Submitted by Energy Answers Blog
The octane and oxygen advantages of ethanol can overcome the fuel economy deficit. But it requires an engine designed to take advantage of these factors. Such an engine would be a game-changer in the automotive and energy world. The CEO of Growth Energy talks about their prototype engine:
Ethanol-Optimized Engine A Major Breakthrough for Producers - Ethanol Producer Magazine: “And, at blends of E40 to E50, the EBDI engine improves on the fuel economy of regular gasoline engines by as much as 10 percent. Think about that: One of the biggest criticisms of ethanol is that engines lose mileage when burning ethanol. But this engine proves that the problem isn’t the fuel—it’s the engine.”
By admin | March 17, 2010
Submitted by R-Squared Energy Blog
Plans are to set up the redirect to the new site for R-Squared on Thursday the 18th. If you subscribe via an RSS feed, you will continue to receive the feed from the new location.
My first post at the new R-Squared will be a position statement. I will briefly cover my views on oil, coal, ethanol (cellulosic, corn, and sugarcane), renewable diesel (green and biodiesel), nuclear power, solar power, wind power, and climate change. That should provide a framework for initial discussions.
As always, suggestions are appreciated. Please let me know if you have questions or comments.
By admin | March 15, 2010
Submitted by R-Squared Energy Blog
At the end of the week, I have to go to New Zealand for 10 days. As is often the case, my posting will be limited while I am traveling. Any time I travel, this always highlights one of the major weaknesses with a personal blog: Traffic is driven by new content, and if there is no new content for a week, traffic falls off. For this, and other reasons detailed below, I have decided that I would make some changes to the operation of this blog. I believe that they will ultimately result in a better experience for readers.
There are multiple reasons for making the changes. In addition to the travel issue, the blog is taking up more of my time. But a large portion of that is due to peripheral issues. Each morning I have to clear out a lot of spam, make template changes as needed, and deal with any technical issues.
Second, I don’t like Blogger’s comment structure. It becomes difficult to keep up with who said what, and then when comments exceed 200 in number, it becomes difficult to find the newer ones.
Third, I have a great number of technically savvy readers. My readers have shown that they have a lot to contribute. They frequently bring my attention to new energy stories, and they often post links to new stories. I have always felt like we needed a forum where readers can start their own discussions - and then discussions needn’t fall off if I am traveling.
If there is a noteworthy or controversial energy-related news story (e.g., the Bloom Box), instead of posting a link in the comments following the latest essay, I want readers to have the ability to start that topic themselves. That would also open up the discussions so that they aren’t so dependent upon me posting something new. I am always hesitant to post on areas that I don’t know a lot about, but with more reader-driven content the discussions could become more diverse.
I have been thinking about this change for over a year, but never quite found a good solution. Now I have found a solution (or maybe the solution found me) to all of these issues, but it requires migrating my blog to a different place. After a number of discussions with Sam Avro, founder and editor of Consumer Energy Report (CER), I have decided to base my blog there. CER is a comprehensive site for all things energy-related. It covers the spectrum from fossil fuels to alternative energy to politics to investments.
Over the next week or so, my blog will migrate there. You can read about CER’s mission here, which is consistent with my mission to have serious, thoughtful discussions on energy issues. But by combining with CER, I will have access to more tools than I have now. You can check out the new blog format here:
R-Squared Energy Blog at Consumer Energy Report
There will be a discussion forum for readers to start their own threads:
Discussion Forum
Readers who wish to participate in the forum will need to go through a 30-second registration procedure (Link here). It simply requires a user name and an e-mail address (which will not be shared, nor will it be publicly visible). This should help to minimize the spam. I also believe that this will facilitate civil discussions.
There will be a redirect from this blog starting later this week. Hopefully readers will come and join the discussions there. I will continue to post on a regular basis. It will still be “R-Squared”, just under a different roof with a number of improvements.
I want to build on the foundation that Sam and his staff have put together so that I can take R-Squared to another level. But it is of utmost importance to make sure it is a good experience for readers. We are open to suggestions from readers, and happy to answer any questions you may have. I believe Sam will be stopping by to introduce himself in the comments.
By admin | March 15, 2010
Submitted by R-Squared Energy Blog
D.C. Discussions Advance Corn Issues
Extension of the Volumetric Ethanol Excise Tax Credit (VEETC) – This blender’s tax credit provides $.45 for each gallon of ethanol blended with gasoline and expires at the end of this year. The credit provides thousands of jobs, fuels economies and helps the U.S. to meet its mandated biofuels-production standard. The elimination of this credit will result in a 38-percent jobs and production loss. VEETC brings dollars back to the U.S. Treasury in the billions, eliminates more than $22 billion in oil imports and has led to a reduction of farm payments of more than $10 billion. Despite the success of the ethanol industry, some members of the Ohio delegation want its advancement to end – even delegates from areas where corn represents the largest economic portion of their district.
Granted, this is from the corn lobby, but that’s just unadulterated nonsense. It is scare-mongering, and given the advantages they already enjoy (and I am not opposed to some subsidies for the industry) it is sad to see corn farmers groveling for welfare like this. (The irony of this is that I grew up on a farm, in a farm community, and farmers love to gather at the local coffee shop to complain about “people on welfare” taking their tax dollars).
As I have been arguing, eliminating the ethanol credit (VEETC) wouldn’t absolve gasoline blenders from their obligations under the Renewable Fuel Standard (RFS). If the credit was eliminated today, gasoline blenders must still blend 12 billion gallons of ethanol in 2010, and 15 billion gallons by 2015. They just wouldn’t get paid to comply with the law.
Most of the attempted rebuttals to my recent essays on eliminating the VEETC completely missed the mark. People acted as if there was no RFS in place, and therefore they argued that eliminating the VEETC would completely destroy the ethanol industry. That was the gist of Growth Energy’s call to arms for their members; the VEETC was just too important to ethanol’s survival. That might have been a valid argument prior to implementation of the RFS, but it is not a valid argument today. If they really require both a mandate and a subsidy in order to compete, then we might as well stop this charade right now.
There was one response to my argument - made by several different people - that does have some merit. That response was that the VEETC helps incentivize blenders to blend more ethanol than what is required by law.
OK, setting aside for a moment the other arguments for and against the subsidies, it is true that the subsidy may result in the blender going above and beyond the law. But the response to that is simple: Only pay for what was blended above and beyond the law. Arguing for a subsidy that will cost almost $6 billion this year by some incremental blending above what the law requires is silly. In fact, that means you would be paying a very high subsidy for that incremental ethanol blending. How much? Try $4.18 per gallon of incremental ethanol blended.
Several related articles have recently been published along the same theme; that not only is a subsidy on top of a mandate redundant, but it subsidizes driving and wastes taxpayer dollars:
Mandates, Tax Credits, and Tariffs: Does the U.S. Biofuels Industry Need Them All?
It is puzzling why the biofuels industry continues to defend these subsidies when it has its mandates in place. Tax credits cost taxpayers more than $5 billion per year, and import tariffs convey the message that the ethanol industry is so uncompetitive that it needs protection against foreign competition. It would seem that there would be major political benefits from simply giving up all subsidies and import tariffs and for the industry to rely solely on the mandates . . .
Pay close attention to this bit: “Expanded mandates under the Renewable Fuel Standard provide ethanol and biodiesel producers a guaranteed future market at volumes that exceed what they have produced in the past.”
Think about what is going on here. Ethanol producers already enjoy mandates that guarantee a growing market. What other industry has that luxury? And on top of that, they want subsidies to complement the mandates? Outrageous.
I am in the middle of preparing my taxes, so tax dollars are much on my mind right now. And I strongly resent my tax dollars being wasted. The issue of taxpayer money has become a bit of a running joke with all of the multi-billion dollar bailouts and stimulus packages, but that money still comes from taxpayers, present and future. I will not sit idly by while we mortgage our children’s futures to pay a redundant subsidy.
That is a perfect lead-in to the theme of this article, which is what I think the ethanol industry’s strategy should be with the VEETC expiring this year. Now the ethanol/farm lobby might be able to push this redundant subsidy through regardless. I won’t be surprised if they do. But it is going to be a nasty fight, and it is going to shine a spotlight on this issue that they would rather have keep at a low profile. They are going to have to resort to scare tactics and exaggerations (as in the corn lobby’s missive above), and major questions will be asked as to why this industry still requires so much protectionism and taxpayer money to survive.
But imagine that instead of spreading a $6 billion subsidy across 12 billion gallons of ethanol (that oil companies are legally obligated to blend), that it was instead targeted at incremental E85 production. So instead of $6 billion, you could maybe spend $2 billion to get an incremental 2-4 billion gallons of E85 into the market. That would be smart politics by the ethanol industry, would save taxpayer dollars, and would still potentially grow their industry above and beyond their already guaranteed future market.
I haven’t been able to find E85 sales statistics for 2009, but there were lots of stories about how demand had dropped off during the year. The major problem here is in pricing; E85 is currently at about a 15 cent disadvantage (with the subsidy) relative to mid-grade gasoline (but only a nickel disadvantage relative to premium gasoline). If the VEETC was focused entirely on the E85 market, that disadvantage could be made to disappear at a fraction of the cost of the current program.
Further, I think E85 would be a much better outlet for the ethanol industry than trying to get nationwide E15 or E20 in the system. Instead of fighting the EPA, boat owners, the oil industry, the auto industry, etc. to force higher ethanol blends into the system (and I haven’t seen them step up and offer to assume the liability from potential damage caused by these higher ethanol blends), use it in cars that were designed for it.
There are numerous E85-ready cars on the road now. If the price is right, the demand will be there. The industry doesn’t even have to rely on the oil companies. There is nothing stopping farmer’s coops from getting together and opening up their own E-85 stations throughout the Midwest.
I am a fan of efficiency, and to me it doesn’t make much sense to produce ethanol in Iowa and ship it to Texas, while shipping finished gasoline products from Texas to Iowa. The Midwest consumes 40 billion gallons of gasoline per year. The ethanol industry should enjoy the largest cost advantage in the Midwest, close to the source of production. If we are going to incentivize ethanol, let’s first focus on getting E85 sales up in the Midwest, in the local markets where ethanol is produced.
I think some version of this argument - only use the VEETC to incentivize incremental ethanol production - would be a win-win for the ethanol industry. But continuing to argue that they need a subsidy for something oil companies are legally obligated to do anyway is not going to sit well with most people.
Note 1: (My recent Range Fuels’ essay has been republished in the current issue of Subsidy Watch).
By admin | March 9, 2010
Submitted by R-Squared Energy Blog
Spring is approaching, and gasoline prices are once again climbing. But you may not know that this ritual of climbing prices happens almost every year about this time. If you check the history of gasoline prices at the Energy Information Administration’s (EIA) website you can see that gasoline prices almost always rise between January and May.
The primary reason this happens is due to a seasonal switch in gasoline blends. There are two key (although not the only) specifications that refiners must meet for gasoline. The gasoline must have the proper octane, and it must have the proper Reid vapor pressure (RVP). While the octane specification of a particular grade is constant throughout the year, the RVP specification changes with the seasons. (See Refining 101: Winter Gasoline for a more detailed explanation of gasoline blends).
The RVP is based on a test that measures vapor pressure of the gasoline blend at 100 degrees F. Normal atmospheric pressure varies, but is usually around 14.7 lbs per square inch (psi). Atmospheric pressure is caused by the weight of the air over our heads. If a liquid has a vapor pressure of greater than atmospheric pressure, that liquid boils. For example, when you heat a pan of water the vapor pressure increases until it reaches atmospheric pressure. At that point the water begins to boil.
In the summer, when temperatures can exceed 100 degrees F in many locations, it is important that the RVP of gasoline is well below 14.7 psi. Otherwise, it can pressure up your gas tanks and gas cans, and it can boil in open containers. Gas that is vaporized ends up in the atmosphere, and contributes to air pollution. Therefore, the Environmental Protection Agency (EPA) has declared that summer gasoline blends may not exceed 7.8 psi in some locations, and 9.0 psi in others. The particulars vary, but key considerations are the altitude and motor vehicle density of a specific location.
The EPA publishes a schedule for the RVP transition:
Guide on Federal and State Summer RVP Standards for Conventional Gasoline Only
The schedule varies somewhat from region to region, but in general is as follows. After allowing vapor pressures as high as 15 psi in the winter, the limit drops starting on May 1st:
May: 9.0 psi
June – Sept. 15: 7/7.8 psi
More congested areas and hotter areas will tend to have a limit of 7.0 psi, while cooler climates generally opt for 7.8 psi. Some cooler climates maintain a 9.0 psi limit throughout the summer. One of the disadvantages of having different requirements for different areas is that summer gasoline is less fungible. This can cause price imbalances in different areas, and sometimes prevents product from flowing from one area into another to ease the shortage.
Refiners will start to pull down their inventory of winter gasoline well in advance of the May 1st deadline. On that date, all gasoline in the system has to meet the stricter requirements, and this “summer blend” is costlier to produce because it contains less butane.
Butane, which has an RVP of 52 psi, can be blended into gasoline in higher proportions in the winter because the vapor pressure allowance is higher. There are two advantages in doing this. First, butane is a cheaper blending component than most of the other ingredients. That makes fall and winter gasoline cheaper to produce.
But butane also adds to the total gasoline pool, so that means that gasoline supplies increase in the winter as more butane is added to the mix. Not only that, but this takes place after summer driving season, when demand typically falls off. These factors normally combine each year to reduce gasoline prices in the fall (even in non-election years). The RVP is stepped back down to summer levels starting in the spring, and this usually causes prices to increase.
One misconception some have is that they can save money by buying cheap gasoline in the winter and storing it for the summer. Remember that winter gasoline will pressure up as the weather heats up, and the contained butane will start to vaporize out of the mix. You will end up with less gasoline than you paid for, and that would also contribute to the air pollution problem that summer gasoline was designed to avoid.
If, on the other hand, you were to buy summer gasoline and try to store it until winter, you might find yourself having problems getting the fuel to ignite, due to the lower vapor pressure. This would be like putting a little bit of diesel in your gasoline – not very good for your car.
So how high might gasoline prices climb this spring? The EIA’s gasoline inventory database can provide some guidance. In the spring of 2007 gasoline prices spiked above $3.00 a gallon for the first time. But that year gasoline inventories also dropped sharply. Rapidly falling gasoline inventories are a good predictor of sharply higher gasoline prices. In the fall of 2005, Hurricane Katrica also caused a sharp drop in gasoline stocks, leading to an atypical fall price increase.
So far in 2010, gasoline inventories have been at very healthy levels. While some inventory draw down can be expected during the transition to summer gasoline, it is a pretty safe bet that the current high level of gasoline stocks will prevent a rapid escalation of prices this spring. I would expect no more than a mild price increase between now and summer, and at the current inventory levels it would not be surprising to see prices start to decline from present levels.
However if oil prices escalate, that could trump high gasoline inventory levels. This is why gasoline is presently about $1 more than it was last year at this time; oil prices were $30-$40 lower than they are now. But that’s a topic for a future essay.
By admin | March 5, 2010
Submitted by R-Squared Energy Blog
I usually scan the energy headlines each morning, but had somehow missed the stories on the recently introduced bills to electrify the U.S. Postal Service fleet:
U.S. Postal Service to test a repurposed electric vehicle fleet
Rep. Gerald E. Connolly (D-Va.) introduced a bill Friday that would pay for 109,500 electric vehicles, though the cost of that program isn’t known yet. “This, to me, would be a very productive thing and . . . likely to produce jobs and revitalize an industry,” Connolly said.
In December, Rep. José E. Serrano (D-N.Y.) announced an “e-Drive” bill that would give $2 billion to the Energy Department and Postal Service to convert 20,000 mail trucks into electric vehicles.
I have always liked the idea of electric cars. I have written a number of essays around that theme, primarily because electric vehicles could in theory be adequate replacements for internal combustion engines as supplies of fossil fuels deplete. Imagine that our electric grid eventually moves more toward renewable energy, and electric vehicles could be a much greener solution than the majority of the vehicles we have on the road today.
But note that I use words like “theory” and “imagine” to describe this idealistic future. I firmly believe that we need to have a look at the data from time to time to make sure that our idealism isn’t in direct contrast to reality. Unfortunately, in this case it might be.
Study: Electric cars not as green as you think
The environmental benefits of electric cars are being questioned in Germany by a surprising actor: the green movement. But those risks don’t apply in the U.S., the American electric-car lobby asserts.
Today, the German plants that deliver marginal electricity are fueled by coal. That is the main problem, according to the study. The research adds that to produce the same amount of energy, coal emits more carbon dioxide than even gasoline.
“The irony is that you don’t need a lot more electricity for electric cars,” Raddatz, said. “But the problem is that if they cause these peaks, we would have to have power plants that would be ready to start (as) the massive charging starts.”
An electric car with a lithium ion battery powered by electricity from an old coal power plant could emit more than 200g of carbon dioxide per km, compared with current average gasoline car of 160g of carbon dioxide per km in Europe, according to the study. The European Union goal for 2020 is 95g of carbon dioxide per km.
I have been thinking about this a lot, as I have recently seen some electric car/combustion engine comparisons in a report that is about to come out. I won’t divulge much about the report, but when it comes out I will link to it. But I will provide a quote from the soon-to-be-released report:
New Zealand energy consultant Steve Goldthorpe estimates that if the entire New Zealand vehicle fleet were replaced with electric cars, the amount of electricity New Zealand needed to generate to power this fleet would be increased by about 60%. Only a small percentage of this electricity could be produced sustainably; the balance would probably have to be generated by burning coal.
I think this is where idealism clashes with reality. As I pointed out in The Nuclear Comeback, over the previous 10 years electricity demand increased by an average of 66 million megawatt hours per year. That is without adding electric cars to the mix. The growth rate for renewable energy over the past 5 years or so has only been about 10 million megawatt hours (although last year saw an impressive 20 million). Still, this is a far cry from just keeping up with normal demand growth.
So the idealistic side of me sees renewable electricity continuing to grow, and powering a fleet of green electric cars. The side of me that looks at the data says that in reality, a rapid ramp-up of electric cars will have to be driven by non-renewables because renewable energy growth won’t be able to keep up. I wouldn’t personally have a problem with a nuclear-driven electric fleet, but I don’t think that’s the vision many have for future electric vehicles.
I am not factoring in the possibility that conservation of electricity can help close that gap. On that I remain hopeful, but our history is one of ever increasing consumption.
By admin | March 5, 2010
Submitted by R-Squared Energy Blog
The following is a guest post written by Dan Harding. Dan has written numerous articles on the solar industry, and is a regular contributing author to CalFinder.
———————————-
Will Solar Prices Fall into Grid Parity?
By Dan Harding
The Holy Grail…in solar-speak, it translates roughly to Grid Parity. It is a goal either mythical or predestined, depending on which side of the solar power movement the speaker resides. A recent surge in supply and technology, coupled with increased government subsidies, are tipping the scales toward destiny, although by no means is the path to grid parity set in stone. The rapid fall in prices for solar panels and other system components in an oversupplied and flooded market could continue home solar power on its way to that mythical Grail but, all mythos and wishful thinking aside, what are the odds?
Good, says Swami Venkataraman, Director of Corporate and Government Ratings at Standard & Poor’s, in a recent assessment of the U.S. solar market for Renewable Energy World. As of February, 2009, installed costs for residential and commercial photovoltaic (PV) systems had fallen to $7.60 per watt from $10.50 per watt just two years earlier. Prices continued to fall throughout 2009 and, while expected to stabilize somewhat as the national economy rebounds, they should remain on that downward slope in 2010 and beyond.
So when will solar cross that line? It could be soon, very soon in regions of the country with either abundant sunlight (southwest) or relatively high electricity costs (northeast). Yet some valuable help is still needed at the legislative level which, if provided, could propel solar power to grid parity in the short-term in the aforementioned regions.
Three factors, says Venkataraman, can help make PV cheaper than, say, a combined-cycle gas turbine plant. One or all of the following could ensure solar power a level playing field in the long term:
- Rising gas prices
- Renewable portfolio standards that make renewable energy credits (RECs) more valuable
- The passage of carbon legislation that would force gas power producers to buy carbon credits, thus forcing an increase in price for natural gas.
Including incentives, solar power is already close to grid parity in many areas. The Northeast holds the handy combination of some of the most lucrative solar incentives (per watt installed) in the country, as well as the highest electricity prices. Therefore, solar has far less distance to make up to reach at least natural gas, and gives solar power the best and fastest chance to reach grid parity in the nation. In California, where incentives have been declining for several years now, the primary advantage is in abundant sunlight (same goes for Arizona, New Mexico, west Texas, etc.), as well as a powerful RPS and a general eagerness from the public to adopt clean energy.
But as those two examples illustrate, grid parity will almost certainly NOT come to the United States as a whole all at once. Federal incentives were expanded in 2009, including the removal of the $2,000 cap on residential systems and the admittance of utilities into the Investment Tax Credit, but continue to vary widely between states. The feds provide a baseline subsidy, but what truly makes solar affordable for most homeowners and businesses are the added incentives offered by their state. So, in terms of reaching grid parity, we can expect the Southeast — despite its healthy share of sunshine — to be the slowest to reach the Holy Grail. This is due primarily to a lack of incentives, low electricity costs and a deep connection to fossil-fueled electricity.
Without incentives, there is still a real chance for PV, especially commercial PV, to reach grid parity in the relative short-term. Current capital costs for commercial PV are about $5.50 to $6.60 per watt depending on the size of the installation, according to Standard & Poor’s. Incentive levels in many northeastern states are upwards of $4.00 per watt, which means that, given incentives, the levelized cost of electricity (LCOE) of commercial PV systems was already below standard commercial rates. Furthermore, if falling panel prices enable systems to reach or fall below $5.00 per watt, then solar PV could reach parity even without subsidies.
Residential grid parity is more distant but still closest in the Northeast. Outside of the Southwest and Northeast, where solar irradiance and/or electricity costs make the solar-grid-parity question more complicated and uncertain, help will have to come from other renewables. Most notable among these are geothermal (Northwest) and wind power (Midwest). It is important when discussing grid parity for solar power not to forget its intermittency and the fact that some backup power system will be needed. Even if our solar infrastructure were so advanced as to provide all our power needs during peak load times, we would still need alternative sources to pick up the slack on cloudy days and at night.
Of course, straight-laced economics aside, we must also consider the inherent value of solar power beyond mere dollar signs. The point of renewable energy is to switch from pollutive, peaking sources of energy to clean, renewable ones. Solar power emits no greenhouse gases, no carbon dioxide and, when distributed, can provide power at or near the point of use without turning our cities into smog factories. That alone is reason enough to subsidize solar, wind, geothermal and other renewable resources until they reach the Holy Grail that is their destiny.
By admin | March 2, 2010
Submitted by R-Squared Energy Blog
Submitted by R-Squared Energy Blog
I just became aware that BiofuelsDigest wrote a story on my recent blog on Range Fuels, and got some comments back from Range Fuels’ CEO David Aldous:
Battle of the Falling Timbers
Aldous said pretty much what I would expect the CEO of Range Fuels to say. He defended his company, and complained that the funding includes money for future phases. That may be, but it is true that Range recently went back to the DOE for more money. If they are already funded for future phases, then why not show us what you can do before asking for more money now?
The truth is that the early public statements from those involved with Range - prior to them getting taxpayer funding - don’t remotely reconcile with what they are now prepared to deliver. The costs have escalated, the capacity has been ramped down, and production went from “cellulosic ethanol” to “cellulosic biofuels” to “mixed alcohols” to “methanol.” Those are the facts, and I think Aldous is trying to put the best possible spin on a bad situation that he inherited.
In fact, left unsaid in my original blog is that things have obviously gone horribly wrong from the days of Range’s early claims. Reading between the lines, I think the capacity downgrades are an indication that the gasifier didn’t scale up as expected. Gasifiers are tricky, and one that works fine at one scale and with one feedstock may not work at all at a different scale. I also think Range found out that producing ethanol from syngas is much more difficult than they expected, and they couldn’t get a catalyst to do what they had hoped.
One interesting comment from Aldous was that their methanol would be a qualifying fuel because they will put it into biodiesel. Imagine that. Biodiesel is already struggling to compete, and now we are going to pay a subsidy on the methanol that is used to produce biodiesel, and then we will probably end up reinstituting the subsidy on the finished biodiesel.
That is going to be some expensive biodiesel (from a taxpayer perspective). Methanol presently trades at about $1.10 a gallon, so if we subsidize that as a cellulosic biofuel we would presumable pay a subsidy of $1.01 per gallon on top of the market price. In a nutshell, the real cost of that methanol going into biodiesel would be double what it should be.
There was a comment left following the story that allows me to finally tell a funny story that happened at the Pacific Rim Summit last November (here are my slides from my presentation). Alan Propp wrote the following:
Dear Editor,
My comment is this: you describe Mr. Rapier at the outset of your article with these terms, “Noted and widely respected energy writer…” I have met Mr. Rapier, and my description of him would have been, “Controversial, highly opinionated and frequently misinformed energy writer…”
His lack of knowledge or understanding of the Range Fuels project is indicative of his blog and other writings.
Sincerely,
Alan Propp, Ph.D., P.E.
Merrick & Company
That comment is priceless on several levels. First, while Propp is smearing me he conveniently doesn’t mention that his company is the engineering firm for the Range Fuels plant. His company has made a lot of money on all the hype, and his fingerprints are all over the project. Think he might have an axe to grind?
But here is the really priceless part. At the Pacific Rim Summit, I was having a bite with a colleague at an evening conference event. Joining us was David Bransby, a professor from Auburn (and advisor to Range Fuels) who gave a presentation that I really enjoyed. His wife was also present, as well as some members of the Hawaii Science and Technology Council. We were having some interesting discussions around logistics, energy density, and the problems of scaling up biomass-based solutions.
Up walks Alan Propp, Ph.D., and he immediately began to berate me. Shortly thereafter, one person got up and left the table (telling me later that Propp’s behavior was the reason he left the table), and two more later asked “What was that guy’s problem?”
We were talking about the difficulties with scaling up biobutanol (which I have blogged on here) and Propp said “You are wrong. They now have a new process which can get butanol titers above 10%.” I looked at him with a puzzled look, and said “That’s impossible. Butanol phases out of water at 7.7% concentration. You can’t have a 10% solution.”
Propp was undeterred. He said that a certain company had given a presentation that day, and if I had attended it “I might have learned a thing or two.” (I would have attended but had a conflict). I was really puzzled, and couldn’t figure out what he was talking about. I decided I would investigate later, but I knew one thing: He was wrong about butanol titers above 10%. That’s like saying “Our water freezes at 40 degrees.”
The conversation turned to energy balances, and Propp’s position was “Energy balances don’t matter.” We were discussing a municipal solid waste project for converting trash into fuel. I said that if the energy inputs into the project were higher than your outputs, then in most cases you don’t do the project (unless you are using non-fungible fuel like coal as an input to produce a liquid fuel output). Propp said (paraphrasing) “If the biomass is free, then usage of those BTUs is what matters.”
I knew that we were looking at this problem in two very different ways. I was looking at it from the long-term viability of an energy project. Propp was locked into the idea that because the BTUs are free, then any usage of them is an improvement over the status quo. I couldn’t get it through his head that if the usage involved consuming more BTUs than you could extract from the free biomass, you don’t do the project. So we had a very fundamental disagreement. For an energy project, I won’t consume more than 1 BTU of fungible fuel to produce 1 BTU of fuel unless there are some really special circumstances (e.g., if the project is really a waste disposal project and energy would have been consumed regardless).
The evening went on like that. Propp was extremely arrogant and condescending. Had I known then of his involvement in some of these biofuel projects, I would have had a better grasp on why he behaved as he did. But then I went back to my hotel and looked up the company he had been talking about. It turns out that the good Dr. Propp was actually confused and had been talking about iso-butanol, a fundamentally different compound than normal butanol (which is almost always shortened to just “butanol”).
From a bio-perspective, it is true that i-butanol is less toxic to microbes than n-butanol, but the phasing concentration for i-butanol is also higher. What is needed to crack open the economics of producing butanol biologically (which used to be the case before the much cheaper petro-route came along) would be to get butanol concentrations above the phasing level, so it could be skimmed off instead of having to distill it all. From that perspective, the lower toxicity of i-butanol is offset by the higher phasing concentration.
Further, in the chemical industry the chemical properties of n-butanol are generally preferred over i-butanol. Therefore, butanol production is shifted to the greatest possible extent to n-butanol, and i-butanol almost always trades at a discount to n-butanol. There is still a market for i-butanol, but it is unclear if i-butanol would be an attractive renewable fuel. The published test results I have seen were all of n-butanol.
So I chuckled at the thought that Alan Propp, Ph.D., didn’t know the difference between i-butanol and n-butanol, yet berated me for not knowing about new technology that produced “butanol titers above 10%.” I sent him a note later that night and said “I think you meant iso-butanol.” He responded back “Yes, that’s correct.” (In fairness to Merrick, Propp did have a colleague with him - Steven Wagner, VP from Merrick - who I found to be much more reasonable and more interested in simply have a conversation about technology).
The next day, I saw Propp and his demeanor had changed entirely. Gone was the arrogance from the night before. (I presumed he was feeling pretty sheepish). He had promised to show up for my presentation later that day and put some tough questions to me, and I said “By all means, show up and give me your best.” He was a no-show.
So it is with an extreme sense of irony that I read Propp’s comment above. It is a classic case of projection. Of course the sort of pseudo-knowledge displayed by Propp that night is a big reason that Range is in the position it is in. They failed to distinguish between cellulosic ethanol and biomass gasification, and therefore made certain representations that many of us knew were incorrect.
Second, they didn’t understand the chemistry of alcohol production well enough to know that the production of pure ethanol via this route is problematic, and that a mixed alcohol is what they would produce. As reality began to settle in, we have seen the statements from Range evolve a very long way from the initial claims of what they would do.
So despite comments from Aldous and Propp, the verdict on Range is the same. What they are proposing to deliver is a far cry from the technology (and cost) that they initially went out and hyped. The public statements are there for anyone to read, and don’t need any particular interpretation from me to see that things have not gone according to plan.
By admin | March 2, 2010
Submitted by R-Squared Energy Blog
I wasn’t going to write anything on the Bloom Box, but people keep writing to ask what I think. My initial reactions were “What a lot of hype” and “I have seen this all before.” I also wondered why it is that people keep falling for these kinds of stories.
But fuel cells aren’t my specialty, and as such I won’t weigh in on the relative technical merits of this design over another. I know that fuel cells have been very expensive for many years, and the initial projections I have seen over the Bloom Box are that they will be very expensive.
Lots of people with expertise in fuel cells have weighed in on the matter, though. If you want a more technical assessment, see the National Geographic story:
Bloom Box Launch Is “Big Hype”–Invention Nothing New?
The Bloom Box—an as yet unbuilt in-home “power plant” designed to be about the size of a mini-fridge—could provide cheap, environmentally friendly electricity to U.S. households within ten years, according to Bloom Energy. Or not.
But fuel cell experts say that, based on the information the company made public today, the Bloom Box technology is not revolutionary, nor is it the cheapest or most efficient fuel cell system available.
“It’s a big hype. I’m actually pretty pissed off about it, to be quite honest,” said Nigel Sammes, a ceramic engineer and fuel cell expert at the Colorado School of Mines. “It really is nothing new. Go to any [solid oxide fuel cell] Web site and you’ll see the same stuff.”
Those were my initial feelings as well, and here is why I say we have seen this before. The year was about 2001, and I was younger and a bit more subject to being influenced by massive hype. There was a company called Plug Power (still in existence today; stock symbol PLUG, but they are flirting with getting themselves delisted) and they came out with pretty much the same story.
In fact, if you go back into Google’s news archives on Plug Power, you can see a histogram that shows the news stories on Plug Power spiking in 2000, remaining fairly strong until about 2005, and then falling to lower levels in the past few years.
The buzzwords used to describe Plug Power were the same as those used to describe the Bloom Box. The technology was called revolutionary and a real game-changer. There was a prediction made that most people would have Plug Power’s fuel cells in their homes by 2010 and we would all be locally producing and using our electricity in a refrigerator-sized box.
What happened? Plug Power’s stock soared to $2 billion on the hype at a time when investors would bid up companies that had no earnings but incredibly high growth projections. It just so happens that hype can lead to those growth projections (a hard lesson for me that permanently changed my investing style), and what happened was that reality eventually caught up with the hype.
Plug Power, like Range Fuels from my previous essay, could not deliver on the hype. They couldn’t deliver cheap fuel cells, and so they didn’t get the market penetration many had (unreasonably) expected. Their valuation came crashing back down to earth. Today Plug Power is worth about $70 million, or about 96.5% less than it was when I was following the story.
Bloom Energy looks like both Plug Power and Range Fuels to me. It is a company that is attempting to produce energy cheaper than all those who came before using known technology - and using hype to attract investors. And if Bloom Energy fails to deliver, they will learn just like Range Fuels that hype is a two-edged sword.
By admin | February 24, 2010
Submitted by R-Squared Energy Blog
When I first began my career, a wise old-timer gave me a piece of advice that I took to heart. He said “When you are planning and executing a project, it is important for you to do what you say you are going to do. People are going to make investment decisions on the basis of the numbers you project. So don’t over-promise and under-deliver.”
As I began to become involved in projects, the wisdom of the advice I was given became clear. I learned to be conservative with my claims, because failing to deliver can have far-reaching impacts. Plus, a pattern of over-promising and under-delivering will ultimately destroy your credibility, and thus your ability to get anything done. (On the other hand, excessive “sand-bagging” is also poor practice, as too much money gets budgeted where it needn’t be).
Now imagine the following scenario. I go to the government and ask for $5 million to build a 10 million gallon per year ethanol plant. I announce that it is cutting edge technology, and I make various far-reaching claims. I issue press releases, and Congress invites me to give testimony in D.C. The government grants me the money I ask for, because I have had success in other ventures and I seem like a credible fellow.
Later, I go back to the government, and tell them I need another $5 million, and that unfortunately the project schedule is slipping. “By the way”, I tell them, “I will now only be producing 5 million gallons.”
As construction continues, I start to realize that the energy business is a bit more difficult than I had imagined, and things that I thought were new weren’t new. It becomes clear that I can’t even deliver on my downgraded promises because I hadn’t appreciated the challenges of scale-up. The government calls me up and asks me how it is going. “Well”, I explain to them, “I am out raising $10 million more in investor money. I am also going to only produce 1 million gallons, and it is going to be methanol instead of ethanol as I have been claiming. I am not really sure when I will produce ethanol. By the way, could you give me some more money?”
So I went from claiming $5 million for a 10 million gallon ethanol plant to $20 million for a 1 million gallon methanol plant. I still have not delivered. I am asking for more money. You still trust me, don’t you?
Range Fuels: Years of Broken Promises
I have for the most part held my tongue over Range Fuels for the past 3 years, but the scenario above essentially describes what has happened. The reason I have held my tongue is that I have heard various bits about their progress that was not public, and so I have held back on commenting. But I firmly believed they were making reckless claims from Day 1.
Now the EPA has just issued a report that gives some remarkable updates on Range Fuels, and I feel I have held my tongue long enough. Let’s walk through the timeline to show the remarkable evolution of their progress that has gone largely unreported.
October 2006 - In an interview with Wired Magazine called My Big Bet on Biofuels, Vinod Khosla gushed about E3 Biofuels (now bankrupt) and wrote about them as if they were a running, proven plant. He wrote about what they were achieving, despite the fact that they hadn’t started up (and would be out of business shortly after they started up). In the article, Khosla described his investment in Kergy (which later became Range Fuels).
IN THE CORNER of an unmarked warehouse tucked away in an industrial neighborhood north of Denver, a new company called Kergy has what is, to my knowledge, the first anaerobic thermal conversion machine (which explains why Khosla Ventures is a seed investor). It’s a 6- by 4-foot contraption that stands about 8 feet high. It looks vaguely like a souped-up potbellied stove. But it runs cleanly enough to operate indoors.
With those comments, everyone in the energy business knew Khosla was operating outside of his element. People have been gasifying biomass for decades, and there are numerous “anaerobic thermal conversion machines” out there. What happened was that Khosla wasn’t aware of this, so he thought this was all new and novel, and he invested - and then began to promote. He also went to the government telling them how wonderful it was, and that he would change the world if they would only fund him.
In that article, the inventor of the gasifier, Bud Klepper, is ominously quoted “We could double the ethanol output of the Mead facility.” I hope not. The output of the Mead facility (E3 Biofuels) is zero, so double that is…
February 2007 - Kergy changed its name to Range Fuels. They announced that they would build their first “cellulosic ethanol” plant in Georgia. The capacity was announced at “more than 1 billion gallons of ethanol per year” (Source.)
I had a problem with this announcement on two counts. First, this is not “cellulosic ethanol”, as I explained in Cellulosic Ethanol vs. Biomass Gasification. Further, if you are going to make an alcohol from syngas (the product of the gasifier), ethanol is a strange choice to make. Methanol is more efficient to produce, and ethanol is generally just a co-product when producing mixed alcohols (which also work well as fuel; see Standard Alcohol). It is only separated out at a great expense of energy - and then you have a lot of lower-value methanol to deal with. So this was looking like a very confused project from the start.
March 2007 - Range Fuels announced a $76 million grant from the U.S. Department of Energy.
Also during 2007, articles on Range Fuels began to appear everywhere. There were high profile pieces in The New York Times and in Forbes. In the Times’ article, the company refused to disclose how much had been invested to date.
An article in USA Today reported that the initial capacity would be 20 million gallons. The site was permitted for 100 million gallons of eventual capacity, and the cost of building a 100 million gallon per year plant was quoted at $150 million. Range said they thought they would be the first to win the “cellulosic ethanol” race (again, ignoring that the race was won a hundred years ago):
By next year [2008], the company intends to have a facility capable of creating 20 million gallons of ethanol per year. The site in Treutlen County, Ga., has received a permit to produce 100 million gallons per year, and Range Fuels expects to eventually reach that production amount, according to company CEO Mitch Mandich.
“A lot of people are talking about 2009, or 10 or 11—even Secretary of Energy (Samuel) Bodman will say cellulosic ethanol is five years away,” Mandich said. “We think by the time we enter production, we’ll be the first, so the race is on between us and some competitors.”
Well, it is 2010, and we still aren’t seeing any ethanol from the facility. Welcome to the real world.
November 2007 - To much fanfare, Range Fuels announced the groundbreaking of their Georgia facility. They continued to maintain that the first 20 million gallon phase would be completely finished in 2008. Those of us who have been involved in plant construction wondered when they would actually face the music and admit they couldn’t deliver.
March 2008 - Range announced that they had raised another $100 million to build the plant. By April this number was announced as $130 million in venture capital funding. They were still treated as media darlings - and nobody in the press was asking them critical questions. But their story was about to begin to unravel.
April 2008 - Range announced that they have received a $6 million grant from the state of Georgia.
October 2008 - In an incredibly ironic story, Discover Magazine published Anything Into Ethanol. It was incredibly ironic because in 2003 they had written Anything Into Oil, a gushing story about a company called Changing World Technologies (CWT) and their claim that they could make oil from biomass for $8-$12 a barrel. After a lot of wasted investor and taxpayer dollars, CWT declared bankruptcy when they couldn’t deliver on their claims. I did a post-mortem on CWT here. There were many more parallels here than just two nearly identical, uncritical stories from Discover Magazine.
November 2008 - Range Fuels CEO Mitch Manditch was replaced.
January 2009 - Although the plant in Georgia was still not complete, there was no explanation regarding the delay. But Range announced another $80 million loan from the U.S. Department of Agriculture. One story announced that the company had received a total of $158 million in VC funding in 2008. This story also announced that the first phase was still under construction, and production was now not expected until 2010! (This new production time frame was probably the result of getting in a new CEO who was actually experienced in the energy business, ex-Shell executive David Aldous).
May 2009 - While Range Fuels stopped issuing so many press releases, former CEO Mitch Mandich was quoted in the New York Times admitting that “The soup’s not quite cooked yet.” This was extraordinary given previous claims from him that they would produce cellulosic ethanol at less than the price of corn ethanol.
October 2009 - In a New York Times’ story that warned that cellulosic ethanol was falling far short of expectations, it was announced that Range Fuels had applied for even more funding from the DOE! This time, the DOE said no.
For the most of 2009, Range went into silent mode. Again, I attribute this to a new CEO who came from the energy business, where you better do what you say you are going to do. One pattern that started to emerge was that they referred less to cellulosic ethanol and more to cellulosic biofuels. This was significant, because I had always maintained that it wouldn’t be cost-competitive for them to produce ethanol via gasification. I was just waiting for the other shoe to drop…
February 2010 - A rather extraordinary update was issued that the mainstream media has still not absorbed. The EPA released an update to the Renewable Fuel Standards Program (RFS2). In that update, they had the following report on Range Fuels (see this document). From Pages 175 and 178:
At the time of our assessment, we were also anticipating cellulosic biofuel production from Range Fuels’ first commercial-scale plant in Soperton, GA. The company received a $76 million grant from DOE to help build a 40 MGY wood-based ethanol plant and they broke ground in November 2007. In January 2009, Range was awarded an $80 million loan guarantee from USDA. With the addition of this latest capital, the company seemed well on its way to completing construction of its first 10 MGY phase by the end of 2009 and beginning production in 2010.
As for the Range Fuels plant, construction of phase one in Soperton, GA, is about 85% complete, with start-up planned for mid-2010. However, there have been some changes to the scope of the project that will limit the amount of cellulosic biofuel that can be produced in 2010. The initial capacity has been reduced from 10 to 4 million gallons per year. In addition, since they plan to start up the plant using a methanol catalyst they are not expected to produce qualifying renewable fuel in 2010. During phase two of their project, currently slated for mid- 2012, Range plans to expand production at the Soperton plant and transition from a methanol to a mixed alcohol catalyst. This will allow for a greater alcohol production potential as well as a greater cellulosic biofuel production potential.
Did you catch that? Initial capacity is now slated at 4 million gallons per year and will be methanol. There will still be no qualifying “cellulosic ethanol” produced in 2010. The amount of money that we know has been poured into this - beyond Khosla and company’s initial investment - is $158 million in VC money, $76 million of DOE money, $80 million from the USDA, and $6 million from the state of Georgia. Further, they asked for more DOE money and were turned down.
So we have Khosla’s initial investment of unknown amount plus $320 million for 4 million gallons of methanol. Wow. At this point, I don’t know why anyone would care about what they say they are going to do during Phase 2, I am more interested in seeing some accountability for what has happened to date.
Let’s recap the highlights:
February 2007 - Range Fuels announced that they would build their first “cellulosic ethanol” plant in Georgia. In a story at Green Car Congress, the capacity was announced at “more than 1 billion gallons of ethanol per year.”
March 2007 - Range Fuels announced a $76 million grant from the Department of Energy.
July 2007 – In a story in USA Today, the Phase 1 capacity was announced at 20 million gallons. The full scale would be 100 million gallons at a cost of $150 million.
November 2007 – Range broke ground on the plant; announced they would be finished with Phase 1 (still 20 million gallons) by the end of 2008.
April 2008 - Range announced a $6 million grant from the state of Georgia.
January 2009 – Range received another $80 million, this time from the USDA, and announced receipt of $158 million in venture capital funding for 2008.
October 2009 – Range asked for more money. This time they were told no.
February 2010 – After investments that have been publicly announced at $320 million, the EPA announced that Range would initially produce 4 million gallons, and it would be methanol. Further, there would be no ethanol produced in 2010.
February 2010 – I write an article wondering why the mainstream media has completely missed this story.
In summary, we were given numbers of $150 million to build 100 million gallons of cellulosic ethanol capacity. What we are being told now is > $320 million to build 4 million gallons of methanol capacity. Of course they intend to do so much more, but I have a very big problem giving more taxpayer money to an organization with this history.
I don’t blame current CEO David Aldous for this. I think Range’s tendency to talk to the press every chance they got ceased once reality started to take hold and they got an experienced energy veteran in. I think Aldous inherited a ship in which people had been in the habit of promising the moon to secure ever more funding. But I do blame a number of the original promoters of the company.
I have criticized Vinod Khosla in the past for what I said were unrealistic claims. I felt like he came into the energy industry without a very good comprehension of if, but felt that he would apply his golden touch from Silicon Valley to show the dinosaurs how Silicon Valley innovates. I also felt like he was attracted to people who made grandiose claims, but didn’t have the proper historical perspective to determine when something was truly novel (and really worked).
The thing is, the energy industry is full of very smart people who went to the same schools the people in Silicon Valley attended. There isn’t much that hasn’t been tried, and most of what is being announced to great fanfare by newcomers is being worked on in silence in numerous places around the globe.
When you step out there and make the sorts of claims that were made, you have some responsibility for your words. Failure tars an entire renewable industry as being hopelessly unrealistic. This is the reason I go after claims that I believe are unrealistic. If you promise and fail repeatedly, funding will dry up for everyone as the government and the public all become cynical. So your actions impact lots of people - and can impact the energy policy of the entire country - thus you need to be accountable for the things you say.
This has played out exactly like I thought it would. Claims that most industry insiders laughed at in private have now come to naught at great cost to taxpayers. Methanol from syngas? Oh, that technology has only been with us since 1923. Congratulations on reinventing the wheel and burning through taxpayer money in the process.
In summary, I will point out that the two primary sources of cellulosic production being counted on by the EPA for 2010 were Range Fuels and Cello Energy. Both are Vinod Khosla ventures, and neither has come remotely close to delivering despite lots of funding and taxpayer assistance. I don’t think these are isolated cases. I think they are a symptom of things to come. We have gotten a lot of overpromises, because face it, that has worked to secure funding. But what this leads to are completely unrealistic expectations regarding our energy policy, and numerous bad decisions regarding where tax dollars should be spent.
Finally, I want to make one thing crystal clear. I am not criticizing failure here. That is normal and expected. Failure is a part of what it takes to learn and move forward. What I am criticizing is the nature of the failure; that it was primarily because inexperienced people were making claims they shouldn’t have made, and taxpayers are going to get stuck with the bills. Personally, I have a problem with my tax dollars being squandered away by smooth-talking salesmen.
By admin | February 22, 2010
Submitted by R-Squared Energy Blog
Dr. Robert Cohen has been involved in ocean thermal energy conversion (OTEC) since the early 1970’s. He has posted two guest essays here previously:
Ocean Thermal Energy Conversion
Potential Markets and Benefits from Ocean Thermal Energy
Following both essays, a number of questions and concerns were raised, so I asked Dr. Cohen if he would respond. He has written me a thoughtful and detailed response, and I will present it here in two parts.
Dr. Cohen also has a website with more information on OTEC. His contact information is available there. Part I is a general commentary on history, current status, and the projections for cost and a market-entry outlook. Part II will delve deeper into the engineering and environmental questions that were raised.
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RESPONSE TO COMMENTS RE OCEAN THERMAL ENERGY POSTED ON THE R-SQUARED ENERGY BLOG
Robert Cohen, February 16, 2010
Introduction
Numerous comments were posted on this blog in response to my two previous postings here regarding ocean thermal energy. Those comments raised various issues and concerns regarding the implementation of ocean thermal energy technology. This posting is an effort to provide some perspective on the status of ocean thermal technology, written with the intention of addressing the points people raised in their comments.
The postings by viewers tended to fall into several categories, which I shall group as follows:
- Possible environmental impacts of plant operation on the ocean, including those on parameters such as temperature and CO2-concentrations
- Technical and economic requirements, challenges, and hurdles for ocean thermal technology to become a commercial reality
- System conversion efficiency and system energy costs
My Perspectives on Ocean Thermal Energy Technology
Since being assigned by NSF in 1973 to serve as the first ocean thermal program manager, charged with organizing and conducting a concerted federal R&D program on ocean thermal energy, my tentative outlook has been, and continues to be, that of a cautiously optimistic advocate of this technology. Informed by my experience since then, I have yet to encounter a demonstrable or foreseeable “show-stopper” in the technical, environmental, or economic areas that would preclude the achievement of economically/technically viable and environmentally acceptable technology for harnessing ocean thermal energy.
In the mid-1970s my outlook was first bolstered by two federally sponsored industrial studies that resulted from contracts awarded to Lockheed and TRW. After conducting an engineering evaluation, both firms independently concluded that ocean thermal technology had good prospects for achieving technical and economic viability. By “economic viability” I believe that we all mean that baseload ocean thermal power systems could become cost-competitive, at least versus oil-derived electricity.
Now, some 35 years later, both Lockheed Martin (LM) and the U.S. Navy seem to have reached similar tentative conclusions about today’s outlook for this technology.
Starting around 2007, LM began rebuilding its ocean thermal engineering team by annually investing millions of dollars of its own discretionary internal R&D funds, and is continuing to make such investments. The LM team’s effort is focused on developing the design of a multi-megawatt power plant for operation off Hawaii, successful operation of which can lead to prompt design and construction of a first-of-a-kind 100 MWe commercial plant. LM regards the latter as likely to be cost-competitive in markets like Hawaii that presently rely on oil-derived electricity. Some company perspective on LM’s effort is stated at this URL.
Recently the Naval Facilities Engineering Command (NAVFAC), which is responsible for naval-base infrastructure, competitively awarded an $8.1 M contract to the LM team. That award is for technical activities aimed at reducing overall system and developmental risks for critical subsystems and components, and at maturing a pilot-plant design. The Navy has a long-term interest in helping foster the commercialization of ocean thermal technology, achievement of which would enable it to purchase, at cost-effective rates, ocean-thermal-derived electricity and fresh water from privately developed facilities at U.S. military bases located in places like Hawaii, Guam, and Diego García.
In an effort to help call attention to what harnessing ocean thermal energy can do to help mitigate global warming, I posted some information on the Copenhagen Climate Council Web site, which can be accessed via URL here. A set of slides addressing various facets of ocean thermal energy can be downloaded there. Those slides summarize many of the technical, economic, and environmental aspects of the issues raised here.
A November 2009 workshop was convened and hosted by the NOAA people who are charged under U.S. law with licensing ocean thermal plants. That workshop was specifically aimed at exploring the technical readiness of ocean thermal energy technology, and it is my understanding that the technology received high grades there. The workshop is summarized on this Web page. [Note that the Web page is replete with hot buttons, i.e., Web links, each leading to detailed information about various technical aspects of ocean thermal that were examined at the workshop. Most, but not all, of the items that are in bold face are Web links.]
Cost and Market-entry Outlooks
The largest ocean thermal power system heretofore operated (by DOE contractors in 1980) was OTEC-1, a floating test facility designed to test candidate ocean thermal components and subsystems, such as heat exchangers, rated at 1 MWe. Lacking a turbine-generator set, that facility fell short of being a complete power system. Two complete closed-cycle ocean thermal power systems of sub-megawatt size have been successfully demonstrated. They were the 50 KWe (15 kWe net power) floating facility operated off Hawaii in 1979, which was developed by a private consortium led by Lockheed, and the 100 kWe (34 kWe net power) land-based facility operated in 1981 on the island of Nauru, which was developed by the Tokyo Electric Power Services Co.
To bridge the gap to multi-megawatt commercial plants, the LM team is designing a 5/10 MWe ocean thermal pilot plant—initially containing the first of two 5 MWe power modules—to be sited off Pearl Harbor, Hawaii. Operation of the pilot plant will provide performance, cost, and environmental data preparatory to designing and constructing a 100 MWe “commercial” plant for Hawaii’s oil-driven market.
Extrapolating pilot-plant cost estimates to what the commercial plant might cost, the LM team believes that a first-of-a-kind 100 MWe commercial plant can be built at a capital cost enabling it to compete in Hawaii’s oil-driven electricity market; i.e., to produce electricity at an avoided-cost target close to what busbar electricity is currently worth there.
Assuming that LM can achieve that energy-cost target—a busbar cost of electrical energy of roughly 20¢/kWh—then, if I work backward from that energy cost, using reasonable assumptions regarding interest rate and plant-amortization lifetime, including an additional cost of ca. 2¢/kWh for O&M, I estimate that that energy cost for a first-of-a-kind 100 MWe baseload power plant would roughly correspond to a plant capital cost target of about $1 B, or $10 per watt. If one assumes that federal tax credits are available to serve as an incentive/subsidy, then the tolerable capital cost for this first-of-a-kind commercial power plant could perhaps be about 50% higher, around $1.5 B.
In contrast, the 5/10 MWe pilot plant that LM is designing—since piloting of a technology at small scale increases the cost per unit output—will probably cost roughly several hundred million dollars, corresponding to an energy cost perhaps ranging from 40 to 60¢/kWh, making that large an investment sub-economic. Hence the pilot plant will require some subsidization, the hurdle-cost for launching this new ocean industry.
But the subsidy required sounds like peanuts nowadays. Note that during its heyday—the late 70s and early 80s—the DOE ocean thermal R&D program was being funded at about $40 M annually, equivalent to $100 M/year in today’s dollars. It may well be that Recovery Act funds or DoD will provide that subsidy, but it would be reassuring if the Obama Administration and the Congress would soon explicitly embrace ocean thermal and commit to rapidly advancing it into the marketplace, as was happening during the Nixon, Ford, and Carter Administrations.
Once the pilot plant is successfully operated, the design data and cost estimates for the first 100 MWe commercial plant will become much clearer. There are various options for funding that commercial plant. For example, about 80% of its capital investment could be federally loan-guaranteed; the remainder, roughly $200 to 300 M or so, would be venture capital, and investment tax credits would offer an additional incentive.
A comparison—albeit crude—can be made between the above $10 capital cost per watt, for baseload (continuous, 24/7) ocean thermal power capacity, versus the capital costs per watt for intermittent wind and photovoltaic power. Let’s assume wind and photovoltaic power systems that cost $4 and $7 per watt, respectively, and that they generate power about one-third of the time. Then, for purposes of making a rough comparison with the capital cost of a baseload source like ocean thermal, the intermittent wind and photovoltaic capital costs can be multiplied by three, yielding $12 and $21 per watt, respectively, compared to roughly $10 to $15/watt for a first-of-a-kind, 24/7 ocean thermal plant.
References
Clare, R., 1981, in Proceedings, Eighth Ocean Energy Conference (ed. E.M. MacCutcheon)
Derrington, J., 1979, in Proceedings, Sixth Ocean Energy Conference (ed. G.L. Dugger)
Gavin, A. P. & T. M. Kuzay, 1981, 0TEC-1 power system test program: biofouling and corrosion monitoring on 0TEC-1. Argonne National Laboratory
Green, H.J. and P.R. Guenther, 1990, Carbon dioxide release from OTEC cycles, Solar Energy Research Institute report TP-253-3594
Myers, E.P. et al., 1986, The potential impact of ocean thermal energy conversion (0TEC) on fisheries, NOAA Technical Report NMFS 40—Available at URL http://spo.nwr.noaa.gov/tr40opt.pdf
Wortman, E.J., 1981, in Proceedings, Eighth Ocean Energy Conference (ed. E.M. MacCutcheon)
By admin | February 22, 2010
Submitted by R-Squared Energy Blog
Many of my essays here are reprinted at The Energy Collective. Following a reprint of my recent essay examining DARPA’s extraordinary claim on the cost of algal fuel, a reader named Durwood Dugger (this gentleman, I presume) posted some very interesting comments that are worth reproducing here. His original comment can be found here.
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I was at the AIAA (American Institute of Aeronautics and Astronautics) meeting in Orlando in February and participated in the biofuel for aviation workshop round-table discussion at the invitation of NASA. I have been producing algae (not for fuel) for commercial purposes for the last 38 years. None of the presentations or the discussions in round table discussion in which I participated leads me to believe that DARPA is going to reach their $2/gal. algae goals and especially not anytime soon.
So, is DARPA just trying to protect it’s current research contractors after several studies have shown algae is neither cost efficient, nor environmentally friendly as a net carbon reducing primary energy source at the near term prices of petroleum? If you look at 2008 DARPA there is nothing more in the PR release than a restatement of their original goals and projections. As someone who is very familiar with the research in this field, I can see no factual evidence given in this current PR or other published data that provides a credible basis that anyone is anywhere near obtaining those $1-2 gallons cost/price goals. No current researchers have produced and published audited and credible results anywhere close $2/gal costs. NREL and several private developers can’t get algae oil production costs below $18 gallon. (See NREL’s Road Map For Biofuel Development).
As you so well pointed out, most of the algae oil costs are energy costs in extraction, separation, drying and stabilization. It isn’t probable that DARPA is any closer because of improbable cost differences between current research and what McQuiston is claiming for DARPA.
I know several DARPA research contractors and they certainly aren’t anywhere close to $2/gallon in their cost estimations. Algae production and extraction technologies are not new - they have been around for 80 years or more. This makes the probability of sudden scientific breakthroughs that also seemingly violate the laws of thermodynamics - even more improbable.
What isn’t being broadly recognized is that for algae to contribute to our energy needs in any significant way, algae cultivation will require chemical fertilizers (again I’ve been doing this for a while.). This dependent relationship between biofuel production and petroleum based fertilizers are being ignored, denied and or dismissed by many government grantor’s who are either too ignorant or too self-servingly corrupt to address this obvious contradiction of logic in pursuing biofuels in a declining petroleum/fertilizer environment producing rapidly increase costs of the same.
The use of petroleum based fertilizer is of no small consequence. As petroleum prices rise - necessarily so do fertilizer prices and consequently so do the costs of the biofuels that are produced with them. More than 85% of the world’s food supply is produced with petroleum based fertilizers - 95% of world foods are petroleum dependent in transportation to market and consumers. Peak oil - no matter when it inevitably occurs - does not bode well for for biofuel economic feasibility, or for that matter - the global human food supply.
Photosynthesized biofuels incorporate two forms of energy - solar and chemical. The solar comes from an off planet sun and the chemical energy comes from an on planet and therefore finite petroleum supply. The net energy to be derived from photosynthesis is essentially from the solar energy coming from off Earth. Photosynthesis is less than 20% efficient (not to mention the processing energy algae oil requires) so it takes a lot of sunlit area to make much biofuel energy. Then combine the need for finite petroleum based fertilizers and biofuels literally have an uphill battle in cost efficiency over time - and one which they cannot win under the current technological criteria.
Clearly, if there were biofuels that could be produced for $2/gallon we would all be driving on this fuel. The petroleum companies would be selling off their drilling rigs. Instead we are not using biofuels and petroleum companies are expanding there drilling rig fleets as we discuss this and greatly - check it out on the web. Since oil platforms cost billions and have a 30 year life, you can tell where the petroleum producers are putting their money and it’s not in algae oil.
Everyone - about this time is saying, “Oh, but we can use waste to grow algae.” Using waste water as a nutrient source turns out to be problematic because most waste sources are not in areas with sufficient space to allow commercial scale algae production. Looking at all waste water sources that are feasibly located, you end up with a very, very small fraction of the amount space required to significantly impact energy requirements - probably less than 3%. Waste from humans and CAFO’s could be a significant source of nutrient for algae production, but only if we re-configure the nations waste treatment and CAFO infrastructure systems to use if effectively. This is something that isn’t going to happen in our current economic environment - where the nation’s tax revenues are being used almost exclusively to wage wars for… wait to guarantee middle eastern oil field access and to prop up it’s failed greed corrupted banking system and related stock market financial instrument sales systems.
It would seem more logical economically - in the face of declining petroleum reserves to invest in primarily in photovoltaic solar, wind, tide, and wave energy which is less reliant (only uses petroleum energy and products in initial fabrication) in the long term on petroleum than any biofuels. If we used our remaining petroleum reserves just for lubricants, fertilizer, special chemicals and even plastics, but not for transportation fuel - it would last us a much longer time. Perhaps enough time to bridge the technological gap between petroleum and the next most economically and environmentally efficient (really the same thing) source of energy.
Poorly phrased and misleading PR from DARPA’s hapless McQuiston only compounds our energy problems and even further reduces the publics confidence in our government and it’s faith in science and technology. Not exactly what is needed in the face of the problems that face us.
By admin | February 18, 2010
Submitted by R-Squared Energy Blog
I started to notice a trend in the comments following my latest Forbes essay about the redundant nature of ethanol subsidies now that mandates are in place. Several comments in a row seemed to be regurgitated talking points that were just red herrings with respect to the point I was making. I knew that meant that somewhere a call had gone out to ethanol supporters to speak out against me. I now know the source, and at the end of this essay, I offer a debate challenge to the organization that issued the talking points.
To review, my point is simple. Someone said that it would be great if I could reduce it to a talking point, so here it is: Mandating ethanol while also subsidizing it is like paying people to obey speed limits.
If that isn’t self-explanatory, here is the logic behind the analogy. We have laws that govern the speed limits on our roadways. You can be penalized if you violate these limits, thus there is an enforcement mechanism in place that compels people to obey the law.
This is the same as the ethanol mandate. We have a law in place that directs refiners to blend a certain percentage of ethanol into their fuel. There are penalties for failing to meet those mandates, thus there is an enforcement mechanism in place.
Now would anyone think it was a good idea if we started using tax dollars to pull people over and pay them for complying with speed limits? I think most people would agree that this would qualify as a stupid idea and a waste of taxpayer money - especially when you consider that some government agency would have to run and audit the program for compliance. It would certainly be redundant given that there are already penalties in place for failure to obey.
With the ethanol subsidies, we are paying people to obey the speed limit. And the ethanol lobby was a little concerned that I had called attention to that fact. Turns out that Growth Energy, the ethanol lobbying organization whose co-chairman is General Wesley Clark, issued the following talking points to their members and asked them to rise up in a groundswell of opposition.
An excerpt from the e-mail they sent out (courtesy of this link):
Here are some points to consider, and remember to use these in your own words:
* What Rapier is suggesting boils down to a tax increase on an innovative, domestic energy industry. Does Forbes really endorse raising taxes in this tough economic climate? Does Rapier really think raising taxes on an emerging industry is smart?
* With domestic, green energy the likely source of hundreds of thousands of new jobs in the United States, why would Forbes and Rapier force a job-killing tax increase on ethanol?
* If Rapier is so eager to tax American energy companies, why not end the massive tax subsidies and tax breaks that Big Oil and gas companies get? By some estimates, the oil and gas industry will get around $29 billion in tax breaks from 2008 to 2013. That’s an enormous handout to an industry that sends a billion dollars a day overseas – often to countries that are hostile to the United States.
* If the choice were to give a tax credit that helps an American farmer and an American engineer in an American ethanol plant, or giving a tax break to an oil man who is doing business in the Middle East, I’d rather the tax credit stay here on American shores..
* The VEETC has reduced farm payments and increased tax revenue that completely offsets whatever the cost of that tax credit is – and in fact generates additional revenue for the federal treasury. In 2007, the $3.3 billion VEETC costs saw farm payments reduced by $8 billion, and generated $8 billion in tax revenue, according to an Iowa State University study.
That is absolutely priceless. None of those talking points actually address my argument. But apparently they were counting on some of their members not being able to think for themselves and just go out and repeat the talking points. So, a few showed up at Forbes and did just that. I answered each one of them - pointing out the obvious flaws in their thinking - and of course none of them responded because they didn’t have anyone telling them what to say.
But hey, I am a big boy. I can take the heat. Let’s take their talking points and address them, just to show how silly they are.
Point 1: What Rapier is suggesting boils down to a tax increase on an innovative, domestic energy industry.
Response: Right. Taking a tax credit away that is collected by the oil companies - which last year amounted to about $5 billion - and giving it back to taxpayers is a tax increase. That’s straight out of Lobbying 101, where up is down and green is red if that’s what your client wants.
I would love for someone to walk me through just how this amounts to a tax increase on this “innovative, domestic energy industry.” Anyone? Remember, the oil companies are still mandated to blend the same amount of fuel, whether they collect a subsidy or not. Point 1 - as silly as it was - refuted.
Point 2: With domestic, green energy the likely source of hundreds of thousands of new jobs in the United States, why would Forbes and Rapier force a job-killing tax increase on ethanol?
Response: Repeat the “tax increase” canard, and hope it begins to take hold with their members (and hopefully the public). “This guy wants to raise our taxes!” Remember, at issue here is $5 billion (and rising) of taxpayer money that is being paid out in unneeded subsidies. Eliminating that is a tax increase in their world? There are no words.
Point 3: If Rapier is so eager to tax American energy companies, why not end the massive tax subsidies and tax breaks that Big Oil and gas companies get?
Response: This one is a beauty. First, the point is completely irrelevant, given that the oil companies would still be under mandate to buy the product. Whether they are being subsidized by a trillion dollars a year has no bearing at all on this argument, as it doesn’t impact how much ethanol they are mandated to buy. It is just one more red herring.
But the really funny part about this point is the oil companies are the ones receiving the subsidy in this case. The ethanol industry has told us that many times. If Growth Energy is suggesting we get rid of oil company subsidies, aren’t they just making my point for me?
It wasn’t so long ago that Brian Jennings, the executive vice president of the American Coalition for Ethanol - a fellow ethanol lobbying organization (there seem to be quite a few) - said matter-of-factly that the blender’s credit does not benefit ethanol producers, that “it is actually an incentive the petroleum industry receives for blending ethanol into gasoline.” Vinod Khosla has made the same argument. Here he is on this issue:
Ethanol has a subsidy, but the farmer doesn’t get any of that. What I heard, is that well past midnight when this was being debated in the conference committee, the oil companies inserted 2 words into the language, calling this subsidy a blender’s credit. So the person who is blending it with gasoline gets it. All $2 billion of it last year [2005] was collected by the oil companies. Like they needed more money.
So which is it, ethanol lobby? How exactly is a credit received by the oil industry for complying with a law to blend more ethanol supposed to benefit the ethanol industry? Are you afraid the oil company wouldn’t blend the ethanol if the subsidy wasn’t there? I know I am repeating myself, but you don’t seem to get it: They are compelled to do so by law regardless. Finally, why do you wish to protect the subsidy when members of the ethanol lobby have pointed out that it is really an oil company subsidy?
Point 4: If the choice were to give a tax credit that helps an American farmer and an American engineer in an American ethanol plant, or giving a tax break to an oil man who is doing business in the Middle East, I’d rather the tax credit stay here on American shores.
Response: But doesn’t the “oil man” get this tax credit? You guys are talking out of both sides of your mouth, and it isn’t a pretty picture. I think you have set a record for red herrings in a response.
Point 5: The VEETC has reduced farm payments and increased tax revenue that completely offsets whatever the cost of that tax credit is…
Response: Irrelevant even if true, because once more I remind you that the blender still has to buy the ethanol. So if it really had the offsets you claim, that won’t change by eliminating the subsidy.
If that’s the best you have, then I can safely conclude that the emperor has no clothes. You didn’t address my arguments at all, because you know you can’t. Of course people might be curious as to why you have responded in such a way, but I know why you did. The last thing you want is for people to confront the costs of ethanol at the pump, where they might start to think that our ethanol policy isn’t such a good idea after all. That is what you truly fear.
In closing, if you guys aren’t afraid to expose your arguments to a bit of scrutiny, I would like to issue a debate challenge. Let’s say 3 rounds, 1,000 word limit per round.
Resolved: The ethanol mandates enacted by the U.S. federal government have eliminated the purpose of the ethanol subsidies.
If you are up to it, pick the best person from your organization. Better bring your “A-Game”, though. Or, if that e-mail represents your “A-Game”, you might as well forfeit now.
