R-Squared Energy Blog

Pure Energy

What I Learned This Decade

In this, my last posting of the decade, I thought I would write something profound. Then I realized I don’t really have anything profound to say today, so at the risk of violating Point 9 below, I thought I would summarize some of the things I have learned since starting this blog.

I am closing in on the 4th anniversary of R-Squared. This essay is my 895th. Based on recent trends, 2010 should bring the one millionth viewer here as well as the one thousandth essay.

I had no high hopes for the blog when I started it. As I told a friend at the time, I looked at it as more like a place to archive some of the research I was doing. My thinking was that there are a million blogs out there, and it would be hard to differentiate mine from the others.

On the other hand, there weren’t a lot of energy-themed blogs covering the specific issues I was looking at. I knew because I was trying to do research on some topics, and ran into a wall of misinformation. So, I would write the stories, mainly for my own reference, until I ran out of things to write about. But on the topic of energy, I would soon find that it is hard to run out of things to write about.

I remember in the beginning that I would get 1 or 2 viewers a day. That changed pretty quickly after Andrew Leonard at Salon linked to one of my ethanol essays. From then on, the number of viewers increased. Shortly after that, one of my essays ended up in the #1 slot on the first page of Reddit. That was only a few months in, and 5,000 viewers linked in from Reddit in a single day.

Of course I have learned a lot since starting the blog. My breadth of knowledge across the energy sector is much greater now than in the beginning. Even so, energy is a huge field, and if I tried to cover all of it the coverage would necessarily be superficial. This is one reason you don’t see more stories here on wind and solar; they are not my core area of expertise so they don’t get a great deal of coverage.

In no particular order, here are some of the other lessons I have learned since starting the blog.

1. Choose my words carefully

I remember this lesson well. The blog readership had grown quite a bit, but I did not really appreciate the diversity of the audience. At that time I was still prone to write blistering, no holds barred critiques of energy companies making outrageous claims. I had written a bit about Coskata, and I felt like their claims were dubious. But then I finally looked a bit deeper, and I wrote Coskata: Dead Man Walking.

Of course I was being flippant with the title, but hey, it’s only my blog. It’s not like I am writing a news story. People know it is my opinion, and thus I can say pretty much what I think. Right?

Then the floodgates opened. I got contacted by the media. I got contacted by investors. I got contacted by the DOE. I even got contacted by Coskata. With the exception of the last one, the others all wanted to know “Are their claims really invalid?” Of course Coskata wanted to let me know that their claims were valid.

But the episode was a turning point in the way I write. I can remember at the time doing a media interview on the story, thinking “Holy Cow! I have to be more careful with my phrasing in the future. That was unnecessarily antagonistic and there are apparently a lot of people reading this stuff.”

Since then, I have tried to exercise more caution. I still maintain that there is no way that Coskata can make ethanol for $1/gallon, but I have to keep in mind that if I write an overly critical story of a company it could influence some investors which could influence the fortunes of the company. (A long shot, but something I have to keep in mind). Thus, I am potentially impacting people’s livelihood with what I write, and as such I have a duty to be very sure about my statements before I make them. No more flippancy or unnecessary antagonism.

2. Don’t make it personal

A friend once said that it is OK to disagree, but you don’t have to be disagreeable. I try to keep this in mind as I debate and engage people. Check the personal stuff and the ad homs at the door. Let’s debate the data, and if the data dictate that my position should move, then it shall move.

3. Not everyone cares about the data

I have learned a lot about how people behave. I have learned that not everyone is interested in objectivity; some are only interested in a very specific viewpoint. In these cases, inconvenient data are either to be rejected outright (That’s absurd!) or discredited (the guy who did the research has a cousin who works for ExxonMobil; thus the study is no good).

Dealing with people like this is never a fair fight, because I am interested in looking at their data. They are only interested in looking at mine if it supports their point of view. Otherwise, they go into the mode of defense attorney attempting to exonerate their client.

4. I love to write

That should be obvious, given that for the past 4 years I have averaged 4.5 essays per week. People often ask “Where do you find the time?” I find the time the same place people find the time to watch TV or play video games (and I do some of that as well, but not so much TV). The fact is that I can type out what’s in my head very quickly. My routine is that I wake up early, read through the latest energy headlines, and write if I see something that I want to comment on. I spend less than an hour on the average essay, so it is not a major time commitment each week. Answering e-mails is a different story, which is why my e-mail address disappeared from the front page.

5. I don’t write well to deadlines

I am prolific when the subject is wide open and there is no schedule involved. When I am writing an article for a website or a publisher, and there is a specific deadline involved, I find that it is much harder to get motivated. There is a different dynamic involved in waking up, seeing a story of interest, and making a post on it than there is if the subject is defined and I have a week to fill in the details.

I have been asked twice about my interest in writing a book, but it would take me 10 times as long to do a book as it would to do enough essays to fill a book. So right now I do a book chapter now and then (I have three that are either published or in process, with another two due next year) and in the back of my mind I hope eventually to pull those chapters together as the basis of a book. But to just sit down and start writing a book? Not at this point in my life.

6. Trying to predict which essays will get a lot of hits is futile

I found out early on that I could spend 3 hours on an essay, pepper it with references and links, and yet another that I spent 10 minutes on may get 5 times as many hits. The essay that ended up on the front page of Reddit was a puzzle to me. I had under 20 essays under my belt at that time, and in fact it was well after I published it that it claimed the top spot on Reddit. But I thought I had written essays that would have been much more deserving. To this day I am puzzled as to why that one made it to the top, and not some others that I think are much better. Here it is: Fuel Efficiency and Lessons from Europe. (Another one claimed the top spot a year or so later, but I don’t even remember which one it was).

In fact, probably the most read essay in the history of this blog is one that I wrote just a couple of months ago. I buried it on the 2nd page of my blog and locked the comments on it. It was off-topic and I didn’t want regular readers to be distracted by it, but I wanted to document something. It was again picked up by Reddit and a number of media outlets, and was read almost 20,000 times in under two weeks. It hasn’t fallen out of the Top 10 since I published it. For the curious, here is that one: Exposing a Two-Bit Scammer. I must warn you that it has zero to do with energy, and should only be read if you are bored and have nothing else to do.

7. Keep an open mind

I pride myself on my objectivity. I consider it a critical aspect of my job and my writing. But I have to constantly guard against slipping into a bunker with a particular ideology, defending against all outsiders. I recognized early on in my blog that most of my essays were anti-ethanol, and that I was starting to come across as an ethanol foe. But that is not a universal truth. I am against aspects of our ethanol policy, and in speaking out against those I sometimes appear to be anti-ethanol without qualification.

But that certainly isn’t the case. I see ethanol as I see other fuels. There are trade-offs. There are vested interests. Some will gain and others will lose. But with this, as with any position, the question I try to keep in mind is “What would cause you to shift your viewpoint?” If the answer to that is “Nothing” then you are truly in the realm of dogma and there is no point discussing data. As I stated earlier, it wouldn’t be a fair debate. But I try to always have an answer to that question in mind. For ethanol, I attempted to answer that question very early on: Improving the Prospects for Grain Ethanol

8. Sometimes you are going to make enemies

I don’t like to make enemies, but when you are speaking out against vested interests you are going to make them. Reasonable people sometimes disagree, but vested interests aren’t necessarily reasonable and their disagreements can quickly become personal. A corn farmer in Iowa isn’t necessarily interested in data that argues against more corn production. (In fact, I got a death ‘wish’ from a corn farmer once; one of maybe half a dozen threats/wishes I have received).

So if you have convictions, even if they are data-based, you are going to make some enemies if you speak out on them. This is especially true when dealing with vested interests. It is simply impossible to please everyone.

9. Don’t force content

While I have written a lot of essays over the past four years, I have had some periods of time in which I didn’t really have anything topical to put out there for a week or more. That has led me at times to post guest essays or 3rd party content that really weren’t up to the standards I have set for this blog. Worse, I have been occasionally guilty of that myself by quickly throwing something together and publishing it. I can avoid this by refusing to listen to the inner voice that says “It’s been a week. You really need to publish something.” If I maintain discipline, then I will only post when there is something worth posting, even if that means I don’t put anything up for a month.

10. The spam bots are getting much better

It won’t be long before I have to start locking comments on the essays that scroll off of the first page. The spam bots – those that write something like “Great blog” with a link to some off-topic business – have gotten much better at breaking through the word verification than they were even a year ago. I get an e-mail of every single comment posted, so I am able to catch and delete all spam, but it is taking more of my time every day.

11. I learn a lot from the comments

The blog would not have continued had it not been for so much good feedback that I received. I find myself learning an awful lot from reading comments. Often, it is through the comments that I first learn of a new development or a new research paper.  The comments also frequently force me to reevaluate my positions, which is something I value greatly.

12. Self-link to my previous essays

Some people may have noticed that I almost always link each essay back to a previous essay. That isn’t so much about self-promotion as it is about maintaining a connection when others pick up and republish an essay. I have given permission to many other websites to republish content as long as there is a note that indicates the origin of the essay. Still, some websites will grab essays and republish content as their own. By putting links in, readers can be linked back here, and since I have a StatCounter that indicates where visitors came from, I can spot the websites that are republishing content as their own.

13. There is no money in this

If I was trying to make a living at this, I would have to move to one of those countries where you can live on $2 a day. Of course I am not doing this for money, nor have I ever tried to write in a way that would maximize ad revenue.  If I was trying to write for a living, I would have picked a different topic, like Hollywood Gossip. Of course then I would have to start watching TV, and who has time for that?

On the other hand, there have been a lot of opportunities that have arisen as a result of the blog. I have had numerous job offers/inquiries since I started this, I have been asked to write for books and magazines, and I have given media interviews and made presentations. This increases the audience that I can reach.

14. People’s interest in energy goes up and down with the price of oil

It is really hard to get people engaged on energy unless prices are climbing. To this day, the query that most frequently brings readers in for the first time is “Why are oil/gas prices rising?” If prices aren’t rising, people don’t care and there isn’t much interest in energy policy. But we have lived through interesting times since I started the blog; prices steadily climbing for the most part. When they level off, the number of readers falls.

So that’s a bit of what I have learned, and hopefully those lessons have improved the quality of the essays over the past four years. May we continue to live during interesting times, so there will be lots of new stories to report on.

Happy New Year to everyone.

December 31, 2009 Posted by | Coskata, gas prices, oil prices | Comments Off on What I Learned This Decade

Transcript from My EIA Panel Session

I only recently became aware that the 2009 Energy Conference put on by the Energy Information Administration has posted the audio and transcripts of all of the sessions. You can hear the audio or download the transcript from my session – Energy and the Media – here. I summarized the overall conference in two posts right after the conference:

The 2009 EIA Energy Conference: Day 1

The 2009 EIA Energy Conference: Day 2

My fellow panelists were Steven Mufson from the Washington Post; Eric Pooley from Harvard, (and the former managing editor of Fortune); and Barbara Hagenbaugh from USA Today. The panel was moderated by John Anderson of Resources for the Future (and a long-time reporter and editorial writer for the Washington Post).

There were questions on the oil price run-up of 2008 (and how the media handled the coverage), false balance in reporting, scale of biofuels versus petroleum usage, peak oil, and the role bloggers are playing now with respect to reporting news.

I will extract portions of my comments below, correcting the transcription as needed for clarity. (For instance, when I said I also write for The Oil Drum, it was transcribed as “aldrum.”)

Mr. Anderson: …subject of energy of the media, a rich subject if ever there was one. My name is John Anderson. I’m joined here by four people who are in the midst of that subject. From my left, Steve Mufson, who writes on this for the Washington Post, and incidentally was also a Beijing Bureau Chief of the Post for several years which turns out to have relevance to our subject. Eric Pooley, who had a long career at Time Incorporated. He was national political correspondent among other things, and managing editor of Time, and has recently been at the Kennedy School at Harvard. Robert Rapier, who resides over the R-SQUARED Energy blog which I and I suspect many of you pay attention to, and Barbara Hagenbaugh who covers economics and energy for USA Today.

I would like to start off by going around the table and asking about a piece of recent history clear in everybody’s minds — four dollar gasoline last summer, $147 oil. That was a huge story for several months. In retrospect, how did we do? Did we get it roughly right? Did we have the causes and consequences roughly right? And in retrospect, what could we have done differently?

My response to that one:

Mr. Rapier: I’ve got a stat counter on my blog, and it tells me what brought people in there and where they came from. “Why are oil and gas prices rising?” is probably the number one keyword search that brings people in. Sometimes ironically from the media, they want to know why oil and gas prices are rising.

I’m an inventory watcher, and I use the EIA data religiously every week when they put out the statistics. On Wednesday I go in and I look to see what oil inventories are doing, what gasoline inventories are doing because we have a pretty good idea of what the gasoline inventory situation is.

So in 2007 we had, I think it was ten or eleven weeks in a row, that gasoline inventories fell, and they fell well below the average range just as we were going into summer driving season. And I got in a little bit of a friendly banter back and forth with Doug McIntyre who wrote This Week in Petroleum at that time, he works for the EIA, and I said I think we’re heading for record gas prices by Memorial Day. He said that generally prices pull off before then and level off. And I said, “Yes, but look at the trend here. The gasoline inventory trend was like this.” I said, “Something has got to give here because demand is just about to pick up.” And sure enough, that’s when we hit $3.00 gasoline by Memorial Day.

In the world oil markets it’s a little bit more murky because we don’t always have good inventory data. Again, we do in the U.S. We’ve got pretty good data in the U.S., but gasoline — if you want to know what gasoline prices are going to do, pay attention to inventories, and the time of year. I mean, if gasoline inventories are low in the fall; it’s not such a big deal. Gasoline inventories low going into summer driving season, that’s something you better watch out for.

Hurricane season. Going into hurricane season you better have good inventories. And we didn’t last year, and that’s again — when the hurricanes started to come in, I warned people we’re going to see some gasoline shortages. And we did because the refineries went down. We didn’t have enough inventories on hand, and suddenly spot shortages.

I was then asked about peak oil:

Mr. Anderson: I hope the EIA is listening. There may be someone from the EIA here for all I know. Robert, you have dealt recently in your blog with the interesting question are we running out of oil? This is one that all reporters constantly have to deal with. How do you deal with that?

Mr. Rapier: It’s obviously a very controversial subject. And often I see very frequently media stories dealing with peak oil as we’re actually not running out of oil. We’ve still got a trillion barrels in the ground. So the issue is not running out of oil. We will never be running out of oil. We will have oil for one hundred more years. It’s can we get it out of the ground fast enough to keep up with demand growth? And that’s where the problem is going to lie in my opinion and forward.

We may see an oil production peak in the next three to five years. There are a lot of very authoritative people who believe that that’s the case. There are some people that would believe that renewables are going to come in and fill that void. I’m not one of those people. I believe it will — there will be a contribution, but if we have a world oil production peak in the next three to five years we’ve got a serious problem.

But again, it’s not about running out of oil. And that’s the most common misconception I see about peak oil when people write about peak oil. They want to debunk that by showing how much oil is left in the ground, and that’s what we’re talking about, issues like one trillion barrels of shale in Utah. The trillion barrels doesn’t help if it takes more than one trillion barrels worth of energy to get it out. In that case it’s useless. It takes a tremendous amount of energy to get that oil out. So we don’t have a trillion barrels of recoverable reserves, maybe a very small fraction of that because the energy balance on that is very marginal.

On the issue of there not always being black and white answers to some of the questions:

Mr. Anderson: Barbara, how does a reporter working from day to day deal with the problem of editors and readers who want sharp clear answers to questions like this that are very much in controversy and very often as Robert suggests aren’t even quite the right questions?

Ms. Hagenbaugh: It’s complicated, and you know, USA Today a lot of times, I’ve got this much space to do all that. So I mean, the most important thing is like Robert just said, there’s two sides to this story and this is always to try to bring that out. I sometimes — editors get frustrated with me because I don’t come out and say this is how it is and this is what the answer is.

On the question of false balance:

Mr. Rapier: I put the question to my readers on my blog and also at The Oil Drum where I write—I said, “Energy in the media, what do we need to talk about?” False balance, probably the most popular answer. One reader gave the example: “scientists discover that the earth is round: flat earth society disagrees.”

The problem is it’s not always clear who the flat earth society is especially in the new biofuels technologies. Algae into biodiesel, is that flat earth thinking that we’re going to be doing that on a grand scale within five years? I can’t even tell for sure early on. I have to really dig and dig.

Steve (Mufson) interviewed me about three or four years ago. It was very early on whenever I was writing about ethanol. He interviewed me for about an hour and one tiny snippet showed up in that story. And I thought, boy, that was a lot of work, but I understand why he did it now. Steve is one of the best writers out there on energy. He does his homework. It really takes a lot of discussion to determine whether I’m credible or a complete nut, and that’s what you have to do. And not everybody does that. And so you get some of this false balance reporting; lazy reporters who simply want quotes from both sides. It’s important for the reporters to really do research. And the good ones do, and the good ones don’t take the false balance approach.

Then came an exchange that was longer than I remembered it being:

Mr. Anderson: Robert speaks with some authority. He’s the one person on the panel, and one of the few people writing on this subject who has a technical background. He’s a chemical engineer, unlike most reporters. Steve, did you want to add anything to that?

Mr. Rapier: That means I can get away without wearing a tie, though, and people forgive me for that.

Mr. Anderson: What about ethanol? How should a reporter approach the future of ethanol? What are the questions he should ask?

Mr. Rapier: Energy in and energy out is very important, but it’s not the only important thing. And I give an example. Some people say that if it takes more than a BTU of a fuel to make a BTU of ethanol that’s a no go. It’s not really because coal, for instance, is quite cheap. So if you took two BTUs of coal to make a BTU of liquid fuel ethanol, from an economic standpoint maybe that’s doable. So the energy in and energy out is not the complete story.

Unintended consequences — I don’t think we spend enough time thinking about what can happen here. What are the things that can happen? Cellulosic ethanol -we turn all this biomass into cellulosic ethanol. What are the implications?

There was a story a while back. Michigan, they figured out they might not have enough trees to fuel this cellulosic ethanol plant because cellulosic biomass in general has a very low energy density. And that’s what I call the logistical problems of cellulosic ethanol. You have to go out farther and farther to fuel this plant. Do the calculations of a mid-size cellulosic ethanol plant; it is going to consume the equivalent of about one million mature trees a year. So think about a 20-year lifetime, 20 million trees, that’s a lot of biomass. And as you get out to the edges of that you’re burning up all your energy getting it back into the plant.

So, those are the kind of things I would question. Your logistics. How are you going to logistically pull this off? How many trucks in and out of days is that? And how in the future are you going to fuel this? A lot of the biofuel options we have are really recycled fossil fuel because they’re entirely dependent on fossil fuel. If fossil fuel prices go up —they have to go up because that’s what they are. They’re fossil fuel. And we really need to go to something — and I talk about the Brazilian ethanol example.

I’m a fan of Brazilian ethanol. I was in India last year, and they do the same thing. I went through a plant. They end up with a waste material at the plant that they have to dispose of bagasse It’s free fuel. Now we don’t have something — in Louisiana and Florida they could potentially do something like that, but the economics of selling molasses and sugar are better than turning it into ethanol, but they do the same thing. They’ve got all the bagasse, and they use it to fuel their plant. A model like that will work. And people sometimes say — and this is some of the false balance that we discussed earlier. Dan Rather, Frank Sesno out there saying, “I was in Brazil. I saw what they did. We can do the same thing.” The problem is we’ve got a higher population than Brazil. We use six times the per capita energy of Brazil. It’s completely apples and oranges.

So, no way can we emulate Brazil, but I see person after person saying the ethanol miracle in Brazil was done because the government set the mandates and they set the standards. What they don’t tell you is that the ethanol miracle really is about 90-percent oil. Ninety percent of their energy comes from oil, and Brazil makes a lot of oil per capita, and they’ve got a lot of oil reserves. That’s how the ethanol miracle in Brazil happened.

On the question of trying to sort what is and isn’t credible:

Mr. Rapier: It’s like Eric said, there’s a lot of garbage out there. And the thing is you can find an argument for any position you wish to make. I can support the flat earth position by things I find on the internet. I can go edit Wikipedia and then use that to support the point that I’m trying to make. So you really have to be careful and you have to know what’s credible, what’s not credible. It’s like drinking from a fire hose. There’s just so much information.

When I’m researching a story, I could take either side and I can support it.

It then went into Q&A from the audience:

Mr. Hall: Yes, Chris Hall, independent oil and gas producer from California. I enjoyed the discussion on ethanol because I think as an industry we spent $135 million to fight Proposition 87 which would have imposed a severance tax, but EIA and the country is focused on reducing our dependence on foreign oil by increasing investment in green energy. And yet the forecasts show the need as you referred to for large supplies of oil and gas and coal during the next 20 years. Meanwhile, the domestic fossil fuels are under attack in Washington, as well as state and local governments, to punish them for last year’s high prices, for polluting the environment, to raise funds to offset deficits, to pay for development of renewable resources, all of which appeal to the public. For example, the Administration 2010 budget would result in the elimination of most of the R&D budget from Department of Energy for the oil and gas industry, would increase 150 percent in oil and gas taxes and a 40 percent reduction in drilling by one account. This will only lead to less domestic oil supply for our needs. How can the media help explain the problem so that we just don’t make matters worse?

Mr. Rapier: I spend a lot of time writing about that kind of issue, and make no mistake I’m a big fan of alternative energy. I would like to see us produce all our energy domestically, but I’m a realist as well. I submitted a question to Secretary Chu yesterday. He did not take it, but it was along the lines of I find it very ironic that he is calling on OPEC to continue producing and at the same time domestic oil and gas has essentially no part in the Administration. So I agree with that. I think the reality is we’re heading down a path here where we’re likely to increase our imports because we’re going to disincentivize our domestic production.

And I know the administration is counting on renewable to fill that gap. I don’t believe that’s going to happen. I believe they will play a part. I believe we should continue to fund that, but I’d also like to see the Administration take a more realistic view of some of these forecasts. Seventy-nine percent oil and gas, maybe that’s not desirable, but that’s what it looks like it’s going to be. So we prefer to get that domestically, I think, as much to the extent possible, but I think we’re just going to be importing it more from OPEC when biofuel targets fall short. We’re going to be counting on Venezuela, and you’ll hear future energy secretaries continue to call on OPEC: “Please don’t cut us off.”

My friend Morgan Downey then asked which books I recommend:

Mr. Downey: Morgan Downey. Just written the book Oil 101. And Robert, I read in your blog this morning that a survey came out earlier this week that said that more than half of Americans could not name one alternative fuel. And is there a role for books and other slow media in improving the average person’s energy IQ and what books in oil would you recommend?

Mr. Rapier: Well, Morgan knows that I’m 250 pages into his book, which is a fantastic book, by the way. The survey you refer to, that was pretty disheartening to read that. I think 51 percent of people surveyed couldn’t name an alternative fuel. Thirty-nine percent couldn’t name a fossil fuel. Nineteen percent said I couldn’t care less. I think you’ll find and I see the same thing, interests waxes and wanes with oil prices. Oil prices are high. Gasoline prices are high. People want to know what’s going on. So the best thing for your book would be for gas prices to start setting new records this year. People will pick up the book and they want to know what’s happening? Why is this happening?

Mr. Downey: Any other books in oil you recommend, or what do you read?

Mr. Rapier: I read a lot of different view points. One of the first ones I ever read was Twilight in the Desert which I think is a good book. It has some faults, but it kind of brings attention to the potential issue with Saudi Arabia. So that was one of the early books that influenced me.

Within the industry, I’m reading technical books on refining. And this is what I told Morgan, that his refining section is incredibly detailed. I don’t think there is a popular book that exists like that with that kind of information. Within the refining industry I’ve got technical refining books, and those are the things that I read to — how do we troubleshoot the cat cracker – and you don’t go into that sort of detail, but for a lay person who really wants to be informed about energy, I can’t give your book a high enough endorsement. I think it’s a fantastic book.

Mr. Rapier: Gusher of Lies by Robert Bryce, I really like that one, too.

There was a question about fact-checking, which was the last thing I responded to:

Mr. Rapier: I have a big issue with fact checking myself. I saw that with the SPR, Strategic Petroleum Reserve. The rate of fill that was reported and picked up and reported and reported was wrong. I showed the actual numbers from the SPR. It was about half what the reported fill rate was. And those kinds of things annoy me. And I wonder why more people don’t. Somebody, somewhere calculated a number based on some monthly fill rate and extrapolated it for a year, and it was just wrong. And then everybody picked it up and just ran with it. So I sympathize.

Anyway, my contribution was only a small part of the whole, which I think went on for about an hour. I would have published this sooner, but only became aware of the transcript about a week ago.

December 28, 2009 Posted by | cellulosic ethanol, Doug MacIntyre, EIA, Energy Information Administration, gas prices, logistics, Media coverage, Morgan Downey, Peak Oil, Steven Chu | Comments Off on Transcript from My EIA Panel Session

My Top 10 Energy Related Stories of 2009

Here are my choices for the Top 10 energy related stories of 2009. Previously I listed how I voted in Platt’s Top 10 poll, but my list is a bit different from theirs. I have a couple of stories here that they didn’t list, and I combined some topics. And don’t get too hung up on the relative rankings. You can make arguments that some stories should be higher than others, but I gave less consideration to whether 6 should be ahead of 7 (for example) than just making sure the important stories were listed.

1. Volatility in the oil markets

My top choice for this year is the same as my top choice from last year. While not as dramatic as last year’s action when oil prices ran from $100 to $147 and then collapsed back to $30, oil prices still more than doubled from where they began 2009. That happened without the benefit of an economic recovery, so I continue to wonder how long it will take to come out of recession when oil prices are at recession-inducing levels. Further, coming out of recession will spur demand, which will keep upward pressure on oil prices. That’s why I say we may be in The Long Recession.

2. The year of natural gas

This could have easily been my top story, because there were so many natural gas-related stories this year. There were stories of shale gas in such abundance that it would make peak oil irrelevant, stories of shale gas skeptics, and stories of big companies making major investments into converting their fleets to natural gas.

Whether the abundance ultimately pans out, the appearance of abundance is certainly helping to keep a lid on natural gas prices. By failing to keep up with rising oil prices, an unprecedented oil price/natural gas price ratio developed. If you look at prices on the NYMEX in the years ahead, the markets are anticipating that this ratio will continue to be high. And as I write this, you can pick up a natural gas contract in 2019 for under $5/MMBtu.

3. U.S. demand for oil continues to decline

As crude oil prices skyrocketed in 2008, demand for crude oil and petroleum products fell from 20.7 million barrels per day in 2007 to 19.5 million bpd in 2008 (Source: EIA). Through September 2009, year-to-date demand is averaging 18.6 million bpd – the lowest level since 1997. Globally, demand was on a downward trend as well, but at a less dramatic pace partially due to demand growth in both China and India.

4. Shifting fortunes for refiners

The Jamnagar Refinery Complex in India became the biggest in the world, China brought several new refineries online, and several U.S. refiners shut down facilities. This is a trend that I expect to continue as refining moves closer to the source of the crude oil and to cheap labor. This does not bode well for a U.S. refining industry with a capacity to refine 17.7 million barrels per day when total North American production is only 10.5 million bpd (crude plus condensate).

5. China

China was everywhere in 2009. They were making deals to develop oil fields in Iraq, signing contracts with Hugo Chavez, and they got into a bidding war with ExxonMobil in Ghana. My own opinion is that China will be the single-biggest driver of oil prices over at least the next 5-10 years.

6. U.S. oil companies losing access to reserves

As China increases their global presence in the oil markets, one casualty has been U.S. access to reserves. Shut out of Iraq during the recent oil field auctions there, U.S. oil companies continue to lose ground against the major national oil companies. But no worries. Many of my friends e-mailed to tell me that the Bakken has enough crude to fuel the U.S. for the next 41 years

7. EU slaps tariffs on U.S. biodiesel

With the aid of generous government subsidies, U.S. biodiesel producers had been able to put their product into the EU for cheaper than local producers could make it. The EU put the brakes on this practice by imposing five-year tariffs on U.S. biodiesel – a big blow to U.S. biodiesel producers.

8. Big Oil buys Big Ethanol

I find it amusing when people suggest that the ethanol industry is a threat to the oil industry. I don’t think those people appreciate the difference in the scale of the two industries.

As I have argued many times before, the oil industry could easily buy up all of the assets of ethanol producers if they thought the business outlook for ethanol was good. It would make sense that the first to take an interest would be the pure refiners, because they are the ones with the most to lose from ethanol mandates. They already have to buy their feedstock (oil), so if they make ethanol they just buy a different feedstock, corn, and they get to sell a mandated product.

In February, Valero became the first major refiner to buy up assets of an ethanol company; bankrupt ethanol producer Verasun. Following the Valero purchase, Sunoco picked up the assets of another bankrupt ethanol company. If ExxonMobil ever decides to get involved, they could buy out the entire industry.

9. The climate wars heat up

There were several big climate-related stories in the news this year, so I decided to lump them all into a single category. First was the EPA decision to declare CO2 a pollutant that endangers public health, opening the door for regulation of CO2 for the first time in the U.S.

Then came Climategate, which gave the skeptics even more reason to be skeptical. A number of people have suggested to me that this story will just fade away, but I don’t think so. This is one that the skeptics can rally around for years to come. The number of Americans who believe that humans are causing climate change was already on the decline, and the injection of Climategate into the issue will make it that much harder to get any meaningful legislation passed.

Closing out the year was the United Nations Climate Change Conference in Copenhagen. All I can say is that I expected a circus, and we got a circus. It just goes to show the difficulty of getting countries to agree on issues when the stakes are high and the issues complex. Just wait until they try to get together to figure out a plan for peak oil mitigation.

10. Exxon buys XTO for $41 billion

In a move that signaled ExxonMobil’s expectation that the future for shale gas is promising, XOM shelled out $41 billion for shale gas specialist XTO. The deal means XOM is picking up XTO’s proved reserves for around $3 per thousand cubic feet, which is less than half of what ConocoPhillips paid for the reserves of Burlington Resources in 2005.

Honorable Mention

There were a number of stories that I considered putting in my Top 10, and some of these stories will likely end up on other Top 10 lists. A few of the stories that almost made the final cut:

The IEA puts a date on peak oil production

The statement they made was that barring any major new discoveries “the output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis.”

AltaRock Energy Shuts Down

Turns out that deep geothermal, which the Obama administration had hoped “could be quickly tapped as a clean and almost limitless energy source” – triggers earthquakes. Who knew? I thought these were interesting comments from the story: “Some of these startup companies got out in front and convinced some venture capitalists that they were very close to commercial deployment” and “What we’ve discovered is that it’s harder to make those improvements than some people believed.” I am still waiting to see a bonafide success story from some of these VCs.

The biggest energy bill in history was passed

In total, $80 billion in the stimulus bill earmarked for energy was a big story, but I don’t know how much of that money was actually utilized.

The Pickens Plan derails

The website is still there, but the hype of 2008 turned into a big disappointment in 2009 after oil prices failed to remain high enough to make the project economical. Pickens lost about 2/3rds of his net worth as oil prices unwound, he took a beating in the press, and he announced in July that we would probably abandon the plan.

So what did I miss? And what are early predictions for 2010’s top stories? I think China’s moves are going to continue to make waves, there will be more delays (and excuses) from those attempting to produce fuel from algae and cellulose, and there will be little relief from oil prices.

December 24, 2009 Posted by | biodiesel, China, climate change, ethanol, ExxonMobil, geothermal, global warming, Media coverage, natural gas, oil consumption, oil demand, oil prices, oil refineries, T. Boone Pickens, valero | 27 Comments

Let the Data Do the Talking

Although not always successful, my goal is to let data drive my conclusions. Still, we all sometimes find ourselves in debates that are based more on passion and conviction than on data. But if the data are ignored because the conviction is strong, it may be dogma driving the conclusions.

Passionate debates are fine, but passionate debates that ignore data have no business in a scientific discussion. Further, such arguments frequently degenerate because one or both sides is not listening to the other.

During such emotional debates, I have been accused of being a shill for oil and gas, or of being a shill for biomass. In fact, in the debate I will discuss here, I was called both in the same thread! I am pro-biomass. I am anti-biomass. I love the environment. I want to destroy the environment. I am a Conservative. I am a Liberal.

The thing is, my world is not a black and white place. In the right hands, a screwdriver is a handy tool. In the hands of an enraged person, it can be a weapon. Same tool, vastly different outcomes, depending on how it is used.

Biomass is also a tool in which the outcome depends on lots of different factors. And even then the answers to the questions don’t always lead to the same conclusions for everyone.

Here is what I mean by that. People die in car crashes every year. So one reaction to that is “If you don’t want to die in a car crash, then don’t ride in a car.” That is true. That is one response.

But one must then consider the impact of that response:

  • “How would this impact your mobility?”
  • “Would you still travel places, and if so, how?”
  • “Is there a bike path that you could utilize, or would you give up your automobile only to risk your life cycling next to a busy highway?”
  • In other words, what secondary conclusions result based on the response to the initial question? But another approach is to reexamine the initial question:

  • “Why do people die in car crashes?”
  • The answer may be that most people die in car crashes due to very specific issues that can be mitigated. That is not to say that this will eliminate your risk of dieing in a car crash. But if I determine that 63% of the people who die in car crashes were not wearing seat belts, then I can always wear a seat belt and improve my odds of surviving a car crash.

    This is the approach I try to take with science issues. Frequently the answers to questions are not definitive, and instead depend on any number of conditions. And in the end there will still be disagreement. Some people may feel that a 1% risk is acceptable, but that may be 100 times too high for the next person on the very same issue.

    When someone is letting their emotions drive the argument, I try to get them to confront the data. If the answer is “It won’t fit”, then I either want to see that it doesn’t fit, or I want to measure it. This was the approach that I attempted to take with Joshua Frank, the author of – Burn a Tree to Save the Planet? The Crazy Logic Behind Biomass.

    Following my recent critique – Biomass is Not Crazy Logic – Frank dropped by and left a number of comments. Not everyone wades through the comments, and the comments are really not designed for prolonged exchanges. Further, these essays are often picked up and reposted without the comments. So I thought it might be worthwhile to extract some of the comments here. (The complete responses can be found following my initial essay).

    Frank’s argument can be distilled down to this: Citing Professor Tim Searchinger, Frank argues that burning biomass creates a net addition of carbon to the atmosphere. Burning biomass creates the danger that we will cut our forests down and inefficiently turn them into energy. Burning biomass creates emissions. Therefore, the burning of biomass is crazy, and it must be stopped.

    My response can be distilled down pretty easily. I actually agree with Searchinger that there are lots of factors that have to be evaluated in the biomass/bioenergy equation. Searchinger’s point is to show that the improperly used screwdriver can be a weapon. Frank then extrapolates that position to: A screwdriver is a weapon, and therefore we must stop the spread of screwdrivers.

    Frank cites Searchinger, but Frank’s extrapolations are subjective and qualitative. Numbers are missing from Frank’s analysis. Conclusions are sweeping and rigid. He argues that there is only one way to do biomass: The wrong way.

    In the real world, the burning of biomass can present the risks Mr. Frank cites. But where Mr. Frank goes wrong is that he believes that it must present those risks. That logic does not follow. Responsible management of biomass resources can have the opposite impact of what Mr. Frank suggests.

    In the back and forth that ensued, Frank seems to be unaware that the issues he raises are known issues; that while he is bemoaning them as a reason to surrender, some are out there working on solving them.

    A perfect example of this was his frequent argument that “burning biomass creates particulate emissions.”

    JF: “Burning woody biomass produces PM25, the most deadly form of particulate matter. This is a serious public health threat. Even if you believe that biomass is carbon neutral, you cannot skate around this important, well-documented fact.”

    Regarding this issue that Frank kept trying to educate me on, here are some excerpts from a book chapter that I recently completed on Bioenergy and Biofuels from Woody Biomass:

    RR: The majority of the wood used for cooking is done over an open stove. This is an inefficient process, leading to excessive consumption of wood. Open cook stoves also result in particulate emissions. Excessive pollution from wood cooking has been identified as a risk factor in acute lower respiratory infection, the chief cause of death in children in developing countries (Smith 2000).

    So I am well aware of the particulate emission issue with biomass burning. But here was the next paragraph, in which I discussed mitigation of the particulates problem:

    RR: Modern biomass stoves have been developed that are much more efficient with respect to wood utilization. These stoves can mitigate some of the problems associated with cooking over an open fire. By operating more efficiently, the money spent for fuel, and/or the time spent collecting fuel is diminished, as less fuel is required. Because combustion is more efficient, the air pollution associated with open fires is also diminished. Due to the multiple advantages of moving to modern biomass stoves, a number of programs have emerged with the intent of disseminating these stoves to the developing world (Barnes 1994).

    In another section, I wrote:

    RR: As with wood for cooking, one disadvantage from using wood for heating is the high level of particulate emissions. Open fireplaces also suffer efficiency losses from heat exiting the chimney. The development of community advanced combustion systems (AWC) has the potential for allowing increased usage of wood for heating, because of increased efficiency and lower particulate emissions.

    So Frank is aware of a problem, but is unaware that this sort of problem can be mitigated if the framework is in effect to mitigate it. This problem has a solution, albeit many have not adopted the solutions. Frank only sees a problem.

    The biggest hang-up, though, was probably around energy balances. There was quite a bit of “it takes a lot of energy to cut trees down and haul them out of the forest.” Again, there were never any numbers associated with these kinds of comments (except for the ones I provided). I guess if you use phrases like “diesel-powered” a lot, you can infer that the energy balance is bad without ever having to crunch the numbers.

    As I told Mr. Franks, the various energy inputs in the logistical chain of taking a tree from the forest and getting it to a processing facility – or the energy inputs in the conversion process itself – are available and are used in life cycle assessments regularly. “A lot of energy” for me has numbers associated with the claim. So instead of arguing about “a lot of energy used to harvest and transport” and that no biomass process can overcome that, why not attempt to quantify that?

    Back to the chapter I just completed, I wrote a section called “Net Energy Considerations.” Here is an excerpt from that section:

    RR: When calculating the energy that one could extract from a resource, it is important to consider the energy inputs into the process, as well as the types of energy inputs.

    In that section, I spent a bit of time explaining that the net energy of a process can easily be negative, and those processes are not sustainable. I concluded that section with:

    RR: Consideration of energy inputs also highlights one of the shortcomings of biomass relative to petroleum: The energy density for biomass is much lower; less than half the energy density of oil. This is due to the fibrous nature of biomass, and the fact that the moisture content tends to be high. This has implications for recoverability of wood resources. In general, the lower the energy density of the feedstock, the closer it needs to be to the processing facility due to the energy required for transport. Economical technologies that can efficiently increase the energy density of biomass in the field are needed. Some are currently under development and will be discussed in this chapter.

    So yes, I am aware of the relationship that energy inputs have on the sustainability of the system.

    At one point Frank did actually use some numbers to show that it takes longer to grow a tree than it does to burn a tree:

    JF: “A large tree that took 20 years to go (GE trees would be less) may burn in 17 seconds (after chopped to fine pieces).”

    This must be a key concept for him, because he actually pointed it out three different times. At one point he referred to this as a fundamental fact. This leads him to the conclusion:

    JF: “Trees will be burned at a far quicker rate than it takes to replace them.”

    As a rebuttal to his “fundamental fact,” I point out that the tomato it took 60 days to grow is eaten in 5 minutes. Therefore, tomatoes are eaten at a far quicker rate than it takes to replace them and the eating of tomatoes must be stopped before they are wiped out?

    Frank made a number of other unsupported arguments such as:

  • JF: “Biomass in the US means deforestation in our national forests. Period.”
  • JF: “Almost 99% of biomass to electricity plants in the US are also burning coal or trash. That’s a huge problem.”
  • JF: “If we are going to promote biomass as a renewable, we are looking at large scale deforestation.”
  • JF: “Trees simply do NOT make for good sources of biomass for electricity. Woody debris is not a dense energy source like coal (I’m not suggesting coal is the alternative). That’s why, as you know, power plants are using other fuels with biomass to produce energy.”
  • JF: “There is no such thing as good forest management when profit is involved.”
  • It’s like arguing that red is the best color. Put some numbers to it and let’s measure it. Are 99% of biomass to electricity plants really burning coal or trash? What is the source of that claim? Or is that simply hyperbole over coal plants that have started to supplement with biomass?

    I kept wondering if he ever gave any thought to what would happen if we abandoned the use of biomass for fuel. I can tell you what would happen: In the U.S., the future would be coal until we run out of coal. (To be perfectly honest, that’s probably the case anyway). That is reality. Sure, there’s nuclear, but something tells me that this wouldn’t be his preferred outcome. In developing countries, it would eliminate the particulate emissions problem because huge numbers of people wouldn’t have any fuel for cooking.

    At one point Frank brought up the threat of genetically modified organisms (GMO). I pointed out that while my company doesn’t use genetically modified trees, I am not personally opposed to genetic engineering in principle. Nature has been genetically modifying organisms since the beginning of time, and everything we eat has been genetically modified. Every mutation (even those that aren’t expressed) is a naturally-occurring experiment in genetic engineering. This was his response:

    JF: If you are not opposed to GE (and no, cross-breeding and hybridized plants are not genetically engineered, stick to engineering because your biology stinks) then I can’t help you. GE is new to the cycle of evolution.

    That line of argumentation is certainly a tangent, but countless people are alive today as a result of genetic engineering. Incidentally, I appreciate his concern, but it isn’t my biology that stinks. I wrote that nature has been doing genetic modifications forever. That is a fact. Frank was the one who translated that as “cross-breeding and hybridized plants.” He may want to look into genetic mutations, because cross-breeding and hybridization aren’t the only things that have changed the genetics of our food.

    Ultimately when I continued to challenge his replies, it went the way emotional-arguments often go. Because I failed to yield to his subjective arguments, he concluded that I couldn’t be motivated by the science. So he threw out a couple of ad homs

    JF: You get paid to do it. Makes much more sense why you will not address the real dangers of biomass production.; You are motivated by factors other than hard science. Biomass = paycheck. I get it.

    – and then left. In light of what he actually wrote, I found the phrase “hard science” especially ironic. Maybe I misunderstood and he was simply complaining that the science is hard?

    For the record, I don’t get paid to promote biomass. I don’t get paid to write at all. I write because I like to, and I am focused on biomass because I think it is going to have to play an important role in our energy future. It can’t be the sole solution – and I have argued the point many times that it can only replace a small fraction of our fossil fuel usage – but every analysis I have ever done suggests that it must be a part of the solution.

    At the end of the day, I try to be practical. I frequently hear people suggest that what really needs to happen is to reduce the global population by 95%. My eyes just glaze over. Those are the sorts of things that are not going to happen by politics or decree. It is navel-gazing to sit around and argue about “solutions” like this. Better to focus on solutions in the context of what is likely to actually take place once the politics have been factored in.

    This is how I view biomass. Frank can spend his time dogmatically arguing that it must necessarily be a disaster. But what is likely? It is more likely (in fact, it is certain) that we are going to continue down this path. Therefore, I think a much more productive use of time is to ask “How do we do it right?”

    References

    Barnes DF, Openshaw K, Smith KR, van der Plas R. (1994). What Makes People Cook with Improved Biomass Stoves? A Comparative International Review of Stove Programs. Washington, DC. The World Bank.

    Smith, K., Samet, J., Romieu, I., and Bruce, N. (2000). Indoor air pollution in developing countries and acute lower respiratory infections in children In: Thorax. June; 55(6): 518–532.

    December 21, 2009 Posted by | biomass, biomass gasification, climate change, global warming | 99 Comments

    German Robot Pigs

    “What I need for this project”, I explained to my young son, “is an army of German robot pigs.” His eyes went wide. “And I know just where to get them…”

    I have a project on my desk right now to look at avenues of disposal for sewage sludge in a specific location. There are lots of things you can do with sewage sludge, but it is obviously dependent on a number of factors. There are places where farmers spread it on their fields, there are places where it is incinerated, and there are places that it is land-filled. And there are other options beyond that.

    In order to utilize sludge for energy, the water content is obviously critical. Too much water, and any energy you create from the sludge is lost due to the need to dry the sludge. So what I really needed in this specific case was a method of drying that could help generate net energy from the project.

    Obviously you could just spread the sludge out in a sunny location, but there are many problems with that. One good rainstorm can ruin a week’s worth of drying and create a brown river to the nearest waterway. Further, as the outside layers dry, the drying slows down unless the sludge is constantly mixed.

    I thought that this particular situation could benefit from a solar dryer. I am familiar with solar kilns and solar ovens, so why not a solar sludge dryer? I envisioned a system like a greenhouse that allows the sludge to dry, but also ventilates and removes the moisture. Several of the functions would need to be automated if this has any hope of being economical.

    So I thought “Hmm, I wonder if anyone has invented such a system.” Since about 98% of anything that I ever think of has already been invented, I Googled it. Turns out that there are lots of solar sludge dryers to choose from, but one in particular caught my eye. Enter the German robot pig:

    German robot pig the star of sludge drying plants

    A group of young, up-and-coming German scientists in the late 1990s founded a company that today is the world leader in solar sludge drying. The star of the environmentally friendly drying process is an unusual pig that works all day without food or complaint.

    What would a machine look like if it lived in the mud? Well, probably like a pig. Some 12 years ago, Tilo Conrad, together with two of his fellow students from the University of Hohenheim, built the first electrical pig, pioneering a device that is now being used as a solution to waste disposal problems throughout the world.

    The stainless steel pigs, which in a sense resemble big beetles, are an important part of a larger solar drying process was patented by Thermo-System GmbH, a company Conrad founded in 1997 in Filderstadt.

    Today, nearly 200 mechanical pigs do what normal pigs do: wallow in and shuffle through the mud — only these pigs do it to reduce sewer sludge disposal costs and protect the environment. Conventional drying processes use non-renewable energy, but Thermo-System’s process harvests solar power to dry the mud. It spreads the wet sewage sludge into sheds that are similar to greenhouses and puts the pigs to work.

    In the sheds, the sludge absorbs heat from the solar rays and an innovative ventilation system keeps the air inside the shed warm and dry. The electrical pig, which is a fully automated robot complete with stainless steel mixing tools, tills and aerates the microbiologically active sludge, thereby accelerating the drying process. The whole system is fully automatic, uses very little energy and can be easily maintained.

    Alas, another invention that someone thought of 10 years before I did. But this system really has many of the characteristics that I am looking for. Whether the economics pan out is still entirely unclear. The company does have an impressive project portfolio, though, having already built over 100 sludge-drying plants worldwide.

    But one doesn’t get a chance to work with an army of German robot pigs every day, so I will continue to investigate and maybe this works out. Besides, that sounds so much more interesting than “I am working on sewage sludge.”

    December 20, 2009 Posted by | solar drying, solar thermal | 18 Comments

    American Freedom from Oil: A Bipartisan Pipedream

    The following guest essay is by Kevin Kane. Kevin is a market analyst, economist, Asia political affairs strategist, and Korean language linguist living in Seoul, South Korea.

    American Freedom from Oil: A Bipartisan Pipedream

    By Kevin Kane

    During election campaigns, presidential candidates, policy leaders, and pundits pander to both American fears and desires when they demand that the U.S. should pursue “energy independence” by eliminating oil imports. This has been a rallying cry of every President since the 1970s when American domestic production began a steady decline that continues through today.

    Is energy independence a realistic policy, or as we are a part of one globally integrated economy, do we need a more relevant global energy strategy that captures the inherent economic and financial vulnerabilities associated with our age of irreversible interdependence?

    Perhaps we need to look outside our domestic tunnel vision and broaden our perspectives on energy security. Seeing the bigger globalization picture will require leaders, starting with President Obama, to refocus the world’s perspective on energy from the zero-sum national to positive-sum international level. Essentially, the world needs a global energy strategy.

    Global Energy Security

    If leaders are serious about energy independence, they will ask the more appropriate energy question, “How can we create global energy security?”

    When asking this more relevant question, we can derive many proposals, beginning, but not limited to, the following three general approaches:

    (1) First, recognizing that global economic integration creates mutual energy insecurity, President Obama could propose addressing the topic through the G20, and call for the creation of a global energy security committee tasked to draft a global energy strategy proposal.

    (2) Second, this global energy strategy should focus on building cooperation, creating transparency, eliminating barriers to foreign energy investment, eliminating energy trade-related tariffs, advancing liberalization, coordinating R&D, facilitating technology sharing, and managing mutual energy insecurity.

    (3) Third and finally, we have to cease “framing” energy security as a national goal, and rephrase our terminology to reflect our mutual international energy insecurity.

    Our Oil Interdependence

    American leaders, and the proposals of many environmental, renewable energy, and oil company lobbyists, individually or collectively, are incapable of “freeing the U.S. from foreign oil.” While the U.S. may benefit from reducing oil imports and increasing investments in offshore drilling, energy efficiency, and oil substitute technology, we must recognize that these efforts do nothing to free the American economy from oil’s transnational social, economic, and financial linkages.

    If one globalization-connected country’s economy were to experience a supply shortage or an industry-crippling price shock, seemingly distant and unrelated, but economically integrated, countries will feel the effects of these shocks in their own trade and financial sectors. Thus, in an era of globalization, nations connected to the global economy are mutually vulnerable to the effects of oil price and supply shocks regardless of their independent national energy strategies.

    Consider how America’s subprime mortgage crisis rippled through seemingly unrelated economies across the entire globe, from South Korea to Russia. We should expect the same economic-linkages to spread the effects of an oil supply or price shock to seemingly energy-independent economies.

    American policy leaders need to recognize that eliminating oil imports will not create energy independence.

    Leader of the Energy World

    As the tip of the globalization spear, American leaders need to think much bigger about how the U.S. will achieve energy security in a world where one nation’s energy insecurity is another seemingly unrelated nation’s economic vulnerability. American leaders have to recognize that the U.S. is only as energy secure as the world’s least energy-secure globalization-connected economy, which includes nearly every developed and developing country in the world. Americans pride themselves on being the leaders of the free world. Perhaps it is about time to lead the world towards universal energy security.

    Biography

    Kevin Kane is a market analyst, economist, Asia political affairs strategist, and Korean language linguist living in Seoul, South Korea. Kevin holds a BA in political science from Georgia State University and a Master of International Studies with a concentration in international trade and economics from Seoul National University.

    Kevin has seven years of military experience serving in Asia and the U.S. as a leader in project management and government affairs, two years of intensive academic study in energy economics and the oil and gas industry, and three years of cumulative internship, fellowship, and consultant experience working alongside Asia policy strategists and fortune 100 business advisors. More details can be found in his resume here.

    December 19, 2009 Posted by | energy independence, energy security, globalization, guest post | 36 Comments

    Keep Your Eye on DME

    Di-methyl-ether (DME) is a fuel that I have been talking about since at least 2006. I have blogged about it, and I have classified it in several of my presentations as a “Sustainable Contender” (including in a slide at last year’s ASPO conference). I want to use this post to explore DME in a little more detail, and explain why I think you should keep an eye on it as an attractive renewable replacement for diesel.

    DME is a pretty simple compound. Methane, the least complex hydrocarbon, has the chemical formula CH4. That is one carbon atom bonded to four hydrogen atoms. When methane is burned – which is to say reacted with oxygen – it produces carbon dioxide (CO2) and water (H20).

    DME can be thought of as a couple of methane molecules with an oxygen separating them. It looks like this: CH3 – O – CH3. This is an ether; in fact the simplest ether (characterized by the oxygen separating two hydrocarbon groups). Note that each methane (methyl) group is missing one hydrogen, which allows it to form the bond with oxygen. But when DME is burned, you still end up with carbon dioxide and water.

    DME is produced from methanol, the simplest (and cheapest) alcohol. The current price for methanol as listed by Methanex is $1.10/gal, compared to a national average rack price of $2.26/gallon for ethanol and a national average spot price of $1.83/gallon for gasoline.

    Methanol works fine as a transportation fuel, but has some disadvantages. While methanol is cheaper to produce than ethanol, the energy content per gallon is even lower than for ethanol (and methanol is more toxic). Ethanol has about 2/3rds of the energy content of gasoline, but methanol contains only half the energy content of gasoline. As a transportation fuel, this is a disadvantage (but not a knockout) because it limits the range of your car.

    As a fuel, DME can be used in either a gasoline or a diesel engine. That makes the potential market huge. DME is a gas at room temperature, but compresses to a liquid under mild pressures. It is currently used as a propellant in many consumer products, and is classified as non-toxic and non-carcinogenic. (Granted that if you stand around in a room filled with nothing but DME, you will die due to oxygen deprivation. The same is also true of nitrogen, which makes up 79% of our atmosphere).

    DME is completely miscible with LPG, and can be used as a supplement/replacement in either transportation or heating applications. When combusted, DME burns very cleanly. There are no associated sulfur or particulate emissions (even in a diesel engine).

    DME can be produced from biomass, coal, natural gas, or essentially any source of carbon. Unlike many ‘next generation’ biofuels, production from biomass is a straightforward route and not especially complex. You gasify biomass to produce syngas, react syngas to produce methanol, and then dehydrate the methanol. Each of these steps takes place every day at large scale at chemical companies around the world.

    There are some specific disadvantages from DME, but this is true for just about any fuel. First, the fact that it is a gas at room temperature means that if there is a leak, it can form an explosive mixture in the air. The same is true for natural gas or LPG. Second, the energy density of the fuel is lower than for gasoline or diesel. The volumetric energy density lies between that of ethanol and methanol.

    So why aren’t we using it in North America? Like many other fuels, it is a chicken and egg problem. We don’t have the infrastructure in place in the U.S. Some vehicle modifications would be required to accommodate it as well. But these are not insurmountable problems, as the continuing roll-out of E85 vehicles and service stations has shown.

    The Chinese have embraced DME for years, and are increasing their DME capacity. This allows them to convert their coal into something much more desirable for them – transportation fuel.

    The Swedes are also at the forefront of rolling out DME. The Swedish company Chemrec has been converting pulp mills into biorefineries that produce DME. Volvo has announced that they are conducting studies on the performance of DME in 14 of their heavy trucks over the next two years. (Here is another story on that at Green Car Congress).

    In North America, I know several people or groups who have expressed interest in, or are dabbling with DME. My expectation has been that at some point there will be an entry into the market here, but it will be slow due to the aforementioned lack of infrastructure. What prompted me to write this essay was I spotted a story yesterday about a Canadian company that is going to give it a shot:

    Dimethyl ether: The unknown fuel that’s gaining fame

    A clean fuel that’s already gaining traction in Asia could be getting a toehold in Canada, just in time to help northwest B.C.’s hard-hit forest industry. Dimethyl ether, or DME, is almost unknown in North America but may soon get a big boost here from new tough emission standards coming to the U.S.

    DME is a mixture of hydrogen and carbon monoxide that can be produced from biomass, natural gas or coal. It is now used as a propellant in aerosol spray cans because it is non-toxic and breaks down. But DME also has the potential to replace diesel fuel because it produces 95 per cent fewer greenhouse gases, no soot, low levels of nitrogen oxide and no sulphur dioxide.

    Calgary-based GV Energy is proposing to build a biorefinery to produce DME in Terrace, B.C.

    While some of those details are slightly inaccurate, the article is a good read on how DME can fit into the fuel mix and add jobs in an area with the right resource base. Especially interesting to me is to view the comments from readers. I find it amazing at times the emotional attachment some people have to trees. I can understand opposition to the conversion of forest to pasture or agricultural land. I can understand the opposition to clear-cutting and not replanting. But it seems that to some people, cutting down a tree is just wrong. Period. This coming from people who are living in houses made from wood.

    If we use managed forestry to produce DME, then that has the potential to be an improvement over the status quo. Like anything else, there is a right way and a wrong way. But just because a wrong way exists doesn’t mean that you don’t try at all. We (my company) are not going stop trying to responsibly manage and use forest assets just because some aren’t doing so. We will just continue to do things in the most sustainable way we can, and hope that the proper incentives are in place to make sure others do so as well.

    But I digress a bit. To learn more about DME, see this presentation put together by Europe’s BioDME project. Note especially the slide that shows the land usage efficiency of DME relative to competing fuels.

    The market for DME is bound to continue growing due to its versatility as a fuel and because it can be produced relatively easily from a wide variety of starting materials. The question is whether North America will continue to watch that growth occur in Europe and China.

    Update: I have received a note that another BC company is also working on DME: Blue Fuel Energy.

    December 18, 2009 Posted by | DME, Sweden, Volvo | 34 Comments

    Platts Survey of Top Energy Stories of 2009

    As I compile my year end list of the biggest energy stories of the year, I have just gotten an e-mail from Platts that is very helpful. As they have done in previous years, they have a survey up so readers can rank the top stories:

    Platts wants to know: the biggest oil stories of ’09

    They will publish the results shortly after Christmas. Scanning the list and comparing to my rough draft of the Top 10, I see one story that isn’t currently on my list that I missed: The Valero Foray into Ethanol. Other than that, all of the stories that I have tentatively in my Top 10 are on their list except for two (and I bet people who take the survey will suggest both of them).

    I will post my list prior to Christmas, and hope that we don’t see another big year end story like the XOM acquisition of XTO. That is a Top 10 story that came in right at the end of the year. Here is how I ranked the stories Platts had listed, but this was off the top of my head and very subjective. I may decide later on that #3 should really be #8, or that something that didn’t make the list should really be on there. My Top 10 will be a bit different because I have combined some topics that they treated separately.

    1. Prices (basis WTI) comes roaring back to the $80 level after almost hitting $30
    2. Full-year decline in demand heads toward biggest drop since 1981
    3. Natural gas-crude spread in US blows out to unprecedented levels
    4. Refinery woes: Valero shuts Delaware City , Sunoco shuts Eagle Point, Repsol shuts Cartegena, Japan cutbacks underway (RR: related to Reliance news)
    5. Valero makes big foray into ethanol with multiple ethanol plant purchases; Sunoco follows on smaller scale
    6. EU slaps duties on US sales of biodiesel into Europe
    7. OPEC holds to its 24.845 million b/d ceiling all year
    8. US EPA rules greenhouses gases are a threat to public health, plans on using authority to regulate them
    9. ExxonMobil gets into bidding war with Chinese, others over Ghana stake (RR: more for what it signals for the future).
    10. Exxon buys XTO for $41 billion

    December 16, 2009 Posted by | Media coverage, oil demand, oil prices, Platts | 20 Comments

    Biomass Is Not Crazy Logic

    I saw a story about a week ago that I flagged to comment on when I got caught up. I suppose I am caught up enough now to do so. The story is:

    Burn a Tree to Save the Planet? The Crazy Logic Behind Biomass

    The author is listed as Joshua Frank, described as an environmental journalist and the author of Left Out!: How Liberals Helped Reelect George W. Bush. Frank has previously written an article critical of Oregon’s usage of electricity derived from coal, and in the current essay he turns his attention to biomass.

    The article is confusing from the start:

    It might seem crazy that anyone would even consider the incineration of wood and its byproducts to be a green substitute for toxic fuels such as coal. Yet that’s exactly what is happening all over the country, and it has many environmentalists scratching their heads in disbelief.

    I find those comments baffling. Why would it seem crazy to believe that burning biomass – which utilizes CO2 when it is growing and helps sequester carbon in the soil through the root systems, leaves, and slash – would be greener than burning a fossil fuel like coal that has a long list of potentially undesirable environmental impacts? Do you know what happens to waste biomass that isn’t utilized? It decomposes and ends up as the same CO2 it would end up as if you burned it.

    While it is true that emissions controls on coal-fired power plants are much improved in recent years, it is also true that burning coal has resulted in acid rain and increased levels of mercury in our waterways. Burning coal also increases the concentration of CO2 in the atmosphere. To suggest that burning trees isn’t greener than burning coal is one of the most ludicrous things I have ever heard. From the tone of the article, it sounds as if the author believes that forestry and the harvesting of trees is by definition bad.

    Now it is true that if you cut down an old growth forest and inefficiently turn it into a liquid fuel, that isn’t environmentally responsible. I could certainly envision any number of schemes to make the burning of biomass come out with a higher environmental impact than from burning coal. If I cut down a chunk of the Amazon, displace the people and the wildlife living there, ship the wood halfway around the world, and combust it in an old, inefficient boiler – then yes, the environmental impact of that would be higher than from burning Powder River coal. But such exceptions aren’t the norm. This article, however, paints with a very broad, one-sided brush and acts as if all usage of biomass is by definition bad:

    NASA’s James Hansen says that the burning of coal is the single largest contributor to anthropogenic global warming, so any alternative fuel source must decrease the amount of carbon dioxide (CO2) released into the atmosphere if we are to put the breaks on climate change. Biomass, despite its label as a renewable energy source, does not solve the problem because burning trees actually emits a large amount of CO2.

    That is another very odd comment. Burning coal releases ancient CO2 that was sequestered away. Burning biomass releases recently recycled CO2. That’s why it is renewable. If the author is concerned about CO2 emissions – and he clearly is – then coal and biomass are night and day. And while they acknowledge in their next paragraph that this is what “proponents counter with”, Frank quickly tries to shoot that one down:

    An article in Science released last October attempted to debunk the myth that biomass is a good alternative to traditional coal and oil burning. The study, authored by climate scientists, claimed that when an existing forest is chopped and cleared to produce fuel, the ability of those harvested trees to absorb CO2 is eliminated entirely while the amount of greenhouse gases in the atmosphere actually increases.

    This entire article seems bent on the notion that the biomass we utilize will come from old growth forest that is slashed, burned, and left fallow. The people interviewed for the article must envision a scenario like turning the Amazon into biofuels – and this is the future they must foresee for biomass to come up with these sorts of conclusions. Such a notion isn’t remotely indicative of the future of biomass. Biomass will be grown for purpose (as I explained in Don’t Weep for the Trees), and it can definitely be grown responsibly and sustainably.

    “The game is up,” stated biomass skeptic Ellen Moyer, a principal of green engineering firm Greenvironment, after the release of the report. “The problem has been identified, and the clarion call for course correction has rung out around the world. The days of biomass burning … are numbered and pending legislation needs to be corrected before perverse incentives to burn our forests are enshrined in law.”

    You will have to show me the laws that incentivize the burning of our forests. If you mean laws that incentivize the usage of biomass for energy – well that isn’t the same as burning our forests. You first grow the forest, and while that is taking place everything you are complaining about when you burn it is running in reverse. Oh, there can be particulate emissions from improper burning, but it is also true that proper forest management can result in improved soil and increased carbon sequestration in the soil.

    Another problem with biomass is that it is typically mixed with substances like coal to produce energy. In Nevada, for example, NV Energy is set to use a mix of coal and wood at its Reid Gardner coal-fired power plant. As a result, the company hopes to qualify for the state’s renewable energy credits.

    The first problem is that this isn’t true. That is not how biomass is typically used. It can only be blended with coal in small amounts due to differences in chemical and physical properties, and it requires a substantial investment in the coal plant to allow such mixing. There is a technology called torrefaction that has the potential to allow much greater mixing, as it converts biomass into something like bio-coal. But torrefaction is still mostly at a pre-commercialization stage.

    If a coal-fired power plant receiving energy credits isn’t mind boggling enough,…

    Why is that mind-boggling? You just wrote that they were going to use wood to displace coal. Why wouldn’t they qualify for the same energy credit anyone else gets for using biomass? Or do you prefer that they simply continue to use 100% coal?

    “They are burning more than trees because wood is simply not a good energy source,” said Jeff Gibbs, who resides in Michigan and is fighting the state’s six operating biomass plants. “Look, wood produces 50 percent more CO2 than coal, for the same amount of energy output. We have to stop this before more plants begin to pop up.”

    I am sorry, but that’s another ludicrous statement. I would really love to see the analysis that provided that figure.

    Not only is biomass not a good source of power, claims a 2007 paper presented at the European Aerosol Conference, it’s also not a healthy alternative to coal. The paper claimed that particulate matter (particles, such as dust, dirt, soot or smoke) was actually higher for a 7 megawatt wood gasification plant than it was for a large coal-fired power station.

    There’s that broad brush again. While it is true that wood gasification plants can have lots of particulate emissions, that is not an inherent quality. You can put the same pollution controls on them that you can on coal plants. So once again a bad starting assumption leads to a sweeping, but false conclusion.

    In summary, this was a very one-sided view that presented the worst extremes as more or less the status quo for biomass utilization. It is true that you can do things a right way or a wrong way. Water is healthy and I need it to live, but if I drink too much it can kill me. Taking a page from this article, I suppose I should avoid water from now on, as it has the potential to kill me.

    For those quoted in the article, I hope they don’t freeze to death in the dark as the biomass they are so opposed to rots and releases its CO2 anyway. As I tell people sometimes, if you are opposed to everything, then prepare to be happy with the status quo.

    December 15, 2009 Posted by | biomass, biomass gasification, climate change, global warming | 133 Comments

    Osmotic Power

    Did you ever wonder why the skin on your hands sometimes shrivels when you have them in water for too long? The underlying reason is called osmosis (a simple explanation in more detail below), and the same driving force is now being utilized as a power source.

    Occasionally I encounter an energy story that catches me by surprise because it is so far under the radar. This morning I got one of those from a friend who e-mailed and referred me to this story:

    The world’s first osmotic power plant opened!

    My immediate reaction was skepticism that you could really make osmotic power work as a viable energy source. But first a bit of background before readers’ eyes glaze over at the usage of unfamiliar terminology. Students of chemistry or biology will have encountered the concept of osmosis, and most people have heard of reverse osmosis for the production of fresh water from saline or otherwise contaminated water.

    In a simplified nutshell, water that is separated from a salt solution by a semi-permeable membrane (like a cell wall) will have a potential to migrate across into the salt solution – creating a pressure difference on the two sides of the membrane. (Lots of systems can create an osmotic pressure, but for illustration let’s focus on salt water and fresh water).

    Osmosis is a very important concept in biology, as it is the mechanism by which water moves in and out of cells. A blood cell, for instance, will lose water and shrink if it encounters an outside environment that is more saline (saltier) than the internal environment. Water moves through plants by this process as well.

    But to illustrate what is going on in the press release above, let’s talk about reverse osmosis. In reverse osmosis, a pressure is applied to the high salt concentration side to force fresh water back across the membrane – leaving the salt behind. The applied pressure must be greater than the osmotic pressure, or the fresh water will migrate to the saline side.

    Now imagine that system in reverse. There is a saline solution on one side of the membrane, and it is allowed to build pressure from the migration of the fresh water across the membrane into the salt water. The build up of pressure – in this case osmotic pressure – could in theory be utilized for energy.

    Imagine the way a dam works. Water pressure forces the water through a turbine, which generates electricity if it is coupled to a generator. If the osmotic pressure is likewise allowed to relieve through a turbine, then yes, in fact it could be used to produce electricity. Such a system would indeed produce osmotic power.

    However, until this morning’s e-mail I had never heard of anyone actually building a system to do this. And I am skeptical that anyone can actually produce cost-effective electricity this way, because to generate a substantial pressure is going to require a lot of membrane surface area. A little bit of digging shows that the system above has a power output of only 4 kilowatts.

    To put that into perspective, there are numerous power plants with outputs greater than 1,000 megawatts – which is 250,000 times the size of this osmotic power demonstration unit. So while this is perhaps newsworthy due to the novelty, they must prove that they can economically scale-up, and that is always a big hurdle.

    One thing I wondered about as I read this article is whether it might not be more cost-effective to put in pipelines of fresh water to regions that are doing reverse osmosis of salt water. The idea being instead of using the fresh water in one location for osmosis and the salt water in the other for reverse osmosis, bypass the osmosis all together (reverse osmosis is very energy intensive).

    Update: A reader just sent a link that says that IBM is looking into this as well: Energy From Sea Water? Consider IBM Intrigued

    Footnote: I Googled the term “osmotic power” to see if that term had ever been used in this blog. My expectation was that it hadn’t, but I see that a reader linked to a story on this a couple of weeks ago in the comments following the story on OTEC (which I should be updating soon).

    December 14, 2009 Posted by | ocean thermal energy conversion, osmotic power | 16 Comments