Arctic Leaf

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

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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.

Arctic Leaf

Can Butanol Be the New Ethanol?

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

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

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

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

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

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

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

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

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

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

Arctic Leaf

Oil and Natural Gas Prices and the Future of Alternative Fuels

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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!

Arctic Leaf

Altruism Aside, Is Ethanol A Competitive Alternative Fuel?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Arctic Leaf

Can Ethylene Replace Gasoline?

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The effort to replace oil-based gasoline in our cars with similar fuels derived from natural gas took a big step forward last week with the announcement that Siluria, a promising start-up, will build a $15-million demonstration plant in Texas

The plant will produce ethylene, the most commonly produced industrial chemical in the world and the feedstock for a whole raft of products in the chemicals and plastics industry. But Siluria, which is not yet a public company, is also planning demonstration plants that will produce gasoline. Initial estimates are that the product could sell at half the price of gasoline derived from oil. If these projections prove to be anywhere close to reality, we could be on a path to a fuel economy that is finally able to cut its dependence on oil.

The idea of producing ethylene from natural gas has been around since the 1980s but achieved little success. Several major oil companies invested millions of dollars in the process but finally gave up on it. Jay Labinger, a Caltech chemist who did much of the initial research, finally wrote a paper in the 1980s warning other researchers that it was a waste of time. He may have given up too soon.

Siluria is a California-based startup that has received much of its funding from Silicon Valley investors who tried to move from computers and the Internet into the energy space over the last decade. So far their success hasn’t been great. In fact Vinod Khosla and other Silicon Valley energy entrepreneurs were the subject of an embarrassing critique on “60 Minutes” only two weeks ago. The Siluria venture, however, may be the gusher that makes up for all the other dry holes.

The 1980s efforts concentrated on heat-activated processes whereby methane is split into carbon and hydrogen and then recombined into the more complex ethylene, which has two double-bonded carbons and four hydrogens. All these efforts proved far too energy-intensive, however, and never became economical.

Siluria has been trying a different approach, seeking catalysts that would facilitate the process at much lower energy levels. Moreover, the company has spurned the more recent approach of trying to design molecules that fit the chemicals just right and gone back to the old shotgun approach where thousands of candidates are tried on a catch-as-catch-can basis.

Defying all expectations, the process seems to have worked. Siluria has come up with a catalyst that it says promotes the breakdown and subsequent reassembly of methane at very low energy levels. It has built pilot plants in San Francisco, Menlo Park and Hayward, California and last week announced plans for building a full-scale demonstration plant in La Porte, Texas in conjunction with Braskem, the largest petrochemical manufacturer in South America. If that isn’t proof that Siluria is on to something, what is

The implications of this development are enormous. Natural gas is two to six times more abundant than oil in the world and is now selling at 1/5th the price for an equivalent amount of energy. The traditional tandem pricing of oil and natural gas prices has now been broken and gas is functioning as a completely different commodity, much cheaper.

The difficulty all along has been that natural gas is hard to put into your gas tank. So far efforts have involved compressing natural gas, which means storing it at 3600 pounds per square inch, or liquefying it, which requires temperatures to be lowered to – 260 degrees F. Neither is very practical and would require a whole new auto engine and delivery infrastructure.

Efforts to convert gas into a liquid have concentrated around methanol, which is the simplest alcohol and has been used to power the Indianapolis 500 racing cars since the 1960s. But methanol is the deadly “wood alcohol” of the Prohibition Era and raises fears about poisoning – although gasoline is poisonous, too. The Environmental Protection Agency has never certified methanol for use in auto engines, although an M85 standard has been permitted in California.

Synthesizing gasoline through Siluria’s ethylene-based pathway could solve all these problems. Ed Dineen, CEO of Siluria, says that the gasoline product could sell at half the price of today’s gasoline. With more natural gas being found all the time – and with $1 billion being flared off uselessly around the world each year – any success in turning natural gas into a readily accessible automobile fuel could have a revolutionary impact on our entire economy.

Arctic Leaf

Is E85 the Solution to the Ethanol Debate?

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Professor Bruce Babcock, of the Center for Agriculture and Rural Development at Iowa State University, believes he has a simple solution to the corn ethanol mandate problem – encourage people to fill their tank with fuel that is 85 percent ethanol instead of the current 10 percent.

“There may be a few good reason for cutting back on our consumption of corn ethanol,” says Babcock, who holds the Cargill Endowed Chair for Energy Economics. “But the reason the EPA is giving sure isn’t one of them.”

In case you haven’t been following, the Farm Belt is in an uproar over Environmental Protection Agency’s recent decision to cut back on the ethanol mandate from 14.4 billion gallons to somewhere around 13 billion for 2014. Iowa Senator Chuck Grassley blames “special interests” – meaning the oil companies – while Governor Terry Brandstat has talked darkly about a “war on corn.”

But dissatisfaction with the corn ethanol mandate extends well beyond the oil companies and the refineries. In December a coalition of liberals and conservatives – led by California Democrat Diane Feinstein and Oklahoma Republican Tom Coburn – introduced a bill to do away with the corn mandate altogether. “I strongly support requiring a shift to low-carbon advanced biofuel,” said Feinstein, “but corn ethanol mandate is simply bad policy,” “This misguided policy has cost taxpayers billions of dollars, increased fuel prices and made our food more expensive,” added Coburn.  “The time has come to end it.”

What’s the problem?  Well, the mandate – adopted by Congress in 2007 at the behest of President George Bush, Jr. – has fallen out of sync with the “blend wall” – the theoretical 10 percent mark where ethanol starts harming car engines. The mandate pushed up to 14.2 billion gallons last year while gasoline consumption actually dropped to 135 billion gallons last year from 142 billion gallons in 2007, pushing it way past the 10 percent benchmark.

Faced with this dilemma, refiners were forced to buy “credits” in the form of “renewable identification numbers (RINS),” which give them bookkeeping credit for consuming ethanol. But the pressure on the market pushed the price of RINs from pennies per gallon to $1.40 last August, pushing up the price of gasoline. Hence the rebellion and President Obama’s apparent instructions to the EPA to cool it on the mandate for 2014.

Professor Babcock says this is all a result of the artificial barrier limiting ethanol content to 10 percent. “E85 [a blend that is 85 percent ethanol] is selling all over Iowa at 15 percent less than gasoline,” says Babcock, who is originally from southern California. “That actually makes it a little more expensive than gasoline because you only get 80 percent of the energy.  But last August E85 was selling 25 percent below gasoline and it was a bargain.  The notion that cars can’t tolerate mixes of more than 10 percent ethanol is purely fictional.”

The 10 percent blend wall is based on the premise that putting more ethanol in your tank can harm your engine. Several years ago the auto companies have announced they will not honor warrantees on older cars that use more than 10 percent ethanol. The EPA has approved E15 (15 percent ethanol) for cars built after 2001, even doing elaborate tests to prove it could work, but no one has paid much attention. “The automakers say, `We didn’t build those older cars for E15 and we don’t want them running on E15,’” says Babcock.  “As far as they’re concerned, that’s the end of it.”

Without much fanfare, however, both Ford and GM are now manufacturing close to half their cars for “flex-fuel” – capable of burning any mix of gasoline and ethanol – or even possibly methanol, which has not been tested yet. “There’s a little embossed insignia on the back of the car but it’s easy to miss,” says Babcock.  “There are now 17 million flex-fuel cars on the road, although most people who have them don’t even realize it.”

Adjusting older vehicles to flex-fuel isn’t that difficult, either.  On the oldest models, it involves only replacing a few rubber fuel lines with aluminum, which a good mechanic could do it for less than $200 – if it weren’t illegal.  On newer models it requires only an adjustment to the software.  New flex-fuel cars sell for the exact same price as ordinary gasoline vehicles.  “GM has done a really good job of figuring out flex-fuel technology,” says Babcock.  “All their trucks are now designed for it. Chrysler is coming around as well but the Japanese cars have stayed away from it.  They’re putting all their bets of hybrids, hydrogen and electric vehicles.  They’re not at all interested in biofuels.”

Babcock’s proposal, outlined in a paper released earlier this month, is for the EPA to sanction E85 so it can start selling somewhere else besides Iowa, where ethanol remains popular and corn is aplenty. “It just doesn’t make sense to have all the stations concentrated in the Midwest,” says Babcock. “The real place for these cars should be on the East and West Coasts.”

Who would pay for upgrading all these stations to handle E85?  Babcock’s answer is the oil refineries. “The cost would be about $130,000 per station or 20 cents for each additional gallon they could expect to sell,” he says.  “If the price of RINs becomes too high, the refiners will have to do something.  People call me naïve to think they will spend all that money building new pumps but they’re already done it in several instances. I’m not some wide-eyed academic economist.”

But the refineries do have another option and that is to go to Congress and the President and insist that the mandate be lowered – which is what they’ve just done. And with a rebellion against ethanol brewing in the non-farm states, it isn’t likely the mandate will be reinstated any time soon – at least until the Presidential candidates start trooping to Iowa again.  On the other hand, Babcock’s proposal for approving E85 so that the 17 million flex-fuel cars already on the road can start using it makes perfect sense.

At this point, the “blend wall” may more of a mental barrier than a physical one. Once we break through it, ethanol, methanol and a lot of other things become feasible.

Arctic Leaf

Who Says Cars Have to Fill a Parking Space?

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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 Fortwo. The 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 IQ. Positioned 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 EV. Still 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.

Arctic Leaf

A Big Year for Natural Gas Vehicles

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

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

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

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

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

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

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

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

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

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

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

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

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

Arctic Leaf

There’s Gold in Them Thar’ Flares

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Walter Breidenstein may be the only CEO in America who still answers the company phone himself. If his operation is still something of a shoestring, it’s because he’s spent four years trying to duel with perhaps the most formidable foe in the country, the oil companies.

“I’ve been trying to get into North Dakota for four years to show them there’s a way to make money by stopping flaring,” says the 48-year-old who started his entrepreneurial career at 15 by washing dishes. “The oil companies have done everything they can to keep me out of the state and the bureaucracy has pretty much goes along with them. The companies know that as soon as they acknowledge we’ve got a workable system here, they’d have to buy one of our rigs for every well in the state.”

North Dakota, in case you haven’t heard, has become one of the biggest wasters of natural gas in the world by flaring off $1 billion worth a year while producing carbon emissions equal to 1million automobiles.  But oil is what the drillers are after and, as it was in the early days of the oil industry; gas is regarded pretty much as a nuisance. The result is gas flares that make the whole state look like neighboring Minneapolis from outer space.

The flaring has generated a lot of negative publicity, environmentalists are up in arms and landowners have sued over lost royalties. The big guys are starting to move into the state. The New York Times ran an article this week about new pipeline construction, fertilizer factories and GE’s “CNG in a Box,” which will capture flared gas and sell it asnatural gas.

Breidenstein has a different idea.  “Somewhere around 2000 I started reading about methanol technology and realized it was a very undervalued resource,” he says. “Then I read George Olah’s The Methanol Economy in 2006 and that convinced me.  At Gas Technologies we’ve been trying to put Olah’s vision into practice.”

Gas Technologies has developed a $1.5 million portable unit that captures flared gas and converts it to methanol. “It’s a very accessible device,” says Breidenstein.  “You can move it around on a flatbed truck.”  The company ran a successful demonstration of a smaller unit at a Michigan oil well last fall but still hasn’t been able to break into North Dakota.

“The oil companies’ attitude is that money is no problem as long as they don’t have to spend it,” says Breidenstein.  “I’ve been in the business 25 years and I know where they’re coming from. But the problem is no one is forcing them to deal with flaring. And as long as they can keep throwing that stuff into the atmosphere for free, nobody’s going to look for a solution.”

You’d think with a billion dollars worth of natural gas being burning off into the atmosphere each year, though, there’d be some say to make money off it and that’s what frustrates Breidenstein.

“Our rig costs between $1 and $2 million dollars,” he says.  “But by capturing all the products of flared gas, you can make around $3500 per day.  That puts your payback at around three to four years.  But the oil companies don’t think that way. They won’t look at anything that goes out more than six months.

That puts things in the hands of state regulators and so far they have sided with the oil companies. “By statute, the oil companies are allowed to flare for a year it there’s no solution that’s economical,” says Alison Ritter, public information officer for the North Dakota Department of Mineral Resources.  “There’s nothing we can do to require them to buy from one of these boutique firms. Many oil companies have already committed their gas to pipeline companies and they can’t back out of those contracts.”  Still, the pipelines may not be built for years. “You have to understand, the Bakken Oil Field is 15,000 square miles, the size of West Virginia,” adds Ritter.  “It’s hard to service it all with infrastructure. We’re building pipelines as fast as we can.” Of 40 applications for flaring exemptions submitted this year the state has approved two and denied one, with the other 37 pending.  While they are pending, flaring goes on.

Of course if Gas Technologies were to start receiving orders right now, they’d be hard pressed to produce a half-dozen of them let alone the 500 that the state might require. “We’ve had talks with venture capitalists but if you’re not from Silicon Valley, they’re not interested,” says Breidenstein.  “But we’ve got a business model here and we know it can work.”

At least someone has taken notice. This year Crain’s Detroit Business rated Gas Technologies Number One in the state for innovative technology, ahead of 99 other contenders, including General Motors, Ford, Volkswagen, Whirlpool, Dow Chemical and the University of Michigan.  “Because the Walloon Lake company’s patents are potential game-changers, its patents rank high on the value meter with a score of 156.57 (anything over 100 is considered good),” said the editors.

It may not be long before others start noticing as well.

Arctic Leaf

Nostradamus, Predictions, Oil, and Alternative Fuels: 2014

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

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

Here I go-no safety net!

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

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

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

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

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

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

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

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

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

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

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

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

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