Friday, July 8, 2011

Biofuel in the air and expensive gas on the ground

There are a couple of items in the news today this week that mark the face of a changing world of energy supply. Of the two the increasing problems that the United Kingdom are facing with maintaining a viable energy program into the future is being marked with an escalating cost and the need for politicians to begin walking back from some of their previous statements. The other is the decision by Lufthansa to use a biofuel mix as a regular fuel for scheduled flights. The latter decision is a little more complex than it first appears, since the logistics of supplying the fuel mean that the aircraft (which will fly the Hamburg to Frankfort route) will only be fueled at one airport, and – to facilitate the monitoring of maintenance and other possible impacts – only a single plane will initially be involved in the trials., which will go on for six months. The testing can now begin since the standards for the fuel have now been approved by ASTM.
After blending with conventional jet fuel, new lubricity, distillation and composition requirements in D7566 must also be met. As a result, the blended jet fuel used in the airplane is essentially identical to conventional jet fuel and does not differ in performance or operability.
The biofuel will be supplied by Neste Oil, which has declared a target of 2 million tons (around 40,000 bd) of jet fuel by 2020. Given that this is a 50:50 fix of biofuel and kerosene to meet the above standard, lowers the volume of biofuel needed, with the source described as:
Produced by hydrotreating renewable raw materials, NExBTL aviation fuel is compatible with all aircraft engines currently in use. Production is based on Neste Oil's proprietary technology, which can make use of a flexible range of various types of vegetable oil and waste-based inputs, such as animal fat from the food industry. Neste Oil is committed to only using verifiably sustainable and fully traceable raw materials that can be tracked all the way back to the original source.

In the United States there have been single plane flight trials, with the “Green Hornet” (flight video ) using a mix that included camelina oil .

Turning from the good to the rather more worrying topic, the British gas industry is in the process of raising natural gas prices by some 18%, which also feeds through into the price that they charge for the electricity generated by the gas, and also supplied to customers. This is occurring at the same time as a report from a British car insurance firm has concluded that the increased price of gasoline (petrol) in the UK has driven some 1.3 million people (out of 31 million registered drivers) off the road, with the cost of car operation reaching $4,800 a year. This is an increase of over 20% in a year, and when taken with the rising price of natural gas is an illustration of the costs that are being incurred as the UK moves more strongly from an exporting to a fuel importing nation.

The U.K. Government is beginning to realize that, without a sufficient domestic resource, they are constrained to pay what the rest of the global community decides is a proper price for their fuel. The UK Government is putting forward a plan that will increase the emphasis on nuclear power and renewable sources of power. The problem is that, to comply with EU rules, the UK is going to have to close a quarter of its generating capacity this decade. The eight nuclear power stations that it is now anticipating private industry will build (though there is some doubt) won’t come on line until perhaps 2025.

Possible Nuclear Power Station locations in the UK (LSE )

In the interim the problems to the consumer of the rising price of natural gas is perhaps being reflected in the same way as it was for gasoline, namely a reduction in demand. In the first quarter of this year, while coal use rose (albeit with two-thirds of the supply imported) by 7%,, the demand for gas fell 20%. Renewable energy sources increased supply by 27% but this should be placed in the context that the overall contribution from renewables was only 3.3% in 2010. Demand has been met by coal
Power companies have been benefiting from local coal production, however, with the small but active number of British facilities recording a 31% increase in output in the first quarter. Deep-mined coal showed an 80% rise as stocks were depleted due to demand from the utilities.
The problem, unfortunately, remains that the coal-fired power stations are going to be pulled off-line soon, and so the cheaper coal-fired power will not be available, and (providing that there are power stations available) the reliance on natural gas will continue to drive prices higher, which is likely to be increasingly unpopular with the British public.

However the first large solar farms in the UK are now on line, although with a combined output of 2.4 MW they are not likely to have much impact on overall supply.

That lesson (of increasing prices costing politicians their popularity) has already been cited as one reason for the release of oil from the Strategic Oil Reserve in the United States. Unfortunately it would appear that this release, coming with the increase in demand that I have referred to earlier, has not had the hoped for impact on oil prices. And, equally unfortunately, that action is still some months before the elections of next year.

The British experience is beginning to show that demand can be curtailed by price, but that still requires that there be an adequate supply to meet such demand. The problems with finding reliable power sources by 2015 for the British electricity suppliers is beginning to become evident and will likely further influence political popularity there. But the UK does not have to hold a national election for some years. That is not the case in the United States, even though the prices of gasoline and natural gas are still well below that of Europe, but where the public is more sensitive to those numbers, and where the elections are a whole lot sooner.

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