May 15, 2008
Below are a few letters we received on topics that appeared in the past few weeks. They capture the essence of how many readers say they feel.
Letters from Readers - May 01, 2008
I noticed in one letter that only peer reviewed data should be considered accurate in regards to "Global Warming". I would suggest that you take it one more level, ask to see the data, and the methods used to obtain it. This prevents the group think that can be an issue. Now all of the Global Warming folks are overstating their ability to predict the future. The global climate is far too complex for any of the models to predict. Now this does not mean to do nothing, but rather to do what we can to reduce our impact and plan to adapt to the changes that will come. Promising reductions that are not possible is only lying to ourselves which is the worst possible situation.
Barry Alexander
Jackson, TN
Most of us who read your newsletter aren't climate scientists. We haven't reviewed all the research on global warming first-hand, nor are we qualified to interpret much of it. So, we need a different strategy to assess the legitimacy of the claims.
Reference to authority is one of the weakest forms of argument. It basically says, I don't know what I'm talking about, but this guy does, so what he says has to be true. Unfortunately, deferring to authorities must play a big part in our strategy unless we become climate scientists ourselves. Even then, the problem would persist: there'd still be a large body of lay people for us to convince.
Another part of our strategy must be to review the available material against what we ourselves do know. Setting aside the philosophical problems of cognition and epistemology, that strategy too is imperfect, since our knowledge is spotty and sometimes just plain wrong.
So what do we know? The ice caps are melting. The glaciers are melting. These facts are directly observable from photographs.
The average world temperature is going up. A lot of air time has been taken up with disputes about cooling in the middle of the twentieth century despite rising carbon levels, whether the heat-island effect of observation stations has been fully accounted for, and what the temperatures really were before the observations. But on balance, the trend seems to be upward.
The atmosphere contains more carbon dioxide now than at any time in human history, and it's accumulating faster. The lay person can't observe the accumulation directly, but it does pass a commonsense test: burning fossil fuels liberates carbon that has otherwise been sequestered for eons. The measurement data is generally accepted. We also know that the level of water vapor in the atmosphere is rising. We know that, to the extent that we believe climate scientists, carbon dioxide and water vapor are better at trapping heat than oxygen or nitrogen, the basic components of the atmosphere. (More on water vapor in a moment.)
We know that, to the extent that we believe paleontologists, the earth experiences periodic warm-ups and cool-downs. The ice age cycle is a spectacular example. Various things cause this, such as sun cycles and perturbations in the earth's orbit and rotation. The role of carbon in these cycles-causative or associative-is less clear.
As we move further down this list, what we think we know depends more and more on the credibility of science. Do we trust the scientific method and the people who have used it to arrive at conclusions about say, the veracity of the existence of prehistoric ice ages, which none of us today observed first-hand?
And so we end up back at the authorities. On one side, we have the Intergovernmental Panel on Climate Change and NASA, who have applied science to global warming and offered their work up for peer review. On the other, we have a handful of contrarians, a small subset of whom are legitimate scientists, none of whom have done peer-reviewed research on global warming.
The contrarians (and who among us does not enjoy the cache of being a contrarian?) cherry-pick bits of (scientific) data that tend to cast doubt on the peer-reviewed material. This technique recalls the ploys of the tobacco industry, which attributed lung cancer to causes other than smoking. I've known two lung cancer victims personally who never smoked a day in their sadly truncated lives. But just because cigarettes are not the only cause of lung cancer doesn't mean that the danger of smoking should be dismissed. The technical term for data so presented is "half-truth."
A case in point is water vapor. Yes, water vapor is a greenhouse gas. Yes, it is growing. But fossil fuel combustion doesn't inject excess water vapor into the atmosphere in nearly the amounts as it does carbon dioxide. And, all else being equal, water vapor doesn't stay in the air. It precipitates out as rain and snow, unless something forces the atmosphere to stay warmer, as carbon does. The increase in water vapor would seem to be a response to increased temperatures.
Another case in point is Singer and Avery's 1,500-year cycle. Setting aside corroboration of the basic assertion, would the existence of a 1,500-year cycle categorically disprove the effect of carbon dioxide any more than the death of nonsmokers from lung cancer disproves the unhealthy nature of cigarettes? No college sophomore worth her B in rhetoric would answer that question in the affirmative.
Why do the contrarians maintain such obdurate skepticism, given the weakness of their position? Rather than impute ugly intentions, I prefer to think of them as deeply disturbed by the implications of global warming and fearful of being duped into the behavioral changes and expenses that might be required to avoid the predicted outcomes. After all, if we successfully avoid the disappearance of the Arctic ice cap and the Greenland ice fields, we may look like fools to them anyway: we will never know if weather patterns would have otherwise altered to the point of causing massive agricultural failures, or if the Empire State Building would truly have required a boat launch on the second storey.
But I do wonder about the contempt so many contrarians heap upon those who take the IPCC and NASA scientists at their word. One recurring trope is that the scientists are conspiring to grab funding. I find this very puzzling. Would a disparate band of international scientists, who are cussedly independent by nature, contrive across decades, language barriers, and divergent personal, professional, and national interests to pull the wool over our eyes to get some piddly UN funding to re-prove the commonly accepted results of previous research? Could that really be sustained? Wouldn't it be much easier-and more lucrative-for a monolithic international cartel of money-grubbing scientists to sell out to an oil or coal company?
And why do the climate skeptics trust some scientific data, such as the fact that global temperatures declined in the mid-twentieth century, but not other scientific data, such as the fact that that was a brief pause in an otherwise steady rise?
Again, I can only surmise that the scornfulness masks fear, either of the phenomenon itself, or of being ramrodded into unpleasant actions. Nobody likes being cornered.
But that's exactly where we are. If the IPCC and NASA scientists are right, then time is of the essence. Given the evidence we ourselves can see, and given the checks and balances of the scientific method, inaction is very hard to support as the conscientious response. The cautionary principle would suggest that there's a risk to be managed, and that the risk increases with each year we fail to stem GHG growth. We can show leadership and devote some resources to prevention, or we can deny there's a problem. Even contrarians would agree that denial is a very poor risk management technique.
So, Ken, while my first impulse is to congratulate you on keeping an open forum on the subject, I wonder if it should be done with a more skeptical eye toward the skeptics. Are they putting forward new, internally consistent ideas that are the product of the scientific method and/or pass basic tests of logic? Or are they just supporting quackery?
Ray Welch
Brazil's Potential - May 02, 2008
You are not talking about Canada or Mexico. Long term predictions about South American countries must be tempered by history. $100 billion could do much good, but it is also a tremendous temptation to many men/politicians to skim a little.
Have we treated Brazil well in the past? Will we show respect or will we expect to be "favored"? Governments have changed for lesser reasons in the past. "Friends" can change, especially when they come into lots of money. Will we have enough money to afford the product in 10 to 20 years or will we have sent it to China, India, etc...?
What I am saying is that we had better bank on other solutions to our energy problems and if this plays out, we will be in a better position. If it turns out to be a "dry hole" or others have more money than us, we won't be left with a future.
Your article was more upbeat than realistic in this case, I'm afraid. I also am concerned about what the US might do. We have a dubious track record in this area.
David McGee, P.E.
Technology Assessment Division
Louisiana Department of Natural Resources
Who needs alternatives when everybody starts celebrating about billions of gallons of black ooze hundreds of meters below the surface of the water in an ultra high temperature caustic environment with salt deposits that skew seismic searching tools. Simply invest a trillion dollars of government backed capital that no truly private capital market would ever put up and voila! No need for alternatives because there is no money left for them and the cost of petroleum stays relatively low as the so called company forgets about recovering it's public financed fixed costs and dumps the black ooze on the commodity market at the variable cost of production. Great idea...
Mac Collins
There were a number of embedded contradictions in the article on the Brazilian oil find which are interesting to look at in the broader context of peak oil:
1. It has been 30 years since a significant oil find (in spite of superior technology). Could we have found it all?
2. The Brazilians admit that it is impossible to approximate the size due to its location. (Brazilians are good fishermen)
3. The high number of 33 Billion barrels represents a mere 1 year of world consumption at current rates which are rising.
4. In spite of current prices there remains a mere 1-2 million barrels/day of production not currently in use.
5. There have been anomalous significant jumps, doubling and even tripling of reserve estimates in various Middle-Eastern countries year-year without any new discoveries. (I have a nice rug for you, sir)
6. You quoted a 7% drop over the next 3 years in OPEC and decreased production rates.
If you add these things up they tell me that we are at peak oil and bought 1 year extra time to find alternatives....and that won't even be flowing for 10 years.
Barry Fitzgerald
Founder
Hidden Compass Consulting
Greening the Transport Sector - May 07, 2008
Are natural gas vehicles a good idea to replace our current primary energy source for transportation? Currently 20% of our nations' net electrical generation is from natural gas. Per the DOE, more than 90 percent of the power plants to be built in the next 20 years will likely be fueled by natural gas. Natural gas is also likely to be a primary fuel for distributed power generators. In addition, 68 million homes and businesses rely on natural gas. More American homes (52%) are heated with natural gas than all other fuels combined. I do not believe we really want to be increasing demand for this critical commodity.
Brian Hill
Partner
Superna Energy LLC
In a former job I helped to push NGVs big time. Conoco even installed a natural gas pump (at great expense) at a station in Mobile, AL for public refueling (the local sheriff converted a few cruisers to natural gas). The more successful programs for getting locals to convert was run by the big gas utility in British Columbia (BC Hydro). They subsidized the conversion of individuals cars or light trucks and then leased the tanks (1 or 2) to provide either 100 or 200 miles of range. They even leased a "Fuel Maker" (small natural gas compressor) so that you could fill your CNG vehicle up at home (Boone Pickens had one of these at his home in Dallas to fuel his CNG Cadillac). There was a lot of hype around back then for a growing fleet of NGVs. Of course, oil fell below $10 in late 1985 and the rest is history.
The best analysis of NGV was by the GRI, before their ultimate demise, which concluded that the most affordable long term application for NGVs was in heavy weight applications such as transit buses and garbage trucks. The simple fact is that the weight of the tanks so penalizes a small vehicle that it just doesn't work for anything other than a heavy vehicle that is centrally fueled. There are other complicating issues for public fueling stations such as varying gas quality and higher Btu gas that ends up in CNG tanks at the fueling stations (the natural gas sold at retail in Houston, TX can vary anywhere from 990 Btu/cu ft to over 1100 depending on the point in the system, time of year, etc). Local stations cannot deal with entrained liquids and it is simply too expensive to super-process every cubic foot coming down the line to meet CNG standards that make up such a tiny market.
But you are right. While NGVs are a great idea, at the end of the day, it is tough to beat light hydrocarbons for energy density, safety and natural state at standard conditions. As I would conclude from my favorite summary on the "Value of Oil" (Oxford Energy Forum, August, 2000), "…if Go d had not given us hydrocarbons, we would have invented them."
Alan Wiggins
Commercial BD, G&P
Conoco Phillips
I am just the publisher of a little country community newspaper in southwest Georgia. I'm not supposed to understand the dynamics of the energy sector. The one thing I do understand, however, is that I don't understand how the 100s, even 1,000s of people a whole lot smarter than myself have failed to step back and weigh the consequences facing our nation from dependence on foreign oil versus the consequences we face from global warming!
Are all of those people really that challenged when it come to understanding the real threats and consequences? Or, are they all being driven by personal and political motives? I don't really expect you to try to answer that. But, look at what's happening! If a fraction of the attention and effort (and money) was focused on the consequences of our dependence to foreign oil as is being placed on carbon capture and sequestration, we might not be faced with the high prices of oil and gas - with no end in sight.
Most recent example... look at S.2958 - the Domestic Energy Production Act of 2008. While only introduced last week, and greatly overshadowed by the Democratic primary coverage, what little response and discussion I've seen has been less than supportive. My prediction... most of the provisions will never see the light of day. Our suffering the consequences will be extended and compounded. Even if the provisions in the legislation didn't drive down gas prices, they would help keep our money circulating in America instead of it circulating through the Mideast and Venezuela and coming back to bite us in the butt a second time.
In part I'm dropping you a line to say thanks.
I was driven back in 2001 to embark on a learning process when we learned LS Power was looking to site a coal-fired power plant in Early County. It was quite a "Googling" experience clicking away at claim after claim and study after study.
It didn't take me long to stumble across Energy Central. Since that time your Energybiz, Energy Central Daily and Energy Pulse have proven to be the most valuable resource available to anyone needing to keep up with what's happening (and most of the time why) in various sectors of the energy world.
Billy Fleming
Publisher
Early County News
The Gift of Solar - May 09, 2008
Solar is an under appreciated and under utilized resource. But looking at it as a base loaded source of energy is one of the problems. Fortunately it could be very effective in a peaking service. With the electric load due to air conditioning (which had been one of the major growth factors for electricity over the past three decades) solar correlates quite well and there is no issue with advancing distributed generation technologies. In the most of the US this stack in the queue also corresponds to the higher marginal cost generating assets.
For a variety of political and perceptual reasons it seems that solar energy never completely recovered from the image of the solar panels being removed from the White House. Hopefully in the coming years we will have the political, technological, and commercial will to remedy that.
Michael Herz
MLH Consulting Services, LLC
c/o Greenstamp America
I enjoy your work. It seems to me that your comments regarding the MIT effort for solar ultimately points to using the solar generated electricity to create hydrogen. Or perhaps that is the MIT view vs. batteries. Is hydrogen development or use technology keeping pace so when a large source becomes available we'll be ready to make good use of it? Is there any effort to use the off peak nuclear capacity to fuel the hydrolysis that can give us hydrogen? I think that Iceland is making good use of all that available geothermal to produce cheap electricity that in turn they then create hydrogen. Is there a big picture, coordinated effort to bring all of this together? Again, I really enjoy your efforts
Jack Moody, RPG
Office of Asset Development
Natural Resources and State Mineral Lease Program
Mississippi Development Authority
Most renewable energy, including wind and solar, has the problem of being intermittent and non-dispatchable. But the alternative to pursuing energy "storage" options is simply building a more robust transmission system.
That is the premise behind Europe's DESERTEC project. At the WIREC conference recently, presenters argued that wind development in the Midwest would be 20% greater today if there was sufficient transmission to connect new wind farms to load centers.
Fortunately, there is already great pressure on the utility to build and expand transmission, particularly via "Smart Grid" initiatives. All that is missing are cost allocation strategies and even new methods for this -- such as the Competitive Renewal Energy Zone (CREZ) process in Texas -- are showing up.
I would argue that there is a new world wide web emerging right before our eyes. It is a global energy network and, like the internet, it will change our culture, society and how we do business. More importantly, it will alter how we use, transform and exchange energy.
Michael Powers
I certainly hope that solar energy one day reaches the point where it is commercially feasible for regular use, but your sunny and optimistic article doesn't do anybody any favors by stating "Solar energy is clean, abundant and widespread." Sunlight is clean, abundant and widespread, but only 30% of the time, as you mention. And it is also incredibly diffuse.
The information in your piece hardly justifies the rosy outlook. "...researchers such as those at MIT hope that it will hit stride within a decade's time." That's what they were hoping in the sixties. Now, forty years later, solar is still 5 times as expensive as coal or nuclear, still only available when the sun shines (that 30% you mention) and the only hope of reasonable storage depends on the premise that "The technologies are feasible, but they do not currently exist."
So the solution is to use solar to create hydrogen. Solar cells have a 15% efficiency rating in creating electricity from 30% available sunlight. And the conversion factor for turning that solar derived electricity into hydrogen using electrolysis is what, 50%? Does this seem like a feasible way to run a technological society? Or like another boondoggle?
Paul Stevens
I had a mixed reaction to your article. I've been in the utility business for 25 years and my degree is EE with an emphasis on power and particularly renewables. I've been a solar advocate for a long time. I still am.
My frustration and frankly disappointment though is that the arguments and economics don't sound a lot different than way back when -- except the new climate change point.
I live in California and our rate structure is basically an inclining 5 tier structure that starts at about 12 cents a kWh and climbs to about 36 cent a kWh. I am reroofing this month, so I figured that this was about the best possible time to get some solar proposals. With my roof off, solar installation would not be much different than installation on a new house.
I got about 10 proposals from 5 different companies with systems ranging from 3 kW to 6 kW. Obviously, the 3 kW system focuses on knocking off my tier 4 and occasional tier 5 usage. The 6 kW system knocked off about 80% of my usage.
There are very sophisticated payback models that both contractors and the California Energy Commission use to calculate payback. I ran about 100 different configurations through the CEC model. What was interesting is that my proposals were all very close in terms of per-unit price ($/kW) and the payback results (CEC and contractor models) were also very close too. Even with the rebate and federal tax credit my best payback was 11 years and this was with a 3 kW system.
The fact that the per-unit cost of the 6 kW system was the same as the 3 kW system and the fact that the proposals were almost all the same tells me that the main issue and cost is the material cost rather than contractor profit or installation and labor. In contrast, my roof estimates (for the exact same material) were almost a 2 to 1 ratio because materials are only about 20 to 30% of the cost and contractors are just bidding very different profit margins.
So we have nearly the exact same issue that we had 25 years ago...we need to get the cost of the PV panels down! My economics could have been better if I had not already done a lot to lower my electricity usage. Perhaps the biggest-bang-for-the-buck was installing my whole-house fan. That eliminated virtually all of my AC use. Payback was less than 2 months. I cannot understand why everyone is not putting these in!
I still am a solar advocate and I still think it will eventually get there. However, my frustration is that I am not sure the economics have improved a lot in 25 years. Higher rates than 25 years ago are helping the benefits side of solar, but I think the point about material cost and the research on PV cost reduction is essential.
Hopefully, the great minds at MIT and others in academic research and in business will find the cost breakthrough. With upward pressure on utility rates, climate change issues and reduction in PV material costs I am sure we'll find the break-even point....I just had hoped we were there already.
Roger Gray
I read your article "The Gift of Solar" with interest but believe there are technologies now that can help solve these challenges, including energy storage, and at much more competitive prices than provided by Photovoltaic (PV) installations.
Your article referred mainly to PV solutions, but we believe the solution to harnessing energy from the sun is really with Concentrated Solar Power (CSP) technology where solar energy is concentrated and transferred to a heat collection fluid (molten salt, oil, or steam) that is then circulated through a heat exchanger to generate steam for a conventional steam turbine power cycle.
This technology is achieving power prices in the 12 to 14 cent range (with ITC support) with some technologies, such as that offered by SolarReserve, providing dispatchable electricity 'on demand' utilizing energy storage.
Kevin B. Smith
Chief Operating Officer
SolarReserve, LLC
Unconventional Gas May Explode - May 12, 2008
This was a great article. Coal-gas, as well as the low-permeability gas and oil plays that are available (and now becoming cost-effective) in the lower-48, may yet see us through to a brighter energy future.
For as a country, we surely cannot continue to pay both our current outlay of 500 billion dollars per year for imported oil and expect that our country can grow LNG imports to a financial-outflow of this order of magnitude as well!
Roy Johannesen
Thank you for this informative article. As I wrote to you earlier, we must consider using CNG/LNG for transportation. Large city bus fleets, school buses and other large vehicle fleets may be the starting points. It is not only relatively better for the environment, but also for our national security. I hope in the near future we will be driving hybrid CNG/LNG powered vehicles.
Jasbir Singh Bhatia
Siemens Energy
Burning Issues over Ethanol - May 14, 2008
I would rather be paying my money to an American farmer than a Saudi prince whether its for ethanol or corn on the cob.
Keith D. Wilson
GE Infrastructure - Energy Contractual Services Ops Manager
I am struck by the University of California, Berkeley study that shows that "ethanol can generate higher energy content than petroleum while producing 10-15 percent fewer greenhouse gas emissions…" A quick calculation of bonding energies (something chemists do all the time to determine the energy released by a chemical reaction) shows that burning ethanol produces less energy than burning an equivalent amount of gasoline. Therefore, I don't understand the "higher energy content" statement. If CO2 is the culprit bad gas, then how does combining an atom of carbon with two atoms of oxygen produce less CO2 when the carbon comes from ethanol than when the carbon comes from gasoline?
"Retreat from bio-fuels is just an empty gesture that won't fill anybody's stomach and won't fill anyone's gas tank," says the chairman of ADM. Since the rise in corn prices correlates directly with the increased use of corn for ethanol and we hear every day not only that people around the world can't afford food but the price of beef, corn, and other food items, in the US, for which corn is a feedstock, have soared, this is a disingenuous statement at best. I believe that the corn-to-ethanol is another "feels good" project that has little reason to exist except for political considerations.
Michael Z. Lowenstein, Ph.D.
Chief Technology Officer
Harmonics Limited
People lose sight of the inexorable huge impacts of our fossil fuel dependencies:
1. Rising energy prices as reserves dwindle.
2. Rising related prices on everything from food to plastics and medicines.
3. Rising geopolitical tension (war) as nations compete for dwindling resources.
4. Greenhouse warming with attendant coastal inundation, weather damage, crop failure, disease, and ecosystem collapse.
Let's try to put things in perspective:
Only Item 1 will be felt directly at the gas pump. The others really SHOULD be added up and tacked onto the price of gasoline. In that view, the price of gasoline would probably be $20/gallon today, heading toward $100 in 5 years. The investment of a few billion in renewable resources, the only feasible way to ameliorate fossil energy price shock, would add about $0.10/gallon. These numbers are just guesstimates, but the proportions are realistic.
Ultimately, if greenhouse warming does cause ecosystem collapse and the human species collapses right along with the rest of them, as some biologists predict, then you can put infinity in the numerator and calculate the proportions again.
Another way to assess the situation is with a root-cause analysis. The cost of shifting to ethanol, with its effect on food prices, is being driven by our addiction to fossil fuels. It's the dependency causing the problems, not the treatment.
Michael Gembol
Chief Executive Officer
Diamond Panel Corporation, LLC
With reference to use of Ethanol as a fuel and corn as a starting material for making ethanol causing food shortage and steep rise in food prices is because of lopsided policies. Brazil pioneered ethanol as a alternative to gasoline. However, Brazil produced ethanol from MOLASSES which is a waste product from Sugar manufacture. Hence, this ethanol did not change the food supply chain but boosted the sugar industry by giving it an additional revenue. The United States embarked on a similar program but based on corn as a starting material. As corn is an important food item, use of more than 25% of production of corn to make ethanol obviously has upset food supply position. To blame the developing countries hunger for more food grains is only a propaganda by the Corn-ethanol lobby headed by none other the President Bush of the United States of America who upset the Indians by stating that increased population of India and improvement economic status of the Indians it the cause of food shortage and rise in food prices. Actually, India has been s elf-sufficient in food. It imports some food grains to keep buffer stocks. Perhaps this past year, because of weather conditions, the food production was lower than normal in India. However, food experts opine that the present steep price rise as due to diverting corn for ethanol in the USA and the famine in Australia which severely reduced production of wheat.
Food is a much more basic requirement of humans than energy. Hence, diverting food for energy is a crime against humanity. The United States should immediately stop using corn for ethanol. Further, as corn based ethanol does not reduce green-house gases emission as compared to petroleum gasoline, alternative energy sources like Solar PV should be given more impetus.
H.S. Gopala Krishna Murthy
Bangalore, India
Great article on the pros and cons of ethanol. However, a small point that seems to be missed by most opining the terrible, cataclysmic things corn ethanol has produced is that _we simply had to start somewhere._ Corn ethanol was the simple answer, and it will be a short run answer, to be sure.
There are a large number of folks in this world afraid of change just for the sake of change, and I believe these people are easily swayed by those who are of a mind to create news. I believe this is what has happened recently with the corn ethanol event; this, and the fact that those who are actually in the corn ethanol business are always playing catch-up with info about its own business. This is never good, when one is constantly reacting to negative articles as opposed to just getting the good side of the word out.
Alternative energy is going to be met with an amazing amount of resistance even though the answer is something most of us don't like, and that is more and more use of oil. However, the unknown is always scarier than the monster (in this case, oil) that we can see.
Don Griffiths
VP & CEO
Colusa Elevator Co
http://www.ers.usda.gov/Publications/WRS0801/WRS0801.pdf is a recent USDA report which basically says it all. If I can summarize, two things:
- Yes, in the past two years and looking up to next year, the US increased consumption of corn for ethanol by some 30Mn metric tons, but it also increased production by 35Mn metric tons. And yes, the rest of the world did increase consumption, but at the margin - China, Brazil and India collectively went from 200Mn to 225Mn, but also made up the difference by increasing production. So by this data alone, ethanol is not the culprit behind the increase in corn prices.
- The real culprits are bad weather in 2006 and 2007, oil prices, the weak dollar, and speculative interest prompted by historical lows in US wheat stocks at the beginning of the 2008/2009 season - 240Mn bushels, or some 10% of US consumption, compared to 780Mn in 2002.
That being said, the real problem with ethanol is four-fold:
- It is not economically viable. It takes 1 bushel of corn to produce 2.8 gallons of ethanol. At $6 per bushel, this comes to $2.14 per gallon. Then you must boil the thing. With natural gas at $10/Mcf, you burn some $0.90 per gallon. Then, because ethanol is hydrophile - it likes water - it cannot be transported by pipeline. Depending on where you sent the stuff, count on say $0.50 per gallon. Then there is marketing - another $0.30 cents. Deduct from this Distillers Dry Grains - assuming we have a use for it - and take out $0.30. The total cost comes to $3.50. Not finished. Ethanol has a 70% BTU content relative to gasoline. So the comparable cost becomes $5 per gallon. Even with the current $0.50 subsidy, no wonder why producers are losing money. I posit that if we were to increase production to 15Bn gallons, the required subsidy would have to go north of $1 per gallon - that's $15Bn plus, no longer a blip on budget radar screen.
- It is highly corrosive, indeed one of the best solvents out there. At high level - E85 - all plastic joints in your car engine would ultimately polymerise.
- Ethanol production does generate a substantial amount of green house gases. I do not have the figures but you have written on the subject. And I am not really interested because I am in the camp of those who believe that Global Warming is not anthropogenic. However, this is another contradiction in the overall pro argument.
- We consume 400Mn gallons of gasoline per day, i.e. 146Bn. Even at 15Bn of production, bearing in mind the 70% efficiency ratio, this would account for displacement of 10Bn of gasoline, i.e. 7%.
While this objective is a good one - anything helps -, the questions are:
- Is it worth $15Bn in subsidies at a time when Social Security becomes a budget problem?
- Is it worth the risk for the food chain at a time when stocks are low and demand ultimately grows?
Of course, grain farmers are happier than they have been in a long time - and there is nothing wrong with that either. And who am I to say what the best or worst economic policy is? But Lester Brown from the Earth Policy Institute said it better than I when he testified last year in front of Senator Boxer: this is the silliest alcohol policy since Prohibition. And Lester is usually in the camp of those who look for real solutions. As far as I am concerned, I am sticking to conservation, increased US drilling, and the electric car. And yes, cellulosic ethanol - but at this point it is a pipe dream. Maybe the $15Bn in subsidies would be better spent on R&D.
Franck J. Prissert
C.E.O.
Capital Max, Inc.
The discussion regarding U.S. efforts to increase ethanol production, as a strategy to reduce oil consumption and greenhouse gas emissions, is incomplete without a comparative overview of the Brazil model. Brazil uses sugar cane as a feedstock to produce its ethanol, and in 2007 exported over 290 million gallons to the United States, despite a $0.54 per gallon tariff which the U.S. imposes to encourage domestic ethanol production. In 2008, Brazil will produce a predicted 6.97 billion gallons of ethanol from sugar cane which is a more efficient feedstock than the corn upon which the U.S. has built its strategy. It is easy to understand why Arthur Daniels Midland, the nation's biggest ethanol producer, contributed $700,000 to political campaigns last year.
Joseph Grynbaum, P.E.
Principal
Power Generation Consultants
Respond to the editor.
Energy Biz Insider