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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

Biofuel Pretenders

Note

This article was initially titled “Pretenders, Contenders, and Niches.” However, the section on pretenders grew to the point that I have decided to split the essay up into three parts. The first part, Biofuel Pretenders, will cover many of the current media and political darlings. The second part, Biofuel Contenders, will discuss some options that have received less attention, but in the long term are more likely to have staying power. The final part, Biofuel Niches, will discuss situations in which some of the pretenders might actually work.

Reality Begins to Sink In

There was an interesting article in the Wall Street Journal this past week:

U.S. Biofuel Boom Running on Empty

A few pertinent excerpts:

The biofuels revolution that promised to reduce America’s dependence on foreign oil is fizzling out.

Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board.

Producers of next-generation biofuels — those using nonfood renewable materials such as grasses, cornstalks and sugarcane stalks — are finding it tough to attract investment and ramp up production to an industrial scale.

This all boils down to something I have said on many occasions: You can’t mandate technology. Just because you mandate that 36 billion gallons of biofuel are to be produced by 2022 doesn’t mean that it has a remote chance of happening. This is not a hard concept to understand, but it seems to have eluded our government for many years. The government would probably understand that they couldn’t create colonies on the moon in 10 years via mandate. They know they can’t cure cancer via mandate. But in the area of biofuels, they seem to feel like they can just conjure up vast amounts of hydrogen, cellulosic ethanol, or algal biodiesel.

Domestically produced biofuels were supposed to be an answer to reducing America’s reliance on foreign oil. In 2007, Congress set targets for the U.S. to blend 36 billion gallons of biofuels a year into the U.S. fuel supply in 2022, from 11.1 billion gallons in 2009.

Cellulosic ethanol, derived from the inedible portions of plants, and other advanced fuels were expected to surpass corn ethanol to fill close to half of all biofuel mandates in that time.

But the industry is already falling behind the targets. The mandate to blend next-generation fuels, which kicks in next year, is unlikely to be met because of a lack of enough viable production.

Most people don’t realize that the Germans were the first to produce ethanol from cellulose. That happened in 1898. For our political leaders and many industry boosters, cellulosic ethanol is a recent discovery, and thus they expect big leaps in the technology in the next few years. These expectations completely ignore the fact that researchers have been hard at work on making cellulosic ethanol a reality for decades – with little success.

In President Bush’s 2006 State of the Union address, he broadly expanded the mandate for ethanol. He voiced his strong support for cellulosic ethanol, and included billions of gallons in the Renewable Fuel Standard – as well as billions of dollars of financial support.

How quickly our politicians seem to have forgotten the 2003 State of the Union, in which Bush set forth his vision of the hydrogen economy:

A simple chemical reaction between hydrogen and oxygen generates energy, which can be used to power a car producing only water, not exhaust fumes. With a new national commitment, our scientists and engineers will overcome obstacles to taking these cars from laboratory to showroom so that the first car driven by a child born today could be powered by hydrogen and pollution-free.”

We spent some two billion dollars toward that goal. Once again, this ignored many technical and economic realities, and so in May 2009 the headlines read:

Hydrogen Car Goes Down Like the Hindenburg: DoE Kills the Program

The dream of hydrogen fuel cell cars has just been put back in the garage. U.S. Energy Secretary Steven Chu announced yesterday that his department is cutting all funding for hydrogen car research, saying that it won’t be a feasible technology anytime soon. “We asked ourselves, ‘Is it likely in the next 10 or 15, 20 years that we will covert to a hydrogen car economy?’ The answer, we felt, was ‘no,’” Chu said.

My prediction is that in the not too distant future we will start to see headlines like this for cellulosic ethanol. The troublesome barriers to commercialization are quite fundamental, and aren’t likely to be resolved by government mandate. If enough money is thrown at it, cellulosic ethanol will of course be produced. But it can never be a scalable, economic reality.

Pretenders

Broadly speaking, in the world of next generation biofuels there are contenders, pretenders, and niches. Over the past decade, we have thrown a lot of money at pretenders and have little to show for it. There are many reasons for this, but fundamentally I believe it boils down to the fact that our political leaders can’t sort the wheat from the chaff. If a proponent extols the benefits of hydrogen, cellulose, or algae – the politicians just don’t know enough to ask the right critical questions. They listen – often to the very people who will benefit from more funding – and then they allocate money. Billions of dollars and little progress later, they or their successors may begin to realize that they have been misled and they start to dial the funding back.

Here is how I define a next generation Biofuel Pretender: A company or group that makes grandiose promises about the ability of a technology to displace large amounts of fossil fuel, despite facing significant (and often unrecognized) barriers to commercialization.

Here are some examples:

Hydrogen

The poster child for the pretenders. Proponents ignored practical realities in many different areas, including fuel cell vehicles that cost a million dollars, the fact that most hydrogen is produced from natural gas, the fact that the energy density of hydrogen is very low, and the fact that there are multiple issues with hydrogen storage and transport. Technical breakthroughs were being counted on to solve these challenges. After all, we put a man on the moon. Surely we could solve these challenges.

The real problem is that the potential for success falls rapidly as the number of needed breakthroughs pile up. Imagine for instance that the following – cost of production, cost effective storage, and cost effective transport – each have a 25% chance of achieving commercial viability in the next 20 years. The total chance for success of all three in that case falls to 1.5% – so this is overall probability of success. Thus, the vast majority of technologies that require multiple technical breakthroughs will fail to materialize commercially except perhaps over a much longer period of time.

Cellulosic Ethanol

As was the case with hydrogen, this one requires multiple technical breakthroughs before commercial (unsubsidized) viability can be achieved. I won’t go through them all now, as I have covered them before. The fundamental reason that cellulosic ethanol won’t scale up to displace large amounts of gasoline is that the energy efficiency of the process is so low. You have the sugars that make up cellulose locked up tightly in the biomass – which has a low energy density to start with. So you add energy to unlock the sugar and turn it into ethanol, and then you end up with ethanol in water. More energy inputs are required to get the ethanol out. Even if the energy can be supplied by the by-products of the process like lignin, the net BTUs of liquid fuel that you end up with are going to be low relative to what you started with.

For example, assume you start off with 10 BTUs of biomass. You expend energy to get it to the factory, to process it, and then to get the water out. You burn part of the biomass to fuel the process, and input some fossil fuel. You might net something like 3 BTUs of liquid fuel from the 10 BTUs of biomass you started with.

Don’t confuse this with fossil fuel energy balance, though. If the external energy inputs in this example only amounted to 1 BTU of fossil fuel, one could claim a fossil fuel energy balance of 3/1. But that doesn’t change the fact the final liquid fuel input is a small fraction of the starting BTUs in the biomass.

This is analogous to the situation with oil shale, which is why I have compared the two. There may in fact be a trillion or more barrels of oil shale locked up in Colorado, Utah, and Wyoming. But if the extraction of those barrels required a trillion barrels worth of energy inputs and lots of water – then that oil shale might as well be on the moon. That means that a trillion barrels isn’t really a trillion barrels in the case of oil shale, and a billion tons of biomass is much smaller than it seems when talking about cellulosic ethanol.

So despite the claims from the EPA that the “Renewable Fuel Standard program will increase the volume of renewable fuel required to be blended into gasoline from 9 billion gallons in 2008 to 36 billion gallons by 2022” – that is not going to happen unless the government is willing to throw massive amounts of money at an inefficient process.

Algal Biofuel

Like many, I was initially enchanted by the possibility of weaning the world away from fossil fuels by using fuel made from algae. Proponents wrote articles suggesting that we could do just that, provided the necessary investments are made.

Sadly, the story is much more complex than that. The U.S. DOE funded a study for many years into the potential of algae to produce fuel. (For an overview of where things stand from John Benemann, one of the men who co-authored the close-out report of that study, see Algal Biodiesel: Fact or Fiction?) The problem is again one of needing to surmount multiple technical hurdles, and the close-out report states that reality. Again, I won’t go into those details, as that has been covered before.

While it is a fact that you can produce fuel from algae, the challenges are such that John has written that you can’t even buy algal biofuel for $100/gallon. He said that if you want to separate the reality from the hype, just try to secure a contract with someone to supply you with algal fuel.

First Generation Biodiesel

This story is primarily about 2nd generation fuels, and as such I won’t get into corn ethanol issues. But I will say a bit about biodiesel. As indicated in the Wall Street Journal story, conventional biodiesel producers are in trouble. Briefly, a conventional biodiesel producer is someone who takes vegetable oils or animal fats and uses methanol (almost all of which is fossil-fuel derived) and converts that into an oxygenated compound (called a mono-alkyl ester). This compound has been defined as ‘biodiesel’, and can be used – subject to certain limitations – in a diesel engine.

Again, the problems are fundamental. It takes a lot of effort (energy, cost) to produce most of the oils that are used as raw materials, and then you have to react with methanol – which usually contains a lot of embodied fossil fuel energy. Up til now, the first generation biodiesel producers have benefited from a high level of protectionism (to the extent of punishing the more efficient 2nd generation producers). But even with the protectionism and the subsidies, producers are still struggling to survive.

Miscellaneous

There are a number of miscellaneous pretenders that we probably don’t need to discuss in depth, such as various free energy schemes or water as a fuel. If you think you might be dealing with a pretender, one caution flag is when their promoters are from backgrounds that have nothing to do with energy. For instance, the person who founded the dot.com that ultimately morphs into an energy company is almost certainly a pretender who is chasing investment funds.

Summary

To summarize, the biofuel pretenders fall into several broad categories. The big ones are:

• Hydrogen

• Most would-be cellulosic ethanol producers

• Most would-be algal biofuel producers

• Most first generation biodiesel producers

This isn’t to say that none of these will work in any circumstances. I will get into that when I talk about niches. But I will say that I am confident that none of these are scalable solutions to our fossil fuel dependence. The problem is that political leaders have been, or are still convinced that there is great potential for some of these and we waste billions of dollars chasing fantasies. This is a great distraction, causing a loss of precious time and public goodwill as taxpayer money is squandered chasing schemes that ultimately will not pan out.

In the next installment, I will talk about contenders – options that I think can compete with fossil fuels on a level playing field.

August 31, 2009 Posted by | algal biodiesel, biodiesel, cellulosic ethanol, hydrogen, john benemann | 145 Comments

Answering Reader Questions 2009: Part 2

In this installment, I continue to work my way through the list of questions recently submitted by readers. This post picks up where Part 1 left off, and covers coal-to-liquids, technology hype, green gasoline, refining improvements, allocation of money toward renewables, electricity consumption, the Automotive X Prize, Big Oil, cellulosic ethanol, and Exxon’s recent algae announcement.

The Questions

Benny wrote: Arlington researchers’ work could lead to $35-a-barrel oil. Any chance of making oil from lignite? At these prices? Or are they just some guys who want research money? Answer

takchess wrote (and Doug also asked about): Thought this was interesting. If cost and technically feasible this would be cool.

Rive Technology Working to Increase Oil Refining Efficiency 7-9% by 2011 Answer

DDHv wrote: The new ionic liquid technique allows easier extraction of cellulose. Do you know if we have enough information yet to do energy and/or economic balances? If so, what are the present results? Improvements are likely, given the novelty of the technique. Answer

John asked: What do you think of pyloric conversion to make “green gasoline”? What are it’s peak lite and environmental ramifications? Specifically referring to an article in the Boston Globe RE: Anellotech and UMAss on July 13th: The greening of gasoline Answer

PeteS asked: How likely is money spent today on renewables to be wasted in retrospect because of “grey swans”? Obviously nobody can predict the future, but I’m thinking more in terms of, say, a plan to completely power a country from wind turbines, versus low-to-medium-probability dramatic improvements in wind-power within a decade or two. Answer

SamG wrote: I hear many theories about electricity consumption and the utility business model (sell more make more). Do you see any mechanism that puts suppliers in the loop for the reduction of consumption (not just demand reduction via passing through higher prices)? Answer

takchess asked: Any comments on this Urea fueled entry into the XPrize auto race?

Alternative Fuel Sciences Answer

John wrote: Americans are being “taxed” at a rate of 200 billion bucks a year to fund the U.S. Military to “baby-sit” the Strait of Hormuz and other oil company interests in the mid-east, etc.

Factor that in and the bio-fuels look good, as do CNG, electric vehicles or bio-fuel-electric hybrids. Imagine that…. a bio-fuel-electric hybrid. That completely shuts out the oil companies and their little “gasoline forever” game. The fact that bio-fuels, CNG and electricity are already cheaper than gasoline must be giving the traditional oil companies nightmares already. Answer

LovesoiL wrote: 1) What is a reasonable pace towards commercialization of ‘1st generation’ alternative fuels, e.g., cellulosic. Many ethanol advocates (DoE, USDA, EPA, US Congress) assume that while only 1 commercial scale facility is currently in construction (Range), somehow 1 billon gallons of annual capacity will get built during the next 3-5 years, and then we’ll build that much (30-40 plants) every year for the next decade?

2) How long is needed to operate a 1st gen facility to optimize its processing and demonstrate profitability before investors will agree to pay another ~$300 million build the 2nd facility?

3) Both Choren and Range fuels have gasification of woody biomass as the first step for their transformation process. Choren finished construction a year ago and has been in the commissioning process ever since. Range says they will finish construction 1Q 2010, and begin ethanol production in 2Q 2010. Can Range really begin production that soon?

4) Ask POET what they think of cellulosic from corn stover. They seem to say that stover has too many collection and handling problems (dirty, low density, etc), and that is one reason they are concentrating on cobs only. Many others assume corn stover will be the primary source of cellulosic feedstock. Answer

Anonymous wrote: While you’re in Alberta, ask about Iogen and when they’ll finally get their cellulosic plant started in Sask. Also, Enerkem has been making news lately, both with a 10 mgy MSW plant and their just-released plans to construct a $100 million R&D facility in Edmonton. EnerkemR&D EnerkemMSWPlant Answer

bts asked: Comments on this partnership between Venter and Exxon?

Exxon to Invest Millions to Make Fuel From Algae Answer

The Answers

Answer

You always have to read between the lines. Sometimes people talk about where costs might be “in a few years” or “with technical breakthroughs” – as is often the case with algal biodiesel (and has been the case with oil shale for 100 years). Not that this is necessarily the case here, but those are the kinds of things I look for as I read these press releases. Is it possible to make oil from coal? Sure, it just traditionally takes a lot of energy. Coal into oil is essentially what you are doing with CTL, and there are several variations of the process (including non-gasification options). South Africa has been doing it for a while now.

So what the UTA researchers are describing is a chemical process for turning coal into oil. Such processes do exist, so the question is whether this is novel, cheaper, more efficient, etc. That will require peeling a few more layers of the onion than what one finds in a press release – where the best you may get is caveats. Generally speaking, press releases tend to over-simplify things a lot. If even a tenth of the press releases on “the next big thing” had turned out to be true, we would be living in a very different world. My favorite pasttime might be loading the family up in my cold fusion-powered hovercraft for a family outing. Or knocking out essays on my DNA-based computer (I remember in 1995 or so when this was going to put Intel out of business).

People have all sorts of motives for these press releases. Some are to announce something truly revolutionary. Those are a tiny fraction. More often, it is as you say; someone is trying to catch the eye of someone who might fund them. I have been in a position many times to issue just such a press release, and sometimes I think about that when I see one of these.

For instance, in 1994 at Texas A&M I had an idea to create a cellulose reactor based on the contents of termites’ stomachs. To my knowledge, I was the first person to attempt such a thing. The experiment didn’t turn out very well. My analysis detected only a small amount of butanol in the product. Had my imagination been big enough, here was the press release: “A&M Researcher Turns Trash into Fuel.” For the story, I could project increases in yields, renewable butanol bringing Arab sheiks to their knees, and an actual use for those pesky termites. Of course as my yield projections go up, my cost projections go down, and I could predict that this “may soon lead to sub-$1/gal fuel.” In reality, I considered it a failed experiment, stopped work, and wrote up my dissertation. But that is the sort of experience that always has me looking at these press releases in a pretty skeptical light.

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Answer

Jim, this is along the lines of my last answer. People are working on these catalysts all the time. I have spent time in the lab working on gasification catalysts, and sometimes you come across something that looks pretty interesting. Then you try to scale it up and find that it isn’t stable in a larger reactor because the temperatures are hotter than they were in the lab.

Again, without peeling the onion and having a look at what everyone else is doing, it is impossible to tell whether this really amounts to something special. It could be that their competitors have already achieved these milestones and just didn’t issue press releases. Most organizations don’t. I was awarded several patents from my days at ConocoPhillips, but we never issued a press release even though the potential implications of some of them were pretty interesting.

One thing I will say is that from my time in a refinery, there wasn’t 7-9% efficiency gain to be had. We were already pushing the maximum possible conversion efficiency of oil into liquid products, and while you might have squeezed out another 2-3%, no way could you get up into the 8% range. There may be some really inefficient refineries out there that could benefit from this, but we will have to wait a couple of years and see if they actually start penetrating the market. Then you will know that they indeed invented something with a distinct advantage over the competitors.

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Answer

There are a couple of developments in cellulose chemistry that I have been watching pretty closely: The ionic liquid techniques that you mentioned, and supercritical cellulose chemistry with either CO2 or ethanol.

Both of these techniques are energy intensive, so a lot of work needs to be done around the economics of these processes relative to competing technologies. A number of questions arise, such as “What other components are extracted along with the cellulose?” Or “What does it take to separate the cellulose from the component used to extract it?” That isn’t to say that these technologies aren’t well-worth further exploration. From an academic standpoint, they are very interesting. In the end, I think they will be hard pressed to compete with gasification if the intent is production of fuels. However, specialty chemicals might turn out to be a good niche application for these techniques.

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Answer

Building on the previous answer, I think the more interesting developments in lignocellulosic chemistry are in chemical processing, as opposed to biochemical processing. I discussed this in an essay a couple of years ago, which was about Vinod Khosla’s investment into KiOR. This is their approach as well; to use catalytic processes to produce fuel.

The challenge is that biomass isn’t very energy dense, and these processes require elevated temperatures and pressures. So a key question is how much energy (and in what form) it takes to transport one BTU of biomass and process it into one BTU of fuel. Presently I think the processing energy is a pretty high fraction of the contained energy. Those energy inputs are going to have to come down before these sorts of technologies make much of an impact. The research is certainly promising, and I favor continued government funding. Would I invest in a company based on this concept? Not at this stage of development.

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Answer

Generally speaking, I think we are going to look back and see that we wasted tremendous money, time, and resources chasing dead ends. As you say, nobody knows what developments are in front of us. But many are betting that there are revolutionary developments that will transform the energy sector. As a result, they are throwing a lot of money in a lot of different directions. I don’t have a big problem with this if the proper due diligence is done, especially if private money is being used to fund these various ventures. I do agree with Vinod Khosla’s philosophy of spreading his bets across many different technologies. What I find annoying is that often the proper due diligence is not done, and often taxpayer money ends up funding these dead ends. That is money that is truly wasted.

However, one thing to keep in mind with respect to your “grey swans” is that they also have entrenched lobbies to contend with. It may turn out that the grey swan finds itself in a difficult fight to penetrate the market. One particular example I am thinking of is the decision of Congress to kill support for more efficient 2nd generation green diesel production because the inefficient 1st generation producers argued that it would put them out of business. Add in the fact that it was an oil company involved in the 2nd generation technology, and we find that grey swan struggling to survive.

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Answer

Sam, I don’t see an easy answer to that. Utilities are in the business of making money. When people reduce consumption it costs them money. Is there a way that they can benefit from that? I suppose in a world in which we are taxing carbon emissions, the savings from lower emissions would partially offset the loss of the sale of the electricity. But truthfully, that will be a small fraction at best. I always had the same issue when I was in the oil business. I wanted to see lower consumption, and I couldn’t see any way the oil companies could benefit directly from that. I think an effective mechanism for enabling suppliers to benefit from lower consumption would really be a game changer. If you think of something, let me know.

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Answer

When I first saw this, I thought “That’s one of the strangest energy-related stories I have ever seen.” It reminded me of my reaction to a recent story: Greenland shark may become new source of biofuel. I like the wild and wacky, and both of these fall into that category. But can it make an impact? The problem with the urea idea is that the fuel is actually ammonia and hydrogen. Where do those come from? Mostly from natural gas. If you look at the efficiencies of the processes involved, you would be far better off just to burn the natural gas. So I don’t see it going far in its current form, but I applaud the creativity. Who knows, maybe this will evolve into something more promising.

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Answer

John, while I agree that we are spending dollars in the Middle East because of oil, I disagree with several of your points. First, we aren’t spending that money to guard oil company interests. It is being done with the intent to keep cheap oil flowing to the American consumer. So the key interest here is that of the U.S. government, so the voting public is kept happy. Not that there is no benefit to the oil companies, but the government views a military presence there as an important issue of national security – not one of oil company security. If the oil did get cut off, the average person is going to bear the consequences.

I also disagree with your comment that biofuels are cheaper than gasoline. There are some exceptions – like sugarcane ethanol from Brazil – but for the most part gasoline is cheaper based on energy content. For instance, at today’s close ethanol on the CBOT for September delivery was trading for $1.65 a gallon. Gasoline on the NYMEX today was trading for $2.07/gal. However, because of the difference in energy content, the cost of this ethanol was $21.71/MMBTU and the gasoline was $18/MMBTU. With rare exceptions over the years, this has always been the case – and at times the differences have been quite large.

Further, you are kidding yourself if you think the oil companies are running scared. As I have pointed out before, it is a matter of scale. If corn ethanol started to look like a viable, long-term business model for them, the oil companies would just buy their way in as Valero recently did. Oil companies won’t sit around and go extinct because some fancy new biofuel put them out of business. They have big R&D budgets, and their efforts likely cover every biofuel you ever heard of (and many options you probably haven’t).

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Answer

1. Put me down as someone who believes that the one currently under construction – Range Fuels – is going to see their schedule continue to slip, and I believe they are going to have a difficult time meeting production goals. Multiple sources are telling me that they have some issues.

Further, the national projected ramp-up in cellulosic ethanol – if it happens at all – will be a fraction of what has been projected. Right now there isn’t even a clear pathway. It’s like marking out the road map for curing various cancers over the next few years. It is great to have such a road map, but you are assuming technological breakthroughs that may not happen. Right now cellulosic ethanol still looks to me like a niche, and not a scalable, mainstream fuel.

2. That’s a good question, because I am aware of just such a situation now. Investors are dragging their feet on Plant #2 because Plant #1 is still not producing per the plan. In general, I think if a 1st gen facility comes online and starts to deliver per expectations, money will start to flow pretty quickly. I would think within 6 months of delivering, investors will be ready to jump in. But it is going to take more than 6 months to optimize production to optimize one of these next generation plants once it starts up. There isn’t a blueprint for success, and novel problems are going to be encountered and have to be solved.

3. No, the schedule for Range will slip because they still have kinks to work out. Write it down and hold me to it.

4. Here is what POET said about stover: “The yield of cobs is 0.65 tons/acre, and we can collect them commingled with grain with a modified combine. Or we can collect them with stover coming out of the back of the combine. The bulk density for cobs is higher than for stover, and that makes them easier to separate. We make sure sufficient stover is left on the field for erosion control and nutrition. We are focused on cobs because the bulk density for cobs is better than for stover, and cobs have 16% more carbohydrates than the stover. We don’t have to leave all stover in the field necessarily over soil depletion issues; we have just chosen to focus on cobs. How much one can remove depends on soil type, location, and tillage practice. Cobs take those variables away.”

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Answer

I did ask about both Iogen and Enerkem while I was in Alberta. My hosts were quite skeptical that Iogen will ever build a commercial plant. I will say that they have enough demonstration level experience that it is suspicious that they don’t have plants sprouting up everywhere. After all, they have been producing cellulosic ethanol at small scale for 5 years. There are people that have been producing it for 0 years who are in the process of building plants. Given that governments are throwing money at anything looking like cellulosic ethanol, I think this puts a big question mark over their true commercial viability (at least at the present state of their technology).

There was less talk about Enerkem, and frankly before the trip I didn’t know much about them. The talk I did hear was that Enerkem is really only focused on the front end of a GTL plant (the gasification step). Enerkem’s view is that their post-gasification steps are flexible, and they can produce a variety of chemicals. They have announced that one site will produce ethanol (this is not the most efficient usage of syngas, by the way). Enerkem’s Press Release page certainly implies that they are busy with projects.

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Answer

I think there are two approaches to algal fuel that might work. One is if algae can be made to naturally excrete oil. If so, then it may be possible to let the oil layer build up and then skim it. This avoids the materials handling nightmare of separating the algae from the water, and then the oil from the algae. This is apparently the focus of the research. Still, it is a long shot. Exxon’s VP for R&D was quoted as saying “I am not going to sugarcoat this — this is not going to be easy. Any large-scale commercial plants to produce algae-based fuels are at least 5 to 10 years away.” I think that is a realistic assessment. If the breakthrough came tomorrow then you are still looking at piloting and finally commercialization. I don’t think that is likely to happen in 5 years. So first you have to have some technical breakthroughs – and those aren’t a given – and if you pass through that gate then you won’t see this on the market for 10 years. I believe that is a realistic assessment.

The second approach that might work is if a valuable product – such as a pharmaceutical – is being produced as the primary product, and oil is being produced as a co-product. The expense of collecting and processing algae is just too great for oil to be the primary purpose of the operation.

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August 4, 2009 Posted by | algal biodiesel, biodiesel, biogasoline, Choren, coal, ExxonMobil, green diesel, Iogen, range fuels, refining, Vinod Khosla | 39 Comments

Congress Kills a Biofuel Project

If we are to seriously encourage a move to biofuels, incentives are going to be required because the economics of biofuels just can’t compete with petroleum (regardless of what Vinod Khosla thinks). Eventually depletion will cause petroleum to become very expensive, and then the economics of certain biofuels (especially those with the best energy returns) are going to start looking a lot better. But if depletion occurs quickly, we are going to wish that we had provided encouragement for all sorts of alternatives. Of course not all alternatives are created equally, and there are often unintended consequences to deal with. But overall, Congress and now two administrations in a row have shown overwhelming support for incentivizing biofuel production. There is, however, one glaring exception.

I have posed the question before of whether it ever makes sense to offer subsidies to oil companies. I would argue that it does if you want oil companies to do something that economics would otherwise argue against. As an example, let’s say in the name of energy security that Congress thought it was a good idea for oil companies to invest in solar. The oil companies wouldn’t be interested if production costs are higher than the price they expect to get for the panels. The only way Congress would convince them that they should do this is by offering an incentive to do so. Oil companies are not going to otherwise make decisions that are counter to the bottom line (unless of course they are mandated to do it, and that’s another matter altogether).

Such is the case with renewable diesel. Broadly speaking, there are two different kinds of renewable diesel. Biodiesel is normally produced by reacting methanol with animal fats or vegetable oil. (See the process description at Wikipedia). The product is actually an alkyl ester. More simply put, the product contains oxygen, and is structurally different from petroleum diesel. The structural differences can cause some problems in cold weather, and this limits the amount of biodiesel that can be blended into petroleum diesel.

The second kind of diesel is green diesel, which is chemically equivalent to petroleum diesel. This product contains no oxygen, and can be blended in any proportion with petroleum diesel. It can be made via gasification from any biomass (see the Choren process) or by hydrocracking the same fats and oils that you use to produce biodiesel. Besides the structural differences in the product, biodiesel results in a glycerin by-product whereas green diesel results in a propane by-product. (All of this is explained in more detail in my Renewable Diesel Primer).

In 2007, ConocoPhillips (Full disclosure: This is my former employer) and Tyson Foods announced a partnership in which COP would hydrocrack waste animal fats and oils provided by Tyson to make green diesel. Costs of production were around $40/bbl higher than for producing conventional diesel, but COP was able to take advantage of the $1/gal tax credit that Congress had put in place for renewable diesel to bring the costs down to parity with petroleum. Whereas corn farmers love our ethanol policy, ranchers were happy with this announcement because it afforded them an opportunity to participate in the biofuels market. Tyson Foods was also happy to have another outlet for their oils, as this would take some of the sting out of higher corn prices which had cut into their bottom line.

The fact that an oil company would benefit from “their” tax credit sent the biofuel lobby into a tizzy. They asked why an oil company should be allowed a tax credit for doing this. My answer was the same one I have earlier: To get them to do something that wouldn’t otherwise make economic sense. We can have a different debate on the wisdom of the incentive itself (i.e., unintended consequences), but if the goal is to incentivize the production of biofuels, you shouldn’t selectively decide who gets the tax credit. The 1st generation biodiesel industry wanted special treatment (a $1/gallon subsidy advantage over anyone else who might like to compete against them) and they cranked up the lobbying machine.

Democrats were particularly outraged, with Lloyd Doggett of Texas suggesting that oil companies benefiting from this tax credit was a case of legislative abuse. (Especially ironic that he is going after a Texas company, mostly to the benefit of companies operating outside of Texas). They promised to correct this by making sure only targeted companies (i.e., anyone but oil companies) could take advantage of the credit. While ConocoPhillips explained that this project would simply not be profitable without the credit, the Senate called them on it and voted to kill the tax credit. The assumption is that they either thought oil companies would subsidize a money-loser from some of their more profitable divisions, or they simply didn’t want oil companies to produce biofuel. The first assumption is naive, and the second implies that this isn’t about energy security at all, but about favoring special interests.

Yesterday, COP followed through by announcing that they were indeed going to idle the project. This is certainly a victory for less efficient 1st generation biodiesel producers, and it should also be a warning to those who think 1st generation corn ethanol is going to naturally lead to 2nd generation cellulosic ethanol. Besides the technical challenges in getting cellulosic to work commercially, cellulosic producers are going to run up against those same vested interests who wish to see the status quo maintained, and who will lobby to prevent anyone from taking away their market share.

I will repeat what someone wrote to me when Congress first announced their intentions to deny the credit: “It ain’t about the fuel… it’s about a piece of the pie.”

May 14, 2009 Posted by | biodiesel, ConocoPhillips, green diesel, Tyson Foods | 49 Comments

Tariff Turnabout

This is a timely story, coming on the heels of the previous story on the tariffs the U.S. applies to Brazilian ethanol:

European tariffs stun U.S. biodiesel industry

The U.S. biodiesel industry will suffer from new trade barriers that threaten to end its lucrative export business to Europe, and in Texas the measure could be devastating.

Last week, the European Commission said U.S. biodiesel exporters will now have to pay additional anti-dumping tariffs of up to 29 percent, and anti-subsidy duties of up to 41 percent. The tariffs are temporary for the next six months, but the commission will decide by this summer whether to extend them for five years.

The tariffs came after complaints last year that U.S. biodiesel producers were collecting both U.S. and European subsidies and then selling huge quantities of fuel in Europe at prices that undercut domestic producers.

European officials estimated that 80 percent of U.S. biodiesel production was exported in 2008.

I would suspect that people who might have a problem with their tax dollars subsidizing Brazilian ethanol would also have a problem with their tax dollars subsidizing European biodiesel users. If I am not mistaken, ethanol that is exported loses most of the U.S. tax advantages, hence the incentive is to use it at home. Apparently the biodiesel industry is set up differently with respect to the tax credits.

Credit to KingofKaty for the find.

March 23, 2009 Posted by | biodiesel, Europe, subsidies, tariffs | 35 Comments

The Prospects for Algal Biodiesel Dim

As I noted in my earlier essay More Reality Checks for Algal Biodiesel, I initially had high hopes for the idea that we might make significant amounts of biodiesel from algae. A few years ago I read Michael Briggs’ essay Widescale Biodiesel Production from Algae and thought he put together a compelling case that algae could power our transportation system. I even exchanged a few e-mails with him at one point in order to get a better perspective on his views.

Ah, but the devil is always in the details. And as I dug into the details, my hopes began to fade. I had conversations with researchers who let me know what some of the problems were, and some were potential show-stoppers. Krassen Dimitrov’s analysis of Greenfuel Technologies and their algae claims strongly suggested that photobioreactors (PBRs), as shown in the slide below from my ASPO presentation last year (Biofuels: Facts and Fallacies), have no future.

Why? Because costs are about two orders of magnitude too high. More importantly, costs are tied to energy. That means that economic feasibility won’t come about if oil prices rise by one or two orders of magnitude. This is a show-stopper for the following reason. The amount of solar insolation falling on a square meter of land is known. The cost to build a square meter of PBRs is known. If, for example, a square meter of land might be expected to produce one gallon of algal biodiesel based on the sunlight falling on the surface, but the cost to build a square meter of PBR is $100, you have a problem. You can’t afford to spend $100 of capital to produce 1 gallon of biodiesel per year. (This is the thrust of Krassen’s analysis).

My previous essay hit on this, as Bryan Wilson, a co-founder of Solix, recently suggested they could produce algal biodiesel at a cost of $33/gal (because of very high energy inputs). Now comes a new report commissioned by the British Columbia Innovation Council (BCIC) et al. to examine the viability of an algal biodiesel industry in B.C. The conclusions were not optimistic. The full report (88 page PDF) is Microalgae Technologies and Processes for Biofuels/Bioenergy Production in British Columbia. I note that my friend John Benemann contributed to the report (and 3 people wanted to remain anonymous).

The study looked at photobioreactors (as seen in the graphic above), open raceways (something like a pond), and fermentors (as corn ethanol is produced). They estimated that the net cost of production per liter for PBRs was $24.60 ($93.23 US dollars/gallon), for open raceways it was $14.44 per liter, and for fermentors was $2.58 per liter.

Biodiesel Magazine also reported on the study:

A Sober Look at Biofuels From Algae

At least 15 companies are known to be pursuing the photobioreactor concept, mostly in Canada and the United States. There is no doubt that growing algae in photobioreactors is technically feasible since successful operations doing just that exist today. There are, however, serious challenges in making this process cost-effective for low-value products such as biofuels.

So, before throwing your money in with a company working on PBRs, make sure it’s money you won’t ever need again.

What about carbon credits? I have seen this mentioned as an additional benefit that might make the economics more favorable:

What about the value of sequestered carbon in algae-based biofuels? In short, there isn’t any. Atmospheric carbon is only sequestered for a short time until it’s burned in an engine. Under existing biofuels mandates in most industrialized countries, there will be no opportunity to sell carbon offsets unless fuel production is additional, or beyond such mandates.

But the technology will surely improve?

What about economies of scale or technology improvements? Economies of scale were considered in the analysis, using very generous assumptions. Some improvements could be made, including increased automation, genetically modified algae with higher oil yields and minimized light losses. On the other hand, the main components, such as concrete, glass and machinery, are unlikely to drop in price. Since there are limits to how much oil and starch algae can produce, the result is that photobioreactors can’t produce biofuels competitively today and are unlikely to do so in the future. It’s not slightly higher than fossil fuels, but by a factor of 10 to 15.

These results may come as a surprise to many. They were, however, confirmed by a number of independent sources. The study, although intended to examine the feasibility of algae cultivation for biofuels in British Columbia, has yielded findings that also apply to other regions and worldwide.

Sure, it’s in British Columbia, which is not the best place for year-round solar insolation. But double or even triple the amount of solar insolation and the economics don’t change enough to matter. So instead of producing biodiesel for $90 a gallon, you can produce it for $30. You still aren’t economical even if you could produce it for $5/gallon.

The fermentation concept appears to hold some promise, but if sunlight is not the energy source you need some other energy source that the algae can convert into oil. That doesn’t seem especially efficient, but they claim an energy balance of 1.93 (I think they can forget about that 2nd decimal point!) against only 1.23 for the PBRs. Still, 1.9 is on the low side of desirable, given that society is currently running off of an energy return in the 5-10 range.

March 10, 2009 Posted by | algal biodiesel, biodiesel | 9 Comments

The Prospects for Algal Biodiesel Dim

As I noted in my earlier essay More Reality Checks for Algal Biodiesel, I initially had high hopes for the idea that we might make significant amounts of biodiesel from algae. A few years ago I read Michael Briggs’ essay Widescale Biodiesel Production from Algae and thought he put together a compelling case that algae could power our transportation system. I even exchanged a few e-mails with him at one point in order to get a better perspective on his views.

Ah, but the devil is always in the details. And as I dug into the details, my hopes began to fade. I had conversations with researchers who let me know what some of the problems were, and some were potential show-stoppers. Krassen Dimitrov’s analysis of Greenfuel Technologies and their algae claims strongly suggested that photobioreactors (PBRs), as shown in the slide below from my ASPO presentation last year (Biofuels: Facts and Fallacies), have no future.

Why? Because costs are about two orders of magnitude too high. More importantly, costs are tied to energy. That means that economic feasibility won’t come about if oil prices rise by one or two orders of magnitude. This is a show-stopper for the following reason. The amount of solar insolation falling on a square meter of land is known. The cost to build a square meter of PBRs is known. If, for example, a square meter of land might be expected to produce one gallon of algal biodiesel based on the sunlight falling on the surface, but the cost to build a square meter of PBR is $100, you have a problem. You can’t afford to spend $100 of capital to produce 1 gallon of biodiesel per year. (This is the thrust of Krassen’s analysis).

My previous essay hit on this, as Bryan Wilson, a co-founder of Solix, recently suggested they could produce algal biodiesel at a cost of $33/gal (because of very high energy inputs). Now comes a new report commissioned by the British Columbia Innovation Council (BCIC) et al. to examine the viability of an algal biodiesel industry in B.C. The conclusions were not optimistic. The full report (88 page PDF) is Microalgae Technologies and Processes for Biofuels/Bioenergy Production in British Columbia. I note that my friend John Benemann contributed to the report (and 3 people wanted to remain anonymous).

The study looked at photobioreactors (as seen in the graphic above), open raceways (something like a pond), and fermentors (as corn ethanol is produced). They estimated that the net cost of production per liter for PBRs was $24.60 ($93.23 US dollars/gallon), for open raceways it was $14.44 per liter, and for fermentors was $2.58 per liter.

Biodiesel Magazine also reported on the study:

A Sober Look at Biofuels From Algae

At least 15 companies are known to be pursuing the photobioreactor concept, mostly in Canada and the United States. There is no doubt that growing algae in photobioreactors is technically feasible since successful operations doing just that exist today. There are, however, serious challenges in making this process cost-effective for low-value products such as biofuels.

So, before throwing your money in with a company working on PBRs, make sure it’s money you won’t ever need again.

What about carbon credits? I have seen this mentioned as an additional benefit that might make the economics more favorable:

What about the value of sequestered carbon in algae-based biofuels? In short, there isn’t any. Atmospheric carbon is only sequestered for a short time until it’s burned in an engine. Under existing biofuels mandates in most industrialized countries, there will be no opportunity to sell carbon offsets unless fuel production is additional, or beyond such mandates.

But the technology will surely improve?

What about economies of scale or technology improvements? Economies of scale were considered in the analysis, using very generous assumptions. Some improvements could be made, including increased automation, genetically modified algae with higher oil yields and minimized light losses. On the other hand, the main components, such as concrete, glass and machinery, are unlikely to drop in price. Since there are limits to how much oil and starch algae can produce, the result is that photobioreactors can’t produce biofuels competitively today and are unlikely to do so in the future. It’s not slightly higher than fossil fuels, but by a factor of 10 to 15.

These results may come as a surprise to many. They were, however, confirmed by a number of independent sources. The study, although intended to examine the feasibility of algae cultivation for biofuels in British Columbia, has yielded findings that also apply to other regions and worldwide.

Sure, it’s in British Columbia, which is not the best place for year-round solar insolation. But double or even triple the amount of solar insolation and the economics don’t change enough to matter. So instead of producing biodiesel for $90 a gallon, you can produce it for $30. You still aren’t economical even if you could produce it for $5/gallon.

The fermentation concept appears to hold some promise, but if sunlight is not the energy source you need some other energy source that the algae can convert into oil. That doesn’t seem especially efficient, but they claim an energy balance of 1.93 (I think they can forget about that 2nd decimal point!) against only 1.23 for the PBRs. Still, 1.9 is on the low side of desirable, given that society is currently running off of an energy return in the 5-10 range.

March 10, 2009 Posted by | algal biodiesel, biodiesel | 16 Comments

The Potential of Jatropha

The previous post provided an introduction to Jatropha curcas, a tropical, oil-producing shrub. In this essay I want to get into why I believe there is great potential for jatropha to make an impact on the world’s energy supply. I will also explain the hurdles that need to be overcome.

Jatropha Curcas in India (Photo courtesy of Tree Oils India Limited.)

The Potential

Jatropha has many qualities that make it an attractive biofuel option. One, it is tolerant of dry conditions and marginal soils. This is a big plus, because it opens up areas for cultivation that would otherwise be unsuitable. The type of land with great potential is land that is being degraded, or turned into desert. Desertification is a significant problem worldwide, and occurs when dry land is overexploited. Think of the Dust Bowl in the 1930’s and you start to get a picture of how desertification impacts and threatens lives.

There are techniques for combating desertification. Plants that can grow on dry, marginal land have the potential to start providing a matrix for the soil to prevent the soil from being eroded by the wind. There are a number of candidate plants that can be used to combat desertification. However, there has to be adequate incentive to grow plants for combating desertification. I suppose the ideal plant would be one that can supply food while at the same time rehabilitating marginal soil. I am unaware of candidate plants in that category, but I presume some exist. A close second, however, would be a plant that can provide a quality fuel – and thus a cash crop – on marginal soil. Jatropha curcas is such a plant.

Comparison with Palm Oil

Where can jatropha be used in such a role? Have a look at the graphic below:

It is true that the African Oil Palm, from which palm oil is derived, is a much more prolific producer of oil than is jatropha. In fact, palm oil yields – as high as 5 metric tons per hectare – places the African Oil Palm as the world’s most productive lipid crop. But there are significant disadvantages/risks that go along with palm oil. First is the fact that the range of the African Oil Palm is a narrow band close to the equator (see the graphic above). While this is fine for countries like Malaysia, Indonesia, and Thailand – where it has provided a valuable cash crop for farmers – it means that India and most of Africa is unsuitable for cultivation.

Of a more serious nature is that expansion of oil palm plantations – driven by biofuel mandates in Western countries – has led to a dramatic expansion in many tropical countries around the equator. In certain locations, expansion of oil palm cultivation has resulted in serious environmental damage as rain forest has been cleared to make room for new oil palm plantations. Deforestation in some countries has been severe, which negatively impacts sustainability criteria, because these tropical forests absorb carbon dioxide and help mitigate greenhouse gas emissions. Destruction of peat land in Indonesia for oil palm plantations has reportedly caused the country to become the world’s third highest emitter of greenhouse gases.

Because the range of jatropha is much greater, there is substantial potential to alleviate poverty throughout Africa, India, and many poor countries by providing a valuable cash crop for farmers. Further, it is unlikely to contribute to deforestation as more productive oil producers provide greater incentive to go that route. (Note: While the range is clearer greater than for palm oil, native jatropha is not frost resistant, which means the range shown in the figure above is overstated. The graphic indicates that jatropha could be grown in the Dallas area, and we certainly get hard freezes and frost here.)

Reality Check

The essay up until now may make jatropha sound like a real silver bullet for addressing fossil fuel dependence. Alas, there are no silver bullets. And in fact, the hype for jatropha has gotten out of hand. As I noted in the essay describing my trip to India, I found the present situation with jatropha to have been overhyped.

Jatropha has negatives just like every other energy source. First, it is toxic to humans and livestock. As pointed out in the previous essay, the Western Australian government banned jatropha as an undesirable, invasive species in 2006. Second, because it has not been domesticated, yields are highly variable and the fruits ripen over a broad time range. Third, it is labor intensive to gather the fruits and extract the oil. Finally, while it can be grown on marginal land, there has to be a logistical infrastructure in place to economically get it to the market. Much of the world’s marginal land lacks such an infrastucture. For instance, when I was in India last year, I saw great swaths of borderline desert land that might be used to grow jatropha. The problem is that it was all remote, with no infrastructure.

The answer to many of these concerns potentially lies in the fact that jatropha is still a wild plant. Selective breeding and/or genetic engineering likely have great potential to address many of these issues. Because the world is just now beginning to seriously experiment with jatropha, there is naturally a learning curve to climb. It may turn out that some of the issues are indeed insoluble, but I wouldn’t bet on it. What is needed is a serious, dedicated investigation into the genetics of jatropha, in conjunction with a major plant-breeding effort. We need some modern-day Luther Burbanks working on this problem. By doing so, jatropha may one day live up to the hype.

Additional Resources

There are numerous jatropha resources out there. Here is a sampling.

The Jatropha System

The site is quite a rich source of jatropha information, and if you are interested I would encourage you to explore it. It is devoted to the concept of providing renewable energy while creating new opportunities for farmers in poor nations

Jatropha Comes to Florida (3 minute video from Time Magazine)

Jatropha Potential for Haiti

Chhattisgarh plants 100 million jatropha saplings in 3 yrs

Mali’s Farmers Discover a Weed’s Potential Power

Toxic jatropha not magic biofuel crop, experts warn

Yield Per Hectare of Various Lipid Producers

UP to cultivate Jatropha for bio-diesel production

February 15, 2009 Posted by | biodiesel, green diesel, India, jatropha, palm oil, renewable diesel | 11 Comments

The Potential of Jatropha

The previous post provided an introduction to Jatropha curcas, a tropical, oil-producing shrub. In this essay I want to get into why I believe there is great potential for jatropha to make an impact on the world’s energy supply. I will also explain the hurdles that need to be overcome.

Jatropha Curcas in India (Photo courtesy of Tree Oils India Limited.)

The Potential

Jatropha has many qualities that make it an attractive biofuel option. One, it is tolerant of dry conditions and marginal soils. This is a big plus, because it opens up areas for cultivation that would otherwise be unsuitable. The type of land with great potential is land that is being degraded, or turned into desert. Desertification is a significant problem worldwide, and occurs when dry land is overexploited. Think of the Dust Bowl in the 1930’s and you start to get a picture of how desertification impacts and threatens lives.

There are techniques for combating desertification. Plants that can grow on dry, marginal land have the potential to start providing a matrix for the soil to prevent the soil from being eroded by the wind. There are a number of candidate plants that can be used to combat desertification. However, there has to be adequate incentive to grow plants for combating desertification. I suppose the ideal plant would be one that can supply food while at the same time rehabilitating marginal soil. I am unaware of candidate plants in that category, but I presume some exist. A close second, however, would be a plant that can provide a quality fuel – and thus a cash crop – on marginal soil. Jatropha curcas is such a plant.

Comparison with Palm Oil

Where can jatropha be used in such a role? Have a look at the graphic below:

It is true that the African Oil Palm, from which palm oil is derived, is a much more prolific producer of oil than is jatropha. In fact, palm oil yields – as high as 5 metric tons per hectare – places the African Oil Palm as the world’s most productive lipid crop. But there are significant disadvantages/risks that go along with palm oil. First is the fact that the range of the African Oil Palm is a narrow band close to the equator (see the graphic above). While this is fine for countries like Malaysia, Indonesia, and Thailand – where it has provided a valuable cash crop for farmers – it means that India and most of Africa is unsuitable for cultivation.

Of a more serious nature is that expansion of oil palm plantations – driven by biofuel mandates in Western countries – has led to a dramatic expansion in many tropical countries around the equator. In certain locations, expansion of oil palm cultivation has resulted in serious environmental damage as rain forest has been cleared to make room for new oil palm plantations. Deforestation in some countries has been severe, which negatively impacts sustainability criteria, because these tropical forests absorb carbon dioxide and help mitigate greenhouse gas emissions. Destruction of peat land in Indonesia for oil palm plantations has reportedly caused the country to become the world’s third highest emitter of greenhouse gases.

Because the range of jatropha is much greater, there is substantial potential to alleviate poverty throughout Africa, India, and many poor countries by providing a valuable cash crop for farmers. Further, it is unlikely to contribute to deforestation as more productive oil producers provide greater incentive to go that route. (Note: While the range is clearer greater than for palm oil, native jatropha is not frost resistant, which means the range shown in the figure above is overstated. The graphic indicates that jatropha could be grown in the Dallas area, and we certainly get hard freezes and frost here.)

Reality Check

The essay up until now may make jatropha sound like a real silver bullet for addressing fossil fuel dependence. Alas, there are no silver bullets. And in fact, the hype for jatropha has gotten out of hand. As I noted in the essay describing my trip to India, I found the present situation with jatropha to have been overhyped.

Jatropha has negatives just like every other energy source. First, it is toxic to humans and livestock. As pointed out in the previous essay, the Western Australian government banned jatropha as an undesirable, invasive species in 2006. Second, because it has not been domesticated, yields are highly variable and the fruits ripen over a broad time range. Third, it is labor intensive to gather the fruits and extract the oil. Finally, while it can be grown on marginal land, there has to be a logistical infrastructure in place to economically get it to the market. Much of the world’s marginal land lacks such an infrastucture. For instance, when I was in India last year, I saw great swaths of borderline desert land that might be used to grow jatropha. The problem is that it was all remote, with no infrastructure.

The answer to many of these concerns potentially lies in the fact that jatropha is still a wild plant. Selective breeding and/or genetic engineering likely have great potential to address many of these issues. Because the world is just now beginning to seriously experiment with jatropha, there is naturally a learning curve to climb. It may turn out that some of the issues are indeed insoluble, but I wouldn’t bet on it. What is needed is a serious, dedicated investigation into the genetics of jatropha, in conjunction with a major plant-breeding effort. We need some modern-day Luther Burbanks working on this problem. By doing so, jatropha may one day live up to the hype.

Additional Resources

There are numerous jatropha resources out there. Here is a sampling.

The Jatropha System

The site is quite a rich source of jatropha information, and if you are interested I would encourage you to explore it. It is devoted to the concept of providing renewable energy while creating new opportunities for farmers in poor nations

Jatropha Comes to Florida (3 minute video from Time Magazine)

Jatropha Potential for Haiti

Chhattisgarh plants 100 million jatropha saplings in 3 yrs

Mali’s Farmers Discover a Weed’s Potential Power

Toxic jatropha not magic biofuel crop, experts warn

Yield Per Hectare of Various Lipid Producers

UP to cultivate Jatropha for bio-diesel production

February 15, 2009 Posted by | biodiesel, green diesel, India, jatropha, palm oil, renewable diesel | 11 Comments

Repost of TDP: What Went Wrong

The is Part II of my look at Changing World Technologies’ thermal depolymerization process. This essay came from a reader, and was originally posted on April 12, 2007.

But I also want to add some comments that regular reader “Optimist” added following the previous essay. First, those comments:

The 85% efficiency claim is based on a faulty mass balance. The faulty mass balance is the basis for an equally faulty energy balance. You can verify by comparing production data (bbl oil/ton of waste) to the mass balance (still) presented by CWT.

Contrary to what the breathless writers at Discover magazine believe, this technology is good only for recycling lipids (fats and oils) and the fat-soluble amino acids in protein. To understand why you need to follow the process flow diagram, which consists of three key steps:

1. Thermal Depolymerization (aka Dilute Acid Hydrolysis – yes, the process uses sulfuric acid).
2. Separation of water and fat/oil.
3. Decarboxylation of fatty acids to yield hycrocarbon (diesel) product.

Anything soluble in water goes into the effluent in step 2. That includes (but is not limited to) all carbohydrate and the bulk of the protein hydrolysis product (amino acids).

CWT cleverly states that this makes the effluent a high quality fertilizer. Probably true. But that high quality fertilizer contains BTUs not available as fuel (the main product).

Another comment from Optimist:

To their credit, Discover magazine did raise another issue: product quality: Fuel quality was another challenge. Changing World Technologies‘ thick, tarry fuel resembles boiler-grade fuel oil. One prospective buyer insisted on what the company called “unacceptable pricing terms” for its relatively unproven product. In the end, CWT sold only 93,000 of the 391,000 gallons of fuel it produced and earned just 99 cents for each one. At the time, wholesale fuel oil distributors were raking in $2.50 to $3.30 per gallon. Even with the $1-per-gallon U.S. biofuels tax credit for every gallon sold, Changing World Technologies paid more for Butterball’s turkey offal than it earned back in revenue. (Accounting for all its operating costs, the company lost $5,003,000 in the first quarter of 2008, though operating at a loss is not uncommon or necessarily a very bad sign for a technology startup.) Emphasis added.

Don’t worry – I’m sure next year they’ll be printing money…

In light of this, I am not sure why they think it’s a good idea to do an IPO now.

Now for the essay from a reader who provided some very specific details on what went wrong. He included a presentation in which he referred to several slides, and I will pull those out and post them so the references are clear. I will also insert some comments in the text [like this].

—————————————

Robert,

I enjoy your blog quite a lot. Intelligent analysis is rare. Coupled with unbiased interpretation it is almost an unknown.

Saw your discussion of TDP/TCP. Pretty much spot on. As a chemical engineer I thought you’d be interested in some deeper insights of how the process works. This is all information that used to be available on the web, but most of it has been removed.

Start with the lecture (attached) by Terry Adams, CWT technical officer at MIT in April 2005 – best TDP technical article I know of [I have searched for an online version of this, but to no avail. Perhaps using the Wayback Machine one could locate an online archive of the original presentation]. The way I understand it, the process basically consists of two thermal treatment steps. The first step (slide #13) is a low temp/high pressure step that causes hydrolysis of all the biological material. A check of steam tables confirms that pressure is just high enough to maintain liquid water at the temperature given.

Slide 13 of “The CWT Thermal Conversion Process” Presentation

The first stage is followed by separation (slide #3).

Slide 3 from “The CWT Thermal Conversion Process” Presentation

As indicated in slide #14 they have a clever way of flashing off some of the water and then using the steam to heat the feedstock [This sort of heat recovery is standard practice in the petrochemical industry]. This is at the heart of their claims about high efficiency: the steam is condensed, so most of the water in the feedstock is discharged as liquid. Calling it distilled water, is of course salesmen talk that would make a used car salesman’s eye’s water.

Slide 14 of “The CWT Thermal Conversion Process” Presentation

But take a closer look: After separation only the “organic oil” goes to the second stage. After full hydrolysis (let’s just assume that for now) what monomers would be part of the organic oil? Fatty acids barely make it into this oil, due to the little known fact (see flow diagram on slide #11) that sulfuric acid is used to aid hydrolysis [If I had known that, I had forgotten about it. That does put quite a different spin on the whole process]. (DOE would call the first stage by another name: Dilute Acid Hydrolysis). Some fat-soluble amino acids. That’s it. (I bet you can figure out what cellulose fed to these two units would yield…) [It would interesting to see some yields on this. What I would really like to see is what they get if they threw corn in there. If their energy balances are really good – and even with all that has gone wrong they appear to be better than for corn ethanol – then I would like to see some experiments in that direction.]

Slide 11 of “The CWT Thermal Conversion Process” Presentation

Of course, CWT are master salesmen. The water-soluble amino acid and glycerol solution is not waste: it is a wonderful liquid fertilizer (slide #23). Talk about taking a lemon and making lemonade…

Slide 23 of “The CWT Thermal Conversion Process” Presentation

So, the “organic oil” goes to the second stage (high temperature/low pressure) where the fatty acids are decarboxylized (to yield oil) and some of the amino acids are deaminated and decarboxylized to yield who-knows-what (slide #15, point 2).

Slide 15 of “The CWT Thermal Conversion Process” Presentation

You raise the question of how on earth did CWT get their cost estimates so wrong. Well, a large factor in that would be overestimating yield (and per extension efficiency). CWT has long claimed that TDP has an energy efficiency of 85% (heading slide #12). Right there you smell a skunk. Now the dirty details.

Slide 12 of “The CWT Thermal Conversion Process” Presentation

The mass balance, slide #11 [posted earlier], shows that CWT probably did not take the CO2 that results from decarboxylation into account. This causes them to overestimate fuel production. You can easily do the calc’s I’m sure, but it is spelled out here. Apologies for the format, got mangled when they changed their format [That thread was a very good discussion on this issue; perhaps I will pull it out, reformat it, and post it at some point].

The energy balance, slide #12, does not include the energy present in the “liquid fertilizer”. What, all that glycerol and amino acids contain no energy? The water vapor also presents energy lost, even if it’s not much.

The mass and energy balances actually date from a previous publication (February and March 2004), also attached. One would expect that CWT would have discovered the error in the interceding year, and corrected it. I guess they were to busy ironing out the substantial start-up problems, such as the odor issue, you mentioned.

You may have notice a subtle shift between those two breathless Discover articles. Instead of producing 500 bbl from 210 tons of waste (first article), they now need 290 tons (20 tons of it pure pig fat), or a 28% reduction in oil yield. Instead of claiming 2.4 bbl/ton of waste, it is now 1.7 bbl/ton (validating an estimate of the maximum yield of ~2.0 bbl/to). Funny thing is Appel and his team still use the 2.4 figure in their financial analysis, even when it would help their argument to use the 1.7 real number. From the second Discover article: “‘We thought we would get $24 a ton for taking the waste,’ says Appel. ‘Instead we are paying $30 a ton.’ That alone raises his production costs about $22 a barrel.” How did they get to $22? ($24/ton + $30/ton)/2.4 bbl/ton = $22.50/bbl. Using the real number would yield: ($24/ton + $30/ton)/1.7 bbl/ton = $32/bbl. Also getting less yield would raise production cost in a number of ways, including the fact that they may be buying natural gas for heating…

So where does that leave TDP? No doubt it is not the silver bullet once claimed. None of the “anything” into oil that seduced Discover’s reporters. And costs are substantial. However, it seems like a good process for converting waste grease into liquid fuel. Much better than say biodiesel. Look at the feedstock (slide #6). How much cleaning (i.e. money and energy) would that stuff need to make it suitable as feedstock for a biodiesel plant? TDP uses sulfuric acid, whereas biodiesel uses methanol and a catalyst (usually NaOH). In terms of energy and money, I suspect TDP has the better input here. TDP yields a liquid fuel that is chemically almost identical to fossil diesel (without the sulfur and aromatics). TDP-40 can be blended with diesel in any ratio 1 to 100, without any issues. As Minnesota discovered last winter, biodiesel has some issues with cold weather. [Having worked in a Montana refinery, I can attest to the fact that winter properties for diesel are critical. I am aware that biodiesel has some problems with pour and cloud points in cold weather, limiting their usage to small blend fractions.]

Slide 6 of “The CWT Thermal Conversion Process” Presentation

The main threat to TDP, as I see it, is a process developed by Neste Oil, Finland, that I read about at GCC. Apparently this process allows an existing refinery to incorporate waste grease as a feedstock, without a radical change to the process (or a brand new SS plant). Even that process is not a slam-dunk, as I’ve seen reports of canceled projects.

So yes, you nailed it: these guys overpromised and underdelivered big time. But in terms of the big picture I give them some credit: at least we are not talking about food -> fuel (as with most of the biodiesel plants being built in Europe, proving that the food -> fuel madness is not endemic to North America). [Oh, I agree completely. It is not the process that I took issue with; in fact I do applaud their initiative. My concern was the completely willingness of so many to accept this as the solution to our energy problems. I see the same thing happening right now with cellulosic ethanol.] They probably help to advance the debate on waste -> energy quite a bit. And they do have a working plant, which is more than we can say about Washington’s next big thing, aka cellulosic ethanol. [I will probably write the same article on cellulosic ethanol in just a few years – overpromised and underdelivered. I see many parallels here.]

January 31, 2009 Posted by | biodiesel, Changing World Technologies, green diesel, reader submission, Thermal Depolymerization | 8 Comments