a) It seems to me that the exercise of predicting future prices of dwindling commodities such as crude oil is largely a matter of identifying its competitive substitutes and projecting the future prices of those. Logically then the high value of crude is currently based in its value as an energy source in mobile transport, so its upper limit price is set by the cost of profitably supplying equivalent energy from other sources: nuclear, coal, solar thermal and a small measure of bio-fuels. In the long term probably nuclear and coal set the standard, and on a per-unit-available-energy-as-electricity basis with current technology, those can likely be set at US$0.10 / kwhr. Given a bbl oil contains potential 1,700 kwhr energy and applying a 50% conversion effic. to oil and a 100% to electricity, make that 850 kwh . At $0.10 / kwh, make a bbl of oil refined and delivered worth about $85. Of course for transportation applications one must also consider the cost of the storage medium per unit energy over time, say $5,000 for 20 kwh batteries cycled ideally 4000 times = 5000/(20 x 4000) = $0.25 / kwh meaning taht at those price estimates oil could go to ($0.10 + $0.25) x 850 = $297.50 / bbl before battery-electric can compete with it economically. So, either a breakthrough in battery technology / cost or oil goes to $300 / bbl. As can be seen, the electricity generation itself is a minor issue in the equasion. We might as well make that the best we can regardless of cost.

b) The above calculation illustrates the high value of locally produced bio-fuels versus electric-power as a substitute, being able to bypass the battery costs.

c) At $300 / bbl oil as the alternative, perhaps compressed or cryogenic hydrogen as a substitute deserves a second look?

Seasons grettings Professor Banks, and all.

Seasons greetings Professor Banks, and all.

I don't have to worry about that any longer however. The Chinese - and perhaps also the Indians - will make my future predictions correct. The major cities in China sparkle and shine, but there are still hundreds of millions of people in that country living decades behind the avant garde. The Chinese government has the intention, the money and the technical and managerial skill to bring them up to speed, and in doing so they will need every drop of oil that they can get. At the same time it's clear - to me at least - that neither Saudi Arabia or Russia intends to continue selling this invaluable commodity at bargain basement prices. Put these two FACTS together and those crazy articles in e.g. Fortune about cheap oil are not just crazy but starkers.

Fortunately, I think that our political masters are getting the message. Or is that another bad prediction?

And season's greetings everyone.

Fred

So far, oil has should very little elasticity of demand; people simply pay more money for it. In reality, I am sure there is some, but if it takes a hard production limit to force demand destruction, there looks to be quite a bidding war for the oil that is available. This is all a fancy way of saying the the price of oil is going to go up.

Fortunately, since so much oil is currently used in personal transportation (10s of percent) then some reworking of that technology may forestall a true crisis for another generation or so. But this will require something fairly innovative, like cost-effective PHEVs or something. Hard but doable. If this can be accomplished, and a major problem averted, hopefully our political masters will get this message. But like Fred, perhaps that's another bad prediction as well.

-Jim

Interesting calculations. A few comments. I'm not sure one can expect 50% efficiency from IC engines anytime soon. 35% would be generous. Your numbers on batteries are a little optimistic, in my opinion, but perhaps reachable soon.

Also, an interesting phenomena has been occurring with respect to biofuels. Way back when, people would say "ethanol will be cost competitive with oil when it reaches $90 per barrel" (or whatever price they might say.) But lo and behold, as the price of oil rises, so do the costs associated with producing the biofuel, so now they say oil has to reach $130 per barrel or whatever. Not a happy situation. Will high oil prices also raise the price of batteries?

What about expanding on this (competitive) price of biofuels for us. Is it really true that to produce a few million more (reasonably priced) barrels of biofuels per year, a (conventional) oil price of $130/b is going to be required? If the price of oil hits $100/b next year, which certainly could happen, and that price appears sustainable, then ethanol is going to look very attractive. Oil at $100/b is the kind of psychological boundary that upsets a lot of important people.

Fred

First off, I'm not expert on this, but no, I don't think $130/b is required. That might not even be enough! The problem is this:

Someone analyzes the cost of making a gallon of biofuel. Say it costs $3.00. So then they say, "Hmm, well to compete with gasoline, a barrel of oil will have to cost $90". So they think that when oil hits $90 per barrel, then they are in business.

But look at what happens when oil does reach $90 per barrel. Many things are a little more expensive; fertilizer, fuel for the tractors, fuel for distillation, etc. All of that impacts on the price of the biofuel. Also, since the biofuel is now (more) attractive financially, the cost of the grain is bid up a bit more as well, because of the higher perceived value. So they need to recalculate again, and find that NOW they need $130/b to be competitive. (This is without subsidies. With subsidies, anything can be competitive. It just won't be real.)

I'm not saying the ethanol won't ever reach parity with oil, regardless of price, but the point is that the target price might move a bit in trying to reach it.

Hope this helps.

An interesting question now is the competitiveness of the ethanol that is already been produced. I wonder if it is not very competititve, although admittedly subsidies - if they exist - might have something to do with it. What I am trying to say here is that the US might be able to raise its output of ethanol by X % without having to think about oil at $130/b.

Fred

The latest Energy Bill passed in the U.S. mandates 36 billion gallons of ethanol per year by 2020. Sounds like a lot, but that's still less than 20% of U.S. gasoline use at today's levels.

Ethanol production even at present levels is already impacting on food prices. Presumably this might change if they get cellulosic ethanol working, but this hasn't occurred yet.

Of course, if they just made biogas (methane) out of waste streams and some cellulose (like switchgrass) then they'd have an economically viable fuel that could be directly fed into the NG infrastructure. And twice the energy content for the biomass consumed. But that would be far too rational a strategy to employ.

20% may not be a lot, but it's a good start if - like me and probably you - the way to deal with both this energy and warming thing is with a portfolio of solutions. It would probably be nice though if they could move the date up. Of course, if ethanol production is already impacting on food prices, then we have a problem.

You say that producing methane from waste streams is too rational a strategy to consider. I know that rationality is often in short supply among the decision makers and voters, but I need some explanation here.

Fred

Well, admittedly, to paraphrase Lloyd Bentzen, methane is no gasoline. It's not liquid at STP (standard temperature and pressure) so it's much harder to deal with as a transportation fuel. That being said, hydrogen has been worked with diligently for use as an auto fuel, and it is more than 3X bulkier than methane. So, I'm not sure what gives here.

The process for creating methane from biomass, anaerobic digestion, is fairly mature. I won't say there aren't some hitches with it, but it's much further along than cellulosic ethanol. For a given quantity of biomass, you can get about 2x the fuel output energetically with methane compared with ethanol. There's lots of reasons for this. The microbes for making methane (methanogens) are more primitive than the yeasts used for ethanol. So energetically they leave 'more on the table' in their waste streams. There is also no distillation step needed with methane production. You just needed to separate it from CO2 in the waste stream. This isn't hard to do on any large scale system; gravity separation can even be used.

Anaerobic digestion is less mature with hard cellulose (like wood chips) because of the poor surface area, but it is more successful with softer cellulose like switchgrass or cornstalks. Cow flop works great, and the process at least partially remediates the waste stream. They really should be doing more of this.

So, putting all the cards on the table, the advantage of methane from biomass is lower cost; the process is less expensive and the yield is higher. Depending on the cost of the feedstock, biomethane is probably competitive TODAY on the market, without subsidies. The infrastructure to distribute it is already in place.

The big problem is the tank storage needed for vehicles. These tanks cost $1000 or more, compared with a $10 plastic gas tank. But since they use fuel which is probably less than 50% of the cost compared with ethanol, one can see how this still might be a prudent investment over any kind of time frame.

Finally, biomethane is the one synthetic fuel that is dense enough (if liquified) to be used in jet aircraft. Kind of a wacky notion (jets don't use that much fuel compared to passenger automobiles) but another point in its favor.

The irrationality as I see it is how automakers are looking to either ethanol (expensive but convenient), hydrogen (expensive and inconvenient) but completely ignore methane (not so expensive, not so convenient) which, on balance, is not a bad choice. Certainly worthy of a closer look. Automakers, as I read them, have no understanding of fuel production, so they make choices that push high costs outside of their black box of understanding, which results in a highly problematic overall system. Hydrogen, and to a lesser extent ethanol, are both examples of this sort of thinking.

I did a back of the envelope calculation and estimate that a gallon of gasoline, diesel, or jet fuel requires 27 cents of coal and 6 cents of nuclear heat (at current cost of 50 cents per mmBTU in the reactor.) Clean water may be the most expensive input, other than capital and O&M costs. Actual efficiencies would be lower, of course, but the promise is there.

Conventional CTL requires that the excess energy required to make hydrocarbons from carbon and water comes from burning more coal - a lot more. Even setting aside GHG considerations, that excess heat would be more economical coming from uranium.

Fred

Firstly your point concerning the coming to an end of the practice of oil producing nations sending their raw product to other countries for refining should raise the alarm bells for any sane individual....even politicians.

Why would any government sitting on large oil reserves and even larger amounts of oil generated cash be content to see most of the profits from their product generated in other nations. I am sure the midle eastern nations are much more interested in developing their own economies than that of Holland or elsewhere.

It is perfectly rational and sensible for those countries to invest their money into oil refining and petrochemical technology. In doing so not only do they exercise control over the raw product but also its derivatives. I can easily envisage the situation where the US imports all of its gasoline and plastics industry feedstocks.

On the second point - the tiger we are riding is a shortage of energy not necessarily a shortage of oil. The shortage of oil now or in future is just a sympton of a bigger problem. There is not sufficient energy - from all resources available - to meet the long term needs of 6 billion people and rising. Oil cannot meet it. Coal cannot meet it. Renewables cannot meet it. Either a large portion of those 6 billion go without or the west becomes ultra efficient in energy use. Neither of these scenarios is likely of course. China and India will see that the former scenario does not occur and tha latter scenario wil not yield sufficient energy to bridge the gap between the energy haves and the energy have nots.

As I have said many times here before and I will say it once again. There is no energy source available other than nuclear power that has anywhere near the capacity to meet this enormous energy demand in the foreseaable future. None.

I could be persuaded (perhaps) that large scale space based solar installations could meet the demand but since it has taken nearly 20 years to design and build a relatively small and basic space station I don't see that idea coming to fruition any time soon.

The sad part of it all is that while the world community frets about "global climate catastrophe" the real catastrophe - energy shortage - is happening before our eyes. The rapid and indescriminate consumption (for burning) of all the worlds fossil reserves built up over the millennia will deny us, our children and grandchildren of an important chemical resource that is irreplaceable. That is a terrible shame on our collective societies.

The reason I started my career in the nuclear industry was that it made perfect sense to me to be able to convert otherwise useless lumps of Uranium and Thorium rock into a clean, reliable and inexhaustible supply of electrical and thermal energy. My view has remained unchanged because those facts have remained unchanged.

For those sceptics out there who think otherwise please tell me where the energy to power the TV's for the TV audience is going to come from when all the worlds oil gas and coal are gone. I think all would agree that in less than 500 years from now and likely very much sooner - there will be none left. Windmills solar, geothermal, biofuels they are not even a drop in the bucket in comparison to the worlds current let alone future energy demand.

The choice is simple. Either western countries drastically curtail their energy intensive living standards (AND the rest of the world accepts that they will never ever get to western standards of living) or nuclear power is deployed on a scale 10 to 100 times more than at present.

The sooner that stark reality is faced the better.

Whether you agree or disagree with me I wish you and your families all the very best for 2008 and look forward to further lively and informative discussion.

Malcolm

Politically, the issue with ethanol is the US Senate. While there are lots of "flyover" states in this country that those on the left and right coasts comfortably ignore, the genius of the senate structure where states with minuscule populations each get the same number of representatives as a California has certainly tilted the balance of power towards those selfsame flyovers. It also so happens that those flyovers produce the vast majority of crops in this country, therefore we have these wonderful farm subsidy bills that perennially get passed and now the ethanol bills.

Unfortunately ethanol is so corrosive it won't pipeline well, so we have the added wonderment of seeing fuel hogging semis loaded up with a few thousand gallons of ethanol and burning hundreds of gallons of much higher BTU diesel to get it to markets thousands of miles away. But hey, ethanol is a better additive than MTBA was, at least according to those who devised a test that could find MTBA in any water, including bottled. Some might contend that test was flawed, but I digress...

As a happy Valero shareholder, I appreciate the efforts that go into refining. On the other hand, as Valero discovered, by tweaking their processes years ago to accept a heavier feedstock, their profits went up substantially. Remember, that $100 / bbl price refers to a specific crude, West Texas Intermediate, which comes out of the ground looking like honey. There is less and less WTI to be found, so its price will naturally go up. Should you try to sell that oil you struck in the backyard to Valero, Exxon or anyone else, they will assay it, and find it lacking, and you will make less or even much less than the Nymex price.

The idea of Saudi refining oil sounds great to me, and it serves the NIMBY's right in each of the respective countries that they now have to worry about oil AND gasoline and other refined products embargoes. The reason the US hasn't built a refinery in 30 years is because of the onerous EPA regulations on same. Something tells me the Saudis, Nigerians, Venezuelans et al won't be so picky. So not only will we import everything with perpetually declining dollars, francs, kroners etc., but we also get to EXPORT our pollution. How egalitarian of us.

Ethanol is indeed a good replacement for MTBE. Not sure it's economically viable as a fuel itself.

Of course we can all just wait around for the magic Genie battery being hyped on the blog pages of this site to solve our problems too...

In-vehicle battery technology (if it ever works) just moves you from one energy source (oil) to another (electricity) for your transportation energy requirement.....so then we sit back and wait ......until all the coal in the US is used up and THAT needs to be imported too.

But vehicle batteries and nuclear are a hand in glove fit....using base load overnight to keep the plants on line at 100% full power while charging the battery in the vehicles for use during the day.

Problem is there are nowhere near enough nuclear plants to fill the gap and the ones still running are at or near the end of their design life. So better get building more nuclear.

Happy New Year to You All

Malcolm

I am not a pipeline guru but I am assuming that existing lines are carbon steel and the ethanol is corrosive to that. So we would need to build a new pipeline distribution system (of more resistant materials) to efficiently move ethanol around..am I on the right track - or in the weeds.

Not heard of that issue before..interesting .

Malcolm

Building a new pipeline system won't be cheap, it would cost about double what the last round of optical fiber installations cost in the late 90's, and that effort bankrupted multiple companies. Williams Co, did figure out a way to utilize their pipeline right of way to deploy fiber and made some bucks from it, but I'm not aware of the reverse ever happening.

Ethanol isn't so bad when it has been blended with gasoline, unfortunately the refiners aren't where the ethanol producers are and vice versa. Maybe MTBA - um Methyl tertiary Butyl Alkaloid would be the ticket... or not. :)

In-vehicle battery technology provides more benefits than just shifting your energy source from oil to electricity (coal).

First, coal-fired plants are more efficient than I.C. engines. So you get more out of the fuel that is used. Second, it reduces the number of exhaust pipes from thousands to one big one. This could help in the reduction of pollutants (but not CO2). Third, since cars can be plugged in up to 20 or more hours per day, this provides a power need with a great deal of temporal lattitude, which is just what is need to make intermittent sources (wind, solar) more viable, and can also play well with the excess demand we have at nighttime with our conventional power sources.

So, essentially, we can displace many millions of barrels of oil (per day) with little or no infrastructure changes at all. Worst case, some additional fuel (nuclear, coal) is burned at night on underutilized capacity.

Finally, since the batteries are the major cost on a plug-in hybrid vehicle, the average consumer could pay "green" power prices and still be way ahead on the margin with respect to gasoline. Even if the price of electricity doubles (10 cents to 20 cents per kW-hr) the cost of use for a PHEV only goes up about 10%.

Sarcasm aside, this issue is about a billion times more urgent than global warming. Interestingly the oil reserves crisis is also at odds with the global warming issue as the most affordable portable-energy alternatives (coal, tar, etc) to conventional oil ultimately leaves larger carbon footprints than does pulling oil out of the Middle East, and do so in our own backyard. It would seem the most ardent global warming enthusiasts therefore would downplay this problem while trying to develop renewable clean alternatives so they become the replacement technology instead of shale / coal / tar based solutions.

Frankly I don't understand the largely unsubstantiated level of confidence in getting oil from coal or tar, regardless of how accurate the predictions might be. I can only assume that the concept is a panacea to soothe the mass hysteria that would result of the realities of our current situation was really understood. At a minimum I'd think that if the world leaders understood the realities at least they would be encouraging the development of coal and tar based oil refineries. Instead I see no such incentives whatsoever - which leads me to believe that perhaps Banks is right - the coal and tar to oil concept is a pipe dream and the powerful already know it.

The industry can hardly keep pace with existing demand (peaks and base load) let alone having large battery chargers adding axtra load to the system - even if it is expected that this will occur only overnight. But that said it is likely less of a change than fuel cells using hydrogen.

Most fossil fuelled plants are shutdown overnight or operated in spinning reserve beacuase they can be loaded very quickly. Nuclear plants are all operated at base load to take advantage of their low fuel costs and high reliability. Adding more base load at night from vehicle battery chargers will result in more frequent operation of the fossil fuelled component or move the industry to build more nuclear plants to cater for the larger base load - a very likely scenario given the age of many coal fired plants and the now urgent need to replace them.

By way of explanation....one of the limits to nuclear capacity is base load saturation because current generation nuclear plants are not easily cycled from low to high power operation. So once all the base load is accounted for fossil plants are required to meet the peaks which they do very well. Larger base load and lower peaks very much favours nuclear over all other forms. The flatter you can make the demand profile the easier it is to meet it with nuclear capacity.

Plug in vehicles will therefore lead to more impetus to build nuclear since they are more efficient and better utilised for baseload (cheaper too - much cheaper and an order of magnitude cheaper than solar). Not many folks that I know are eager to pay 40 cents a kWh...over 4c for nuclear...they want their power for as low a price as they can get it.

Not sure I entirely agree with the efficiency argument. Vehicles are not particularly efficient but neither is generating electricity. A large modern coal plant can achieve about 38% efficiency (That is electrical energy out divided by chemical energy in). But many of the old ones (still in use) are nowhere near that efficient....many in the low to mid 20% range. Also the line losses to get the power to the point of use is not insignificant - especially at lower local distribution voltages. So I'd estimate the overall process to make the power from coal and get it to the consumer is not much more that 20% for an old coal burner and maybe about 30-35% for a nuclear plant or new coal plant. So some gains for sure but not that great. Marginal at best.

The big gain as far as the US and Canada is concerned is no longer relying on oil based products for transport. But then again oil refining is a complex business and fuels oils are only one part of the extraction process.

Using zero gasoline does not mean using zero oil - a point that many commentators do not yet understand. All the other products that come from oil still need to be produced at the refinery....we may be in a situation where the gasoline becomes a waste product and must be flared off!!!

If we do not refine oil where do the feedstocks for the plastics industry, lubricants, diesel fuel for trucks etc come from. If one reduces consumption of just one product (gasoline) from a refinery by 50% my guess is that you must also reduce demand for the other products by a similar amount. It cannot be done in isolation because the single barrel of crude contains it all. The problem is we equate oil use to gasoline use and that is not a correct assumption and is an over simplification of a very complex industry.

By using plug in hybrids we could displace millions of barrels of GASOLINE per day. It is not true to say that we would also displace millions of barrels of CRUDE OIL a day....not unless consumption of every other crude oil based product is also reduced proportionally.

It seems straightforward on paper but I suspect the reality of wide scale use of plug in vehicles will be somewhat different to what you expect.

It might make wind power more viable but not solar. Since I have observed (frequently) that the Sun does not shine at night I must assume that PV cell output is also zero at night. So how exactly does that fit in with the overnight charging of batteries. The idea seems about 180 degrees out of phase with what you need to me. I suppose one could place solar panels on the cars so they can be charging during the day but not sure the surface area is sufficient to do much of anything.

Thoughts?

Malcolm

Yet we repeatedly hear on this site and in the news media the "panacea solutions" or the latest technology that is going to save us all without any consideration of what actually will be required to be done to make them work.

Your thoughts on the comaprison of replacing wire telecomms cabling with fibre optic cable is a good one. Billions invested...many companies bankrupted in the process. That pales in comparison to the costs of some of the ideas put forth to solve the various energy problems that exist now and that are likely to get worse in the future.

I think part of it is that society (especially western democracies) have got so used to their comfortable lifestyles that are maintained by all this technology that they have become oblivious or just do not care how their lifestyle is created.

It is especially true with electricity. Producing it is a complicated process that no one cares about .... until it is not there when they need it .... then the phones start ringing off the hook. No one wants a power plant or power lines but everyone wants electricity. No one wants an oil refinery or to import oil but everyone wants gasoline so they can drive their cars.

So lets just produce billions of gallons of ethanol and not worry about how it gets from A (producer) to B (consumer). Let's tell the utility industry to build millions of windmills and not worry about the wrecked countryside and miles of new power lines required. I think everyone who wants wind power should be given planing permission to build a 200 foot tower in their back yard....perhaps the misplaced enthusiasm will wear off.

Malcolm

Ultimately the NIMBY's have to acknowledge that they live in a fantasy world and unless and until they are willing to accept the FULL consequences of their actions (and inactions), they should not lever the kind of influence they do today. Clearly the democratic system is far from perfect and overloads the scale with rights geared for the so-called underprivileged class. The scale gets out of whack with minorities claiming rights they never earned by votes or otherwise, and holding the rest of society hostage to their whims. AGW is only the tip of this iceberg.

Just because engineers have managed against all odds to produce miracles in the past does not mean they can be relied on to do so in the future, and society as a whole neither appreciates nor acknowledges the role engineers have played in its status quo. Just look how few parents are pushing their children to engineering disciplines and how the US immigration system stigmatizes non resident engineers, and we can see the writing on this wall. A future of too many lawyers who couldn't' design their way out of a paper bag determining a future society that can never come into being - and wondering what went wrong when there is nobody left to sue when the power doesn't work, in fact when nothing works.

Check out Ausra's solar thermal technology. 24 hr/day power and rates that are competitive with coal. 92 x 92 miles square (a small section of one of our deserts that gets full sun all year long) is enough to supply the whole country.

Of course, sans Ausra's technology I'd agree with you regarding solar.

If Ausra can deliver on their promises (24/7 grid power at coal power rates) you will see some radical changes in public sentiment toward solar - but it will be regarding solar thermal, not solar PV.

I'm still a huge proponent of PV for distributed energy where it's economical, but I find it amazing that there are those that think distributed energy will be viable for as many as 10% Americans, while most Americans are taking out second mortgages just to make payments on their first mortgage and pay off debts.

As Malcolm said, the great unwashed haven't a clue how those electricity thingies get to their TV's, and even if their collective IQ is 10, their vote cancels out Malcolm's and mine times 10,000. Dumb people vastly outnumber smart people, which as Hamilton immediately recognized is the fundamental flaw of the democratic process. BTW, the US has systematically removed every check and balance Hamilton put into the system so now we do indeed get the dumbed down version of leadership we justly deserve.

There is no great conspiracy, nothing that intelligent. This is just the natural progression of consistently stupid leadership with NO PLAN whatsoever. Evolutionists should be thrilled.

Fred, Thanks for the article. Love your writing style.

On the topic of corn based ethanol in the US, it seems like most analysts have settled on an Energy Return on Investment (EROI) of around 1.3+/-. Not good.

Len, Nice calcs on energy use arbitrage. Seems like a useful exercise to set some type of price targets, although I would think it possible for prices to exceed this floor during infrastructure transition periods.

Not my area of expertise, but my understanding is that ICE rarely exceeds mechanical efficiencies of 20%. Also, potential additional benefits from PHEV vehicles can be attributed to weight reduction in engine & drive train.

David, For viability of coal to oil see German experience in WWII and S. African experience during Apartheid.

Malcolm, You can sign me up for that tower & turbine in the back yard.

Joe, Followed you here from TOD. This place is great, thanks!

BCK

Anyway, I'm not especially enthusiastic about EROI, although I'm not prepared to bad-mouth it. I think that if the calculation is made in dollars instead of energy units that there is room for some corn-based ethanol in the scheme of things. The question is how much!

As for coal to oil in Germany and South Africa, that seems to me like a last rather than a first resort. Unless I'm mistaken, a lot of oil was smuggled into South Africa during the boycott, and if coal to oil had been so great, the South Africans wouldn't have bothered. But as with ethanol, some of it is justified, because the bottom line is going to be a basket of energy sources - perhaps with nuclear tying the whole thing together.

Fred

To be fair, the main benefit of PHEVs is displacing oil with something else, such as coal or nuclear. I am not sure how much this would really impact the existing infrastructure, especially if they are charged overnight, but I will admit not being well-read on this area. Obviously, no changes are needed until a substantial number of PHEVs are in the field.

I think PHEVs as a load obligation dovetail well with renewables that suffer from intermittency problems. A load obligation that has a 10 to 20 hour window to be serviced provides quite a bit of flexibility to the electricity provider. The added costs of green energy are still low compared with the costs of the gasoline it displaces, so the consumer is still ahead.

There's a strange brew of PHEVs, renewable energy, and smart metering that oddly can all play together fairly well, but if implemented separately, are much more problematic.

Don't get me wrong, I'm all for more nuclear power, but renewable sources actually could be useful for charging PHEVs as well.

PHEV's in any shape or form (battery, hydrogen fuel cell or whatever actually works) are essentially energy storage devices paid for by the automobile consumer. Instead of buying and ICE you buy an electron storage box with an electric motor. Not a bad idea in theory.

To some extent I agree with notion of a fit with intermittent sources of supply and I have said a few times that the biggest (but not the only) problem for them is storage of the electrons they produce. If the public can be persuaded to make such an investment then grid systems will have tens of millions of free electron storage boxes to use. That is a good thing...and very good for nuclear power.

Should a design of PHEV be mass produced that can utilise base load electricity for charging overnight then the very best energy fit is with nuclear - not wind or solar. That is the perfect dovetail.

At well over 90% capacity factors and very low fuel costs nuclear and PHEV's make a perfect combination that could not only displace the use of gasoline (I am careful not to say displace oil which is not the same thing) but also displace coal fired generation that is used for most supply over base load. In other words we build nuclear capacity over and above base load so that it is available duting the day to meet loads above base. Overnight or during off peak times the extra capacity is not de-loaded but used to charge PHEV's. PHEV's essentially flatten out the load profile for the utility....that has to be a good thing - especially when the utility is not footing the bill. It is also going to be resistive load so that is good for power factor control.

Overall I like it. Of course every gas filling station in the country will go broke as will the governments who tax the stuff so mightily. There will be no fuel tankers on our roads (not so good for tanker drivers) and no gasoline pipelines to worry about. Not sure what the oil refineries will do with all the gasoline which will now be a waste product since no-one will need it. All the current investment in ethanol will be wasted too as there will be no need for it either. So as with all things - lots of downside too.

Welcome to the forum Brian...good to have another view of life in the energy business. Hope your neighbours don't mind the 200 foot tower in the back yard - mine complained about a flagpole a tenth the height and the flag didn't make any noise (well it flapped a bit). Of course as part of the deal I would have to disconnenct you from the grid so that when the wind wasn't blowing you would need another source of electricity. Can't have your cake and eat it too.

Thanks Jeff for your insightful comments. Our level of education on technical issues is so abysmal that politicians and media alike can tell the public any garbage they want and it will be believed. Like there is enough solar energy in our desert to power the whole country. There is enough water in Lake Michigan to supply the whole country too....so how come many parts of the US are in dire shortage of the stuff. Methinks the problem is getting it to the right place....via those nasty power lines that no one apparently likes (can't think why not...but Brian won't mind a tower in his yard - just gotta convinve the neighbours it's a good idea.).

Of course powering Alaska and Hawaii might pose a small technical problem - but hey nothing that a few hundred billion more on the US debt pile won't fix. Any way most of the power lines from the desert to Alaska would be on Canadian soil - I am sure the residents of Alberta and BC won't mind that - they are just champing at the bit waiting to build more sections of 500kV line over the pristine Rocky Mountains and Northern Forests.

Might be a small problem with line losses. Over such long distances I suspect there would not be a whole lot of desert electricity left at the end.

Seriously any changes in our complex infrastructure need to be well thought out and the repecussions fully understood before we start spending billiions on one hair brained scheme after another.

Happy New Year All. Still making lots of electrons at our plant here - and it is not sunny or windy today.

Malcolm

Such vehicles (using methane) are quite common. Enbridge Gas in Canada runs its fleet of vehicles on it and so do a few other corporations. It is available from many has stations here and has been for 10 years or more. No major chages to the engine required. Gas tank is heavier of course being high pressure cylinders. So the question is why use ethanol and not methane. It's simple no subsidies or Government hand outs for using methane - none that I am aware of any way - lots of them for ethanol. Nothing to do with the technology. Most houses have a methane gas supply so you can fill up at your home....no need for gas stations in the number we have now.

Also I am sure the oil cartels can accommodate a bit of ethanol (they do now) but a switch to methane puts most of their profitable operations out of business. They would not know what to do with all the gasoline which is a by product of refining. The gasoline becomes a waste stream.

That is why no methane cars.Since the methane distribution network is already in place and there are numerous ways to make it (apart from getting the stuff from the middle east and elsewhere in ginourmous tankers) you would think that option would make alot more sense than ethanol......you make it out of waste not foodcrops. Much more sensible.

But if PHEV's work there will be no need of either methane or gasoline or ethanol. Just nuclear plants.

Gotta love that.

Malc

I am a self confessed dunce when it comes to the oil refining process but I would like your thoughts on what would likey happen to oil consumption if the demand for the gasoline part of the refinery output declines to zero.

Can a refinery be reconfigured to NOT produce gasoline. We have talked much on this site as though oil and gasoline are the same thing but I don't think they are in reality.

One learned friend of mine said to me that if the refineries could not sell the gasoline into the market place they would have to flare it off like they used to do for methane.

I don't think gasoline and oil can be considered the same thing but I would appreciate your wise Proffessorial thinking on it.

Malcolm

I think I can answer the refinery question partially. The short answer is no, they wouldn't flare off the gasoline. A similar problem occurs whenever the mix of diesel vs. gasoline changes. With some tweaks the refining process can alter the ratio of gasoline or diesel produced.

Gasoline are the shorter chained molecules (7-10 carbons), diesel and heavier fuel oils are longer chained. You want them all to be C-C bonds, or alkanes, so methane is often used to hydrogenate double- and triple-bonded carbons.

I THINK the trick with unwanted gasoline would be to tie them together into bigger chains. I think this can be done, with some effort. Oil companies are far too smart to just throw that stuff away.

BTW, methane can also be produced synthetically, via electrolysis (4H2O -> 4H2 + 2O2) and the Sabatier reaction (4H2 + CO2 -> CH4 + 2H2O). A bit more expensive than from biomass, but from easier-to-find materials. Just add (a lot of) energy!

The latest U.S. energy bill does recognize biogas as a renewable energy and able to receive subsidies, etc. So I dunno why people aren't pouncing on it more. it's not even due to lack of subsidies. Just disinterest of some kind. Very odd.....

I think an optimal vehicle would be a PHEV with a largish methane tank, and an IC engine optimized to use methane. Also, give it a tiny (2-5 gallon) liquid fuel tank, just in case one is in a bit of a bind with respect to fuel sources.

Marvellous article on oil's economics and politics, and all the reader comments following are very enlightening too, especially to those like myself who are little educated (to various degrees) about the oil industry and the electrical energy generation industry.

As an electronics design engineer I have a much different perspective on these matters. I am for the most part just an average Joe consumer who sees the threats to our lifestyle of escalating oil prices and unstable supplies, of global warming, of an ageing electricity generation and grid system read less reliable and more expensive, and of the never ending growth in all types of energy consumption that is accelerating because of countries like China and India.

A common old saying is to never place all your eggs in one basket - and unfortunately a lot of the world's eggs are in the oil basket. I agree with Fred, Len, and others who are predicting that we should and probably will see a greater mixture of energy sources in our future because we will have no choice but to diversify.

Curtailing growth in world energy consumption would help ease the looming crisis in oil, or at the very least buy us time to transfer our eggs into a variety of other baskets. But not enough attention is given to this subject, since it is taken for granted that energy consumption growth is a foregone conclusion that we can do little about, and is in fact a necessity to sustain growing populations and growing economies.

Malcom, I agree nuclear is very likely the least painful way of sustaining massive growth in electrical energy consumption on a huge scale. While I believe in adopting a mix of all the other generating sources, nuclear will have a major role in providing most of the baseload. Indeed in places like Ontario Canada our provincial government is undertaking massive steps to set the stage for much more nuclear - by forcing smart electricity meters on every local utility company, and soon Time-Of-Use billing rates on all 5 million homeowners and industrial consumers. The TOU billing rates will be designed to level demand curves by encouraging load shifting to off-peak hours. Complementing this is massive government spending on promoting a culture of energy conservation through rebates to consumers who purchase compact fluorescent lights, appliance timers, and new more energy efficient home appliances. These measures alone however will not save us from the massive expense we face to replace our ageing generators and electricity grid.

We in the electronics industry are partially to blame for the world's growing demand in electrical energy consumption, and petrochemical plastics consumption. Consider the vast number of electronic consumer goods today sucking power from the grid as compared with only a few decades ago. It's common to have a home filled with multiple TVs, entertainment systems, electronically controlled major appliances... all often consuming phantom loads even when they are not being used. It is precisely the lifestyle these things help to provide us in the developed world that the emerging economies of China and India are rapidly trying to aspire to.

To its credit the electronics industry is changing, quite rapidly in its traditional character, by focusing much more now on lower power consumption designs in consumer products to achieve greater energy efficiency, and in portable products to achieve longer battery life operation. You cannot design any new consumer product today without considering the most power efficient technologies, as well as in automotive electrical and electronic system designs. It is largely the adoption of electronically controlled engines that has enabled the large gains in engine fuel efficiencies over the last twenty years.

The electronics industry is also capable of enabling much greater energy conservation with consumers that could help curtail energy consumption growth. Things like in-home automation that could function as demand response systems for utility companies, and real-time in-home energy monitoring that would help to educate consumers about what the effects are on energy demand, and on their pocket books, every time they reach for electrical switches in their homes. These concepts have been studied by many in the utility industry, and in governments, but are not implemented on a very wide scale yet often because of conflicts over who should pay for it.

Bob Amorosi, Resident of Ontario Canada

Glad you like my paper Bob. Yes, thanks to the Chinese and the Indians, people have stopped telling me to shut up and find something else to talk about.

I find your remarks interesting also. Something that I have never worked with is this business of restraining consumption, or changing lifestyles. One constantly hears more and more about this however, which I think is good in the light of where global population is going, but frankly I don't have the guts to offer my two cents. What I could do however is to study the details and results of a comprehensive introduction of smart meters. What I am afraid of here though is having my theories about the craziness of electric deregulation questioned.

Fred

The American car industry has a huge overcapacity problem. CEO's will not be applauded if going for invvestments into vehicles able to run on methane. A safer strategy wiould be to talk about future H2/FC vehicles, or PHEV's as a longer term solution, and bioethanol and biodisel as the short term remedy. Unfortunately bioethanol and biodiesel are not very good alternatives.. The prices for feedstock unfortunately are growing (www.public-ledger.com)

2006 2007 Wheat 350 880 cents per 60 lb bushel Maize 220 390 cents per 56 lb bushel Soya 360 800 Euro per tonne Palm oil 400 920 Euro per tonne Sugar 340 280 $ per rtonne Rape 230 480 $ per tonne

The truth obviously is that conventional bioethanol and biodiesel are becoming extremely expensive. .

In Europe the legislators have recognized the need to support the use of different waste fractions as a means to to boost the supply of biofuels, and, for this reason, suggested that fuels derived from waste should be considered as offering twice the normal GHG benefit.

Regarding PHEV's it is not a foregone conclusion that these vehicles will provide energy and CO2 savings, One would have to prove that the energy consumed is less thän the energy otherwise spent to propell the vehicles. Very likely this will no be the case.

Here's an example. If a PHEV is charged with 10 kW-hr, and can use most of it, that's about $2 worth of electricity, even if obtained from green sources like wind or solar. We are ignoring the cost of the batteries, which is substantial, but the fuel cost itself is very low.

If, instead, we chose to synthesize the fuel from electricity, the cost would be higher. Working backwards, 10-kw-hr of usable energy from a fuel burned at 30% efficiency, means about 35 kw-hr of fuel is needed. That's roughly 1 kg of H2 or 2 kg of CH4, or a gallon-equivalent of gasoline. At 70% efficiency of electrolysis, that's about 50 kw-hr of electricity needed or about $10 at 20 cents per kw-hr. Quite a bit. And this does not take into account the cost of the electrolyzer. With respect to synthesizing fuel, you get losses coming (synthesizing) and going (using the fuel). Fossil fuels don't have the loss from synthesis, but they have the even more pressing problem of eventual depletion.

It should be apparent that if we wish to minimally disrupt our current energy systems, the best way to do this would be to make use of short-term storage technology to displace expensive fuel used for short term needs. Since most vehicle trips ARE short duration, this is a really good fit, at least in theory. Fuel is best valued when it stores energy for a long period of time, or when a large concentration of energy is needed for a task, such as a long trip. A vehicle idling, or even travelling at load speeds in stop-and-go city traffic is not a good use of gasoline, and is better displaced with gasoline.

The lack of push for methane vehicles is odd. To be fair, they don't seem to be well-received by the public. Their inner space is limited by the tankage, their range is a bit low, their cost is a bit higher, and fueling stations are limited. Further, NG prices tend to rise along with gasoline, though I think they are still lower.

But consumer disinterest aside, its far easier for an automaker to pawn off an E-85 vehicle on the public than a methane vehicle? Why? Because it costs less. The typical consumer would not appreciate the sticker shock of a methane vehicle, which is already perhaps problematic to fuel. It is no matter that an E-85 vehicle does basically NOTHING to address our usage of oil, but that appears to be beside the point at this time. If the government was serious about addressing our oil use, perhaps they could issue tax credits for methane vehicles, instead of subsidizing ethanol. Until something like that happens, renewable methane will continue to be the red-headed stepchild of alternate fuels.

Thermal energy "...24 hr/day power and rates that are competitive with coal..." reminds me of nuclears original claim of being "too cheap to meter."

If the calculations and belief in the technology were anything more than speculative, I would expect billions of dollars to be flowing into this today. Solar Thermal electrical generation has been around in prototype form for over a decade at least. I'm not saying it isn't a solution, but I am wondering why, if it has even a 50% chance of coming through, why Westinghouse, G.E., Microsoft, GM, or any other deep pocket corporate concerns aren't massivley funding it. They must see something that holds them back.

I see they claim "...directly competitive with new gas-fired generation facilities and much cheaper than coal-fired plants with sequestration."

That's a slightly different story than I originally took from your comment.

Good luck to them. My original question still stands. If the technology is as far advanced as they seem to claim, I wonder why they haven't been scooped up by Exelon or Areva or somebody else.

Ken

I think you are talking about a serial vs. a parallel hybrid PHEV. The Toyota Prius and the Ford Escape are both parallel hybrids. Under certain circumstances of high power needs, both the ICE and the battery pack can apply power for acceleration. (This is done with a nifty planetary gear arrangement, but I digress). A serial hybrid is more along the lines you propose, This is also exactly what GM is doing for the Chevy Volt. In fact, they don't even call it a PHEV, but instead call it an extended range electric vehicle.

I'm not sure exactly what the "right" strategy is, but I personally lean toward the parallel configuration. That's just my present bias. That could change over time.

One issue with the serial strategy is the limited power. You are limited to what the battery pack can source at any time. That's an issue that will either drive up costs or result in less than desirable performance. The planetary gear allows you to access both power sources, but adds complexity. But perhaps not that much. Automakers know how to make gears. Vehicle power is another one of those odd things that is important to the consumer, but only used for a few seconds at a time.

Critics of parallel hybrids (and PHEVs in general) point to the high weight and complexity of a full-sized engine. I don't know how valid this is. Tesla Motors advocates insist that one is better off with an all-electric strategy, as you don't need the weight of the engine. I am concerned with battery cost. It seems to me that for short trips, one must either haul around several hundred pounds of unneeded engine, or several hundred pounds of unneeded batteries. Given the choice, I prefer the former, because it is less expensive.

I guess a good compromise would be a small engine with a parallel configuration. (There's no reason this couldn't also charge the battery too.) To some extent, this is done with the Prius and Ford Escape, at they both use Atkinson cycle IC engines, which have better efficiency at the expense of low-end torque (which the batteries can do well).

Finally, there is sort of an issue with using gasoline to recharge your batteries, especially if you do it a lot. You might have some net efficiency gains, but overall it might not displace much gasoline, which is the major point of this whole exercise.

You've basically said (I think) that methane would be easier to make from biomass feedstocks than ethanol, but it is more expensive and inconvenient to use it in a car due to the gaseous state. I had been hearing about gas-to-liquid (GTL) plants that can convert methane into clean liquid (diesel?) fuel, w/o that much of an economic or energy cost/loss. If so, shouldn't we just make methane out of the various bio-sources, then convert it into liquid fuel using the GTL process? This could be used in an ordinary car, or better yet, a PHEV, using our existing liquid fuel (and electricity) distribution infrastructure. No compression tanks required.

All the above said, however, given the dire situation for natural gas, with North American gas going into decline right now, and ~80% of world reserves being in Russia and the Middle East, transport may not be the best, most important use of such bio-derived methane. It may be that all of the output from such bio-methane plants would be better directed to applications that now rely on natural gas (for which there are no practical substitutes). It may even be that using oil in cars is preferable to using methane, as the methane is saved for other uses. Of course, PHEVs (or pure eletrics) would greatly reduce the need to this bio-methane in the transport sector, allowing much more of it to be used to relieve the natural gas supply crunch that will be affecting other applications.

If GTL doesn't cost much (money or energy) there will be an overall market (level of demand) for methane and/or liquid fuels, at some overall equilibrium price. The question then simply becomes how much of this fuel (i.e., methane) can be provided by these bio-sources.

Absent increasing efficiency isn't energy consumption growth a necessity to sustain growing populations and growing economies? I'm thinking here of the work done by folks like R. Ayres to explain the Solow residual via addition of energy & energy use efficiency to the old pillars of labor & capital.

Malcolm,

With a population density of about 50/SM I don't have too many neighbors to convince :). Some of the larger scale wind developments in the area do meet with some resistance, but they are being built. My endorsement is driven by reported EROIs of 20-40 and tradeoff comparison with the alternatives. Hmmm, if you're going to pull the plug on my grid participation can I add a small pumped storage facility to my tower?

Apparently the price of oil only increased by 59% during 2007, and not the 73% mentioned in this article. Sorry about that, but upward movements of that amount say something about talking about the real versus the money price of oil. If, for instance, you were a refiner buying oil, I doubt whether it would bring much joy into your life if you heard that the real price of oil is actually lower than it was 25 or 30 years ago. The same is true for a SUV owner - or perhaps I should say some SUV owners.

That observation is valid for the macroeconomy in general. Certainly a slight correction in the oil price is possible, or perhaps even likely, but oil at or near $100/b could mean some very undesirable changes in the scheme of things regardless of what the real price was at any time in the past. Matthew Simmons was interviewed on CNN this morning, and he implied that if there was any optimism left in the ranks of the movers-and-shakers on the buy side of the market, it would be best for all of us if they stopped daydreaming.

This might be a good time to talk about my new energy economics textbook, but anyone who wants to find out about what is going to happen in the future in the great world of oil and desires some reading matter should obtain and read a good elementary book on game theory - if there is such a thing. By anyone I don't mean the people in this forum, because for the most part they know the bottom line in this oil market thing as well as I do, and in some cases even better, but those ladies and gentlemen like Meester Quest on CNN who recently pronounced nuclear energy ineffective. (He needs to be introduced to the former Swedish prime minister, who pronounced it "obsolete".) Unless I am mistaken, nuclear based power in going to be essential in this business of substituting out of oil, as implied in many papers and comments in this forum. It will have to supply the "extra energy" that Joseph Somsel referred to above.

"Substituting out of oil" - what does that mean? It simply means that the future availability of oil is not going to be what we want it to be, and if we want our Volvos to continue taking the high road up to the skiing and partying in the north of Sweden, some means has got to be found to take the pressure off the oil market.

Fred

Your mention of subverting PCTs with bootleg replacements or even Faraday shielding built around them to block their radio control signals explains much more than you can imagine.

Firstly, it points out the simple fact that most consumers will be abhorrent and refuse to have someone outside their home monitor or control their home's environment, since it smells of privacy invasion.

Secondly, this is PRECISELY the reason why this kind of technology has never been embraced and developed by meter manufacturers and utility companies before.

Utility meters, whether they are the old electromechanical or new smart meters, are industrial products with high reliability, warranties, and field support. Most importantly they are sold to a utility company and under their exclusive control. But it is quite another matter to make equipment for inside the home that intimately operates with a consumer's home appliances. There are huge issues with monitoring (for load shedding verification), warranty repairs, consumer complaints, etc. that the meter manufacturers and utility companies historically want no part of, since ultimately this technology would be in the hands of consumers and out of their control.

What Len talks about would be ideal - if consumers could purchase in-home technology that they themselves can set up and control, and program as they see fit to respond or not respond to energy pricing or financial incentives from their utility company. This concept however requires utility companies and in-home technology manufacturers to work together to develop and commercialize it. This however is foreign to the utility industry, since our utility companies are generally not interested in becoming heavily involved in new technology development and then retailing it to consumers.

My last posting above was intended for the other current Energy Pulse article on Statewide Demand Response Network Update from California.

Many articles here focus on the technology advantages and disadvantages of alternate fuel vehicles. What is not mentioned is the role consumers can potentially play with their purchasing power to influence the direction of new vehicle technology development and commercialization.

Replacing your vehicle with a new one is not something we do every year, and choosing what to buy when we do is rife with complex social issues. Fuel economy is one of them, and heir are many economists that suggest consumers would look for alternative fuel vehicles if there is significant economic benefit to buying them.

If gasoline prices reach the stratosphere because of the looming crisis in oil, most consumers will look for alternatives, but they generally cannot respond as quickly as the oil price markets can and do lately. The gasoline price threshold that triggers significant change in consumer driving behaviors and in consumer purchasing behaviors of new vehicles is a variable many economists find difficult to predict and is a subject of much debate. Some say it will take at least around three times the present price of gasoline to foster significant change, others say less.

One thing is certain; a crisis in oil will cause an economic crisis with consumers and the economy unless, among other things, alternative fuel vehicles are commercialized competitively with existing gasoline vehicles. This is where governments have a role to play - by providing financial incentives to consumers and vehicle manufacturers for the alternatives long before the crisis materializes. The federal government of Canada is taking some steps to do this now by taxing the purchase of gas guzzlers like SUVs.

You make good points which I might not be able to address completely or coherently in a single short note.

A few things:

There is a cost to everything, including GTL. I don't know what it is, but as a wild guess, I would say at least 20%, plus the cost of the refining equipment. That makes the liquid fuel cost higher. There's no free lunch, especially with liquid fuels. GTL makes sense in a world of ridiculously cheap NG, which is not the case in North America right now. Most GTL makes methanol, which is not the most wonderful liquid fuel anyway. Perhaps you are referring to a different strategy.

Yes, there are other things that use a lot of energy (esp. NG) so and additional demand seems odd. Perhaps it is. Truth be told, if PHEVs can be got to work well, you can basically run them with anything, including gasoline. If a PHEV uses 80% less gasoline than a typical car, then higher prices for liquid fuel shouldn't bother the consumer as much.

Living in a cold state (especially right now!) I use more BTUs for heat than I do for gasoline. So higher NG prices affect me directly. But nationwide, home heating is a much smaller draw than transportation and even smaller than vehicle transportation.

Other processes, such as chemical plants (ammonia) can move off-shore near cheaper sources of NG. This has already happened in many cases. Like oil-fired electrical generation, NG-fired power plants are also on the decline. The demand that always seems to tolerate high fuel prices is transportation.

If we could get off of oil (via PHEVs) then much NG used for refining of oil would be freed up. The NG market seems to have a lot of booms and busts, due to demand destruction when costs get high. Hopefully something like that will happen if we get PHEVs working.

(Note the great amount of NG used to pull oil out of the tar sands in Canada. Probably not the best use of this scarce material. They probably should built a nuclear power plant in that area to provide the heat sources needed, but the last time I looked, I'm not a member of any Canadian energy council....)

We pay much more per BTU for vehicle fuels than we pay for NG, even now. If the two markets were to directly compete, vehicles would 'win' because of the inelastic demand.

It's possible that methane does not make sense as a vehicle fuel. I don't think that's the case, but it's possible. I'm 100% convinced that ethanol does not make sense in any form, other than as an additive to replace MTBE. One thing I've noticed about energy issues is that when you tease apart an issue further, it unfolds in a different way, and you have to start all over. When it comes to energy plans, always use a pencil.

My understanding is that GTL (gas-to-oil) makes high grade, low suflur diesel fuel that fetches a premium in the market. You could even run diesels in California on it!

Yes, I checked and GTL can be used to make diesel, methanol, ethylene, and some other compounds, including waxes and heavy oils. But not gasoline. At least as far as I can tell.

It's unclear how practical GTL is if the NG feedstock is high-priced. Most GTL plants seem to be set up in places where the gas is considered 'stranded' due to lack of pipelines, etc.

The link below states that you lose ~1/3 the energy content converting the methane into liquid diesel fuel.

http://www.greencarcongress.com/2004/10/results_from_sh.html

Energy losses shipping gaseous methane to the point of use would reduce the difference a bit. Thus, it does seem that the convenience and cost savings associated with using a liquid fuel (vs. using pressurized methane directly in the car) comes at some cost in efficiency.

To me, all this strengthens the argument that any bio-derived methane should probably used in natural gas applications (peaking power, space heat, chemical feedstock, etc..) as opposed to transport, at least at first. Once again, I think PHEVs will win the day on the transport front.

Interesting thing about methane is that we USED to consume it, but the "natural gas" laws essentially OUTLAWED it. What happened is "natural gas" had to have a certain number of BTU's per cubic foot. The conversions are a bit dicey, but essentially a therm is a cubic foot of natural gas, and it is about 1000 BTU's. I'm doing this off the top of my head, so any intrepid souls who wish to disagree are welcome to Google the exact numbers and correct me to the nth decimal place.

However, the main point is that methane is 'only' about 900 BTU's per cubic foot, so naturally it doesn't qualify as a "natural gas". Also town-gas, which was cheap and easy to make likewise doesn't qualify so literally can't be sold in the United States. Make something illegal, and if it doesn't alter your mind, it is difficult to sell here. Not sure about Canada, but would bet a large sum they have precisely the same regulations.

Now our politicians making these laws have clearly been altering their minds for decades, but apparently they aren't subject to the same rules and regulations as the rest of us. :)

Methane has about 1000 BTU's per cubic foot (1015), so I'm trying to figure out what was outlawed. You might be referring to biogas, which has both methane and CO2 in it, so it has a BTU value of 600-800 per cubic foot, or thereabouts. I know that natural gas has to contain no more than 5% CO2 by law, so perhaps that's what you are referring to. It's not that hard, even at a small plant to separate CO2 from CH4. The CO2 is almost 3 times denser so it can be settled out via gravity or filtered out.

Town gas had CO in it, so perhaps that affected legality as well.

James,

I guess I could agree that perhaps biomethane SHOULD be used for non-transportation applications, but we are already paying dearly for gasoline. Even at retail prices $20 per 1000 cu feet (1 MMBTU) translates into about 8.3 gallons of gasoline equivalent, or $2.40 per gallon equivalent.

You can get about 86 gallons of methanol from a ton of dry biomass. This is equal to about 43 gallons of gasoline equivalent from an energy standpoint. This is from pyrolysis, so the plant cost is small.

You can get about 100 gallons of ethanol from a ton of dry biomass, theoretically. This is equal to about 70 gallons of gasoline, but it does not include the added energy input needed.

You can get about 12-14 MMBTU of methane per ton of dry biomass. This is equal to about 100-120 gallons of gasoline equivalent.

I completely agree that liquid fuels are tremendously convenient, but unfortunately they come at a price. No free lunch.

http://fora.tv/2007/11/20/Robert_Zubrin_Energy_Victory

"A Solar Grand Plan; January 2008; Scientific American Magazine; by Ken Zweibel, James Mason and Vasilis Fthenakis; 10 Page(s)

High prices for gasoline and home heating oil are here to stay. The U.S. is at war in the Middle East at least in part to protect its foreign oil interests. And as China, India and other nations rapidly increase their demand for fossil fuels, future fighting over energy looms large. In the meantime, power plants that burn coal, oil and natural gas, as well as vehicles everywhere, continue to pour millions of tons of pollutants and greenhouse gases into the atmosphere annually, threatening the planet.

Well-meaning scientists, engineers, economists and politicians have proposed various steps that could slightly reduce fossil-fuel use and emissions. These steps are not enough. The U.S. needs a bold plan to free itself from fossil fuels. Our analysis convinces us that a massive switch to solar power is the logical answer."

Thanks I was indeed referring to biogas, which happens to be largely methane, not "natural gas" which also happens to be largely methane. Thinking methane got me typing methane...

Here's are two articles from UnionGas in Canada. One talks about LNG vehicles and the other talks about Uniongas leaving the business: LNG faqs Union Gas leaving

I'm REALLY going to have to stop celebrating the new year before I kill off ALL my brain cells. :)

Assuming that GTL is 66% efficient (per my link), then the 100-120 gasoline-equivalent gallons of methane from a ton of biomass would yield GTL diesel fuel that is the equivalent of ~66-80 gallons of gasoline. Thus, the GTL route seems to be about the same as the ethanol route, although I don’t know what the equipment (plant) cost comparison is, or the magnitude of the ethanol energy inputs (which are already covered by the 66% factor for the GTL case). If the liquid fuel approaches for biomass are similar (ethanol vs. GTL), the question then becomes whether the ~1/3 loss in energy yield for liquid fuel is worth it. This comes down to cost and perhaps convenience. One must also factor in energy losses from gaseous methane compression and distribution, etc..

In terms of the second question, i.e., whether a new biomass energy source should be used for transportation or for some other (gas) application, your observation that we are paying more per BTU for transport for anything else seems true on the surface. I’m not sure what price the cost of gasoline (before profit) coming out of the refinery is, but even at $1.80, it translates into an equivalent of $15/MMBTU. Gas is not that high, yet. (Given the extra costs of dealing with gaseous fuel, however, the price of methane may have to be significantly lower than gasoline to compete with it.)

Another effect that has to be considered, however, is the effect that using gas for transportation will have on other, necessary gas applications. Given that we are paying more per BTU in the transport sector than in the gas sectors, using gas for transport will increase the price of gas to match the transport per-BTU cost, thus raising costs for space heating, peaking power, chemical feedstocks, etc.. What’s cheapest in one sector may not result in minimum cost overall (in the overall economy). This argument may also apply for oil. It doesn’t really apply, however, for electricity/batteries, as those sources are “abundant”. Thus, the PHEV approach may be cheaper, relative to gasoline and/or various synthetic fuels, than the straight economics suggests. The effect of suppression of the gas and/or oil price for other sectors (that would result from the reduction in demand for gas/oil as a result of PHEVs) has to be considered. I talk more about this minimum cost concept in the next post.

Say, for the sake of argument, that natural gas is the cheapest form of baseload power generation for at $6/MBTU or less. Above this price, other sources like coal, nuclear, or renewables, which have no uses in other sectors and/or are infinitely abundant, become cheapest. Also assume that gas currently costs $3/MBTU and is currently being used in all sorts of other sectors (space heat, chemical feedstocks, etc..). Under a “pure” free market, we will build gas baseload power plants until the price increases to $6/MBTU. Thus, the power sector (the sector that is willing to pay the most) sets the market price. The net result is a doubling in gas price for all the other gas-using sectors. Oh well….

According to the pure free market, if gas costs $5.9/MBTU, it “makes economic sense”, and “minimizes costs” to build a gas plant as opposed to the alternatives. Needless to say, this is clearly not the case as far as the overall economy is concerned. The real, incremental cost of the gas power plant option is the cost of the power plant and gas fuel, plus the total cost to all other gas-using sectors that results from gas price increase that results from the increase in demand from the power plant. Accounting for this would change the picture significantly, but market purists seem to insist that, no, the free market will automatically minimize costs, and that building the gas plant is “clearly” the lowest cost choice. The above arguments apply no matter what the source of gas and or oil is (i.e., from fossil sources or synthetic/biomass sources). The bottom line is that there is a single, fungible market for gas and/or oil, and any gas/oil produced from biomass is simply “thrown onto the pile”.

Somehow we need to account for these effects and indirect costs, and fold them into our energy policies. May I suggest a fuel use act (banning gas/oil from baseload power)?! As I point out in the last post, these considerations also apply for the transport sector. The real cost comparison between PHEVs and their non-electric alternatives (whether fueled by synthetic/biomass fuels or fossil gas/oil) is not what is suggested by the “pure free market”. Subsidies are in order; even permanent ones.

Once again, I am not an economics scholar. Where am I wrong on this?

The problem with "the market will perfectly allocate resources and minimize overall cost across the economy" theory is that it assumes, if I understand it correctly, that resources can and will be allocated AS NEEDED. When it comes to natural fuel resources from the earth like gas, oil, or coal, supply cannot always be throttled up beyond production capacity quickly if demand steadily increases. Just witness what is happening today with peak oil production capacity vs. demand growth, and the the price per barrel now passing $100.

I can just see myself now standing in front of the blackboard in the economics building at Uppsala University, explaining to those wonderful students why this or that should happen, thinking all the tiime about another invitation to one of their marvelous parties - thoughts which allowed me to keep my authoritarian tendencies at least partially under control .

What would get in the way of an 'optimal' explanation however is something mentioned en-passant by Mr Nietzche, which is "that the future is as important for the present as the past", For instance, somewhere in one of my early books I noted that gas had indeed been banned/discouraged as a base-load input, and in looking at the so-called merit-order, that struck me as making a lot of sense. But then combined cycle equipment came along, and it made no sense at all. But it might make sense again because the difference between the BTU price of oil and gas has moved in such a way that gas is probably under-priced.

Might...probably... It's things associated with these terms that keep the market from perfectly allocating resources. The operative word is uncertainty. And it's here that we have our problem, because to this humble teacher of economics and finance, the way to hedge this uncertainty in the context of the discussion immediately above is with nuclear - WITH NUCLEAR WE KNOW WHAT WE ARE GETTING! Unfortunately, everyone doesn't agree with this conclusion. Somebody above wants solar, while Mr Quest on CNN flashed his perfect (front) teeth during a recent debate and said that nuclear is ineffective. But that somebody is 'probably' wrong, while if I were to encounter Mr Quest in a seminar here in Uppsala I would be tempted to tell him that where this subject is concerned, clown time is over.

Let me add two more things to this incomplete explanation: on the average the market does pretty good, although I can think of some terrific blunders. And in your favorite economics book, 'change' takes place practically instantaneously, as illustrated by the movement of this or that curve.Unfortunately it doesn't work that way in the real world.

Fred

I too think your argument is substantially correct, but unfortunately, when we are talking about utilities in the US, we are talking about a HIGHLY regulated industry, so free market dynamics never get a real chance to gain traction. Given the non-dynamic pricing structure, the majority of purchase agreements (for natural gas) are based on long term contracts, which may or may not have much relationship to the spot prices generally quoted in the news. Of course when the utilities miscalculate, and are forced to go to the spot market, all kinds of calamities ensue as we've seen.

My previous link showed the natural gas conversion cost (net of subsidies) as being $2000, which somewhat surprises me because it really isn't that big of a deal as far as the engine is concerned. I don't have any experience with auto engines, but have had plenty with standby generators that are often configured for both diesel and natural gas. The cost differential there is pretty negligible given that the plumbing is easier without having to deal with a pressurized tank.

Fred

Dan

I think what I was talking about was the lack of fundamental market dynamics where utilities are concerned. I wasn't talking about deregulation per se, but now that you bring it up, the sad fact is the butchers (er I mean politicians) are simply UNABLE to keep their big fat thumbs off the scales, so even when we have the chimera of deregulation, the utilities are unable to rationally set prices, and of course there is no true competition either, so that other element of the free market is likewise sadly absent.

If in some alternate reality, Mr. Tesla was able to finish his experiments and accomplish wireless power delivery, there we might have a functioning competitive energy market, with no entrenched monopoly utilities and regulators playing at economics. This reality on the other hand has all that, and a market that lurches along with so many thumbs on the scale it is amazing that anything can be weighed (to carry the metaphor to its breaking point).

There are some places like Ontario Canada that are actively seeking ways to reduce energy consumption growth rate, and diversify sources of power generation. The Ontariio provincial government is spending massively to promote consumer energy conservation (yes by using better light bulbs and trading old appliances in for more efficient ones, among other things), and by subsidizing alternative distributed generation like solar, wind, etc. But even these measures are not probably not enough to achieve the massive cuts you are suggesting.

The general thinking by our provincial and our federal governments is that it would be too disruptive to the economy to force draconian changes on industry and the private sector. Interestingly enough however climate change and preserving the environment have recently become the leading issues in the Canadian public, and they generally feel our governments are not doing enough yet to address it. And note the public looks to their governments to do it for them because they feel private industry will always place profits before the public good, and so leaving things up to the private sector is generally hopeless.

As you might also note reading some of the comments on this website there are those who feel very strongly that in a capitalistic society like America, government has no place or right to interfere in a free market economy. I wonder how these same folks will feel about it someday if the looming crisis in oil, and the crisis in our environment, and ultimately the economy comes true.

I myself tend to side with one of the other writers here Len Gould - if government intervention for new technologies in the energy sector benefits the public good, then I would be supportive of it, but ultimately free markets for energy should be allowed wherever possible.

Bob Amorosi, Resident of Ontario Canada

Dan, you say that you get more valuable information from this forum than from ALMOST anywhere else. What does almost mean here? I'm curious, because I told the readers of my new textbook that they can't afford to miss the articles and especially the comments in EnergyPulse.

Fred

If 66% efficiency is reasonable for GTL, then adding in the plant cost, if might go to 50%. So if liquid fuel is twice the cost of methane, then using gaseous fuel makes sense if you drive enough.

Assuming 15,000 miles/year and 30 miles/gallon, that's 500 gallons of gasoline per year. If you could half the cost of that, at $3 per gallon, then you'd save $1500/year. So payback would be around 2 years or so.

If you have a PHEV, then you might only use 100 gallons of gasoline per year (rest electricity). That drives the payback out to 5+ years. Maybe not worthwhile.

I think there's a lot of tuning to be done here. A PHEV with a small pressure tank and a small gas tank might be the best of all worlds.

Note that liquid methane probably makes sense for jets compared with GTL fuel because they fly so much (tank cost quickly amortized), they could deal with complexity of liquid methane (it's pretty cold at 30,000 feet anyway) and overall, fuel with would lighter than JP-8 per BTU.

Dan,

Most ready way to reduce energy use would be to get PHEVs working. Not easy to do, but a big payoff. A car today goes about 30 miles on a gallon of gasoline. Since a gallon of gas is 35 kW-hr, that's a little over 1 kw-hr per mile. An electric drive in a PHEV needs only about 10 kW-hr of electricity to go the same distance (perhaps even less when accounting for the regenerative breaking). This is about a 70% savings in energy for one of our most energy intensive resources. The electricity needed to drive the cars can come from intermittent sources like wind and solar, which are hard pressed to service the 24/7 grid. Even at elevated "green" prices, the consumer spends much less on electricity than they would on gasoline. (There is no free lunch however. The initial cost of the batteries is high, but lifetime costs of PHEVs are still favorable, especially with battery chemistries shown to be long-lasting.)

In addition to PHEVs, everyone should insulate their homes well.

CHP, if made viable, could produce net efficiencies of 80-90% or more, though not everyone needs electricity AND heat at the same time....

Jim... what makes this site really good is guys like you who can do the math that allows us to compare apples to apples. So much of main stream media likes to throw out a few numbers and make it seem that the energy cruch can be solved by turning corn into fuel. Electric transportation would be great - and a good way to use on-site generation... and even low tech lead acid batteries would be better than what we've got now.

And Yet the Market Place isn't working to make big changes ... and why should it. While we all (come on.. even you Canadians) have been raised to think that capitalism always wins (ask those Chinese and Russians) I think we have all failed to notice how increasingly short term business leaders are thinking and acting. Most of the CEO need only a year or two on the job to walk away with 200 million in stock and cash - why would any of these guys think ahead to what the company should be doing in 20 years. Open Question To All on this Blog: I would like to know in detail what each of you see the world being like in 20 years. That time frame was picked because it is long enough to be beyond all peak oil forcasts. Swing away bloggers.

Dan

http://www.americanthinker.com/2008/01/who_will_control_your_thermost.html

Specifically, the state is seeking to impose a requirement that all home and business thermostats be fitted with radio recievers allowing the state to control the interior temperature.

Here's an interesting rebuttal to the usual suspects argument in a Utah paper concerning unconventional fuels, something more akin to the topic you started here.

In 20 years? I predict energy wars over oil and gas resources. Your comment on the short-sightedness of CEO's also applies to politicians, so they don't act, simply react. By the time it becomes politically profitable to react to problems in the transport energy sector, it will be too late for significant development of alternatives and too politically risky to not fight over remaining suplies.

Oil will be sky high, so cars will be alternatively fueled, if at all possible. They will probably be smaller. More effort will be put into saving energy in heating homes. Most petrochemical plants will be moved offshore to lower cost NG sources.

If alternative fuels are expensive, then world economic growth will be stalled. (That may the the key spur needed to get this technology working....) Smart metering and conservation will provide some improvements, perhaps staving off some plant constructions. Nuclear power will revive. Coal will probably still be very popular, despite concerns about global warming.

Overall, probably nothing too much is changed, other than our choices will appear a bit starker by then. If high oil prices stall the global economy, this could result in population stabilization sooner rather than later. High NG prices could raise the price of ammonia (fertilizer) and thus raise food prices to levels unacceptable by many. Humanity will either handle these challenges reasonably or not.

And that expression "energy wars" needs to be put into circulation, even if these wars don't take place.

Fred

If governments do very little or nothing, or simply react too late as they typically do when crisis develops, then these changes will probably still eventually happen by free market forces. But when the free markets ultimately force the changes, they will happen with much more pain to the environment, disruption of economies, and probably not be handled very well read potentially create wars. (Gosh I wonder if the Iraq war is an example of this).

Early in 2001, Cheney met with energy people behind closed doors to concoct an an energy plan. It's unclear exactly what was discussed, but it probably dealt with the impending production peak that could be seen coming in the next 5-10 years. Iraq was noted as a place of proven resources that was pumping far under capacity. It was the best place to get more production growth from. The fact that no one liked Saddam Hussein didn't hurt either.

Then 9/11 happens. It's used as an opportunity to get access to this Iraq oil production capacity and bring it on line. This has ended up being a bit harder than anticipated.

I guess I'm a bit more optimistic about our politicians. If oil prices STAY high, then alternatives will continue to be supported. The alternative fuel programs by Ford and Carter only died when the price of oil collapsed. OPEC would like nothing better than to collapse the price of oil at an appropriate time to kill off the alternative fuels programs. However, I think they have lost the ability to control it at this time, and (hopefully) many more people see the writing on the wall with respect to eventual oil depletion.

I also don't believe that the Iraq war is an energy war - conventional or otherwise; but Alan Greenspan has some of the biggest ears on the US east coast, and he says that it was about oil. So...speaking for myself, I think that I've got to look at this matter a little more closely.

Fred

Anyone want to hire Frioua as an architect? Anyone like him spamming the forum? Didn't think so.

To tell the story right, would require prognostications on the political front, technology front and nature front. These little edit boxes and whatever the word limit to these posts just wouldn't let us do it justice. It IS a very interesting question however.

For a look at some aspects of what the world may be like in 2030 you might try "The Age of Consequences: The Foreign Policy and National Security Implications of Global Climate Change" (see link below). According to this document, the authors "...consisted of nationally recognized leaders in the fields of climate science, foreign policy, political science, oceanography, history, and national security." Although I suspect they be missing some of the energy 'big picture', their mix of expertise provides some insights that ring true.

http://www.csis.org/component/option,com_csis_pubs/task,view/id,4154/type,1/