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Technology is Magic

I am freshly arrived back on the U.S. mainland, with a couple of stops before I head back to Hawaii. I have been reading about energy developments during my travels, and finally wrote something on the flight from Europe yesterday. What has prompted me to write was a report that was recently issued by The President’s Biofuels Interagency Working Group:

Growing America’s Fuel

As I read through this report on the status of advanced biofuels, I couldn’t help but think that this appeared to have been written by an optimistic cheerleader rather than by someone conducting a sober assessment of the situation. It contains very little of “Here is why we have fallen more than 90% short of our targets.”

Bear in mind that the advanced biofuel mandate for 2010 was 100 million gallons. The report admits that the shortfall will almost certain exceed 90% (as I have been saying it would for at least a couple of years).

Where the report does get into specifics, it makes excuses, suggesting that the technologies themselves aren’t the problem, lack of funding is. To that I say that I can make all sorts of things work “commercially” if I am willing to throw enough money at them. But they will only continue to remain “commercial” so long as I am supplementing them with outside funding.

This report would seem to have been written by people who believe that technological progress is inevitable. All barriers can be broken down by throwing enough money at them. While I am definitely a technology buff, I have a different view on technology. Generally, technological successes are built upon a great many resolved technical problems. Yet it may require only a single unresolved problem to lead to technological stagnation, or failure.

For example, consider the scale-up of a process from the laboratory. I have run laboratory reactors and distillation columns – and scaled those up – so I am familiar with some of the things that can go wrong. The scale of a laboratory process may be on the order of a few pounds a day. At that scale, things behave differently for a number of reasons. When scaling up a lab process to something like demonstration scale – say a factor of 100 times greater than the lab process – many things can go wrong. In fact, I think it is safe to say that most good ideas die in the lab when practical realities intrude upon theoretical considerations.

One of the most important aspects to manage is the heat inputs and outputs. In the laboratory, the size of the equipment is such that the heat losses from surface areas is a much greater percentage of the total than when the equipment is scaled up. What does this mean? It can mean that it is difficult to replicate the temperatures achieved in the lab. It can mean that the temperatures at scale are much hotter than desired, or it can mean that there are undesirable temperature variations within the process. In my experience, this is a frequent cause of failure when scaling up from the lab.

Each successive scale-up filters out more seemingly good ideas, and in a world in which commercial success hinges on actually being able to earn money from a project, this filter works well. In a world in which technological failures are met by optimistically throwing more money at the problem, then end result will be a massive amount of spending, and later congressional inquiries into why we wasted so much taxpayer money with so little to show for it.

So success for these projects is far from assured. Even success at one level of scale-up doesn’t assure success at full commercial scale. I can rattle off a dozen things that have gone wrong and been apparent only as projects progressed to full commercial scale. Trace contaminants that can easily be disposed of in the lab can become big headaches at scale. Corrosion is often a killer once some of these projects begin to operate at bigger volumes.

But for the technological cornucopians, these are not real problems: They just require more money and they will be solved. But then why do cancer and heart disease still kill so many people each year, or why does my laptop battery only lasts a few hours instead of a week? Why don’t we commercially fly people from London to New York in an hour? The reason is that not all problems are solved by throwing more money at them, and many solutions are only advanced an incremental step at a time.

As I have pointed out, cellulosic ethanol technology is more than 100 years old. You heard it here, and you can hold me to it: There will be no breakthrough that suddenly makes it cost-competitive to produce. On the other hand, press releases that announce big breakthroughs for small incremental steps? No end to those I am afraid, nor any retraction when they can’t replicate this outside the lab.  The impression this leaves is a steady upward march in the commercialization of cellulosic ethanol – and no setbacks that weren’t simply related to lack of funding.

Cellulosic ethanol will never be produced in large volumes for less money than corn ethanol can be produced for – and keep in mind that we are still subsidizing that after 30 years. What may happen is that it eventually can be mildly successful in certain very specific instances. But to think that a billion tons of U.S. biomass will contribute a major portion of the U.S. fuel supply via cellulosic ethanol? Hogwash from many people who have never scaled up anything. The reasons are not from lack of funding, they are fundamental based on physics, chemistry, and the nature of biomass.

Had I written the report, you can bet that I would have written it differently. It would have been a sober technical assessment, and while the conclusion would have probably been to continue funding, there would also have been a lot of planning for scenarios in which things didn’t pan out as expected. I like to have a Plan B that wasn’t cobbled together only after Plan A fell apart.

February 8, 2010 Posted by | cellulosic ethanol, energy policy, EPA, politics | Comments Off on Technology is Magic

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

Son of Xethanol Goes Bankrupt

I have written several essays on Xethanol over the past few years. If you recall, they were a poster child for the theme of “overpromise, boost your stock price, and get rich quick” on biofuels.

For me, this story dates back to 2006, when an investigative journalist working for Dallas Mavericks’ owner Mark Cuban e-mailed me and asked about the company’s claims. They had announced that thy would “be the first to commercialize cellulosic ethanol” (if I had a nickel for every time I have heard that), and they issued press releases at every opportunity. It worked for a while – at one point their market cap was something like half a billion dollars – despite the fact that there was very little of real value within the company.

Anyway, the investigative journalist published his story (which seems to be offline at the moment), Mark Cuban shorted the stock just before the story was released, and I wrote up something on the company, which I considered to be essentially a scam:

Xethanol Story

Anyway, if you looked into their financials, they were spending money on everything but R&D, while claiming they would be the first to commercialize cellulosic ethanol – which would require a lot of R&D. I continued to follow the story, and predicted in February 2007 that they would eventually go bankrupt:

Xethanol Can’t Deliver on its Promises

Well, about this time last year they went bankrupt – more or less:

Xethanol Now Defunct

I say more or less, because what they did was stop operations as Xethanol, changed their direction, and relaunched as Global Energy Holdings Group Inc. At that point I said I wouldn’t write about Xethanol any more, but there is a final chapter to this saga:

Global Energy Holdings Group Files Chapter 11

Global Energy, formerly known as Xethanol Corp., warned in a recent securities filing that it needed substantial additional capital, but that the credit crunch has made it difficult to sell assets or obtain financing.

Global has had no operating revenue this year and said its sole source of revenue last year was an Iowa ethanol plant that ceased production because of high corn and natural gas prices. The company sold the Iowa plant last week and is also looking for a buyer or partner for a landfill gas project in Georgia.

I do want to make it clear, though, that when Global Energy Holdings Group Inc. was created from the ashes of Xethanol, they did so under new management. Therefore, I don’t attribute the same shenanigans to them as I did Xethanol. As far as I know they were making a legitimate attempt to make a go of it, whereas it appeared to me that Xethanol was just trying to make a fast buck off of very gullible investors. But they were handicapped by previous Xethanol decisions, and the current credit crisis was enough to push them over the edge.

I think that officially closes the book on the Xethanol saga – unless a grandson of Xethanol is born. But with the baggage that comes along with it, I wouldn’t bother reorganizing. If you still want to do business, get a fresh start.

November 27, 2009 Posted by | cellulose, cellulosic ethanol, fraud, Global Energy Holdings Group, scams, Xethanol | 59 Comments

Catching Up

Back home now, just trying to catch up on the energy news of note. Four stories that I want to highlight. First was POET’s announcement on their progress on cellulosic ethanol:

Poet hits ‘long shot,’ cuts cellulosic ethanol costs

WASHINGTON – The head of the world’s largest ethanol producer, Sioux Falls-based Poet, said Wednesday that his company has drastically cut its cellulosic ethanol production costs.

It is a breakthrough that will allow cellulosic ethanol to compete with gasoline within two years.

Jeff Broin, Poet chief executive, told reporters during a roundtable discussion that the company has reduced its cellulosic ethanol production cost during the past year from $4.13 a gallon to $2.35 a gallon.

Andrew Leonard of Salon asked me for some comments, which he included in a story on the news:

Who cares about peak oil when you have corn cobs?

In addition to what made it into the story (and those comments were specifically about the kinds of risk factors POET faces), I said that I thought the guys at POET had done a nice job on this (that comment did make it into the follow-up story at Salon). One thing that isn’t clear to me is whether the production cost includes any capital recovery. If not, then they still have some distance to go to get that $2.35 into an economic range with ethanol presently trading at about $2.00 a gallon. [Edit: A comment from Nathan Schock of POET over at Green Car Congress indicates that this is in fact the total production cost – including depreciation]. Another question I would have is how their version of the process performs with other sources of biomass.

One other thing I said to Andrew (that didn’t make it into the story) is the really big challenge is in getting those ethanol titers up. Low titers mean lots of energy is spent in getting the water out. This is why I have always favored gasification technologies over hydrolysis technologies: You don’t have water to deal with, and thus the BTU efficiency is potentially going to be higher. (Probably your capital costs as well will be higher for gasification – depending on what you are producing from the syngas). If biomass costs rise in the future – as I expect them to – then there will be added incentive for maximizing BTU efficiency.

The second story was sent by a reader. In light of the amount of corn we produce, this could have significant ramifications:

Amaizing: Corn Genome Decoded

A team of scientists led by The Genome Center at Washington University School of Medicine in St. Louis published the completed corn genome in the Nov. 20 journal Science, an accomplishment that will speed efforts to develop better crop varieties to meet the world’s growing demands for food, livestock feed and fuel.

The United States is the world’s top corn grower, producing 44 percent of the global crop. In 2009, U.S. farmers are expected to produce nearly 13 billion bushels of corn, according to the U.S. Department of Agriculture.

The next story is about a trend that I think will continue. In my presentation in Orlando, one of the trends that I pointed out is that more refineries are being built closer to the source of the oil. Saudi produces crude, but would like to capture more of that value chain by refining it as well. There are a number of very large refinery projects underway – especially in Asia and the Middle East – and in a world with stagnant oil production that means some refineries are going to shut down. In the U.S., our refining capacity is more than three times greater than our oil production rates. I see a dismal outlook for refining in the U.S., with a lot of refiners going out of business in the U.S. Valero just announced another refinery closing:

Valero refinery in Delaware City to close permanently

DELAWARE CITY, Del. — Valero Energy said this morning it plans to permanently close its Delaware City Refinery, eliminating hundreds of high-paying jobs, because of weak economic conditions, high local costs and chronic troubles at the 210,000 barrel-per-day complex.

Company spokesman Bill Day said that a plantwide maintenance shutdown, announced late last month, was already under way, and will convert to a final closing. Plant employees will continue on the payroll for 60 days under federal rules for large-scale layoffs.

Day said the plant — which produces about 70 percent of the gasoline sold on the Delmarva Peninsula— has lost $1 million a day since the start of 2009.

About 550 full time workers will be put out of work by the decision. Valero (VLO) also has notified companies that work closely with the refinery, Day said, but effects on those operations were not immediately available.

People forget that refining is a very tough business. They remember when refiners make money – as they were doing a couple of years ago – but forget that most of the time they aren’t making money. Plus, when they do make money they are subjected to accusations of gouging and calls from politicians to tax their windfall.

Finally, readers know that I have consistently avoided wading into the debate over global warming. It takes enough of my time just trying to keep up with the latest energy news, and I decided long ago to sit out the debate on climate change. It is far too politicized and people get too emotional over the issue. However, I do think it is important that the debate takes place, and I don’t like to see people trying to shut it down. Attaching labels like “denier” to people who question the science is an attempt to shut down debate, and I don’t care how right you think you are – in my view the debate needs to go on.

A couple of days ago it was announced that some e-mails from a climate research outfit in England had been hacked:

Global Warming Research Exposed After Hack

A climate change dust-up

I have to say that some of the e-mails I have seen posted are troubling. Whatever history ultimately shows, some of those e-mails appear to be agenda-driven and not science-driven. There is no place for that.

Let the debate carry on, and let science – not agendas – determine the outcome.

November 22, 2009 Posted by | cellulosic ethanol, genetic engineering, global warming, greenhouse gases, oil refineries, POET, refining, Salon, valero | 118 Comments

Slides from the Pacific Rim Summit

I am hopping on a plane again today, this time bound for the Orlando Energy Conference. The topic I will present is An Overview of Global Energy Issues. Good thing they asked for something easy and non-controversial. 🙂

This is the last trip I have scheduled for this year, and I am hoping not to have to travel again for a while. Following Orlando, I will spend a few days at the family farm in Oklahoma, where Internet access has yet to make an appearance. Therefore, I will be slow to return e-mails and respond to comments. If all goes according to plan I will be back in Hawaii on November 21st (after having missed my wife’s birthday for the 4th consecutive year).

I quite enjoyed the presentations at the Pacific Rim Summit. I got to talk to a lot of people about what they were doing, and I got to hear the latest from the algae and cellulosic ethanol camps. With the exception of the guys doing algae fermentations, the mood wasn’t great as the challenges of turning cellulose into ethanol and algae into fuel start to manifest themselves. Like I have said before, we have been trying to commercially make ethanol from cellulose for 100 years. There were multiple panels going on simultaneously, though, and I didn’t get to see all of them. Maybe the news in some of the other panels was better.

Then there is Joule Biotechnologies. They gave one of the talks at lunch one day. To say people are skeptical is an understatement. I don’t really know what to make of them. I can’t find enough information yet to give them a really thorough critique, but I am not a big fan of issuing press releases following lab tests. Note that they haven’t yet advanced to pilot scale (that comment came out during the talk – that they were moving toward piloting), and they are already making pretty bold claims about yield, cost, and solving the energy crisis. Personally, I think I would wait to see how these things scale. As one cellulosic ethanol executive commented this past week, “These things don’t scale like you think they should.” That’s right, they don’t. That’s why most technologies don’t make it out of the lab. Always better to make conservative claims and then deliver beyond expectations than to make wild claims and fall short.

Anyway, here are the slides I presented at the Pacific Rim Summit. There is some overlap with what I presented at the First Nations’ Futures Program at Stanford University on September 27th, but there are a number of new slides there.

At some point I will probably write some posts around the theme of these slides, throwing in my notes pages to put the slides in context. To put these slides in some sort of context, here were three of the slides and the notes I had jotted down for them. From the Outline slide:

We have talked a lot about sustainability this week. I must have heard that word a few dozen times the past couple of days. So who in here lives sustainably? We don’t, and our parents didn’t. Some of our grandparents may have, but for the most part they didn’t either. As a society, it has been a very long time since we lived sustainably.

So, why is it important then? I once had a friend say “There really is no need to worry too much about sustainability. Mother Nature will ultimately resolve the problem.” The problem with that statement is that I might not like how Mother Nature solves the problem. Hence, it is important to move toward sustainability voluntarily.

From the Coming to Grips slide:

I am presently reading Big Coal by Jeff Goodell. Jeff opens with a comment that I think captures the nature of the problem we face. When we go to the gas station or turn on a light switch, we don’t have to face the consequences of our dependence – the externalities. The consequences are there nonetheless, as Pat Gruber of Gevo noted yesterday when he said “There’s mercury in our fish, and I don’t like that.”

Our actions have consequences. Who said that? My oldest son can tell you. He hears that all the time, because he doesn’t always connect the fact that when he takes certain actions, sometimes there are bad consequences. The difference between him and the person filling up with gas is he does get to face them immediately.

I also don’t know who said that last one – Deal with reality or reality will deal with you – but again it’s like something I tell my kids. The future is coming whether you plan for it or not. If you plan for it, you tilt the odds in your favor.

From the slide My Paradigm:

We all view the world through a set of lenses. These are my lenses, and they shape my opinions. I know where we are, but I want to know where we are going to be in 3 , 5, 20 years from now. I believe that we will end up paying a lot more for oil than we do now. I often point out to people that consumers in Europe pay the equivalent of $250/bbl for oil. Thus, I believe the technologies will need to compete against a higher future oil price.

We are burning fossil fuels at an unsustainable rate, and we have gotten away with it for a century. We won’t get away with it for another century.

As competition for biomass heats up, low-cost biomass is going to vanish. If your business model is based on tipping fees, then I don’t believe that’s a sustainable model. Jim Imbler from Zeachem commented yesterday that Macdonald’s in San Francisco used to pay to have their waste grease hauled off. A lot of people starting making their own biodiesel, and now not only does MacDonald’s charge for the grease, but the mob is stealing it. That’s my long-term view of biomass, and that theme has been repeated all week. You better lock in your feedstock. You don’t have the same luxury as an oil company to switch to a supplier halfway around the world. The energy density of biomass makes that proposition problematic.

Finally, those “renewable” solutions that are heavily dependent upon fossil fuels won’t compete. More on that later.

Anyway, off to the airport now. Probably no new posts from me for a week.

November 14, 2009 Posted by | algae, algal biodiesel, cellulosic ethanol, gevo, presentations, zeachem | 46 Comments

What Happened to a Buck a Gallon?

Coskata will produce ethanol for under US $1.00 a gallon anywhere in the world, from almost any input material.Coskata Vision Statement

A bit more than a year ago, I read a number of claims from ethanol start-up Coskata stating that they would be able to produce ethanol from cellulose for less than $1.00 a gallon. One thing that is very important to me as an engineer is that you deliver what you say you will deliver – or more. If you deliver less, you lose credibility. If it becomes a habit, you lose all credibility.

I am not a fan of hype, and I don’t like my tax dollars funding hype. So when I think someone is overly guilty, I will often report on it. I did:

Coskata: Dead Man Walking

A couple of comments I made in that essay:

The fact that they don’t even have an operating pilot plant should tell even the most optimistic supporter that they have little basis for their claims of producing ethanol for less than $1/gal.

My prediction? I predict that Coskata’s suggestions that they will produce ethanol for less than $1/gal will look ridiculous in hindsight.

There were two reasons that I took exception to their claim of “under $1/gal.” First, they had no pilot facility upon which to base that claim. Making such a claim on the basis of lab tests is pretty reckless, as you are staking credibility on the line with little to back it up.

Second, the claim was incredibly misleading because there was no capital recovery in the number. If you don’t understand what that means, consider this. Let’s say I claim to be able to make gasoline for a nickel a gallon. But to do that, I have to build a plant that costs a trillion dollars. Do you really think then that I can make ethanol for a nickel a gallon? If I specified that my operating expenses amounted to a nickel a gallon, then that may be a true statement – which would then lead to questions about capital costs. In the case of Coskata, these capital costs are not trivial, and thus “$1/gal” immediately goes way up because capital isn’t free.

Well, that was a bit over a year ago, and two things have happened. First, they now reportedly have an operating pilot plant:

Coskata leaks word that demo plant is up and running

Ethanol developer’s CEO tells the Cleantech Group at the Boston Forum that its pilot facility, capable of producing 50,000 gallons a year, has been operating for nine weeks.

Warrenville, Ill.-based ethanol developer Coskata has been planning to announce the opening of its demonstration plant in October. But CEO William Roe leaked the news a little early.

Let me congratulate them on that accomplishment, and sincerely wish them the best. They will gain important operating knowledge from this plant – and I believe they will learn that their earlier cost claims weren’t credible.

The second thing happened at this week’s gasification conference. Coskata’s gasification provider – AlterNRG – made a presentation. Apparently they did not get the memo from Coskata, because they had on their slide that “Coskata expects overall operating costs to be less than $1.25/gallon.” That may not seem like much, but that’s a potential upward creep of 25%, and their pilot plant is barely warm. Further, they specified that this was just for operating costs; something Coskata’s early claims did not specify.

Another thing that AlterNRG said specific to their gasifier is that it really needs tipping fees for the economics to work. I expect long term, there will be more competition for biomass, and tipping fees will start to decline. So a company that is dependent on tipping fees is making a pretty risky bet in my opinion. In my first ever essay on Coskata almost two years ago – Coskata Hype – I wrote about the potential need for tipping fees:

My guess is that unless they found someone to pay a steep tipping fee to get them to take biomass, there is nowhere in the world that they will be able to make ethanol via gasification for under $1/gal.

Coskata would not be the only company back-pedaling on their cost claims. Last year Mascoma claimed “The cost of fuel from the process is similar to Coskata’s at about $1-1.50 a gallon.” (Like Coskata, Mascoma is a Vinod Khosla-backed venture).

Now they have changed their tune:

“Governments need to help with the financing for the first plants, once you have those the private sector will start to come in,” said Jim Flatt from research and development at U.S. biofuels firm Mascoma, speaking at a conference in Amsterdam.

“Oil needs to trade at a sustainable level of $100 or above to make this competitive,” said Flatt.

Both of these companies have quietly increased their projected costs (although Coskata still has the <$1/gal claim on their website). Bear in mind that neither company has anything that would be considered much of a demonstration plant. Coskata's recently completely pilot plant has a nameplate capacity of 3 barrels a day. So reality about cellulosic ethanol appears to be setting in for everyone. Everyone except for General Wesley Clark, who just went on record with this whopper: U.S. seen unlikely to meet ethanol fuel-content goal

Retired U.S. General Wesley Clark, co-chairman of the Growth Energy group, said the 100 million gallon level could be reached in time if the cap on the permitted level of ethanol in regular gasoline is increased to 15 percent from 10 percent.

“There is cellulosic capacity standing by … but the later than policy decision is (taken), the less likely we are to meet that 2010 mandate of 100 million gallons,” he told reporters during a trip to Ottawa.

The auto industry says gasoline containing 15 percent ethanol could damage engines and fuel lines in some older cars, and has urged regulators not to approve the higher blend.

“There are a lot of people who see it our way — namely, that this is good for the environment, it’s good for jobs, it’s good for national security. It doesn’t hurt automobiles,” said Clark.

That’s right, just lift the 10% cap, and the cellulosic ethanol will start to flow. Plus, it will be under a buck a gallon, it will create jobs, and it will bring us one step closer to energy independence.

I don’t meant to downplay the issue of the 10% cap, but there is room to put a lot more ethanol out there in the form of E85 even with the 10% cap – if it could be made in a cost-competitive manner. But that won’t open up the cellulosic taps. We actually had a pair of those until about 1920, at which time they were shut down because they weren’t economical.

October 8, 2009 Posted by | cellulosic ethanol, Coskata, Mascoma, Vinod Khosla | 14 Comments

Energy Potpourri

I am at the 2009 Gasification Technologies Conference this week, with a pretty full schedule. But there are three stories that I wanted to quickly hit. One is a follow-up on the previous cellulosic ethanol post, one is about Paul Sankey’s new report on peak demand, and the last is on a technology that ExxonMobil has reported on here at the conference that I felt was quite interesting. There will probably be no more new posts from me until the weekend. I only got away with this one because I decided to write instead of network (which I hate to do anyway) during free periods today.

When Technologies Are Mandated

I don’t care too much for mandates. I think they are so much worse than subsidies, because with a mandate you are really saying that it doesn’t matter how much it costs, you don’t want to know how much it costs – just do it.

If the government thought it was a good idea to blend bio-butanol into the gas supply, they could offer a $0.50/gallon subsidy to do so. If that doesn’t result in butanol entering the fuel supply, then that’s a pretty good indication that butanol is at more than a $0.50/gal disadvantage to gasoline. But imagine instead that it is mandated. The costs could go very high in that case, but gasoline blenders would still have to pay up. We may find out that the cost to fuel suppliers was $8.00/gal. Had it been a subsidy instead – and it needed to go to $4 or $5/gal to make it economical – it would have never passed because the costs would be more transparent.

Thus, I was not too enthusiastic about the cellulosic ethanol mandates we got as part of the 2007 RFS. In 2010, for instance, it is mandated that 100 million gallons of advanced biofuels will be blended into the fuel supply. Cellulosic ethanol has been the technology that has been favored, but I have warned about costs that are going to be very high. Instead of a mandate, suppose we put a $1/gal subsidy in for cellulosic ethanol. Then instead of relying on people promising that they can make cellulosic ethanol for $1/gal if they can just get grants, mandates, and loan guarantees – you put the burden on the producer. Here is a $1/gal subsidy for you. Build the plant, make your $1/gal ethanol, and collect the subsidy.

Not surprisingly we are now getting news that despite throwing a lot of money at it, the 2010 levels of cellulosic ethanol are going to fall far short of the mandate – as I have been saying all along. They are going to need more money to meet future mandates – highlighting the problems I have with mandates. From the NYT:

Biofuels Producers Warn They Are Going to Fall Far Short of Federal Mandates

“The current economic climate almost makes the RFS a moot point for the time being,” said Matt Carr, policy director for the Biotechnology Industry Organization.

His organization estimated last month that 2010 volumes will, optimistically, reach 12 million gallons, far short of the 100-million-gallon mandate that year.

Range Fuels had gotten an initial $76 million from the DOE, then an $80 loan guarantee from the USDA. They also got $100 million in private equity. (I predict some folks are going to lose some money – including taxpayers). But that still wasn’t enough, so they went back to the DOE for more money. This time, the DOE said no:

The Department of Energy’s loan guarantee program, producers say, has been particularly flawed. No advanced biofuel makers, aside from a partnership between BP PLC and Verenium Corp., have so far won approvals.

“We received a ‘Sorry, Charlie’ letter,” said Bill Schafer, a senior vice president of Range Fuels Inc., which is now building a cellulosic facility in Soperton, Ga., slated for completion early next year.

He said that under the program, biofuels companies must compete directly against solar, wind and even compressed natural gas — all energy technologies that, unlike advanced biofuels, have already been built at commercial scale.

So there you have it. The DOE seems to be losing some of the earlier enthusiasm for cellulosic ethanol. Range Fuels is here at the conference, by the way. I should probably say hi.

Again, this highlights the risk of mandates. Costs can spiral out of control. The ultimate cost can’t be easily predicted. Instead of assuming that technology can be mandated if enough money is thrown at it, we would all have been better off had there merely been subsidies offered. In that case, if this is truly not economically viable, the taxpayer may not have to foot the bill for millions of dollars for failed or stalled plants.

Printing Money

One of the reasons I invest in oil companies is that I think oil prices will continue to spike higher in the future. Because of the recession, we currently find ourselves with excess production capacity. But it looks to me like that excess production capacity will be eroded in the future, which will once again put pressure on prices. Oil companies will again reap very big profits by supplying a dwindling resource. (Whether governments will aggressively move to confiscate these profits is another question entirely).

There is another view that the oil companies will die out as oil depletes, and therefore oil stocks are very risky investments in the longer term. I don’t subscribe to this view because I believe the oil companies will possess enough cash to enter into any future energy business that looks lucrative. If we are supplying 90% of the cars with liquid fuels derived from coal in 20 years, I suspect it will be the oil companies producing it. In fact, most major oil companies – ExxonMobil, Shell, BP, ConocoPhillips – have active programs in this area. It is a naïve view to think that the oil industry as a whole will fail to anticipate the changing markets. That’s why I always think it is humorous that people feel the ethanol industry is a threat. If the oil industry thought it was a threat, there is nothing keeping them from getting involved.

Paul Sankey of Deutsche Bank just put forth both views in a new report. As I have mentioned previously, I think Sankey is an analyst who really understands the industry. And I agree with his first comments. I just don’t think he is right about the second point.

Don’t Fill Up on ConocoPhillips

That one is a somewhat misleading title because he is recommending ConocoPhillips (which I do own):

DESPITE NUMEROUS SIGNS that the global economy is still struggling, just about everyone following energy predicts at least one more spike in oil prices in coming years.

It’s just that scenario that prompted Deutsche Bank analyst Paul Sankey to publish today a 61-page opus to clients in which he upgraded shares of ConocoPhillips (COP) to “Buy” from “Hold” and raised his price target to $55 from $40.

Sankey’s thesis — and he’s not alone — is that Conoco will benefit in such a scenario by being able to sit back and milk profits from its existing reserves of oil with minimal new investment, thus leading to generous cash flows.

In brief, Sankey sees global demand surging again with economic rejuvenation, leading to a spike in oil of $175 per barrel in 2016, after which developments in global fuel efficiency, specifically electric cars, will cause demand for crude to fall off precipitously, until oil comes back into equilibrium with supply at $100 per barrel in 2030.

Sankey spells out why he is long-term bearish on the oil companies:

Peak Oil: The End Of the Oil Age is Near, Deutsche Bank Says

Deutsche Bank expects the electric car to become a truly “disruptive technology” which takes off around the world, sending demand for gasoline into an “inexorable and accelerating decline.”

In 2020, the bank expects electric and hybrid vehicles to account for 25% of new car sales—in both the U.S. and China. “We expect [electric propulsion] will reverse the dynamics of world oil demand, and spell the end of the oil age,” the bank writes.

But won’t cheaper oil in the future just lead to a revival in oil demand? That’s what’s happened in every other cycle. Au contraire, says the bank: Just as the explosion of digital cameras made the cost of film irrelevant, the growth of electric cars will make the price of oil (and gasoline) all but irrelevant for transportation.

He could be right, but I am betting against it. But I may find that in 20 years ConocoPhillips’ core business is something entirely different than it is today.

ExxonMobil’s MTG Technology

One of the more interesting presentations for me at the gasification conference has been ExxonMobil’s work on a different kind of coal-to-liquids (CTL) technology. Conventional CTL would involve gasification of the coal to syngas, followed by a Fischer Tropsch reaction that converts the gas into liquid fuels such as diesel. Exxon has a different process, in which they gasify the coal, but then they turn it into methanol. As I have said before, methanol can be made quite efficiently, and I think it’s a shame that it wasn’t allowed to compete with ethanol on an equal footing. But the technology doesn’t stop at methanol. The methanol is dehydrated to di-methyl-ether (DME, also a nice fuel). The DME is then passed over a catalyst and converted to gasoline in yields of around 90%. The technology is called methanol-to-gasoline (MTG).

The process has been around for a while, but hasn’t gotten much attention. In the 80’s and 90’s, they ran a 14,500 bbl/day plant in New Zealand. As far as synthetic fuel facilities go, that’s a big plant with an impressive track record of operation. The on-stream reliability of the plant was over 95% during its operation. (Following the oil price collapse in the 90’s, the plant stopped upgrading the methanol, and just made methanol the end product).

The advantage of the process is that capital costs are reportedly lower than FT, and the product is gasoline – in high demand in the U.S. The disadvantage is that the process produces relatively little diesel and jet fuel. The military and various airlines are highly interested in FT because of its ability to supply these important fuels.

Exxon reports that a new plant, based on 2nd generation technology with better heat integration and process efficiency, has been built in Shanxi, China. At 2,500 bbl/day, the facility is smaller than the earlier New Zealand facility, but Exxon has licensed MTG technology to a pair of companies in the U.S. DKRW announced in 2007 that they would utilize MTG in a 15,000 bbl/day facility in Medicine Bow, WY. Synthesis Energy Systems announced in September 2008 that they would license MTG for their global CTL projects.

While Exxon seems to be more focused on coal to gasoline, there is no reason this process couldn’t be used to turn natural gas or biomass into gasoline (GTL and BTL). This technology could be complementary to FT technology, providing gasoline while FT supplies the liquid fuels needed for airlines, marine applications, long-haul trucking, and the military.

During the Q&A, though, one guy asked “If this is so great, why aren’t you building these plants yourselves?” The answer was that they weren’t experts, and only wanted to license.

October 6, 2009 Posted by | btl, cellulosic ethanol, ConocoPhillips, COP, ExxonMobil, Paul Sankey, range fuels, XOM | 115 Comments

Cellulosic Ethanol Falling Short

The reason I spend time debunking wild claims is that I think they damage the entire bioenergy sector in the long run. People who issue press releases claiming they can produce fuel for $1/gallon – and by the way we can do it next year if you give us the money – may attract some funding, but in the long run if they can’t deliver, investors will shy away from the entire sector.

One of the things I have spent time debunking is the notion that we are going to rapidly scale up and produce massive quantities of cellulosic ethanol. I believe – for fundamental reasons of chemistry and physics – that it isn’t going to happen. I have said that I think the people who are getting money to build cellulosic ethanol plants will start coming up with a litany of excuses for the cash they burned through, and their failure to deliver. A year ago, I wrote:

The next few years will see a record amount of back-pedaling from most of the companies trying to establish a foothold in this space – and overpromising on their technology to do so. There will be the normal litany of excuses – such as ‘the oil companies are suppressing the technology’ – but in the end the chemistry, physics, and most importantly the capital costs and logistical challenges will catch up with them. Yes, excuses will be made, but those who know a little about the technology will know what really happened. It’s going to be TDP all over again.

Today a new article in Nature says that cellulosic ethanol schedules are slipping and prospects are dimming – partially because investors have gotten burned by rosy biofuel promises (which is exactly my fear). The article is:

Cellulosic ethanol hits roadblocks

The article is behind a pay wall, but I have access. So I can provide some excerpts:

In February 2007, the US Department of Energy selected BlueFire and five other companies to negotiate for up to US$385 million in funding for commercial-scale plants. And later that year, Congress issued a federal mandate to produce 61 billion litres of cellulosic biofuels annually for transportation by 2022.

As I have said on repeated occasions, I don’t believe the advanced biofuel mandates will be met, and I think you will start to see targets slipping next year (the first year the advanced mandate really phases in). I predicted quite explicitly a year ago that we wouldn’t come close to meeting the targets. The Nature article agrees:

According to ThinkEquity, an investment bank based in San Francisco, California, the United States will have the capacity to produce less than 13 million litres of cellulosic ethanol this year, and it will almost certainly fail to meet the US Environmental Protection Agency’s (EPA) projection of 381 million litres of cellulosic biofuels in 2010. Two of the six companies selected by the Department of Energy to negotiate for commercial plant funding have dropped out of the programme, and several plants belonging to other companies have been delayed.

They also casually note more delays in Vinod Khosla’s Range Fuels project:

Range Fuels, based in Broomfield, Colorado, originally planned to complete the final phase of construction on a Georgia commercial plant in 2011 but has delayed that until late 2012, says chief executive David Aldous.

The reason I have criticized Vinod Khosla is that I believe he is out there making promises that he can’t deliver upon. But he is Vinod Khosla, so people (private equity and taxpayers) give him money to invest, potentially diverting it from ventures that make less noise, but have more real potential to deliver. And a lot has been invested into his Range Fuels venture. However, it is no surprise to me at all that the schedule has been slipping since the project was first announced.

I first covered the Range Fuels ground-breaking as one of my Top Energy Stories of 2007 (See #6). A year later, I covered the first announced delay in my Top Energy Stories of 2008 (again #6). The initial announcements from Range were that the first 20 MM gy phase is expected to be fully complete in 2008. Then that was delayed until 2009. Next it was scheduled to be completed by the first quarter of 2010, with the production of ethanol and methanol at a run rate of less than 10 million gallons per year to follow in the second quarter of 2010.” So now we see delays pushing into 2012. As some readers noted, this is the “final phase” they are talking about, but they need to start producing from the first phase before they have to worry about any final phases.

The article also discusses Iogen, and the fact that they “suspended operations on an Idaho plant to focus its resources on a possible plant in Saskatchewan.” Iogen has been producing for long enough at their pilot plant that they should have a good idea of what the economics really look like. That’s why I don’t expect them to build a plant, but instead to keep announcing that they are studying the issue.

The article also noted that researchers at Sandia National Laboratories had predicted that “cellulosic ethanol could compete with petrol in 2030 only if oil was $90 a barrel or higher.” Left unsaid is that this hinges upon technical improvements.

I find the entire issue very frustrating, because I have felt for years that our energy policy is being pushed by people with influence, but not necessarily people who are knowledgeable about energy. So what happens is that we waste years chasing dead ends and losing precious time as oil depletion marches on – and we spend our tax dollars because someone made a lot of empty promises.

These delays should also serve as a message to those who think the market will fix the problem of oil depletion by driving prices higher and making alternatives more affordable. The problem is that it takes years to bring these projects online, so you have to have a long-range plan for pursuing the right strategies. If oil prices are back to $150 next year, we will either pay up or do without. The energy business isn’t like a widget maker that can easily set up shop and compete for market share. It takes years and lots of money.

Note: I originally put this up in a hurry, and in reading it later I felt it came across as unnecessarily abrasive. In my haste I had also chopped off a quote that made it appear out of context. That was not my intention, but after viewing some of the comments I reread the story and I saw that this was the case. So I have corrected it.

October 2, 2009 Posted by | cellulosic ethanol, range fuels, Vinod Khosla | 77 Comments

Corn Ethanol Breakthrough?

I just read an interesting story from Reuters courtesy of a reader:

UK technology could turn U.S. ethanol industry green

DUNSFOLD PARK, England (Reuters) – A compost bacteria bred by a British company could be set to transform both the profitability and environmental credentials of the U.S. ethanol industry.

“The application of our technology results in the greening of corn ethanol,” Hamish Curran, chief executive officer of TMO Renewables Ltd said in an interview on Tuesday.

OK, I am listening. Just to reiterate, I don’t think the political support in the U.S. for corn ethanol is ever going to go away, so I would certainly like to see it “green up.” Despite sometimes being viewed as simply “anti-ethanol”, this has been my position for years. (See here or here). So I am certainly interested in technologies that can improve ethanol’s energy balance.

Incidentally, as I frequently do when I hear about a “new” technology, I dug back in my G-mail to see if I had any references to it. I have over 10,000 G-mails archived, so sometimes it is hard to recall if I have e-mails regarding a specific technology. In fact, I have exchanged about a dozen e-mails about TMO Renewables over the past 2 years. I even had some questions answered by their Technical Director over costs and ethanol tolerance of the microbes.


Curran said the TMO technology uses a by-product of the U.S. corn ethanol industry, distillers’ grains (DDGS), converting it into additional ethanol and boosting production levels by about 15 percent.

He said U.S. corn ethanol plants also currently use large amount of energy drying the DDGS before selling it as fodder for livestock.

The TMO process uses the material while still wet, allowing substantial energy savings as well as additional output, raising profit margins by 50 to 60 percent, he said.

Therein lies a potential accounting problem that could result in a conclusion of no greenhouse gas savings. The current energy balances for corn ethanol (the “official” balances calculated by the GREET model, which the U.S. government relies on) already use the DDGS to help improve ethanol’s energy balance. If they consume the DDGS in the process, they may run into a problem based on the way we have historically calculated the energy balances.

Consider this example (for illustrative purposes only, but not far off from the 2004 USDA report on ethanol’s energy balance). Let’s say I put 100 BTUs of fossil fuel into my ethanol production process. In the process, I make 110 BTUs of ethanol and some quantity of DDGS. The way the USDA has accounted for the energy balance is that they assign some quantity of the energy inputs to the DDGS. For instance, let’s say I allocate 45 BTUs of the energy inputs to the DDGS. That leaves 55 BTUs for the ethanol, and voila, my energy balance for ethanol is 2/1 (110 BTUs out/55 BTUs in).

So we now lose the ability to allocate energy inputs to the DDGS because we are now using DDGS to produce ethanol. While the “true” energy return might indeed be better, the previous accounting method may not reflect that because we can no longer split those energy inputs.

Now the energy return might look something like this. If we can produce an additional 15% ethanol in our previous example, we now might have something like 130 BTUs of ethanol out and 100 BTUs of fossil fuel in (in fact there would be additional BTUs needed to distill the new ethanol production, but savings from not having to dry the DDGS). All of the energy inputs get allocated to ethanol now, and even if we presume a generous 25% savings on energy inputs due to not having to dry the DDGS, the prior accounting method that USDA has used may show a drop in the energy return (unless they again change the accounting method). This could result in little or no calculated greenhouse gas savings (since earlier savings were based on the earlier accounting method), and thus no “greening” credit.

This is not to say that this new bacteria may not be well worthwhile. But some people have gotten quite creative with ethanol accounting by using DDGS, and we have long heard how wonderful DDGS is and how it helps out with the ethanol story. This new bacteria may giveth, but it also taketh away a story that the ethanol lobby has come to rely heavily upon.

September 16, 2009 Posted by | cellulosic ethanol, ethanol, TMO Renewables | 39 Comments

The First Commercial Cellulosic Ethanol Plant in the U.S.

I received a two-week reprieve on the book chapter deadline, as some of the other contributors aren’t finished. So I now have time to pick a few other things back up. I have ended up really reworking the structure of the chapter to discuss the size of the biomass resource base, the combustion technologies, the conversion technologies, and the enabling technologies. Thanks to all who provided feedback and sent e-mails.

As I was writing the section on ethanol from wood via hydrolysis (cellulosic ethanol), I came across some very interesting historical facts. I have known that cellulosic ethanol has been around a long time. I used to say that we have been working on this for decades, but then I found a reference back to 1922 which would put it back almost 100 years. Then I found a reference back to 1898, when the Germans first tried to commercialize it. Now I have traced it all the way back.

I don’t think I have ever had the privilege of using a literature reference from 1819, but here it is. In 1819, Henri Braconnot, a French chemist, first discovered how to unlock the sugars from cellulose by treating biomass with sulfuric acid (Braconnot 1819). The technique was later used by the Germans to first commercialize cellulosic ethanol from wood in 1898 (EERE 2009).

But believe it or not, commercialization also took place in the U.S. in 1910. The Standard Alcohol Company built a cellulosic ethanol plant in Georgetown, South Carolina to process waste wood from a lumber mill (PDA 1910). Standard Alcohol later built a second plant in Fullteron, Louisiana. Each plant produced 5,000 to 7,000 gallons of ethanol per day from wood waste, and both were in production for several years (Sherrard 1945).

To put that in perspective, Iogen claimed in 2004 that they were producing the world’s first cellulose ethanol fuel from their 1,500 gallon per day plant. (While 1,500 gal/day is their announced capacity, if you look at their production statistics they have never sustained more than 500 gallons per day over the course of a year; 2008 production averaged 150 gal/day).

Many companies are in a mad rush to be the “first” to commercialize cellulosic ethanol. The next time you hear someone say that they will be the first, ask them if they plan to invent the telephone next.


Braconnot, H. Annalen der Physik. (1819) 63, 348.

EERE, U.S. DOE Energy Efficiency and Renewable Energy. (2009). Biomass Program. Retrieved September 9, 2009 from

PDA, Pennsylvania Department of Agriculture. (1910). 16th Annual Report.

Sherrard, E.C.; Kressman, F.W. “Review of Processes in the United States Prior to World War II.” Industrial and Engineering Chemistry, Vol 37, No. 1, 1945, pp 5-8.

September 10, 2009 Posted by | cellulosic ethanol, Iogen | 78 Comments