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Arctic Leaf

Progress on Fuel Efficiency: More is needed

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Every now and then I will read a White House Blog.  They’re sort of a fun read when you’re depressed about the state of the world and the country.  The content always somehow reminds me of  Gene Kelly dancing in the street in the middle of the rain, or that old (possibly New Yorker) cartoon where the patient tells the psychiatrist that he is not doing well and the good doctor says ‘no you’re just fine, you’re happy and healthy.’  Probably neither is the proper analog to the politically necessary positive nature of the White House blurbs.  I marvel at times at the President’s ability to seek a better America, especially given the politics of the present.  While his optimism and tenacity don’t always come through as “Morning in America,” I believe that his attitude is based on a reasonable outlook about what the nation can do, if it can engage in an honest dialogue about key environmental and alternative fuel issues.

Last week’s blog focused on the White House’s effort to increase fuel efficiency standards.  It notes correctly that the President’s legislative approach to the environment has resulted in the toughest fuel economy standards in history:

“Under the first ever national program, average fuel efficiency for cars and trucks will nearly  double, reaching an average performance equivalent to about 54.5 miles per gallon by 2025….In 2011, the President also established the first-ever fuel efficiency and greenhouse gas standards for medium and heavy duty vehicles, covering model years 2014 through 2018.”

More is to come! Increased fuel efficiency standards are currently being addressed by the Administration, and the EPA is hard at work developing Tier 3 rules.

The Administration’s record is a decent one and has benefited the environment, lessened ghg emissions, and strengthened the economy. Regrettably though, fuel efficiency regulations primarily apply to new cars.  They should be matched by a cost efficient and comprehensive federal effort to encourage the conversion of older non flex fuel vehicles; they also should encourage Detroit to continue producing larger numbers of flex fuel cars.

In this context, EPA and Detroit automakers need to reach a consensus concerning effective engine recalibration alternatives, as well as an extension of consumer warranties and related financial coverage of recalibrated vehicles.  Without permitting older cars to achieve the fuel efficiency and environmental advantages of flex fuel vehicles, we will not be able to respond to Pogo’s admonition and Commodore Oliver Perry’s initial statement (paraphrased): that we, as a nation, have met the enemy, and he is us!

To grant primacy to new or relatively new flex fuel cars would increase the nation’s ability to reduce ghg emissions and other environmental pollutants (e.g. NOx and SOx). There are well over 200,000,000 non flex fuel cars in the U.S. that cannot readily use available fuel blends higher than E-15 and will not be able to use natural gas based ethanol that hopefully relatively soon will come on the market.

Lowering the certification costs of conversion kits by the EPA and increasing the number of manufacturers of those kits would bring down their price from around 1,000 dollars to the near 300 dollar level that is common in the “underground” market.  Simplifying legal conversion could  —and indeed would —-make an important environmental difference.  Such action would also open up the fuel market to competition, and likely lower the price of gas at the pump for consumers. Finally, such actions would also support the President’s objective to wean the nation off of oil and gasoline.  Oh Happy Day!  Go for it Gene Kelly and the American Association of Psychiatrists!  It might be time to show some real love for environmentally and efficiency neglected and needy older vehicles.

Arctic Leaf

Tesla Takes It to the Next Level

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

What do Grover Norquist and Edmund Burke have to do with Natural Gas?

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I don’t like the idea of advance pledges by candidates concerning how they would vote, if they were elected by us. I believe it is contrary to representative democratic government and denies the fact that economic, security, social and environmental conditions change, often rapidly, and must be responded to with studied intelligence and common sense, not constant polling or focus groups.

I guess I am, at least, part Burkian.  Although it departs from present reality, as the great philosopher and British MP, Edmund Burke indicated, our elected leaders , should use their “…unbiased opinion…mature judgment…enlightened conscience…(our) representative(s) owe …not (their) industry only, but (their) judgment; and (they) betray, instead of serving (us), if they sacrifice ( judgment) to (our often fleeting ) opinion(s).” Voters can, at least in theory if not always in practice, dismiss their representatives at the next election. I am not sure Burke won again after he made his plea for more thinking and less pandering.

I am suffering emotionally (not too significantly) by being tempted by  a Kaplan analogue to Grover Norquist’s “no new taxes” pledge, required of  candidates for office.  While the tax pledge, I believe, is responsible for at least some of the dysfunction in Washington, there is a certain romantic, almost utopian appeal to it with respect to frustrated advocates for more and better fuel choices at the pump than just gasoline. As Emerson wisely indicated, perhaps, “a foolish consistency is the hobgoblin of little minds.”

The new Kaplan analogue to the Norquist pledge would acknowledge that the natural gas train has left the station. Indeed, it has! One has only to look at the number of wells/rigs now in place compared to just a few short years ago and the relatively rapid escalation in gas production.

The natural gas sector has become, and likely will remain, an economic and political powerhouse. In this context, advocates of a “renewable transportation fuel only” approach, risk, implicitly, supporting a short and intermediate term future dependent on oil and gasoline. As a result, their success would likely result in increased environmental degradation, more greenhouse gas (GHG), higher costs for consumers, increased security problems and restricted economic growth. Clearly, the enemy of a short term good would become a distant perfect.

The Kaplan pledge would commit candidates to help secure reasonable and effective federal and state regulations to protect and enhance the environment and significantly reduce GHG production during production, distribution and sales of natural gas-from wellhead to automobile.

The pledge would commit candidates, once elected, to help foster a collaborative public, nonprofit and private sector effort to wean the country off dirty oil and gasoline. It would require them to develop and support initiatives that open up the now almost closed transportation fuel market to safe, environmentally sound, cheaper alternative transition fuels. Finally, it would commit candidates, should they take office, to support the development of renewable fuels and vehicles that would reflect competitive costs and mileage capacity that match the budget and occupation as well as life-style needs of low, moderate and middle income Americans.

I feel sinful in departing from the philosophy of Edmund Burke. I need to contemplate my fall from philosophical grace. I apologize!  I hope I am treated with grace and redemption. My excuse in proposing a Congressional pledge was only a temporary errant fantasy. It “ain’t” going to happen. It is a flight from reality.

But, was it all bad? Perhaps, the Kaplan pledge points the way to an alternative that is not antithetical to Edmund Burke. What if, instead of trying the impossible with elected officials, many  of whom try to fit their views to the, often of the moment, views of their constituents, advocates of a free fuel market and alternative transitional transportation fuels worked to form  a coalition of nonpartisan or bipartisan groups: business, labor, environment, government, academic and community . Each group would join because they are consistent in heart and mind with the Kaplan fuel freedom pledge. Each would accept the intent explicit in the pledge; that is the nation’s need for a comprehensive fuels strategy that would bridge the gap between renewable and natural gas advocates, between environmentalists and the natural gas industry, between liberals and conservatives.

Free market business and conservative adherents would put muscle behind their ideology in seeking a more open fuel market. Liberals would put meaning behind their desire to aid the needy who suffer from the high cost of gasoline and limited job opportunities because budget constraints limit driving. Environmentalists would match their concern for the environment with support for natural gas, ethanol and methanol as transitional fuels — fuels that would reduce GHG and other gasoline generated pollutants. The nation would be better able to secure the stimulus now required to improve economic growth because of the reduced dependency on foreign imports. Every one of us would benefit from success in assuring research and development of renewable fuels. The coalition would inform and increase Congressional understanding of the need for an integrated coherent national fuel strategy. The payoff to elected leaders:  The Coalition would promise to help voters comprehend the nation’s need for alternative fuels and a comprehensive fuel freedom strategy. It would meet with measured success. Sign me up! The best of all possible worlds! Oh Happy Day!  I can dream can’t I?