Tech Talk - without Cellulosic Ethanol where will transportation fuel come from?

There are some ominous signs that we are beginning to reach a point where it is less economic to look for and develop new supplies of oil, as costs rise, return on investment becomes less certain, and alternate opportunities exist for the funds that promise a better return with a lower initial investment. The problem, of course, that this generates is that as existing fields decline, so the fields that remain are likely to be smaller and more difficult (and thus expensive) to develop. To meet the need, therefore, exploration investment needs to increase, rather than decline, since the need is to find an increasing number of the smaller fields. Without those searches, then future supply will increasingly be unable to meet the growth in demand.

Further, given the time that is required to find new fields, develop them and then connect into a distribution network that carries the oil to refineries and the customer, without the knowledge of what is going to be needed, the crisis of under supply will approach not only more rapidly but also with less flexibility in being able to remediate the shortages when they start developing.

A large part of the problem lies in the way that oil is used. With much of it being refined into transportation fuels – in the USA some 70% - there is little in the short run that can be used to replace it.

Figure 1. Percentage uses of petroleum products in different sectors of the USA (Institute for Energy Research )

Since we are unlikely to see much change in power sources for vehicles in the next couple of years, as the oil shortage begins to bite there is insufficient flexibility in the system to offer an immediate alternative that will be viable. While corn ethanol has provided (at some cost) less than a million barrels a day it has reached an apparent plateau of production that is unlikely to change, given the alternate demand for the corn.

Figure 2. Ethanol Production in the United States (EIA) (Note: A billion gallons a year is roughly 65 kbd).

Cellulosic ethanol remains an unfulfilled promise, back in 2010 there was already some concern that it would meet even the initial targets, as time has worn on these seem increasingly out of touch.

Figure 3. Projected needs for cellulosic ethanol to meet projected national needs by 2030. (Bloomberg Biomass Magazine )

More recently Robert Rapier has noted that KiOR, one of the companies that Vinod Khosla founded and then took public as a promised source for this ethanol, is failing to live up to its promises, and may likely soon be bankrupt. It began shipments in 2013 from its Columbus, MS plant but of only nominal quantities of fuel relative to the future need. Shortly thereafter the plant shut down through the first quarter of this year, needing additional funds to improve operational efficiency.

Share prices that started at $15 have now dropped to $0.64, having recently visited $0.59 a share. Investments to make those changes may only come for a limited time, perhaps only through August, from Mr. Khosla. But the company has to pay back the $75 million it borrowed from Mississippi – with the next $1.8 million payment due June 30th, and there don’t appear to be other investors waiting in the wings. The state will get the assets should the company fold.

Sadly this is another exemplary case of a number of firms who promised much in this field, but have so far delivered relatively little, although there are several new plants coming on stream this year. The EPA has suggested that the production target for this year be lowered from 6 billion liters to 64 million liters – a significant cut, and one indicative of the likely difficulties in finding alternate sources to petroleum based products needed for the transportation industry when oil becomes less available.

Figure 4. Status of the Cellulosic ethanol production plants planned to be in operation by the end of this year (Nature )

The INEOS plant in Florida began production last July but then shut down and is looking to achieve stable production this year, after upgrading the facility, which will have a capacity of 8 million gallons a year. Not much against the millions of barrels a day that may be needed, but the company has the advantage that it is using local municipal waste and also providing power to the community – which provide other gains to their operations.

The Hirsch Report was published in February 2005. In that report the authors noted that it would likely take up to 20-years of concerted effort to produce an alternate source to petroleum based fuels. We are now nearly ten years through this potential period of grace, and the major candidate to provide that alternate resource is so far being found wanting.

The writing on the wall is increasingly discernable, oil companies are cutting back on exploration investment ensuring that future discoveries will likely be smaller in number as well as in size. This will reduce the amount available, requiring an alternate source. Cellulosic ethanol, which has been held up as one answer to the problem, is falling significantly short of the mark needed to make up for possible conventional shortfalls within the next decade.

The question then becomes – what is the alternative? We could look to making oil from coal, peat and other alternate sources as was done in Germany in World War 2 and in South Africa, where SASOL continues to operate. But planning, permitting, building and operating a facility to convert coal is something that will take at least seven years, and require initiatives to make commitments that are currently lacking.

What else is there? Bear in mind that solar and wind energy production largely goes to address the electricity market – which is largely separate from that of the transportation fuels. Thus their development will largely not impact the problem, since electric cars cannot be produced in the quantities that will likely be needed in the time that remains. Bedazzled by the promise of cellulosic ethanol we have failed to properly pursue the alternatives that now look as though they will prove to be needed.

Time is running short, but awareness of the problem is as yet, even less evident. Basking in the transient benefits of increased domestic production, even as turmoil has cut global oil production by an estimated 2.3 mbd, production that won't soon return, there is less inclination to face the issue than there has been in previous Administrations, even though it is now becoming possible that it will be this Administration that first sees the impact.

Tech Talk - of oil, water and the age of Stone.

There seems to be an assumed correlation between those who have some concerns over the accuracy of the theories of climate change (shall we call them the doubters for today’s discussion) and those who believe that there is a plentiful amount of fossil fuel available that will see us properly provided for well into the future. This is in contrast with those who are actively pushing the agenda associated with remedial matters that might affect the climate, and who also assume that there remains a plentiful sufficiency of fossil fuels, but are anxious for the world to change to alternate sustainable and renewable fuels to reduce our dependency on fuels that generate carbon dioxide.

Discussions of peak oil, the limits to natural gas production, and concerns as to when, this century the currently abundant coal reserves (not to mention the resources beyond them) will run out are dealt with as an increasingly irrelevant topic for discussion. The current adequacy of supplies is assumed as likely to persist, and neither camp is much inclined to argue the issue. Which is unfortunate, since this lack of real interest is taking place at a time when the dominoes are lining up toward a series of cascading falls, when the rather glib commentaries of the past will lie forgotten, and concerns over national fuel resources will be topics for discussion in many more nations around the world than now even talk about it.

One of the most quoted remarks that epitomizes the blindness of many to the coming problems is that of Sheik Yamani "The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil.". Unfortunately for the applicability of this analogy, we have seen, in the past, times where technology disappeared under the assaults of external forces, wiping out civilizations around the world.

I recently mentioned the book "1491" by Charles C. Mann – who covers some of the civilizations that thrived and fell in the Americas before the arrival of Columbus. At some point or other some resource, vital at the time to each civilization proved inadequate. For example the Mayan Civilization collapse has been blamed on a prolonged series of droughts that made the centralized city life impractical. Richardson Gill, for example, in “The Great Maya Droughts: Water, Life and Death” points out how very short a distance a city worker can travel to find food for his family, if he has to go on foot. It is an argument that likely also held true, in its time, in Mesapotamia. Yet, in the short term, there was nothing apparently that the rulers of the time could do to achieve an adequate supply of water. The transient shortages were, however, sufficient to doom those civilizations that suffered (and that includes those along the West Coast of the United States in about the same period). We still have to rely on water, but that doesn’t mean that the times where it fell short were not locally catastrophic and destructive of civilization.

And that is the problem with Sheik Yamani’s analogy between the supply of liquid fuels and the Stone Age. We can look outside and see stone in abundance all around us. Yet we have moved on to rely on other materials. Even in a drought in California, they have a huge amount of water right beside them. It is merely the wrong sort (sea water) and they are only slowly coming to recognize that perhaps they are going to have to bite the bullet of desalination, if the problem is not going to get recursively worse.

There will always be some form of energy available. We have, in large measure, moved away from dung fires for heating and cooking in North America and Europe and it is unlikely we will return to those days. But what is often missed in the assumption that we can switch from one resource to another in times of shortage, is the time that it takes to make the change. That wasn’t too hard to do, if the switch was from gathering dung to gathering wood, but it gets more complicated if the two alternatives are coal and, for the sake of discussion, wind energy.

When coal-fired power stations are closed and demolished they cannot be turned back on if wind energy proves to be an inadequate reserve. Arranging for coal mines that will supply the coal, railways to ship it, and power companies to acquire the permits to build and then burn it takes years. Nuclear power takes even longer, and even running a new pipeline can (in the case of Keystone) drag on for seemingly ever without a decision. The changing picture of energy subsidies for wind and solar are also raising concerns over the reliability of return on investment in those industries. Small, local solar operations (as with the dung fire) can move relatively quickly. Individual houses can be retrofitted within a few months – but for an effort with national impact, the small-scale is likely to be inadequate in overall size to match the power output from major coal-fired stations now on the block.

We are marching to a set of drums that beats out the message that there is no problem, even as the signs of a slowing oil production increase are appearing, and none of the global signals is very reassuring. Those European nations dependent on Russian oil and gas are discovering that, perhaps there really isn’t a practical alternative to that supply, and so speak more quietly about Ukraine and the Baltics. Any tightening of global supplies (a likely event in the next couple of years) will only make that situation worse for those customer nations, and serve to strengthen the national stature of the Russian President.

It is worth remembering that those of us who talk about peak oil are not talking about a resource that will suddenly disappear. No, we are merely projecting that sometime in the near future there will come a time when that year’s overall crude oil production will be a little less than the year before, and similarly in the following years. (Projections for future drilling operations in North America are receiving increasing scrutiny). There will still be a lot of oil around, but as demand exists so the price will start to steadily increase in an continuing rebalancing of price, cost and supply that will increasingly roil the global marketplace. Unfortunately in an increasing number of cases the need for money is an upfront and increasingly expensive one, to pay for the exploration and development, with only some assurance of a payback. And as more money goes into a smaller return in volume, the mandatory prices needed to continue that progression will continue to rise, even as gains diminish.

In the interim the EPA has cut the targeted production of cellulosic-ethanol yet again.

The changing sources for renewable liquid fuels

While it may be way too early to declare a final winner in the race to find replacement renewable liquid fuels to replace the jet fuel and diesel that power so many of the vehicles in the world, there are some indications as to the technology that just might end up coming out ahead.

The results that are starting to appear also show that sometimes there is a disconnect between what the Government wants and considers possible and the real world. The concern over climate change (not peak oil) led many Governments around the world to mandate that propulsion fuels include a growing percentage generated from a renewable source. Six years ago I was in St Louis for the Renewable Energy Conference with its great emphasis on cellulosic ethanol. President Bush came to bless the endeavor, and much was made of it being the time to start building plants. A short while thereafter I started looking into the generation of biodiesel from algae, and brought up the, to me, logical suggestion of growing it underground. (That idea still gains me the occasional pat on the head). Some of the early reviews of the technology were not good, but nevertheless the Defense Advances Research Projects Agency began funding the development of algae, particularly as a source for jet fuel.

Time passed, and the development of the new fuels took quite different paths.In order to encourage the change to renewable fuels the EPA mandated that motor fuel include 100 million gallons of cellulosic ethanol in 2009, 250 million in 2010 and 500 million by 2013. (This is on the way to a target of around 2 mbd by 2022.) Some of the original companies to seize on this opportunity started out with too great an ambition. Range Fuels, after some $156 million of Government loans from the Bush Administration, closed its doors this past year, unable to make the product it had promised. When it became obvious that the initial targets would not be met the mandated volumes were lowered, so that, for example, this year the industry target is 8.5 million gallons. But still the Government will fine companies, for not using a fuel that doesn’t yet exist in the volumes needed to meet those quotas.

Two firms say that they will be able, in time, to produce significant volumes; POET is beginning construction of a plant in Emmetsburg, Iowa that is targeted to produce 25 million gallons a year from 700 tons a day of the left-over material from corn fields after the corn is removed. They have currently stockpiled 61,000 tons of stover for use this year. There is some concern however over the long-term Biomass Crop Assistance Program which is supposed to help with funding. (DOE is to provide a $105 million loan). However the Scotland S.D. pilot plant can only handle a ton a day of material (turning it into 80 gallons of ethanol at a cost of around $3 a gallon), and so the rest is to be burned as a fuel at the ethanol plant in Chancellor, S.D. (This is a corn ethanol plant.)

A second plant will be built at Kinross in Michigan, by Mascoma following an agreement with Valero, and the award of $80 million from the Department of Energy. The plant is intended to generate an annual flow of 20 million gallons (1,300 barrels/day ) of cellulosic ethanol from hardwood pulp. The process is based on the use of engineered micro-organisms to the necessary saccharolytic enzymes and then converting the sugars released by those enzymes into the desired end-products. The process is knows as Consolidated BioProcessing (CBP) In the meanwhile they are also licensing a technology for improving the performance of corn ethanol plants. To date, therefore, the promise of cellulosic ethanol has not been met.

Other sources for liquid fuels have been also been tested, and some – particularly the use of vegetable oils, either pre or post use in fast food chains – have found some niche in the market. Alaskan Airways are using an 80% conventional 20% cooking oil derived mix. At the moment the cooking oil derivative is six times the cost of conventional fuel and Dynamic Fuels is the only commercial source with the plant having a capacity of 75 million gallons per year. The are now working with Solazyme to meet a target delivered volume of 450,000 gallons of renewable fuel, and that brings the focus back to biodiesel from algae.

By 2010 DARPA was already claiming that the contractors it was working with had shown the promise of producing algal biodiesel at a price of $2 a gallon. Following that step, the US Navy has begun trials with oil made from algae. In the set of agreements that have flowed out of the initial success, and led to the 450,000 gallon agreement, the U.S. Navy has taken delivery of roughly 75,000 gallons of biodiesel for testing in the fleet. And while the US Air Force is continuing trials of jet fuel made from camelina as the search for replacement renewable fuels continues. Beyond camelina (which has some problems finding a suitable home for large volume growth) commercial airlines are looking at algae sourced alternatives, with a United Continental flight having used a 60% conventional 40% algal sourced mix on a flight from Houston to Chicago. The algae-based fuel comes from Solazyme, which went public last spring and the company and has signed a non-binding letter of intent with the airline to sell them 20 million gallons of bio-sourced jet fuel starting in 2014. Interestingly the plant uses “indirect photosynthesis” to grow the algae, rather than open ponds. Robert Rapier has described the technology that they use. By using algae that do not require sunlight they can generate the fuel in bioreactors where the process can be better controlled. Gail Tverberg first wrote about the company in 2008.

Despite the opportunities that the fuel market presents, it does not, however, at the present time, provide much profit to a company, since it is costing about as much to produce a product as the market price will bear (around $3 a gallon). Thus it is still more profitable for the company to use the algal product in an earlier form as a triglyceride that can then be used in cosmetics and other chemical stocks. But, in contrast to the problems that cellulosic ethanol continue to have, I must admit to a quiet smile as I see the success that algal-derived fuels are starting to achieve.

Now if I could just get them interested in nice, constant temperature locations for their plants, with much of the infrastructure, walls, roof and floor already in place, and relatively little cost for development, my original projections just might . . . . . . .

Cellulosic Ethanol and Jatropha, too much too soon

It would seem, despite the inability of the cellulosic ethanol industry to produce an economically viable product to date, that it remains this Administration’s answer to coming liquid fuel shortages. Last week President Obama announced that $510 million from the Government, would be invested in biofuels, with an equal amount of private funding.

The U.S. Departments of Agriculture, Energy and Navy will invest up to $510 million during the next three years, in partnership with the private sector, to produce advanced drop-in aviation and marine biofuels for military and commercial transportation, President Barack Obama announced today. . . . . . . To accelerate the production of bio-based jet and diesel fuel, Secretary of the Navy Ray Mabus, Agriculture Secretary Tom Vilsack and Energy Secretary Steven Chu have developed a plan to jointly construct or retrofit several drop-in biofuel plants and refineries.

The investment will be aimed at increasing biodiesel production. The country has more than doubled the production of biodiesel in the last year, with monthly production rising to 81 million gallons in June. (That is 64,000 bd). Further, as the EIA TWIP noted this week, the USA has started exporting significant quantities of ethanol (from corn). Which is good since Brazil's ethanol production is not doing as well as might be thought, due to high sugar prices.

Current increase in exports of ethanol, relative to historic imports.

At the same time some funds will support scientific advances in the National Labs and help to move the results into production.

A team of researchers at the Department of Energy's BioEnergy Science Center have pinpointed the exact, single gene that controls ethanol production capacity in the microorganism Clostridium thermocellum.

Scientists can now experiment with genetically altering biomass plants to produce higher concentrations of ethanol at lower costs, said Secretary Chu, announcing the discovery on Thursday.

Why the combination of departments? Well:

The Agriculture department will work on securing feedstocks while the Energy department will look for the right technologies. The Navy, which has a huge fleet of ships and planes, will be the customer.

Feedstocks are not necessarily the problem, depending on the technology that is going to generate the fuel. (The bacterium can turn cellulose into gasoline, with an estimate that it might be cheaper than getting ethanol from corn. Though IIRC we may have heard that argument before. )

The plan will first create an Executive Steering Group and that will then create a Plan of Action and Milestones. So this won't drop gas prices tomorrow.

I have a bit of a concern about this effort, which has the goal of replacing half the Navy’s consumption of petroleum-based fuels with domestically produced sustainable fuel alternatives by 2020. This is especially true as the objective is directed at creating or retrofitting existing biofuel plants and refineries to create military specification biofuels at a price competitive with petroleum.

We have seen, for example with Range Fuels, that the Government is quite willing to throw large sums of money into creating plants nominally capable of producing large quantities of fuel, before the enabling technology to make that fuel at that scale exists.

in March 2007 (Range Fuels) received a $76 million grant from the Department of Energy . . . . Range said it would build the nation's first commercial cellulosic plant, near Soperton, Georgia, using wood chips to produce 20 million gallons a year in 2008, with a goal of 100 million gallons. Estimated cost: $150 million.

By spring 2008, Range had also attracted $130 million of private funding. . . Investors included California's state pension fund, Calpers. The state of Georgia kicked in a $6 million grant, and all told Range raised $158 million in VC funding in 2008.

By the end of 2008 with no operational plant in sight, Range installed a new CEO, David Aldous. In early 2009, the company said production was not expected until 2010. Undeterred, President Obama's Department of Agriculture provided an $80 million loan. In May 2009, Range's former CEO, Mitch Mandich, explained that the problem was that nobody had figured out how to produce cellulosic ethanol in commercial quantities.

The plant closed in February, and it was only then, as Robert Rapier has noted that the media started paying attention to some of the downsides of cellulosic ethanol production.

So now we go through the whole thing again. The problem, however, if you look at the totality of the sums of money that were involved in the Range Fuels case, the $510 million that has not been proposed for this new effort could, at the same scale, be easily swallowed up by just one or two ventures. We seem to be getting too far ahead of ourselves and rushing to put large quantities of money into technologies before they have gone through the proper demonstration, scale-up, demonstration, scale-up process that stops a few folk wasting large amounts of a lot of other folks cash.

There is an unwillingness to do all the due diligence required to slowly and methodically build on small successes to ensure the value when larger investments are finally made. Money is being concentrated in the hands of a few groups, rather than issued as a broader funding to address potentially different and successful approaches outside of the one that has maneuvered to get the best media and government attention.

There is a similar sort of story, though with a possibly ultimately different conclusion, going on with the potential for getting fuel from the Jatropha plant. Initially when the potential viability of this plant was discovered (the nut produces an oil that can be used for fuel, yet it grows on very poor land) there was a rush of investment with Governments persuaded to spend millions of dollars in plantations in places such as India and China. Spurred on by promises that were not adequately checked at small and intermediate scale, plans were implemented to raise millions of acres of jatropha. By 2008 it was estimated that over 2 million acres had been planted, with plans to increase this to 25 million acres by 2015. It has been estimated, given that the plants take 3 years before producing a crop, that the crops would only be profitable at a yield of 7.5 tons per acre, but it has turned out that yield is only about half to two-thirds that.

Yields can be raised by more care in the selection of land, and with fertilization and watering ( up to 18.5 tons/acre) – but none of these were considered necessary in the initial rush to plant. So now there is a reaction to the poor result, with the suggestion that this was yet another blind alley.

Again the problem seems to be one of rushing to large scale investment without the necessary intermediate steps to ensure that scale-up works. In India there also appears to have been considerable manipulation in the market, so that farmers were not, among other things, waiting the three years for the first crop to develop but giving up before that point.

On the other hand it appears that the smaller experiments and plots in places such as Mali, with a Youtube here have been successful, and they are now seeking to expand the Mali project.

The objective of the Malian government is to achieve a 10% reduction of its diesel imports by 2013 and a 15% one by 2018 via the development of agrofuels such as bio-ethanol, bio diesel and Jatropha oil., If 25% of that objective is based on Jatropha oil production, Mali must produce 10 million liters of oil in 2013 (which will require to cultivate 21,000 ha of Jatropha plantations.) and 14 million liters in 2018 (which is the equivalent of 32,000 ha of village plantations)

Work is also progressing in Ghana though there are also protests.

But with a bit of patience, and a more methodical approach, this may still lead to some answer, perhaps only on the smaller scale in villages that previously did not have electricity and now might, rather than on a huge scale, but that will still be progress, and at much less cost.

Moving slowly and methodically does not carry the political credits that flashy large scale investments do, but on the other hand it is an approach that is more likely to lead to success without large wastes of money, which may well be the current consequence. If the technology is not yet in successful demonstration of viable economic pilot scale production, then it is highly unlikely that it will reach "drop in" capability by 2020 at a scale large enough to help the Navy out. And at the moment I don't see those technologies for cellulosic ethanol in that phase.

API and some thoughts on America's Energy Future

There seems to be a little drop in the intensity of the debate over the arrival of Peak Oil. Given that crude oil prices are hovering around $100 a barrel, and quite likely to go higher over the course of the year, it is perhaps only the recent history of oil at $147 a barrel that stops a more intense debate. After all we have been there - done that, before so why worry? Unfortunately this may be the lull before the storm.

Consider that there has been a change or two, even in the short period of time since our last visit to this price range. Last time it was possible to see an increase in production from places such as the United States, and from Russia. Not huge amounts, but symbolic, that production could respond, somewhat to a potentially more expensive product. But this time around it is likely that we will see both United States and Russian production fall this year, even as prices rise. And with a certain complacency evident in the politicians, whose constituents are now paying higher prices for product, things that might be properly done to at least help out, are not seen as that important at the moment.

The API addressed this issue, at the beginning of the year, through the speech of Jack Gerard, their President. Looking at the “State of American Energy”, he was able to point to the number of new jobs that the industry has been able to create both with the development of the Marcellus gas shales in the East, and with the Bakken developments in the North West. He also pointed to the $95 million in taxes, rents, royalties and bonus payments that the Treasury gets from the industry each day. The totality of current jobs was counted as 2.1 million directly employed in the oil and gas industry and 7.1 million in the affiliated industries that work to support it.

Yet, as he noted,

Over the past few years, revenues to the U.S Treasury from lease sales have decreased, due in part to a lack of opportunities.

Our industry is eager to initiate new projects. But without an adequate level of business certainty, with concerns about policies that might curtail this industry’s ability to access new resources, those projects might never get off the drawing board

Part of that uncertainty comes from the changes in regulation that will control drilling offshore from the United States. Some rigs that could have continued to drill in the GOM, but were halted after the Deepwater Horizon disaster have now moved abroad, and may be gone years before they return to American prospects. But until there is a clear commitment to facilitating American production, that exodus may well continue. The severity of the coming crisis is still not evident in the eyes of the politicians and the general public. Further, as the price of oil rises, it is assumed that the wealth of the companies producing the oil is also increasing, and so (despite rising costs that are not mentioned nearly as often) it is assumed that companies can afford higher payments. And with new quarterly and annual profit statements coming out soon, it is going to be a little difficult to defend that position against what is quite likely to be a set of overall record, or close to record, earnings. Even BP had returned to profit at the end of the 3rd Quarter of 2010.

The fact that they are playing in a shrinking sandbox, as producing countries take over more and more of the profit generating parts of production is not seen as a concern.. Yet, as we have seen in places such as Venezuela, the results of government involvement is quite often to reduce the level of investment in the industry, just as investment costs should, in reality, increase to allow discovery and development of the more difficult reserves that will be needed in the future.

As the Venezuelan experience shows “Twenty billion here, and twenty billion there, and soon they are talking real money,” (to misquote Senator Dirksen). And yet those monies are likely to be inadequate to properly develop the resources of that country. Jack Gerard seems the future in the further development of the gas shales, in increasing production from the Canadian oil sands, and in the development of a significant oil shale industry.

At the present there is too much natural gas available for the growth of the gas shale industry to be assured over the next five years. This is not because of the problems that are being stirred up over the chemistry of the fracking fluids, nor the ability of the companies to properly protect the ground water around the sites, those issues have realistically been solved decades ago, and the furor will die away in time. The problem at the moment relates more to the cost of developing the reserves at a time when the market has natural gas available that is cheaper than can be extracted from some of the gas shale wells. And as long as that holds true the industry is unlikely to grow much.

One thing that API did not mention much in the speech, but which came later, in one of Jane Van Ryan’s blog posts, is a valid concern over the march toward E15, that is the use of 15% ethanol in gasoline. That original target was predicated on the assumption that, by now, cellulosic ethanol would be at or close to large-scale commercial production. Well that has not proved to be the case. EPA backed off a little on the targets last year, as Robert Rapier noted at the time. More recently he has drawn attention to the failure of the Range Fuels plant in Soperton GA , which is now closing. After spending $320 million, and producing one batch of ethanol, the company needs more money to solve technical issues.

As far as the national target is concerned:

Congress initially set 100 million gallons as the 2010 target for cellulosic biofuel, but the EPA cut that to 6.5 million gallons. It appears that the industry might have produced less than 1 million gallons last year, reported ClimateWire on Tuesday, citing an estimate by a government analyst.

(On the other hand Valero is moving ahead with plans to invest $50 million in the Mascoma plant in upstate New York, that move will include the purchase of just under a million barrels of cellulosic ethanol) .

That decline is now, however, the concern expressed by API. Among other issues, there are two problems that higher concentrations of ethanol in the mix may cause that are not necessarily that evident. The first is that those of us who use small engines for mowers, chain saws, trimmers etc may find these running unexpectedly hot if they use the new mix. And albeit the manufacturers warn against its use, most of us fill the can while we are refueling the car, and from the same pump.

The other concern relates to the seals in tanks and underground storage.

Just as there are seals in gaskets in cars that can be affected by E15, similar seals and gaskets can be found at the service station and the pump above the ground and the underground storage tank. The DOE recently released some test results of gas station dispensers and the results were pretty sobering. About 70 percent of the older equipment in existence failed these tests and about 30 percent of the new equipment failed these tests. That is a real liability concern because if you are a service station owner and have to determine whether to use E15 in an existing underground storage tank when the replacement costs for that storage tank could be $50,000 to $200,000. The testing that the DOE did was only above ground.

If that weren’t enough – since we won’t have much cellulosic ethanol, we’re going to have to rely on corn. And what is the story on the price of corn? March prices are $6.59 a bushel, and still rallying.

Output in the U.S., the world’s largest grain exporter, dropped 4.9 percent last year, leaving supply before the 2011 harvest at the lowest in 15 years, the Department of Agriculture said last week. The agency also cut its forecast for global inventories to 127 million metric tons, the lowest since 2007.

“Prices have not risen high enough to slow demand,” said Greg Grow, the director of agribusiness for Archer Financial Services Inc. in Chicago. “The attitude among consumers is that you have to buy the breaks to accumulate tightening inventories.”

I guess one of the interesting questions becomes as to whether we will see $5 a gallon gasoline in 2011 or 2012?

Of course we could talk of alternate investments in geothermal, the less popular renewable. But maybe I’ll hold off on that for another day.

Predicting and investing in the energy future

When Congress passes laws, and politicians put the full resolution of a problem into the “out years”, i.e. those in the future, there is a tendency to see this as a way of providing an “answer” while giving time for the answer to be developed to the scale needed. It also allows the subject to be considered covered, so that other problems can rise to the top of the list. There is an inherent assumption that industry will meet the obligations that are defined in the legislation, and that the needed tools will be invented in time to be useful. So it may well be with the supplies of future renewable energy, those that will be needed to power the country forward at defined points in the future. Any problems associated with the various technologies, whether cellulosic ethanol, solar or wind are assumed to have been resolved by the time that the supply will be required.

There are several dangerous assumptions that are made in developing such policies, and assuming that they will provide for the national need (whether American, European or wherever) when called upon. Considering just a couple, the first of these is that we have the time to evolve the technologies at the scale required, the second is that the funds and knowledge will be available to resolve any existing technical problems in generating viable supplies at the required level. By stating or implying that these things will happen, the public concern is meant to be relieved, and the problem resolved. To meet the growing global need there is an increasing assumption that the answers will come from renewable sources. This is the sector expected to have the fastest growth in supply (the EIA is anticipating an 11% contribution by 2030, with 5.9 mbd of ethanol and biodiesel by that time). (The EIA anticipate that, through 2030 only Libya and Ecuador of the OPEC nations will see a fall in oil production, most will increase with Saudi Arabia producing 12 mbd). So let’s look at these assumptions to see why we might be in trouble.

The first is the time that will be needed to resolve the problem. And to resolve this problem (and the others) someone has to be working on it. Yet, with the decline in the economy, the amount of investment in energy producing plant both conventional (as in oilwells) and in renewable systems is dropping. The IEA has expressed concern over the levels in investment in the oil industry, with projects being postponed or cancelled.

Fatih Birol, The IEA's advisor to 28 industrialized countries, said in an interview he expected oil and gas upstream investment to fall 21%, or about US$100-billion ($113.8-billion), in 2009 from 2008 due to the global recession.

At the same time investment in renewable energy is dropping more rapidly, while existing companies are going bankrupt in the face of the current economy.

Spending on renewable energy, such as wind power, is falling even more rapidly than on oil and gas. The IEA expects renewables investment to slide 38% this year compared to last, Mr. Birol said.

Now that story ends with the usual caveat

Not all agree with the IEA. The agency warned in 2007 of a supply crunch around 2012, a view that some analysts said was actually contributing to higher prices by putting a "fear premium" in the market.

But the reporter fails to grasp a point I have made before, that while it is easy to delay projects, it is much more difficult to accelerate them. The millions of barrels of oil that will no longer be available when needed within the next five years, mean that the need for an alternative supply, the role the renewables are meant to fill, will come earlier than anticipated, and at a level higher than now projected. It is a concern that is also now being voiced by some of the Ministers of the G-8.

Italy, which currently holds the G8 presidency, expressed concern about the possibility of another soaring period of oil prices when the world economy comes out of the crisis.
"When the crisis is over, the risk of insufficient energy supply exists, and as a result high and unstable prices," Italy's economic development ministry said ahead of the meeting.

Now part of the second problem is tied up with the first as cited above with the second quote from Fatih Birol, but a more significant part relates to the nature of the problems in establishing the new renewable plants, and, particularly for the replacement fuels, in making their operation profitable in the short term. Companies that invested in corn ethanol production have seen prices fall and several have become bankrupt, with Pacific Ethanol being the latest. And investors in cellulosic ethanol have also lost some confidence( despite the President’s confidence in the (as yet unproven) technology.

"My administration is committed to moving as quickly as possible to commercialize an array of emerging cellulosic technologies so that tomorrow's biofuels will be produced from sustainable biomass feedstocks and waste materials rather than corn,"

Shrinking an industry when it needs to be growing is not something that has an immediate impact, given the recession, but it makes it that much more problematic to be able to meet future targets. I accept that 2030 is a relatively distant time (the 20-years that will be needed according to the Hirsch report) but unfortunately by picking that interval there is an inherent implication that problems won’t arise before then. And that is where I expect that the greatest error in these assumptions is being made.

There is no longer enough investment in the resources that will be required to provide an adequate supply for the next five years, let alone 20, and while the results of that lack may well bring future funding it will be too late to avert significant negative impact. By focusing only on that long term, we may be missing the intervening hard times. I thus expect that the EIA prediction that oil will not get back to $110 per barrel until 2015, and to $130 by 2030 to be not only unrealistic, but dangerously complacent.
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Can politics be removed from biofuel generation?

The Administration has been praised for its move to rely more on science in the generation of policy, and on Tuesday a new group was announced that will work to encourage a new generation of biofuels.

The working group aims to accelerate funding to biofuels producers, in the hopes that they will phase out fossil fuel use at their own plants, instead using biofuels.

The group, which will be headed by the chiefs of the Environmental Protection Agency, the Department of Energy and the Department of Agriculture, also exists to encourage a new generation of biofuels made from biomass and other non-corn feedstocks.

Part of the study will, however, try to create a standard for assessing the GHG costs of producing and using the new fuel.

Mirroring a similar change in California, EPA is proposing to measure carbon emissions that come as a result of biofuel production. This includes a complicated and controversial formula that adds in emissions that occur when overseas farmers respond to higher food prices by converting forest and grassland to cropland.

“Life cycle estimates of the greenhouse gas relate to the fuel cycle and land conversion,” said EPA Administrator Lisa Jackson. “This research will be very important to future policies.”

It may well be that the “controversial” formula may take the discussion out of pure science, and give the opportunity to ease politics back into the discussion.

Certainly the Administration recognizes the financial cost, with some $800 million of DoE stimulus money being directed at research, development and the funding of test projects. However $484 million will go to demonstration projects, some of which are already being funded. The major emphasis seems to remain on generating ethanol, though an algae biofuels consortium will also be funded. This is to be followed by $1.1 billion in DoA funds much of that will go to help producers, through the biofuels credit program, restructure their businesses to survive. At present production is down and there is not enough (if any) profit to be made between the price of the corn feedstock and the sale of the ethanol.

The carbon costs of each process, will be calculated by the “controversial” formula, but the calculation was first subjected to “peer revew.” Though I guess that the validity of that process depends on the peers that were used.

In regard to the algae effort the Univ of New Haven are looking for better strains of algae to use. They note that some $195 million was raised for investment in algae work last year.

One of the greater drivers for algal biofuel development is coming from DoD who are anxious to find a replacement source for the jet fuel, on which an increasing percentage of their mobile systems run. DARPA have been taking a lead in developing this research. One of their advances has just been given some publicity

Researchers at the university (UT) have already developed an electromechanical process for extracting oil from an alga cell that is rapid, energy-efficient, free of solvents and less expensive than competing methods. The technique employs electric fields to break open the cell.

Another group of researchers at the university is focused on the science of separations research and is identifying techniques to separate the oil from the algae biomass once it has been released.

In another development Richard Sayre at theDanforth Center in St Louis has discussed the use of algae that can be milked instead of being destroyed. The goal of the DARPA program is to reduce the cost of the biofuel to $3 a gallon.

The fact that algae make fuel while consuming CO2 is also being presented to Congress at the same time as a new report on the subject is being released. (pdf).

In perhaps a sign of things to come, an ethanol plant in Iowa is going to add some algal photobioreactors to the plant. The algae will take advantage of the water heat and CO2 generated from the ethanol plant, with hopes to use some 60% of the CO2.

On Oil Prices - or a Gentle Cough in Newsweek's direction

Newsweek has a story this week on why we should not be worried about the potential problems of peak oil. (One of the advantages of the Kindle is that I can read this early, one of the disadvantages of this being tax weekend is that I haven’t had time, so hat tip to Gail). Basically it is quoting chapter and verse of the Cornucopian Bible, and sadly it is riddled with misperceptions and the sort of blind faith in “someone who will take care of us” that it does a significant public disservice.

Let me explain the scale of the problem with a couple of examples, as I review parts of the article. To start there is this comment, noting that in real terms the price of oil has not gone up, but rather declined.

This long-term price decline is due mainly to the constant discovery of new fields and greater energy efficiency, making nonsense of the idea that the world is rapidly running out of oil.

To point out the fallacy of assuming this will continue, let me use John Grace’s excellent book on Russian Oil Supply. I use it because it geographically illustrates the point in a way that is more difficult with other countries. First you see the Russians could get all the oil that they needed from around Baku (in what is now Azerbaijan), and then when that proved insufficient, they moved North East and discovered the Volga-Ural Basin. Here, in the 1948 they discovered one of the great oilfields of the World, Romashkino, which held around 17 billion barrels of oil. Romashkino peaked in 1972, and the whole field peaked in 1976, at just under 4.5 mbd, and has been in decline since then. It was here that the technique of water flooding was perfected in Russia.

As Romashkino declined so the Russians moved further east, into Western Siberia, where they found the Samotlor field, Russia’s largest. By 1980 this field was producing 3.4 mbd but it too started to decline and by January 2003 had produced some 16.4 billion barrels and was down to a production of 300,000 bd. So where next? The Russians kept moving East and, at the same time tapped smaller fields, such as Fedorovskoye and Mamontovskoye, which are now running out. They reached Sakhalin Island and that is now in production, but Russian overall production is falling again, so where to move to next? Further East ? Er! Well there is this slight problem – Russia sold “further East”, AKA Alaska, in 1867. And so Alaska has already been put into production, and now is in decline. There are only so many places to look, and as Magellan showed, if you keep moving one way long enough finding new reserves, after a while you get back to where you started from, and you used those already. All the easy oil has now been just about found. The places we are left with to look are more expensive to look, and even more expensive to produce(such as the deep waters of the Gulf, and off Brazil).

There are three parts to the Newsweek argument:

Yet the fact is that the world has faced all these issues before, and for the past 200 years, commodity prices have been trending downwards, thanks to new technologies, greater efficiency in extraction and the substitution of one commodity for another (which explains the high correlation between commodities prices).

In themselves, and at certain levels of production of different items they each have validity, but in the current cycle they significantly ignore the factors of scale and time. Let me explain part of the this with another example. After Hurricane Katrina paid a visit to the Gulf there were a significant number of oil and gas wells that went out of production. Now the oil and gas remaining in those wells is still there, but it is not economic to go back and redrill the formations and restart production for the amount that is left. As the required technologies to generate production become more expensive, so the fields have to produce more to justify that investment.

A case in point here is the development of gas from the shale deposits around the country. With the development of horizontal well drilling, hydrofracing, slick-water hydrofracing, and now multi-stage hydrofracing the wells can produce up to 20 mcf/day. But the wells cost over $5 million and so the gas has to sell for a certain amount to justify that investment, and the fields decline in production at 60% the first year, so that initial number had better be high. At the start of these fields most of the wells are, though as they are finding out in the Haynesville, not all of them. And so where do you look for the next level of technology to find a better way of getting more out? There are some ideas out there (we filed a new patent last month, for example) but these take time to move from lab, to pilot to prototype to full production, and there are not that many ideas in the pipeline because there was, among other things, not that much investment.

We have just about run the gamut of the new technologies for now, and it will take a while to come up with more. Certainly injecting carbon dioxide for enhanced oil recovery can, in the right formations, give you an extra 10% or more, but there are only so many places that that can work, and the expense in getting the gas moved around, compressed etc is significant, and much of that logistic cost, when considered in the past, has been enough to restrict use of the technology.

And so we get to substitution of new fuels. And I guess the Newsweek reporters haven’t been paying attention, because ethanol and biodiesel are the likely candidates at the moment to replace liquid fuels. And neither are at a stage where they can be expanded to produce, for example, the 245,000 bd of oil production that is being lost as Cantarell declines. We are not talking about being able to wait the 10 – 15 years that it is going to take for the work on cellulosic ethanol to generate, economically, the fuel types that we need – these declines are happening, in real time, now!

Both scenarios ignore history, which shows that only one commodity rises in an inflationary environment: gold. Other commodity prices tend to bloom only during the mature stages of a boom when the global economy overheats and demand briefly exceeds supply. At the moment, supply for nearly all commodities far outweighs demand, and likely will decline for at least the next couple of years.

This assumes that there is enough oil, and substitute fuels that will be available, at a reasonable price, as demand resurges. To make that statement with confidence, you need to be able to say where that extra supply is coming from. Russia? It is falling back into decline, as is non-OPEC in general. Within OPEC, as was discussed last week at the EIA meeting, there is only so much additional production available (if in reality it is, and in some cases there are reasonable doubts that it is).

We have seen, in the last few months, as OPEC has cut back production, the matching of demand, in this time of global recession, with supply that is made available. The difference between flat-out production, which we had at times last year, and now, is in the neighborhood of 4 million barrels a day, over a total of about 80 million barrels. Expansion of the markets in China and India does not have to be that great, with a slight return of confidence in the rest of the world, and that cushion will be gone. When there is not enough supply to meet demand at a given price, what happens? Prices go up, and demand drops to meet the new price. But if the commodity is critical, and oil is an integral part of the world we live in, what happens when there is not enough at an acceptable price. What happens when you don't have the fields to open new reserves, when you don't have time to develop the new technology to extract more from existing fields, and when the substitute fuels aren't that ready for prime time?

What actually worries me more than the Newsweek story alone, is the feeling that this reflects the opinions of many in the new Administration, and if they don't realize the scale and imminence of the problems, then by the time that they learn, it will be too late.

And this is one of those predictions that will show results, either their way, or mine, within eighteen months.
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2009 Energy Conference - Renewable fuels

The renewable energies panel was moderated by Michael Schaal of EIA, and again took the form of a panel sitting around a table chatting. The panel each gave a short presentation and that took up most of the time before a short discussion.

Andy Arden of the National Renewable Energy Lab spoke mainly about the production path for ethanol, since the future supply of gasoline is likely to be flat, and ethanol provides therefore the only path to growth. He anticipates that with a 7% growth in use each year, the contribution from this fuel will grow from 2% to 15% of the total. A considerable part of the ultimate expansion in supply is to come from cellulosic ethanol, and the assumption, since companies are now constructing pilot and production plants, is that the techno-economic analyses are now coming up favorable. This is needed given that the target for that milestone is 2012, for it to be cost competitive, and that by 2022 the yield needs to be 21 billion gallons. The enabling bill has set specific targets for production after 2012, and all that is needed (ALL ??) is for the process to become cost effective.

The problem with that goal now is likely to be a lack of available credit, given the financial condition.

In the division of tasks for the National Labs, NREL deals with the thermo and chemical treatment of the biomass, INL and ORNL are responsible for the biomass production (including such examples as poplar). There is a concern however over logistics and an understanding of the issues of both quality and quantity. Because of scale issues in the economics of these plants a 5-mile gathering radius is too small, but as one goes to a larger harvesting radius then the costs of the harvesting, transport and storage also begin to factor into the equation (see the story from Dubuque). The resulting ethanol has to live within a price spread that makes it viable, which is thought to be around $2.50 as an equivalent price to gasoline).


Unfortunately the long-term numbers are not inspiring for ethanol, it is the current “biofuel du jour” mainly because it only “requires only one miracle to work” while some of the alternatives require several. And so there is a need to look beyond ethanol, to those technologies that, usually based on bacteria, will generate other fuels generally through aqueous phase reforming. One that I had not heard much of before was dark algae, which is a form of algae grown in the dark, that feed on sugar. Companies to watch in these areas are Virent, but the challenge will always be in the provision of an adequate feedstock at an acceptable price.

Matthew Hardwick of the Renewable Fuels Association lists 26 cellulosic programs, but things arre changing, since now credit is hard to come by and this is a capital intensive industry. He felt that the EPA models that consider ethanol were too low when it came to judging it against a carbon production standard, and felt that it was less of a polluter than it was painted to be. But there are other constraints, such as water and land use, that are only now becoming evident as plans to scale up production start to be put in place. And in developing the market forward, there is a blend wall that comes into play at 10% of the fuel market. This will hurt the ability to meet the target goals since they require that ethanol surplant gasoline at levels above 10% of the blend. The hope, therefore, is that EPA will change the mix max to 15% with the target of using an E50 by 2015. However once the mix gets to 12% engines will need to be changed to effectively use the new blend.

Denise Bode (who is the voice on the video at the American Clean Skies website, though is now with American Wind Energy) talked about the benefits of the coming growth in Wind Energy. Though did recognize that there are some concerns about transmission to get it where it needs to be.

Bryan Hannegan of EPRI spoke more from the point of view of the utilities, and noted that renewables still have a long way to go to ramp up to the levels of scale of production that are needed. He quoted a fiure of $27 a ton for carbon credit (allowance) that comes in in 2015, as being part of the models that they use for prediction. In their models gas prices float in the $4.95 to $7.95 range. But in looking at a goal of 35% of the national energy coming from renewables by 2050, there are some things that still must happen. Bear in mind that for that much penetration the renewable source must replace some of the existing legacy systems that are well established, and paid for. Without that there is not enough market for the growth.

He sees wind being the initial market penetration, penetrating even into the Tennessee Valley where there isn’t much wind, and a lot of competition. He had some land use and water concerns over biomass, though this will also be a big player by 2050. From the generation stations there will then be the need for transmission and linkage into the coming smart grids and those also are questions not yet answered. The EPRI position is spelled out in a report available on the EPRI website. He noted that just using natural gas as a fall back when the wind does not blow will put too high a demand on dedicated gas turbines, and that just relying on the grid being big enough so that the wind will be blowing somewhere might be a little optimistic. In the end he felt that to meet the carbon goals the country will need to do more than just rely on the renewables.

It was further noted in the discussion that less than half of the country could name a renewable fuel. And we need to avoid complacency over energy supply when business returns to normal.

Biomass is not free - memories from a Dubuque conference

One of the things that I think is important, where possible, and when I have been to a Conference, is to provide information on Conference papers, so that those of you who didn’t go can at least get some sense of what the current thinking on the topic is. Looking over at the Natural Gas Weekly Report there is nothing dramatically new in the situation as prices continue to fall, and though the EIA Annual Energy Report for 2009 came out, that is too voluminous to review in a short post, with this little notice. So, having continued to watch Dr Chu’s talk on The Helios Project (he’s over half-way through the talk and just getting to the Helios bit) I thought I would resurrect a post I put up on The Oil Drum back in October of 2007.

Dr. Chu mentioned in his talk that the raw material for cellulosic ethanol generation – the wood, miscanthus and switchgrass would come sensibly free to the refinery. That actually is a relatively large miscalculation. To explain why, here is the repeat of that Conference report on the progress of Biofuels back in 2007. Note the cost figures per ton, just to get the biomass to the refinery. It comes in the paper just before the last, at the back end of the report. Oh, and the reason for the comment on Conferences is that I will be at the EIA Conference on Energy in D.C. next week.


The Report from Dubuque: The fun thing about conferences is that there are also sorts of individual lines that presenters say that could be pulled to the headline, and perhaps be more mischievous than helpful. I was thinking that today, when the opening speaker began with explaining why she couldn’t start her talk with a joke. Turns out that when she tried to Google “ethanol and Joke” all she got was pages of citations of “ethanol is a joke” or “ethanol is a big joke!” Conference, you say, speaker, you say, but I thought the ASPO Conference didn’t start until tomorrow?

Well yes, that’s true, but sometimes if you want to catch some of the developing stuff, or the stories that never make it to the National Meetings, you can learn a lot from smaller conferences, and so I came to Dubuque. Today is the first of two days on “The Impacts of Increased Bio-Fuel Production on the Midwest Landscape.” At a time when the current ethanol situation has been described as “the farmer’s version of the gold rush,” it was interesting to hear what is happening down at the farm level and in planning within the Midwest to look at answers to the looming problem. Some of the papers today discussed switchgrass, and algae, and biodiesel and how to effectively harvest the “crappiest wood” in the U.S. and turn it into useful energy. And in the discussions, in a town where the corn grows right up to the airport runways, there was a lot of realism in the discussions of water needs, and soil nutrition replacement and bottom line cost levels.

The meeting started with a presentation by Diana Friedman of SARE , Sustainable Agriculture Research and Education, whose talk was “Beyond Biofuels.” The group is about to publish a pamphlet on “Clean Energy Farming,” and it was information on this that she talked about. One of their issues, and one that was common to a lot of today’s discussion was on the need to re-invigorate the rural communities and the benefits that sustainable agricultural solutions would have to that economy and those goals. Skipping a discussion of ethanol, (too polarizing) she talked about the benefit of Energy Audits, and how they could help farmers, though even when done they were not always followed through, noting that Energy Efficiency provides the best and fastest payback. She noted that 3-5% of the Iowan energy cost could be reduced just be better vehicle maintenance and upkeep of farm equipment.

She gave examples of innovators in the industry Piemont Biofuels who have established a biodiesel operation that reached its first year target within 6 months of start-up, and who are using solar heat to help in running the plant. John Williamson (pdf file) who also includes passive diesel in a farm-scale closed loop energy operation, in which he uses sorghum to provide the ethanol for plant equipment; Mike Collins (pdf) who operates greenhouses and converted them to using waste oil in the furnaces; Don Bustos who, facing bills that would drive him from the land his family had owned for 400-years, used undersoil piping with geothermal cooling in summer, and solar heat in winter to eliminate fuel costs from his greenhouse operation; Dan West who uses fruit waste to generate ethanol and who glued mirrors to an old satellite dish to make a pre-heater for the ethanol; Plug Flow Digesters (pdf) who use the “output” from 560 milk cows to generate 60 kW of power; and Community Wind Power of Wisconsin, where 12 farmers raised $3.6 million to buy and install 2 1.9 MW wind projects, setting up a 15-year contract with the utility.

She discussed recent government initiatives, including the Sun Grants, and the trends in future legislation, with the goal of 36 billion barrels of renewable fuel by 2022, of which only 15 billion would be from corn ethanol. She mentioned the initiative to provide funds for farmers to start producing the feedstocks for the nascent cellulosic ethanol industry (though she noted that it “wasn’t here yet”) and that the Sustainable Biodiesel Alliance were beginning to formulate and codify how that industry might operate. In general she felt that the opportunities outweighed the challenges. In regard to corn ethanol, while we are still living the “gold rush times” there may be a course correction coming in regard to capital investment.

In comments someone said “ethanol is a 50-year blip on our energy plot, and we’re 25 years into it.” And someone else noted that we will transition from ethanol to pyrolesis of much of the feedstock because of water issues.

Brian Wrenn of the National Corn-to-Ethanol Research Center gave a talk that introduced the Center, budget $4 million, half from industry. It is involved, among other things, in training ethanol plant operators, for which there is currently much demand. Almost all new ethanol plants use dry grinding and he had a good map (from the NCGA ) showing where the ethanol plants are, and are planned. It is heavily oriented to the MidWest. (not surprisingly). Half of their research is dealing with what to do with the Brewers grain that is a byproduct of the ethanol generation. They are looking at pre-fractionating the corn to remove the non-starch components pre-digestion and maybe using that in a cellulosic treatment. We are at 12 billion bu this year, with a lot of the increse starting to come from increased yields, rather than acreage. We will have 8 billion gall of ethanol (4% of gas used) reaching 15 billion gal by 2015 (7% of gasoline). This is currently using 20% of the corn crop and will rise to 33%. The big issue however is water use. It takes approximately 5 gall of water per gallon of ethanol, so that a 50 million gal/yr plant will use 600,000 gal of water a day, which is more than the ratio of water used in refining gasoline (3 – 4.5 gal/gal). Much of the water loss is in dissipating the heat of the process.

There is still no good way to harvest, store, and transport feedstocks for cellulosic (see Dora Guffey’s talk later), and the chemicals used for pretreatment inhibit fermentation. And while enzyme activity in cellulosic has been improved, it is still very slow. And the water use/gallon of product is double. Further the pre-treatment water cannot be re-used, but must be discharged, preferably to a municipal sewer, since it contains organics that sewer treatment plants can deal with.

His ultimate conclusion was that the costs of making ethanol are what they are, and as a result the best path forward is conservation. (Since if we reduce the overall amount then we can meet the mandated percentage). Using corn stover is like a lot of biofuel ideas, it sounds good – until you start thinking about it. In the debate about that the numbers for stover, I got the impression that there are about 5 t/acre generated, and that it is acceptable to remove about 1.5 tons, since this also helps with no-till operations, without depleting the nutrients too much.

After the break there were four talks on Alternate Biofuels, starting with one by Hank Stetzler of the University of Missouri, who talked about sustainable forest thinning. With Missouri having the “crappiest wood” in the country, and lots of unproductive underbrush and poor timber, there is a potential to thin the forest to provide a better environent. By using satellites and “real truth” techniques, and then assessing the relative volumes of wood available, and accessible (no >30 deg slopes) and near a highway (while not precluded by other use) they were able to identify a resource of perhaps 9 green tons per acre. If the tops are left (and perhaps laid to protect the access paths from erosion) this leaves most of the nutrient in the forest, while improving the forest, and providing a resource.

The problem is how to convert this into an economic energy supply. Harvesting techniques have been studied, as has close-to-growth portable charcoal kilns that also produce the liquid byproducts, and which combine to make transportation costs more effective. (Hauling chipped wood is expensive). Trees under 8-inches yield nearly 100% biomass, by 11-12 inches this drops to 40%; 12 – 16 inches yields 25% biomass, and above that less than 20%. By looking at where the best resource lies, and the practicality of the use, they identified 3 locations in Missouri, Frederickton, Cuba and Thayer, where a potential use site could be created. Much of this land is in private hands, but if only 5% became involved it would be enough to provide a sustainable supply.

One potential is to generate pellets (this is done at NW Missouri State who burn a mix of 80% wood chips, 15% pelletized paper/trash from the campus and 5% pelletized animal waste). The increasing costs for transportation have reduced the viable collection area around a plant from 70 miles to 25.

The second paper was supposed to be be on the use of Osage Orange, which can produce 500 gallons of diesel, 750 to 900 gallons of ethanol and 4-5 tons of combustible biomass per acre per year, but unfortunately Alan Gravett the author could not make it. The operation recently obtained a $325k award from the DoA .

Brett Hulsey of Better Environmental Solutions talked of the use of various biofules. He noted that in the report “Cleaning the Air with Ethanol”, authored during the Carter Administration, cellulosic ethanol was said to be 5-years from viability. It is now said to be 2. He noted that it is currently uneconomic, given the price of soybean oil, to make biodiesel. The same concern might exist for corn ethanol, save only for the tax breaks that it currently gets, and which provide a profit of $0.50 to $1.00 a gallon (not bad for 20 million gal/year plant owners). Wisconsin spends $18.5 billion on fuel, 60% of which money leaves the state, but if $12 billion is spent on renewable energy then it will create 300,000 jobs. It will currently in displacing diesel and benzene, reduce the cancer causing components of current fuel mixes. He noted that using rice straw had an energy return of 9:1 (not sure what he was talking about here) and that Wisconsin could utilize 4.9 million tons of crop residue a year; 3.4 million tons of CRP grass; 2.9 million tons of hybrid poplars; 2.2 million tons of forest residue; 1.7 million tons of mill waste; 0.55 tons of urban waste; 0.32 million tons (sic) of methane; and 0.051 million tons of manure, which gives 14.8 million tons that could be combusted to provide fuel. Burning matter is not new and by now we know how to do it. We have the rivers that help with transportation, and if grass is burned it can provide ten times the energy source of solar and wind. And again he mentioned recovering 1.5 tons/acre of corn stover to help with no-till, while providing an energy source.

He noted that the manure from dairy herds (and Wisconsin has a large dairy herd) is a possible source for cellulosic ethanol since it is already partially digested and has a much better payback this way then by using it as a fertilizer. The problems with developing the new renewable fuels is that no-one will invest in the production of feedstock, until they see a need, and no-one will invest in the plants until they see the production. One problem he did mention was that it appears that burning corn stover in power plants raises corrosion issues. (Such is not the case with burning wood with coal, since this allows combustion of high-sulfur coals without the sulfur dioxide emissions).

This combustion issue was part of the presentation by Dora Guffey of the Chariton Valley Biomass Project who discussed a program in which switchgrass has been raised on delicate land, and harvested and burned in controlled tests at a normally coal-powered plant. The intent was to see if using this grass, which controls erosion, and improves soil quality could provide a viable fuel alternative. Three test burns have been made, addressing such issues as boiler corrosion.

They harvest the grass after a killing frost, so that virtually all the nutrients have left the plant body which is harvested, and are left in the root bit which is left on site. The grass is bundled into special bales 3 x 4 x 8 ft, and hauled to storage. You can’t leave it in the field as it wicks water, and it must be stored on gravel in a barn (same reason). Bale integrity controls energy availability. The bales weigh 1,000 lb and when reground for combustion they prove to be abrasive, and moisture content helps with this (12% moisture at the boiler if kept well, which matches the harvested value). The third test burn used 25,000 tons of grass over the 90-day test period. It cost $61 per ton for haulage, and $26 per ton for re-processing the grass at the power plant into small fragments (< ¾ inch) that could be blown into the furnace. The plant was paying about $20 a ton for the coal, and in the above you will note that the farmer did not get paid for the grass. Like the coal, the grass had to be totally consumed by the fireball within 3 seconds of being fed into the boiler fireball.

They displaced 2% of the coal in these tests, and are now permitted to burn the switchgrass. It should be noted, however, that fields of switchgrass can contain up to five different plants and all must be permitted (only one is, and it was selected for by using herbicides on the test plots). Thus more extensive testing will be required before a more general feedstock can be used. There is a concern that with the grass growing near waterways, any use of controlling chemicals might enter the waters, which would be a strong negative. Increasing transportation costs will negatively impact this project.

The final paper was by Dave Summers, of the University of Missouri-Rolla, talking about the growth of algae underground. I noted that some of the slides he used to illustrate the critical need for new fuel sources bore a remarkable resemblance to some of the information from this site. He quoted the Greg Paul number of 2,500 gallons of biodiesel, per acre, per year, from algae in comparison with the yields of other biofuel sources. He talked about experiments that are ongoing to identify high-yield varieties, finding that the local pond, for example contained algae that had nearly 25% oil content. The program, which is ongoing, is currently looking at the energy balance in supplying energy to the algae, and using LEDs in controlled frequencies to examine their potential in supplying the light more efficiently. (Sorry I did not take good notes).

37. Pick Points

Half-a dozen or so stories of interest:

Since reconvening in Juneau last month, Alaskan lawmakers have been looking to the natural gas fields in the Brooks Range foothills to deliver gas to Alaskans by 2014. There has not been a lot of exploration for gas in the region to date, more for oil. The sort of country they are talking about is dramatically photographed. There are also plans for more wells north of Prudhoe Bay. Getting Alaska’s natural gas down south is something that will come up when President Obama goes to Canada this week. However there is some concern that the current glut of natural gas, from the shales around the lower 48, might make the project unwanted for a decade or more. Pipeline companies are therefore looking at a gas pipeline from the Rockies to Chicago, for example and there are plans for a new pipeline up into the region where the gas from the Marcellus shale is coming on line. Now as long as we can keep them running . . . .

The Nevada Governor is seeking to have bonds for power-line construction become tax-exempt. This is needed since new lines to areas where sun and wind are available are often not where folk are. At the end of last month the Public Utility Commission in Texas, without that incentive, gave 7 utilities pieces of a $5 billion package to bring Wind Energy from West Texas to Houston and North Texas. And as I noted last week, the “Green Power Express” is planned to bring wind power from the Dakotas to Chicago. With the right incentives it is claimed that the lines can be in within two years. Last Monday NV Power postponed plans to build a new 1,500 MW coal-fired power plant in Nevada, but still plans on putting in the transmission lines, though now for wind. At present a renewable energy line would be less expensive. However Gristmill would rather reduce costs by putting smaller power generators nearer users – the only snag being that you have to build the generator where the wind blows. And an environmental group in California has suggested that the power plant may not be needed, if there is sufficient improvement in energy efficiency, more renewable resources used, and more natural gas plants. The postponed coal plant may, in the interim, be replaced with a smaller gas-fired plant. It is a locally popular decision.

Cellulosic ethanol has a pilot plant running that is producing 20,000 gallons a year of ethanol from corn cobs. In defining this step forward it is noted that

With a few key technology improvements, the United States could do even better, creating up to 90 billion gallons of ethanol by 2030, enough to meet one-third of the nation’s transportation fuel needs,

GM is already on board with plans to boost production of cars that can use E85. There is some concern, however, that too much emphasis on biofuel crops could come at the expense of the rainforest. And the cellulosic plant that had been planned for Grand Junction, CO has been put on hold, due to the economy. (One of the partners is Suncor). I made a list of plants that were in planning or process earlier, but this one, which was announced in October, was not on that list. At present the economic floor price for ethanol, at the pump, is considered to be $1.50 a gallon, without taxes, and if gas is selling for less than $2.65 a gallon with tax, it will undercut the sales of ethanol. Last week the average price of gas was $1.93, while that for ethanol was $1.65. However, while some are working on making the fuel production more economical, there is also work going on to make ethanol engines better.

Hopes for increased oil production from Iraq have been the base for a number of studies that decry worries of oil decline. Yet all is not well in that region of the world. There are concerns in Parliament about the current state of the oil contracts. Yet the Government is proposing to further sweeten the deals with outside companies in order to boost output further. Certainly production is increasing and hopes to meet domestic demand this year, while exports rose to 1.81 mbd in December, the highest in 5 months, their target this year is 2 mbd of exports. Iraq has signed a deal with Iran whereby it will send crude to Abadan and receive refined products back. They will also jointly exploit some common fields.

OPEC, in general, now believe that they have roughly stabilized global oil prices with their latest cuts, although there will still be some instability because of the way in which stockpiles are being manipulated. There are currently 70 – 80 million barrels (one day’s global need) on tankers held offshore. With tanker numbers rising, as demand falls, there may be more floating storage coming on line, just when it is not needed. However, if oil prices don’t pick up soon, then OPEC may decide to cut more production at their March meeting. At 26.33 mbd in January, their current output is still 1.5 mbd above the target. (This excludes Iraq), although the OPEC Sec-General says that only a 600,000 bd cut is needed for balance. And this is the season where some refineries go into maintenance mode., which may last a little longer this year.

Gazprom announced Friday that its oil production last year was down 5.8%, that will likely be hidden this week, as the company will celebrate the opening of the LNG plant at Sakhalin Island. While the first shipment is publically expected in March (it was supposed to be tomorrow), local news suggests that it won’t be until April. Gazprom is also increasing their investment in refining, and hope to attract almost as much investment this year as last.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.