R-Squared Energy Blog

Pure Energy

Book Review: Big Coal

Big Coal: The Dirty Secret Behind America's Energy Future by Jeff Goodell

One of the triumphs of modern life is our ability to distance ourselves from the simple facts of our own existence. – Jeff Goodell

Big Coal by Jeff Goodell is a book I have had on my reading list for a long time, but I only got around to reading it during my recent trip to Europe. It has taken me a very long time to finish this review for a number of reasons, but one is that I had a hard time deciding what to write. Normally, when I read a book I will dog-ear the pages that I want to revisit either because 1). There was something significant that I did not know; or 2). I want to reference a particular point in the book review. By the time I finished reading this book, I probably had 50 pages dog-eared.

My introduction to Jeff Goodell came a couple of years ago when he was writing an article for Rolling Stone about ethanol. He contacted me and we talked a few times, I got to know him a bit, and he published a pretty scathing article during the early days of the ethanol euphoria. For more on that episode, see Rolling Stone Article, Jeff Goodell Debates the Rolling Stone Article on CNBC, or Bob Dinneen Responds to Rolling Stone.

I wish I could write like Goodell. I really enjoy his writing style. I sometimes disagree with particular points, but in Big Coal he makes a very compelling argument that we don’t come close to paying the societal costs of coal usage when we pay our electric bill.

Even though we don’t often see it, coal is a part of daily life for most of us. It produces a great deal of our electricity. But we don’t spend a lot of time thinking about the implications. As Goodell notes on the first page, “We love our hamburgers, but we’ve never seen the inside of a slaughterhouse.” Isn’t that the truth? I have always imagined the number of people who would become vegetarians if they ever saw the inner workings of a slaughterhouse.

When we fuel up our cars, we don’t think (much) about the ramifications of our oil dependence. When we flip a light switch, we do not associate that with the coal-driven mountaintop removals in West Virginia. In this book, Goodell thrusts those associations right in your face.

The book is divided into three parts: Extraction, conversion to power, and the resulting emissions. He covers the history of the industry, tells the stories of the people in and around the business, and while most of the book is based on U.S.-happenings, he does spend a chapter on China.

I would imagine the coal industry was none too pleased with Big Coal, because it paints a really ugly picture of the industry.  Goodell contrasts the coal industry with the individuals whose lives have been negatively impacted by coal in one way or another. He details corruption and politics that allowed the industry to delay implementation of pollution control equipment. And on a big picture level, he argues that continued usage of coal poses a serious threat to the earth’s climate.

This book will leave you shaking your head, wondering why we use coal at all if the overall picture is as troublesome as Goodell suggests. I found myself wondering as well, which was actually what led to my post on the cost of various energy sources. There at the top of the list for the cheapest source of energy was Powder River Basin coal, which is why we continue to heavily use coal despite the issues Goodell spells out.

We humans aren’t very good at willingly making sacrifices today in order to potentially improve the situation a few years down the line. We want instant gratification and coal fits the bill. (I would argue this is also why the U.S. is so deeply in debt and our personal savings rate is so low.)

I noted in my book review of Crude World that Peter Maass didn’t present a balanced picture of the oil industry; it was all bad. His book was intended to highlight the negative aspect of our oil dependency. Big Coal is the same in that respect. It is hard to argue that coal hasn’t improved the lives of a great many people around the world, and I know a number of people who would argue that these improvements outweigh the negatives. Further, it is fair to say that the coal industry has come a long way in cleaning up their emission profile over the past few decades.

But it is clear which side of that argument Goodell would come down on. To be honest, I come down on that side as well. I would like to see us limit our coal consumption and boost electricity generation from other resources. I know a great number of people who feel this way, but coal is like oil in that replacing it will likely entail economic sacrifices that individuals don’t like to make. Coal produces half of the electricity in the U.S., and I would have a hard time arguing that anything – outside of nuclear power – can scale up and take on the role that coal currently plays.

The realist in me thinks that we will eventually use up all of our coal, as will China, Australia, India, and all of the other major coal producers. This is primarily why I sit out the debates on climate change; I can’t realistically envision anything that will get the world to collectively NOT burn up all the coal. In an energy-constrained future, prices will rise and people who feel morally opposed to coal will suddenly find their moral fiber weakening as high energy prices bite into their budgets.

I don’t discount that renewable energy can eventually make a bigger impact (I hope so, because that’s what I am doing for a living), but it is starting from a very small basis compared to electricity generated from coal. While coal produces about half of the electricity in the U.S., renewables other than hydropower account for only about 3.5% (per the EIA).

So I think Big Coal will continue to be a very big part of our lives for many years to come – although with a strong political commitment the nuclear option could put a dent in our coal dependence.

March 9, 2010 Posted by | book review, coal, Jeff Goodell, nuclear energy | 142 Comments

Prices of Various Energy Sources

As we continue to develop biomass as a renewable source of energy, it is important to keep the cost of energy in mind, because this has a very strong influence on the choices governments and individuals will make. I sometimes hear people ask “Why are we still using dirty coal?” You will see why in this post.

Last year I saw a presentation that projected very strong growth in wood pellet shipments from Canada and the U.S. into Europe. My first thought was “That doesn’t sound very efficient. Why don’t we just use those here in North America?”

It didn’t take very long for me to find out the answer to that. It is because wood pellets are much more expensive than natural gas in North America. On top of that it takes more effort to use wood for energy than it does natural gas. That combination means that wood has a tough time competing with natural gas in North America.

When I was looking into that issue, I compiled a list of the price for various energy types on an energy equivalent basis. The price is as current as possible unless noted. I have converted everything into $/million BTU (MMBTU), and the sources are listed below.

My preference is to use EIA data over NYMEX data because the former is an archived, fixed number. I have included energy for heating and for various transportation options. For comparison I also included the cost of electricity and the cost of the ethanol subsidy/MMBTU of ethanol produced.

Current Energy Prices per Million BTU

Powder River Basin Coal – $0.56
Northern Appalachia Coal – $2.08
Natural gas – $5.67
Ethanol subsidy – $5.92
Petroleum – $13.56
Propane – $13.92
#2 Heating Oil – $15.33
Jet fuel – $16.01
Diesel – $16.21
Gasoline – $18.16
Wood pellets – $18.57
Ethanol – $24.74
Electricity – $34.03

Observations

It isn’t difficult then to see why wood pellets have a difficult market in the U.S. For people with access to natural gas, they are going to prefer the lower price and convenience of natural gas over wood. For Europe, their natural gas supplies aren’t nearly as secure, so they have more incentive to favor wood as an option.

The cost of the ethanol subsidy is interesting. We pay more for the ethanol subsidy than natural gas costs. However, if you consider that we are paying a subsidy on a per gallon basis – and a large fraction of that gallon of ethanol is fossil fuel-derived, the subsidy for the renewable component is really high.

For instance, if we consider a generous energy return on ethanol of 1.5 BTUs out per BTU in, that means the renewable component per gallon is only 1/3rd of a gallon. (An energy return of 1.5 indicates that it took 1 BTU of fossil fuel to produce 1.5 BTU of ethanol; hence the renewable component in that case is 1/3rd). That means that the subsidy on simply the renewable component is actually three times as high – $17.76/MMBTU. Bear in mind that this is only the subsidy; the consumer then has to pay $24.74/MMBTU for the ethanol itself.

Sources for Data

Petroleum – $13.56 (EIA World Average Price for 1/08/2010)
Northern Appalachia Coal – $2.08 (EIA Average Weekly Spot for 1/08/10)
Powder River Basin Coal – $0.56 (EIA Average Weekly Spot for 1/08/10)
Propane – $13.92 (EIA Mont Belvieu, TX Spot Price for 1/12/2010)
Natural gas – $5.67 (NYMEX contract for February 2010)
#2 Heating Oil – $15.33 (EIA New York Harbor Price for 1/12/2010)
Gasoline – $18.16 (EIA New York Harbor Price for 1/12/2010)
Diesel – $16.21 (EIA #2 Low Sulfur New York Harbor for 1/08/2010)
Jet fuel – (EIA New York Harbor for 1/12/2010)
Ethanol – $24.74 (NYMEX Spot for February 2010)
Wood pellets – $18.57 (Typical Wood Pellet Price for 1/12/2010)
Electricity – $34.03 (EIA Average Retail Price to Consumers for 2009)

Conversion factors

Petroleum – 138,000 BTU/gal
Gasoline – 115,000 BTU/gal
Diesel – 131,000 BTU/gal
Ethanol – 76,000 BTU/gal
Heating oil 138,000 BTU/gal
Jet fuel – 135,000 BTU/gal
Propane – 91,500 BTU/gal
Northern Appalachia Coal – 13,000 BTU/lb
Powder River Basin Coal – 8,800 BTU/lb
Wood pellets – 7,000 BTU/lb
Electricity – 3,412 BTU/kWh

January 19, 2010 Posted by | coal, EIA, electricity, Energy Information Administration, ethanol prices, ethanol subsidies, gas prices, oil prices | 1 Comment

We’re Number One!

The U.S., that is, in total fossil fuel resources. At least those were the findings of the Congressional Research Service in a report they just released:

U.S. Fossil Fuel Resources: Terminology, Reporting, and Summary

The primary reason is our huge coal reserves. While we are 12th in oil reserves (Table 5 of the report), our coal reserves are by far the largest in the world. All together, the fossil fuel reserves (oil, natural gas, and coal) of the U.S. are reported at just under one trillion barrels of oil equivalent (BOE). The global total is reported at 5.6 trillion BOE.

While I think you have to take data from some of the listed countries with a grain of salt – especially when talking about categories like “undiscovered technically recoverable” oil and natural gas – it does point to the importance that coal will play when oil reserves start to seriously deplete. I have said this before, but when gasoline is $5/gallon, most objections to coal as a fuel will disappear. At that point I think you will start to see coal-to-liquids (CTL) plants moving forward.

Also from the report, at first glance this chart may seem ridiculous:

But I am also reminded of my amazement at a U.S. oil statistic I once came across. In 1982, U.S. reserves were 27.9 billion barrels. In 2005, U.S. reserves were 21.8 billion barrels. But over the course of that 24-year period we produced 57 billion barrels of oil and pulled our reserves down by only 6 billion barrels. So the graph above seems far-fetched, but so does the evolution of our reserves over past quarter century.

Of course it goes without saying that government policies will heavily influence which resources are developed, and over what time period. My guess is that over the next few years we will favor policies that are intended to wean us off of fossil fuels. While I applaud good intentions – and in fact my new job is all about moving developing fossil fuel replacements – I expect we are going to see more than a few unintended consequences. The one I am most concerned about is heavily disincentivizing domestic production, but not having an adequate answer for the domestic production shortfall. In this case, while more alternative energy may be the target, more oil imports may be the unintended consequence.

November 4, 2009 Posted by | coal, CTL, domestic production, oil production, oil reserves | 48 Comments

Britain’s Impending Energy Crisis

In case you missed the story yesterday in the Economist:

How long till the lights go out?

North Sea gas has served Britain well, but supply peaked in 1999. Since then the flow has fallen by half; by 2015 it will have dropped by two-thirds. By 2015 four of Britain’s ten nuclear stations will have shut and no new ones could be ready for years after that. As for coal, it is fiendishly dirty: Britain will be breaking just about every green promise it has ever made if it is using anything like as much as it does today. Renewable energy sources will help, but even if the wind and waves can be harnessed (and Britain has plenty of both), these on-off forces cannot easily replace more predictable gas, nuclear and coal power. There will be a shortfall—perhaps of as much as 20GW—which, if nothing radical is done, will have to be met from imported gas. A large chunk of it may come from Vladimir Putin’s deeply unreliable and corrupt Russia.

Many of Britain’s neighbours may find this rather amusing. Britain, the only big west European country that could have joined the oil producers’ club OPEC, the country that used to lecture the world about energy liberalisation, is heading towards South African-style power cuts, with homes and factories plunged intermittently into third-world darkness.

For more background on Britain’s situation, see also The looming electricity crunch.

I thought about these issues a lot when I lived in Scotland. Britain is clearly facing a crisis, and how they address it will be instructive to those of us who are concerned about energy shortages. I always said that Britain will ultimately conclude that they have to have a lot of new nuclear power, but it looks like that recognition won’t come in time to help them. So what’s the answer? They start ramping coal back up – breaking those green promises – or they start to suffer power outages. What do you think they will do? As I have said before, when the power starts to go out, environmental concerns will fly out the window. Sure, people like the idea of not burning coal. But will they give up power 6 hours a day to achieve that? I don’t think too many of them will.

Of course there is still natural gas from Russia, and I think they are going to have to roll the dice in the short term and hope Russia doesn’t hold them hostage. Longer term, LNG terminals would seem to make sense to me, but they don’t seem to be a part of the discussion here.

Ultimately, I think Britain will behave as the rest of the world will behave when faced with energy crunches. They will find that renewables can’t step up and fill the gap, and so they will roll out conservation measures and make do with whatever it takes to avoid crippling power outages: No matter if it takes coal, natural gas, or the blubber from baby seals. This is how I expect the world to respond when renewable dreams meet the reality of power shortages.

August 7, 2009 Posted by | coal, electricity usage, energy crisis, natural gas, Russia, Scotland, United Kingdom | 43 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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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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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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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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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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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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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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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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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

Answering Reader Questions 2009: Part 1

Before I took a recent trip to Canada, I opened up the floor for questions. Getting them answered has taken longer than I intended. Fortunately, other readers answered a lot of them in the comments of that thread. So I have sifted through the list, trying to find questions that were still open, or those I wanted to make an additional comment on. Thanks to those who submitted questions, as well as to those who answered them. A special thanks to Kit P., who wrote some extensive answers to some of the questions around electricity and saved me a good deal of work.

This is going to take at least three installments. But I have put this off long enough, so here are my answers to the first five questions. This installment covers plasma gasification, natural gas projections, free energy, promising alternative energy technologies, and GTL.

I have a total of about 25 to answer, and I will get to them in the coming week.

The Questions

Russ wrote: I read about plasma gasification of garbage. Naturally the people promoting it say how great it is. Your comments please. Answer

Bob S. asked: What will natural gas production in the US be 5, 10 and 15 years from now? Should I convert my 310 delivery trucks (I operate in an east coast city) from diesel to natural gas? Answer

bc asked: The inline ad for this article claims “Never pay for electricity again”, something called Magniwork. I recommend NOT clicking the click, as it does dodgy things with your browser. Does Magniwork really work? Is there such a thing as “free energy”? How do I stop these scammers’ ads appearing on my screen? Answer

C asked: Which alternative energy technologies do think will have the greatest impact in the US? Answer

Benny wrote: A friend of a friend of mine is working on a process to convert natural gas to gasoline, through some sort of heat and pressure. My friend did consulting on pressure and flow inside of a tube. That is all I know. Is there any hope for such a scheme? Any hope of commercial viability (obviously, we have abundant NG in North America)? Answer

The Answers

Answer

Gasification technologies in general have a lot of idiosyncrasies that can make them difficult to get right. I have seen this first hand in a gasifier that failed to perform. The issue in that particular case was the refractory which protects the metal from the very high temperatures of the gasifier. If the refractory has a problem, you can get hot spots on the shell of the gasifier and weaken the metal.

That’s just an example of one of the things you have to get right. Plasma gasification is a special case within gasification technologies. It uses electricity and very high temperatures (thousands of degrees) to gasify the feed. Because of the electricity demands, the external energy inputs into plasma gasification can be high relative to other gasification technologies. Further, if you are using the synthesis gas produced to further produce a liquid fuel, there are a couple of other considerations. Plasma gasification occurs at low pressures. Many of those downstream reactions (like Fischer Tropsch) are carried out at high pressure, requiring a further energy intensive compression step. This means that plasma gasification has been looked at very little for the production of liquid fuels. Coskata is looking at it for their system, but this was one of the criticisms I had of them. The technology at scale and in that application is an unknown. That puts increased risk on Coskata’s technology.

If the purpose is merely to destroy the garbage and produce a bit of syngas in the process, then that might be a more workable option. I think it just depends on how the costs compare to digestion or to producing power from incinerating the waste. But if the intent is to turn that garbage into liquid fuels, plasma gasification may not be the best choice.

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Bob, the projections from the EIA (admittedly taken with a grain of salt) are that natural gas production will be relatively flat because prices are expected to be relatively flat. Because of all of the shale gas that starts to become economical in the $6-$8/MMBTU range, I think it is going to be hard for natural gas prices to break through those levels for a good while. Therefore, if I was planning for fleet purposes, I might take the upper end as a worst case and see what that would do to my business. Then, I think whether to convert depends entirely on how many miles per year your fleet travels and the availability of fueling stations in your area.

I believe that if the savings would pay back the conversion costs in 3 years at a presumed natural gas cost over that time of – say $5 – then I would do it. For that matter, you can hedge your natural gas price. If I look out 5 years, the price I can lock natural gas in for is still in the $6-$7 range in 2014, and in 10 years is only in the $7-$8 range. You just have to make the call on whether you are going to be financially OK if prices do get up into that range, knowing you have a substantial upside if they stay in the $3-$5 range.

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Answer

No, I don’t believe any of these free energy systems work. The ones I am familiar with all violate laws of thermodynamics (e.g., Steorn). So I certainly don’t endorse any of them, and the appearance of their ads here is because someone paid Google to place their ads on topical websites (presumably with certain energy-related keywords). I don’t know how to stop them from appearing, except I do have some ability to block them when I see them. I have done this in the past for highly non-topical ads.

My other option is of course to take the ads down altogether. The income from them is pretty trivial. However, I have always liked the idea that my writing is helping to pay my grocery bill. Best thing I would suggest is just not to click on ads that seem too good to be true.

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Answer

I am going to tip-toe around this one. As some others pointed out, there are options that are making a contribution right now, albeit I think you probably mean in the long run. To be clear, I think we will have corn ethanol for a long time. But I also think it will necessarily be subsidized for the next 30 years as it has been for the past 30. I don’t believe it will be able to make a big impact insofar as displacing large amounts of fossil fuels simply because a lot of fossil fuels tend to be consumed in the process of producing the ethanol.

However, I do think there are technologies that have a lot of promise – especially in specific niches – but that haven’t gotten a lot of attention. But in my new role, I will be working on developing some of these technologies and trying to bring them to commercialization. Some of them are very specialized and relatively unknown, and therefore I don’t want to write about them until our relationships are more secure.

But without totally dodging the question, I will provide some hints. There is a guy who posts here sometimes called Al Fin (see his website here). I was reading through a blog posting on cellulosic ethanol a few days ago, and I ran across a comment that Al made. His first paragraph here hits specifically upon some of the things that I think show a lot of promise – and in fact that first paragraph hits very close to the mark on several things I am looking at. I will at some point start writing more about some of them.

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Answer

Benny, that’s the basis for gas-to-liquids (GTL). Natural gas can be turned into synthesis gas, and then you can send that gas through a Fischer-Tropsch reactor to make longer chain hydrocarbons. From this process, you get wax which has to be cleaned up, and as part of the clean-up you can make gasoline blending components. The problem is that it is a capital intensive process due to all of the downstream clean-up equipment required, and thus is expensive. This is why – despite lots of natural gas reserves – we don’t have GTL plants popping up all over the place.

Now if your friend is working on a process to directly make gasoline from natural gas, I am unaware of such a process. Natural gas isn’t too keen on reacting with other natural gas molecules to form longer chain hydrocarbons without first converting it into an intermediary like syngas. One could perhaps envision a catalyst that could build up the chains directly from natural gas into something longer.

There is a reaction called methane coupling (which I have some experience with) in which the methane (C1, because it has one carbon) in natural gas is converted into C2. In order to get up into the gasoline range, you need to grow that chain to something like the C5 to C8 range. In other words, you have to grow the single carbon atom in methane into a string of 5 to 8 carbon atoms joined together. The methane coupling reaction, for instance, has low yields and low selectivity, demonstrating the challenge of growing these chains. If you can only get 10% of the methane to form C2, and the reaction is capable of going to C3, then your yields beyond C2 are going to be trivial. Still, it isn’t pseudoscience.

OK, that’s all for now. The next installment will start with the story about the UT Arlington researchers making oil from lignite.

August 1, 2009 Posted by | coal, Coskata, fischer tropsch, free energy, gtl, methane coupling, natural gas, plasma gasification | 24 Comments

The New and Improved CTL Scheme

“In theory, there is no difference between theory and practice. But, in practice, there is.” – Jan L. A. van de Snepscheut

A very short paper (two pages) appeared in the latest Science detailing an improvement on coal-to-liquids (CTL) technology. A couple of people have e-mailed me to ask for my take on it. You can get the executive summary from the quote at the top, or from my version, which is:

“In the world of energy, people sometimes have trouble distinguishing make-believe from reality.” – Me

Wired Magazine weighed in on the (subscription-only) Science report – Producing Transportation Fuels with Less Work – a few days ago:

Bad News: Scientists Make Cheap Gas From Coal

If oil prices rise again, adoption of the new coal-to-liquid technology, reported this week in Science, could undercut adoption of electric vehicles or next-generation biofuels. And that’s bad news for the fight against climate change.

The new process could cut the energy cost of producing the fuel by 20 percent just by rejiggering the intermediate chemical steps, said co-author Ben Glasser of the University of the Witwatersrand in Johannesburg, South Africa. But coal-derived fuel could produce as much as twice as much CO2 as traditional petroleum fuels and at best will emit at least as much of the greenhouse gas.

“The bottom line is that there’s one fatal flaw in their proposed process from a climate protection standpoint,” Pushker Karecha of NASA’s Goddard Institute for Space Studies wrote in an e-mail to Wired.com. “It would allow liquid fuel CO2 emissions to continue increasing indefinitely.”

The Wired story has spread like wildfire. I have seen numerous references to it. It has spawned lots of debate over whether it is desirable to increase our usage of coal. But one important detail seems to have been overlooked: It’s not real.

So what’s the story? Here is a clue, from early in the paper:

We outline reaction chemistry and processing designs that could dramatically reduce these energy inputs and minimize the amount of CO2 emissions that would be emitted or mitigated by other costly strategies, such as carbon capture and sequestration.

This is a ‘process’ only in that it has been drawn up on paper. This isn’t even at the stage of lab scale. This is Step 1: You have an idea. Next comes the step where you try to economically evaluate the implications, and then if they are favorable you start doing some laboratory experiments. This is the stage where probably upwards of 90% of all ideas that were thought to be good fail because the theory overlooked something that turns out to be a problem in the lab.

However, if the lab studies look good, you go on to build a pilot plant to demonstrate the concept at a larger scale. Again, the majority of the ideas that make it past the lab stage get weeded out at this stage. You have situations like CWT building a pilot plant only to find out that they have an odor problem that didn’t seem all that bad in the lab. Or you find out that while the front end of the process works well in the lab, and while the back end works well, when the front is connected to the back there is a problem. Maybe the front end produces a trace impurity that is a real problem for the catalyst in the back end. In the lab, this wasn’t a problem because you were simulating the back end with gases from a cylinder. However, those gases were of a higher purity than what you are producing now in the pilot plant. The list of land mines is endless.

None of this suggests that this is an idea without merit. But an idea is not a process, and so Wired got a little carried away with their description. In fact, the Science paper heavily references Sustainable fuel for the transportation sector (PDF) by Rakesh Agrawal et al. at Purdue. Theirs is another proposed process. It is called the H2CAR ‘process,’ and is another idea in need of some laboratory testing. For a layman’s explanation of H2CAR process, see:

H2CAR could fuel entire U.S. transportation sector

For a more detailed technical (and skeptical) view see:

H2CAR: Another blind alley

In that essay Engineer-Poet (of The Ergoshpere) concludes that this idea is doomed to die once the economics are considered fully.

But the bottom-line here is that it is important to distinguish between what is real and what is make-believe. A process that has survived lab tests or that is successfully being piloted is real. A process that only exists on paper is make-believe, and should be recognized as such. That’s not to say that the make-believe process won’t some day turn into a real process, but the lab has an uncanny ability to kill a lot of seemingly great ideas.

March 31, 2009 Posted by | coal, CTL | 39 Comments

Thoughts on the New Energy Team

In case you are just venturing out of your cave for the first time in a week, you are probably aware that President-elect Obama has announced his new energy team:

Obama names energy team

The team includes Nobel Prize winning physicist Steven Chu as Secretary of Energy, former EPA head Carol Browner to fill the newly-created job of Energy Czar, and Lisa Jackson to head the EPA. The focus of this essay will be on Dr. Chu, but I will comment briefly on the others.

Lisa Jackson is trained as a chemical engineer (as was the outgoing Secretary of Energy Samual Bodman). It should go without saying that I like to see technical people in roles like this, where understanding science and data are both critical. Carol Browner, while not trained as a technical person, has a lot of administrative experience within the EPA. Incidentally, I once met Mrs. Browner, as she was the person who presented my research group with the 1996 Green Chemistry Challenge Award at the National Academy of Sciences.

While I don’t know nearly as much about Browner and Jackson, Dr. Chu has a very long public record. I have been searching through his various publications, speeches, and presentations to get a really good view of the man. Here is what President-elect Obama had to say about Dr. Chu:

“His appointment should send a signal to all that my administration will value science. We will make decisions based on the facts, and we understand that facts demand bold action.”

If you asked me for a few characteristics that would top my list of desirables for the spot of Energy Secretary, I would want someone who is 1). Knowledgeable about a broad range of energy technologies; 2). Someone who is passionate about the subject; 3). Someone who isn’t highly partisan, and can work with diverse groups.

Dr. Chu’s record indicates to me that he easily fills these three criteria. Dr. Chu is currently director of the Lawrence Berkeley National Laboratory. Among his accomplishments there was to secure a $500 million partnership with BP to do alternative energy research. (See this story from Salon for more details.) This suggests someone who can work with industry on next generation energy technologies. I am not sure how quickly he feels we can transition away from oil, and therefore whether we need additional exploration and drilling. However, he has been outspoken over his opposition to coal, and his concerns about global warming. Some quotes on these topics from Dr. Chu. First, his position on coal is pretty clear:

“Coal is my worst nightmare.”

He favors nuclear energy over coal (it should come as no suprise that a physicist like Dr. Chu is pro-nuclear):

“The fear of radiation shouldn’t even enter into this.”

“Coal is very, very bad. Nuclear has to be a necessary part of the portfolio.”

Chu, who also is professor of physics and molecular and cell biology at UC Berkeley, said nuclear is the preferred choice to coal, pointing out that coal releases 50 percent more radioactivity than nuclear power plants.

His concerns over global warming have been well-publicized:

Consider this. There’s about a 50 percent chance, the climate experts tell us, that in this century we will go up in temperature by three degrees Centigrade. Now, three degrees Centigrade doesn’t seem a lot to you, that’s 11° F. Chicago changes by 30° F in half a day. But 5° C means that … it’s the difference between where we are today and where we were in the last ice age. What did that mean? Canada, the United States down to Ohio and Pennsylvania, was covered in ice year round.

So think about what 5° C will mean going the other way. A very different world. So if you’d want that for your kids and grandkids, we can continue what we’re doing. Climate change of that scale will cause enormous resource wars, over water, arable land, and massive population displacements. We’re not talking about ten thousand people. We’re not talking about ten million people, we’re talking about hundreds of millions to billions of people being flooded out, permanently.

He is no fan of corn ethanol:

We can indeed make fuel out of crops. Corn is not the right crop. The reason it’s not the right crop is because the amount of energy you put into making a fuel and growing the corn and fertilizing the corn fields and plowing the fields is within ten or 20 percent of the amount of energy you get by making it into the ethanol that you can put in your car.

Also, the amount of CO2 you create by growing corn is again within 20 percent of the amount of carbon dioxide you make by drilling and refining oil and putting into your car.

He favors higher gas taxes:

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” Source.

From that same article:

Lee Schipper, a project scientist with the Global Metropolitan Studies program at U.C. Berkeley, hailed Obama’s nomination of Chu as Energy Secretary and praised his colleague’s support for higher gasoline taxes.

Schipper thinks Obama’s concerns about not placing additional burdens on America’s families can be addressed by agreeing to rebate all — or close to all — of the money raised by higher fuel taxes. “The answer is: raise the price of gasoline and give all the money back,” said Schipper.

Hmm. Where have I heard that before?

He appreciates the need for greater energy efficiency (and like me, wants to be emperor of the world):

“I cannot impress upon you enough how important energy efficiency is.”

“Just refrigerator efficiency — bigger refrigerators by the way — saves more energy than all we’re generating from renewables [today], excluding hydroelectric power.”

“If I were emperor of the world, I would put the pedal to the floor on energy efficiency and conservation for the next decade.”

And finally recognizes that the U.S. can be a leader in new energy technologies, but are starting to fall behind in some areas.

“We have an option to be a leader in energy technologies, but we are not because our support system for that is on again off again. The future wealth of the United States will come from our ability to invent new technologies.”

“Americans take for granted that the United States leads the world in science. But we’ve lost many of these leads, especially when it comes to energy.”

“The U.S. is making it easier for other countries to catch up and pass us.”

So, let’s see. He has had a career devoted to energy, is clearly passionate about the subject, doesn’t favor making ethanol from corn, thinks we need higher gas taxes, favors nuclear power, favors alternative energy funding, is pro-science, and favors higher energy efficiency. That’s exactly how I would describe myself, so from my perspective he is a very good choice. I like his priorities. He has also been involved in research on cellulosic ethanol, and will likely send more research dollars flowing in that direction.

I think the issue that will generate some controversy is his very strong position on global warming. Not since Al Gore was Vice-President will there be such a staunch proponent of reducing greenhouse gas emissions at the highest levels of government. Global warming activists will love him. Skeptics probably won’t be quite so enthusiastic.

——————

Here are the quick bios of the rest of the energy/environment team, courtesy of Wired:

Lisa Jackson, EPA head

Quick bio: Trained as a chemical engineer at Princeton, she has spent her entire career with government environmental agencies. She worked her way up through the EPA from 1987-2002, then moved to the New Jersey Department of Environmental Protection, eventually becoming its head in 2006. She was appointed as New Jersey Governor John Corzine’s chief-of-staff less than a month ago.

Carol Browner, energy czar

Quick bio: The longest-serving EPA administrator in the history of the agency, Browner is the non-scientist on the team. She came up through politics, working as Al Gore’s legislative director in the late 1980s, before heading the Florida Department of Environmental Regulation. She was appointed by Bill Clinton in 1993 to helm the EPA and left in 2001. Since then, she’s been a consultant with The Albright Group.

Her position: The new “energy czar” will coordinate (and politically shepherd) the President-elect’s various proposals around energy and the environment.

December 17, 2008 Posted by | cellulosic ethanol, coal, conservation, DOE, energy policy, gas tax, global warming, greenhouse gases, politics, Steven Chu | 40 Comments

Coal-Based Ethanol

The handwriting has been on the wall on this issue for a couple of years. In fact, I first mentioned it in March 2006 in Improving the Prospects for Grain Ethanol. Here is an excerpt of what I wrote:

This is an option that most environmentalists will abhor. However, it is the one most likely to take place in the short-term. The natural gas input into ethanol production is a serious long-term threat to economic viability. Since natural gas is a fossil fuel, and supplies are diminishing, it will put upward pressure on the price of ethanol over time. However, if the energy inputs could be produced from coal, ethanol prices would be insulated from escalating natural gas prices.

Using coal might also lessen the significance of the EROEI debate. If you take 1 BTU of (cheap) coal, and you get back 0.8 BTUs of (more valuable, liquid) ethanol, then EROEI doesn’t have the same significance as when you use natural gas to produce ethanol. You converted the BTUs into a readily usable liquid form. This argument may be valid from an economic point of view, but it ignores the fact that coal is still an inherently dirty energy source. If coal remains abundant and cheap, coal economics will beat natural gas economics, but coal will increase the rate at which we put carbon dioxide into the atmosphere. If we come up with a viable method of sequestering the carbon dioxide produced at the power plant, then we might have a temporary economic solution (although we are still using up a non-sustainable fuel in the process).

Now I am not going to tell you that I think this is a good idea. I am just telling you what I think is going to happen. And a couple of days ago a friend sent a link that says Iowa is considering a couple of new coal plants for some ethanol plants, acknowledging the superior economics of coal as fuel:

Iowa needs $2 billion in coal-fired electricity production to supply power for ethanol; critics say coal use “ungreens” ethanol

Two coal-fired electricity plants, in Marshalltown and near Waterloo, have been proposed in Iowa to provide electricity for the growing collection of Iowa ethanol plants. Critics say that ethanol’s need for coal-powered electricity makes the case that it is not a green fuel.

Alliant Energy, co-owner of the Marshalltown project, said that the needs of the ethanol plants can only be solved at this point in time by nuclear, natural gas or coal, and that natural gas is not economical while nuclear has been taken off the table due to environmental concerns. The proposed plants would cost $1 billion each.

Last week, Xethanol Corporation announced that it would invest $500,000 in Consus Ethanol for its cogeneration project that would provide power for its ethanol production process from waste coal, that would have a $0.48 per gallon cost advantage over comparable ethanol plants in the Midwest powered by natural gas. The Pittsburgh-based facility will distribute fuel to East Coast markets, which have higher prices for ethanol.

That last bit is interesting. Where is Xethanol finding any money to invest? Since I last wrote about them, they have racked up another $6 million loss, dropping their total current assets to under $15 million. They remain on the trajectory to bankruptcy, which is one of my predictions that is still unresolved.

But that’s a digression. On the subject of using coal as the source of BTUs for ethanol production, there are two things that stand out. First, the current process of using natural gas to produce ethanol makes little sense, since you can use natural gas directly in a CNG vehicle. You gain little or nothing by turning a BTU of natural gas into a BTU of ethanol (plus some animal feed). However, coal can’t be used directly as automotive fuel, so one can make the argument of upgrading the quality of the energy source by turning some of coal’s BTUs into ethanol.

Second, the cost of energy per BTU is far lower for coal. The current price of natural gas is $8 per million (MM) BTUs. However, according to the EIA coal sells for about $40/ton, or 2 cents a pound. The energy content of bituminous coal is about 12,750 BTU/lb, which calculates out to $1.57 per MMBTU. (Just double-checked my numbers, and found that the EIA reported that coal prices in September 2007 were $1.78 per MMBTU, so I was in the ballpark).

So, the economics are going to drive ethanol producers toward coal as their fuel of choice. And some have already been driven there. I predict we will see a lot more of this in the future, especially in light of my previous essay on the economics of corn ethanol. Plug in coal at $1.57/MMBTU instead of natural gas at $8, and it makes a huge difference. But for ethanol producers who do go this route, don’t pretend that what you are doing is clean or renewable.

February 4, 2008 Posted by | coal, CTL, ethanol, Xethanol | 43 Comments

Coal-Based Ethanol

The handwriting has been on the wall on this issue for a couple of years. In fact, I first mentioned it in March 2006 in Improving the Prospects for Grain Ethanol. Here is an excerpt of what I wrote:

This is an option that most environmentalists will abhor. However, it is the one most likely to take place in the short-term. The natural gas input into ethanol production is a serious long-term threat to economic viability. Since natural gas is a fossil fuel, and supplies are diminishing, it will put upward pressure on the price of ethanol over time. However, if the energy inputs could be produced from coal, ethanol prices would be insulated from escalating natural gas prices.

Using coal might also lessen the significance of the EROEI debate. If you take 1 BTU of (cheap) coal, and you get back 0.8 BTUs of (more valuable, liquid) ethanol, then EROEI doesn’t have the same significance as when you use natural gas to produce ethanol. You converted the BTUs into a readily usable liquid form. This argument may be valid from an economic point of view, but it ignores the fact that coal is still an inherently dirty energy source. If coal remains abundant and cheap, coal economics will beat natural gas economics, but coal will increase the rate at which we put carbon dioxide into the atmosphere. If we come up with a viable method of sequestering the carbon dioxide produced at the power plant, then we might have a temporary economic solution (although we are still using up a non-sustainable fuel in the process).

Now I am not going to tell you that I think this is a good idea. I am just telling you what I think is going to happen. And a couple of days ago a friend sent a link that says Iowa is considering a couple of new coal plants for some ethanol plants, acknowledging the superior economics of coal as fuel:

Iowa needs $2 billion in coal-fired electricity production to supply power for ethanol; critics say coal use “ungreens” ethanol

Two coal-fired electricity plants, in Marshalltown and near Waterloo, have been proposed in Iowa to provide electricity for the growing collection of Iowa ethanol plants. Critics say that ethanol’s need for coal-powered electricity makes the case that it is not a green fuel.

Alliant Energy, co-owner of the Marshalltown project, said that the needs of the ethanol plants can only be solved at this point in time by nuclear, natural gas or coal, and that natural gas is not economical while nuclear has been taken off the table due to environmental concerns. The proposed plants would cost $1 billion each.

Last week, Xethanol Corporation announced that it would invest $500,000 in Consus Ethanol for its cogeneration project that would provide power for its ethanol production process from waste coal, that would have a $0.48 per gallon cost advantage over comparable ethanol plants in the Midwest powered by natural gas. The Pittsburgh-based facility will distribute fuel to East Coast markets, which have higher prices for ethanol.

That last bit is interesting. Where is Xethanol finding any money to invest? Since I last wrote about them, they have racked up another $6 million loss, dropping their total current assets to under $15 million. They remain on the trajectory to bankruptcy, which is one of my predictions that is still unresolved.

But that’s a digression. On the subject of using coal as the source of BTUs for ethanol production, there are two things that stand out. First, the current process of using natural gas to produce ethanol makes little sense, since you can use natural gas directly in a CNG vehicle. You gain little or nothing by turning a BTU of natural gas into a BTU of ethanol (plus some animal feed). However, coal can’t be used directly as automotive fuel, so one can make the argument of upgrading the quality of the energy source by turning some of coal’s BTUs into ethanol.

Second, the cost of energy per BTU is far lower for coal. The current price of natural gas is $8 per million (MM) BTUs. However, according to the EIA coal sells for about $40/ton, or 2 cents a pound. The energy content of bituminous coal is about 12,750 BTU/lb, which calculates out to $1.57 per MMBTU. (Just double-checked my numbers, and found that the EIA reported that coal prices in September 2007 were $1.78 per MMBTU, so I was in the ballpark).

So, the economics are going to drive ethanol producers toward coal as their fuel of choice. And some have already been driven there. I predict we will see a lot more of this in the future, especially in light of my previous essay on the economics of corn ethanol. Plug in coal at $1.57/MMBTU instead of natural gas at $8, and it makes a huge difference. But for ethanol producers who do go this route, don’t pretend that what you are doing is clean or renewable.

February 4, 2008 Posted by | coal, CTL, ethanol, Xethanol | 190 Comments