Arctic Leaf

Are Hydrogen Cars the Future – Again?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Arctic Leaf

Drill Baby Drill and Increase US Exports of Oil: A Conundrum

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Over the last year or so, many in the media have commented on the Saudization of America. Readers and viewers have been told that drilling for tight oil will lead to reduced imports and energy “independence.” Luck, or perhaps because of good ole American ingenuity in developing fracking technology, America, the Saudization folks indicate, will no longer be tethered to Middle East petroleum. “Amen” said a chorus of readers and viewers to the “drill baby drill crowd” during recent previous Presidential elections. What good red-blooded American could be against accessing America’s apparent ample supply of oil from dense rock formations or shale? Another popular win for “manifest destiny,” particularly when promises are made by the oil industry and believed by consumers that we will soon be blessed with oil independence as well as stable and ultimately lower gas prices. Who could ask for anything more?

I do not want to get into the “drill baby drill” debate– at least at this juncture. Nor, for the purposes of this piece, do I want to dwell on the opportunities and yes the problems related to fracking.  What I do want to focus on is the impact of the so-called Saudization of America on consumer prices for gasoline.

Since for most of us, gas is an inelastic good and, although we express anger or dismay at its costs, we will pay the price. No doubt, you, your wife, or significant other must get gas to get to work, to shop, to take kids to school or play, to go to a doctor, and to vacation. For folks with low and moderate incomes, the costs of fuel often constrains the purchase of basic goods and services and even job choices and access to decent housing because of limited transportation budgets. Happily, Americans are getting some relief from recently sky rocketing fuel prices during this holiday season.

But think about it: Even at today’s “low” national average price of “only” about $3.25 (I paid $3.63 for regular gas this morning), the price remains relatively high. Further, the recent drop in prices probably had relatively little to do with increased production. More important in setting prices were likely lower demand, the continued slow growth of the U.S. economy, the reduction of tension in the Middle East, wall street banker and speculative behavior, monopolistic type conditions limiting consumer choices at the pump set by the oil industry as well as oil company decisions concerning market management. (It would be interesting if some independent qualified think tank or government agency undertook an in-depth factor analysis concerning variables affecting gas prices.)

Increased oil production and refinement in America likely will not have a major impact on price or price stability. Despite being produced here, oil is traded globally. Understandably and legitimately from their perspective, the behavior of producers, refiners and investors is not governed by patriotism or security interests but by return on investment (ROI). Their voices often seem bi polar. They argue for more drilling here to benefit U.S. consumers, but they often, less than transparently, translate drilling and new production into dollars stimulated by new exports or relaxation of export regulations into pleas for new drilling.

Clearly, a good share of the oil produced in the U.S. — unlike Las Vegas stories– will not stay in the U.S. It will be sold to other nations. While the oil export train (or in this case the boat) has not yet left the station, political pressure from the oil industry and its friends is beginning to generate a Washington buzz that current federal restrictions on oil exports, in place since the Arab Boycott, soon will be reduced significantly. When big oil speaks, many in Washington listen! Yet, right now production per year meets only about 50 percent of demand in the nation–

According to CNBC, “oil companies are securing licenses to export U.S. crude at the fastest rate since records began, as the shale boom leads to swelling supplies along the Gulf of Mexico. The U.S. government granted 103 licenses to ship crude oil abroad in the latest fiscal year, up by more than half from the 66 approved in fiscal 2012 and the highest since at least 2006…”

Bloomberg News notes that the surge in U.S. oil production has made the nation the world’s largest fuel exporter. Exports to Brazil grew by almost 60 percent and Venezuelan imports from the U.S. grew by more than 55 percent; So much for the cold war between the U.S. and Venezuela.  As Bloomberg reports, U.S. exports of refined productions, such as gasoline and diesel, have reached new highs and increased by 130 percent since 2007.

Interestingly, Canada, despite the fact that it is the largest exporter of oil to the U. S. and has ample shale oil resources, has been the primary beneficiary of increased licenses for exports in the U.S.  Less expensive U.S. gulf oil crude is a good deal for Canadians, particularly from eastern Canada. It’s cheaper than the Canadian alternative.

So despite all the noise, we still have a long way to go before we reach oil independence, a truism in part because U.S. oil will soon constitute a relatively and historically a large share of the global oil market.

Clearly, a less exuberant goal than achieving oil independence would be reducing oil dependency. Advocates of alternative fuels like natural gas and natural gas based ethanol and methanol have a strong case. Do you remember when Ronald Reagan strongly urged Mikhail Gorbachev to tear down the Berlin wall?  President Obama, paraphrasing Reagan, should urge oil companies to tear down the barriers to competition at the pump and allow in alternative, safe and environmentally sound alternative fuels. Unlike other Presidents before him, the President, courageously, has already asked the nation to wean itself off of oil.

Offering consumers more choices than gasoline at “gas” stations will help reduce and stabilize fuel prices for consumers.  A double win for the nation and its residents: reduced dependency and stable as well as lower costs– Happy New Year!

Arctic Leaf

What Do Iceland and Israel Have in Common?

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

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

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

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

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

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

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

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

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

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

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

Arctic Leaf

A Thanksgiving Feast of Alternatives

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“Over the river and through the wood

To grandmother’s house we go.

The horse knows the way to carry the sleigh\

Through white and drifted snow.”

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

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

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

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

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

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

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

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

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

Arctic Leaf

The Principal Impediment to Alternative Fuels Is – Government Regulation?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Let the best fuel win.

Arctic Leaf

Ford Leads the Way

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The Ford Motor Company stepped front-and-center in the effort to fine alternatives to high-priced imported oil last week with the announcement that it will offer compressed natural gas (CNG) tank as an option in the F-150 pickup truck, its most popular brand that currently sells 700,000 models a year.

Now it won’t come cheap. There’s a $250-$350 charge for the vehicle to come “prepped” from the factory. That means putting hardened valves, valve seats, piston and rings into the V6 engine. But after that, there’s a $7-9000 charge for installing the CNG tank in the cargo bay – made considerably more expensive than in Europe because safety standards are interpreted in a way that makes them much more expensive. This lifts the showroom price from $24,000 to around $32,000. That’s a big chunk but Ford swears you’ll make it back in three years by substituting fuels.

With the price of gas at around $3.80 per gallon and the oil-equivalent of natural gas at around $1.20, those savings should add up fast.  Of course all this assumes that the price differential won’t narrow to its traditional level, but that doesn’t seem very likely now. Electrical plants have shown a tendency to move quickly back to cheaper coal if the price of gas rises, but the difference between the crack spread and the spark spread seems to have separated permanently, much to natural gas’s advantage.

All this is good news for those looking to substitute some of our abundant natural gas for foreign oil in our transport sector.  In fact, there’s a lot of progress being made right now:

Clean Energy Fuels of Newport Beach, CA already has a network of 360 natural gas fueling stations at truck stops along Interstate highways and is trying to build a complete national infrastructure.  NGV stations cost $750,000 a pop but Clean Energy is looking at the long term.  The ready availability of filling stations will help spur the conversion of giant 18-wheel diesel haulers, which most people see as the ripest target for conversion.

Heavy-duty fleet vehicles are making rapid progress.  Buses and garbage trucks are in the forefront. Eight out of ten new vehicles bought in 2012 by Waste Management, the leader in the field, were powered by natural gas.

There are now 120,000 gas vehicles on the road in the United States, according to Natural Gas Vehicles of America, the trade group.  Unfortunately, this constitutes only a tiny fraction of the 15.2 million NGVs worldwide. Iran, Pakistan and Argentina, improbably, are the leaders. We’re behind in making the transition, but there’s plenty of room to catch up.

In a report issued in June, Citi Research estimated that one-quarter of the world’s present consumption of oil could be replaced by natural gas under present conditions. More than 9 million barrels per day could be replaced in truck transport, 2 million of these in the US. Another 3 million b/d could be opted out in marine transport and 200,000 b/d in railroad locomotives.

All this would be fairly easy to transact since it involves large commercial organizations with centralized decision-making.  Sooner or later, however, this approach is likely to run up against limits.  The stumbling block will be the vastly more decentralized system of private automobiles, which still consumes 60 percent of our oil and involves a car in every garage and a gas station on every other corner. Here the problem of building an infrastructure and achieving widespread distribution is much more difficult.

The problem comes because reformers are viewing natural gas as a fuel instead of a feedstock. Compressed natural gas (CNG) and liquefied natural gas (LNG) are the most readily available options – and both are legal – but in the end they are going to have their limits. It will make much more sense to use methane as a feedstock for the manufacture of liquids, methanol in particular.  These will be much easier to transport and will substitute for gasoline in current car engines with only minimum adjustment – nothing like the $8000 required for the F-150. Valero has just opted to build a $700 million methanol manufacturing plant in St. Charles, Louisiana in anticipation of this demand. All depends on whether the Environmental Protection Agency decides to give a go-ahead to use methanol in car engines. The matter is pending.

So the effort to use our abundant natural gas resources to reduce our dependence on expensive, unpredictable and unreliable foreign sources of oil is making headway. Ford’s decision to equip the F-150 with CNG is a beginning. But there’s more to come.

Arctic Leaf

What Happened to Saudization? Bipolar Fuel Projections!

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Just a few short months ago, newspapers, led by the WSJ, trumpeted, many on their front pages, the Saudization of America and the end of America’s and OECD’s reliance on Middle East oil. Do you remember?   Well maybe you don’t have to– at least after 2025. The IEA’s World Energy Outlook for 2013, published Nov 12, indicates that the “Middle East, the only large source of low-cost oil, remains at the center of the longer-term oil outlook.” Within about 10 years or so, it will provide the largest share of the world’s expanded oil supply.

I realize the fragility of projections and have in the past criticized the IEA and the EIA and other makers of global energy projections. At times, projection makers are more artists than scientists. The good artists, sometimes, come close to what actually happens. The not so good ones either get lucky or appear to mute their “over or under” reality numbers. They either provide ranges, permitting them to say they were right in the future, or they complain, perhaps over a good bottle of wine, about the complexity of the variables.

I believe it is important to read the IEA report because it lends a bit of skepticism to the idea that America and its friends are entering the golden era of energy abundance. Indeed, The New York Times on Nov 13 ran the IEA story under the headline, “Shale’s Effect on Oil Supply Is Forecast to Be Brief.”

Here is what the IEA said in their Executive Summary:

“The role of OPEC countries in quenching the world’s thirst for oil is reduced temporarily over the next 10 years by rising output from the U.S., from oil sands in Canada, from deep water production in Brazil and from natural gas liquids from all around the world.  However, by mid-2020, non-OPEC production starts to fall back and countries in the Middle East provide most of the increase in global supply. Overall national oil companies and their host governments control some 80 percent of the world’s proven-plus-probable oil reserves.”

America’s likely surplus combined with a slowdown in the increase of demand will not affect costs of oil and gasoline in a major way.  Escalating demand for both will be reflected in Asia and will place a floor under prices. America’s oil companies function in a global market and are not governed to a great extent by the laws of supply and demand in this country.  They will sell to the highest bidder worldwide.

IEA indicates that “the need to compensate for declining output from existing oil fields is the major driver for upstream oil investment to 2035…conventional crude output from existing fields is set to fall by more than 40 mb/d by 2035.Of the 790 billion barrels of total production required to meet our projections for demand to 2035, more than half is needed just to offset declining production. According to the NY Times, IEA conclusions are generally shared by the EIA; that is, today’s rapid oil production from shale will continue for a relatively short time and then slow rapidly. IEA indicated the slowdown will occur in the mid-twenties, EIA by the late teens.

IEA’s and EIA’s analysis should not generate a bipolar response or create a need for a regimen of pills to cure projection related manic depression. It’s only a projection. Take a deep breath and count to ten.  Next year it will likely change because of “complex variables ” including but not limited to changing world demand, Middle East tension, new technology and the use of alternative fuels.

Until we get better at projection, let’s applaud IEA and EIA’s professionals.  At a minimum, they are honestly and artistically responding to lots of unknowns.  Paraphrasing the comedian Ilka Chase (and changing a word or two) projectionist’s minds are cleaner because they change them so often…

Just kidding!

Their efforts should at least reinforce the need to think through transportation fuel strategies and act with all reasonable speed on what I would consider, at least, low hanging fruit. For example, a coordinated campaign by the public, nonprofit and private sector to encourage the federal government to approve methanol as a fuel would be a good first step.  Federal acquiescence, if combined with simultaneous certification of low cost kits to convert existing vehicles to flex fuel cars could provide the framework for an effective transitional fuel strategy.

It, likely, will take from five to ten years before electric and or hydrogen powered vehicles will be able to reach the budgets and driving needs of most low, and moderate income Americans.  Even when renewable fuel powered new vehicles reach a mass market, the technology will not be able to change the gasoline dependent older vehicles. In this context, alternative transitional fuels could, with the addition of an increased number of conveniently located fuel stations and stimulated by new demand, offer competition to oil company restricted gas-only stations and consumers a choice of fuels.  America would be better off economically and environmentally.  Consumers would secure a more predictable, probably lower price for fuel at competitive pumps and charging stations.  The nation would be less dependent on imported oil.

Arctic Leaf

Building the Natural Gas Highway: The Journey of Thousands of Miles Begins in Newport Beach

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California still is seen as the state that exports innovation, despite the fact that it has seen some tough economic times of late. In this context, I was pleased to see the recognition granted by the Orange County Register (Nov 6) to the Clean Energy Fuel Corporation, and its efforts to build the Natural Gas Highway. I was even more surprised to find out that the corporate offices were located near my own office. Clearly, the popularity of natural gas and its derivatives, ethanol and methanol, are on the uptake since the President’s State of the Union address indicating the nation’s economy and environment  would benefit if it weaned itself off oil and by implication gasoline. Even before Obama’s speech, there was a growing recognition among many Americans– including environmental and business leaders– that natural gas could become the core of a strategy aimed at reducing greenhouse gas (GHG) and other pollutants, lowering the costs of vehicular fuel, and reducing dependency on oil imports, thus providing funds for investment in the U.S. Clean Energy Fuels Corporation, located in Newport Beach, is making it easier for consumers to access natural gas for their vehicles. According to the story in the Register, it has invested more than $300 million in the last two years on natural gas fuel stations across the nation. Most of the more than 400 stations that they have developed and  offer only compressed natural gas (CNG), a fuel that works better for comparatively short trips ( e.g. buses, taxis, garbage trucks, short hall trucks, local consumers ). Current and future placement of stations will increasingly offer liquid natural gas (LNG). LNG works better than CNG for long distance trips. Are the leaders of the Clean Energy Fuel Corporation nuts?  Maybe they are…but I don’t believe so.  While, the Corporation has yet to turn a profit (apparently after 15 or 16 years), since going public in 2007, their market value is now more than 1 billion dollars. Their phones are ringing. Large retailing companies relying on trucks, long distance trucking companies, bus manufacturers, taxis and bus companies seem to be gravitating toward use of cheaper natural gas as a fuel. But these users and potential users need assurances that natural gas fuel stations will be reasonably accessible. Clean Energy Fuel aims to provide such assurances. Many respected financial analysts believe that the Clean Energy Fuel Corporation is on the cusp of and will benefit financially from the increased acceptance and growth of alternative transportation fuels, particularly natural gas. Assuming both the sizable price gap between oil and natural gas remains and the corresponding price gap between natural gas fuel and gasoline as well as between natural gas and diesel fuel stays relatively large; Clean Energy Fuel Corporation’s future looks bright. Yes, it will have rivals. Shell Oil, according to the Register article, apparently is going to start selling LNG at existing truck stops. Soundings that I have picked up from natural gas leaders, CEOS of businesses dependent on trucking and diverse investors suggest an evolving interest in developing both CNG and LNG fuel stations and the Natural Gas Highway. In this context, 22 states, under the bipartisan leadership of Governor John Hickenlooper (D) of Colorado and Governor Mary Fallin (R) of Oklahoma, have initiated a collaborative project to buy CNG outfitted cars from Detroit to replace old state vehicles, when their time passes. Detroit in turn has promised to develop a less expensive CNG vehicle for the participating states which could ultimately benefit consumers. Given recent projections of the market for natural gas fuel by government and reputable private and nonprofit groups and increased advocacy for alternative fuels by a coalition of environmental, nonprofit and business groups, I wouldn’t bet against Clean Energy Fuel’s future health. My hope, however, is that it and, indeed, its competitors add room for natural gas derivatives such as ethanol and methanol in their planned natural gas stations.  Apart from generating use by owners of flex fuel cars now in existence, their agreement to do so would encourage (the relatively inexpensive and easy) conversion of existing vehicles to flex fuel vehicles. Significantly, EPA has certified the use of E10 in all vehicles, E15 in vehicles after 2001 and E85 in approved flex fuel vehicles. Hopefully, EPA will soon certify methanol as well as approve an expanded list of conversion kits for existing older vehicles. These approvals are possible, if not probable, given the environmental, economic and consumer benefits of alternative fuels and the evolving politics of fuel. Allowing oil companies to sustain the very restrictive rules now governing the vehicular fuel market will continue to prop up America’s dependency on imported oil as well as support relatively high fuel costs and increased environmental degradation.   President and CEO Andrew Littlefair of Clean Energy Fuel indicated, “With cheaper, abundant fuel, a network of stations, [and] redesigned engines …the time for natural gas transportation has arrived.” I would add, the time for natural gas based ethanol and methanol has also arrived. I commend Clean Energy Fuel for its initiative in developing the Natural Gas Highway. The Company, borrowing from President John Kennedy, has begun an important journey of thousands of miles in Newport Beach. Contrary to (and paraphrasing) the poet Robert Frost, hopefully the road they are building will be very well travelled.  Maybe a couple of leisurely  lunches near the ocean in beautiful Newport Beach could convince my colleagues at Clean Energy Fuel  to consider working with producers of natural gas based ethanol and methanol as well as interested states and localities to  extend  the Natural Gas Highway to ethanol and methanol. It would be good for traffic and their bottom line, good for development of related commercial activities and, most important, good for America

Arctic Leaf

If Mother Jones and the Wall Street Journal can agree on this

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When Nobel Laureate George Olah wrote his Wall Street Journal op ed recently announcing a new process that can turn coal exhausts into methanol, it reverberated all the way across the political spectrum and into Mother Jones.

 “Can Methanol Save Us All?” says the headline of a story on MJ, written by political blogger Kevin Drum. Although loath to admit he had    been reading the pages of capitalism’s largest broadsheet (he blamed the government shutdown), Drum admitted that he was intrigued. “George Olah and Chris Cox suggest that instead of venting carbon dioxide into the atmosphere, where it causes global warming, we should use it to create methanol,” he wrote.

Olah has been writing about a “methanol economy” for a long time, and he skips over a few issues in this op-ed.  One in particular is cost: it takes electricity to catalyze CO2 and hydrogen into methanol, and it’s not clear how cheap it is to manufacture methanol in places that don’t have abundant, cheap geothermal energy – in other words, most places that aren’t Iceland. There are also some practical issues related to energy density and corrosiveness in existing engines and pipelines. Still, it’s long been an intriguing idea, since in theory it would allow you to use renewable energy like wind or solar to power a facility that creates a liquid fuel that can be used for transportation. You still produce CO2 when you eventually burn that methanol in your car, of course, but the lifecycle production of CO2 would probably b less than it is with conventional fuels.

There are a few things we can cite here to set Drum’s mind at ease. First, methanol made from natural gas is already cost competitive. We don’t have to speculate. There is a sizable industry manufacturing methanol for industrial use from natural gas where it has sold for years at under $1.50 a gallon. That’s a $2.40-per-gallon mileage equivalent for gasoline (before further gains from methanol’s higher octane), making it at least 30 percent cheaper from what you’re now buying at the pump.

Of course Drum is referring here to Olah’s proposal to manufacture methanol by synthesizing hydrogen and carbon exhausts. This would be a more expensive process. But if it ever happened, the utilities would undoubtedly pay the processors to take the carbon dioxide off their hands, since it would allow them to go on operating their coal plants and using all that cheap black stuff coming out of Wyoming and West Virginia. It’s hard right now to factor up the costs but suffice to say, you would not be limited to geothermal from Iceland to make it happen.

As far as the corrosion issues are concerned, Drum can rest assured as well. It is true that methanol corrodes certain elastomers in current engines. They will have to be replaced with o-rings that can be bought at Office Depot for 50 cents. Any mechanic can perform the procedure for less than $200. Modifying current gasoline engines at the factory to burn methanol is also a surpassingly simple procedure – as opposed to altering an engine to burn liquid natural gas, compressed natural gas or hydrogen, which all require an entirely different assembly costing up to an additional $10,000.

The real rub mentioned by Drum, however, is the implication that if methanol can’t be shown to reduce carbon dioxide emissions in the atmosphere, then there isn’t any sense in doing it. There’s a slight divergence of purpose here that isn’t always clear to people who can agree we ought to be looking for alternative fuels to replace gasoline.

For some people the issue is energy dependence and reducing the unconscionable $400 billion we spend every year on imports. As the United States Energy Security Council pointed out in a recent paper, even though we have reduced imports to only 36 percent of consumption, we are still paying the same amount for oil because OPEC functions as an oligopoly and can limit supplies. As the report concluded, “It’s not the black stuff that we import from the Persian Gulf, it’s the price.”

For other people, however, the amount of money we’re spending on foreign oil – and the international vulnerabilities it creates – is not the issue. The only thing that matters to them is how much carbon dioxide we’re putting into the atmosphere. Global warming is such an overriding concern that it supersedes everything else.

This was made clear in a recent article in Yale Environment 360 by John DeCicco, professor at the University of Michigan’s School of Natural Resources and Environment and former senior fellow for automotive strategies at the Environmental Defense Fund, entitled “Why Pushing Alternative Fuels Makes for Bad Public Policy.”

The article argued against all forms of alternatives – ethanol, compressed natural gas, hydrogen and electric vehicles – on the grounds that none of them will do anything to reduce carbon emissions. “In the case of electric vehicles, an upstream focus means cutting CO2 emissions from power plants,” wrote DeCicco.

Without low-carbon power generation, EVs will have little lasting value. Similarly, for biofuels such as ethanol, any potential climate benefit is entirely upstream on land where feedstocks are grown. Biofuels have no benefit downstream, where used as motor fuels, because their tailpipe CO2 emissions differ only trivially from those of gasoline.

Instead, DeCicco argued that environmentally conscious individuals should concentrate on cleaning up power plants while support for alternative fuels should be limited to research and development.

By the time the power sector is clean enough and battery costs fall enough for EVs to cut carbon at a significant scale, self-driving cars and wireless charging will probably render today’s electric vehicle technologies obsolete. Accelerating power sector cleanup is far more important than plugging in the car fleet.

All this short-changes the clear advantages that can come from reducing our huge trade deficit and replacing oil with homegrown natural gas. The less money we spend on imports, the more we will have for making environmental improvements and investing in complex technology such as carbon capture that can reduce carbon emissions.

In addition, DeCicco may be being too pessimistic about alternative fuels’ potential for reducing carbon emissions. As The New York Times reported in a recent story about natural gas cars, “According to the Energy Department’s website, natural gas vehicles have smaller carbon footprints than gasoline or diesel automobiles, even when taking into account the natural gas production process, which releases carbon-rich methane into the atmosphere. Mercedes-Benz says its E200, which can run on either gasoline or natural gas, emits 20 percent less carbon on compressed natural gas than it does on gasoline.” Besides, if the source of emissions can be switched from a million tailpipes to one power plant, it’s a lot easier to apply new technology.

Mother Jones and The Wall Street Journal have much more in common than they may realize. One way or another, it would benefit everyone if we could reduce our dependency on foreign oil.

 

Arctic Leaf

Natural Gas Demand Causes the EU to Invite Russia to Join…

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Hold the presses, stop the cable and network news shows, break away from Twitter, and forget for a moment about Facebook… Why? Read the latest wire from The Associated Press! Many European nations, including Great Britain, have signed a multibillion dollar long term contract for Russian natural gas. The signing was accompanied by a decision by the European Community to integrate Russia into the community’s governance– NATO officials expressed anger and disappointment. Great Britain’s ambassador to America gently, but affirmatively, responded to the New York Time’s question concerning “what does this do to America and Great Britain’s special relationship? Well, it isn’t so special anymore.” She went on, “the world is evolving and Europe, as well as Great Britain, is evolving also. . . The alliance, and indeed NATO, is a relic of the past. I am sorry but that’s just how it is!”

Please don’t respond like many in America did to the late 1930s broadcast of H.G. Well’s War of the Worlds, narrated by Orson Wells. Don’t fear! don’t run out to the street! No deal with Russia for natural gas has yet been signed, NATO is still intact. The European Commission and European Union are still alive, if not well, given the economic problems plaguing many of its members and the continent as well as Great Britain.

While not factual, my flight into hyperbole and negative fantasy could become a reality sometime in the future. What got me thinking about the possibilities was an interesting article in the Oct. 31 Financial Times (coincidentally, on Halloween) by Paolo Scaroni, Chief Executive of Eni, Europe’s largest natural gas dealer.

Scaroni’s thoughts were not offered to trick or treat us. They were meant to make us think seriously about opportunity costing and risk analysis sure to be undertaken by European countries because of their increased need for natural gas and other energy sources.

Scaroni suggests that Europe’s present energy policies and related energy costs impede economic growth, and do not reduce Greenhouse Gas (GHG) emissions. Of note, he indicates that “the problem is that we have so far failed to grasp the implications of the U.S. shale revolution for Europe. Thanks to the rapid increase in efficient non-conventional gas production, U.S. companies pay about $3.50 per million British Thermal Units (BTUs) for their natural gas…That is about a third of what Europeans pay. “

Apart from high gas feedstock costs, Europeans also pay a hefty set of charges to sustain incentives to invest in renewables. As a result, Europe’s electricity is “twice as expensive as America’s” and gives the U.S. a clear competitive advantage with investors around the world, including investors from Europe. Why invest, build or expand in Europe if your company is energy intensive?  The U.S. has the Red Sox, Lady Gaga, Madonna and, most importantly, relatively cheap natural gas fuel.

Because natural gas in the U.S. now crowds out coal, Europe gets a lot of its surplus coal for power plants. So while natural gas use has declined, it is increasingly hostage to dirty U.S. coal- sort of a negative equilibrium for our friends on the other side of the Atlantic. Rising carbon emissions from coal have come close to netting out the carbon benefits from investment in renewables, natural gas and the economic downturn.

What are Europe’s generally intelligent public and private sector leaders to do?  Sounds obvious!  Increase imports of shale gas from the U.S.!  No, says Scaroni. By the time transport costs are added and subject to liquefaction in the U.S. for shipping and regasification for use in Europe, shale gas exported from the U.S. is twice as expensive as gas in the U.S. While likely a bit exaggerated, the author indicates that buying U.S. natural gas would be economically disastrous.

It is also not a good political move. Besides the costs for U.S. natural gas, many Europeans still view the U.S. as “that” upstart nation, once defined by old Europe as the “colonies.” Heck, it was only near 325 years ago; it’s too early to pay reparations.

Scaroni thinks the answer is to explore home grown shale oil assets and nuclear energy, as well as increasing the efficiency of conventional fuels. To secure the first two, however, will be tough given the opposition of environmentalists and people who would like to keep Europe just as it is. Further, high density wall to wall development throughout Europe and Great Britain creates even more fear concerning despoiling the remaining open space and breeds an intense “not in my neighborhood” attitude in many areas. Efficiency is praised by most, because it is often used devoid of real meaning in political rhetoric. Who can be against it, until specifics and likely mandates, costs, and its impact are put on the table?

Scaroni, realizing the obstacles to lowering the costs of gas to U.S. benchmark prices, suggests strengthening commercial and political ties with Russia and perhaps other traditional non U.S. energy partners.  Reading between the lines of the author’s words, he seems to be saying, “let’s milk Russia for all the comparably inexpensive gas we can get.”  WOW!  Communist! Reprobate!  Misanthrope!  No.  Probably just a good analyst and business person.

Without access to NSA data or James Bond, I still almost can hear the buzz at the Pentagon and State Department.  I can see the dour faces at NATO offices in Brussels. I can visualize the depression in the EC and EU. Sure, Russia may soon find a welcome mat in Europe. Its entrance price will be relatively cheap natural gas. New alliances, new travel patterns for diplomats, better food in Russia in the future, new political fun and games as well as new problems for the U.S.

Russia’s natural gas exports to Europe are likely to increase, but Russia’s natural gas dominance is probably not around the corner. The West can take a deep breath.  Use of fracking, governed by strong environmental regulations, likely will increase and result in expanded natural gas supplies in Europe and Great Britain.  While exports from Russia will increase, they will reflect a measured increase at least in the short term.

Russian exports to Europe and Great Britain will not have a major impact on the U.S. We can manage any uncertain political changes and the European price of natural gas will not have a major effect on the U.S. price of the same.

What’s the U.S. going to do with its natural gas? While LNG exports from the U.S. may increase to Great Britain and Europe (as well as Asia), the increase will be moderate, given the continued absence of sufficient port capacity, the cost and the slow pace of government approvals. Pressure, in light of predicted surpluses and the advocacy of alternative fuel supporters, may help open up the almost monopolistic U.S. vehicular fuel markets and increase natural gas demand.

Natural gas prices in the U.S. will remain subject by and large to U.S. production and related costs, as well as regional market behavior and investor speculation. Contrary to oil, natural gas produced in the U.S. likely will not play a major role for at least the next several years in global markets

Is this good for U.S. and U.S. consumers?  On balance, yes. The gap between demand and production as well as production potential will remain visible. ROI in natural gas wells and rigs will probably be sufficient to secure modest production increases. Natural gas prices will likely go up over time but remain well under the price of oil when both are converted to vehicular fuels. Assuming positive government rule-making and the increased use of natural gas derivatives, ethanol and methanol as alternative transitional vehicular fuels, consumers at the pump will benefit from the continued differential and the U.S. will benefit security-wise as well as environmentally and economically.