R-Squared Energy Blog

Pure Energy

E85 Road Test

A couple of months back, I posted Gary Dikkers’ analysis comparing the fuel efficiency of Minnesota and Wisconsin. Gary’s conclusion was:

Both states have almost identical topography, climate, demographics, and about the same mix of urban/rural driving. (In fact, Wisconsin has a slightly higher ratio of urban to rural miles driven.) The two states are about as close to being twins as any two states could be. (Not counting the Vikings/Packers difference of course.) Yet fuel economy in Minnesota is worse, and their drivers buy and burn more fuel than their neighbors.

The only obvious difference that jumps out is that Minnesota has mandated its drivers burn a blend of ethanol and gasoline — a fuel with a known lower energy density than gasoline.

Along that same theme, a reporter in Minnesota has done a road test comparing the operating costs of E85 in Minnesota to regular gasoline in Wisconsin.

Ethanol Part II – Our E85 road test

Some excerpts:

In the effort to find clean alternative sources of energy, consumers have been led to believe they can “go green” by fueling up on corn. “Join the movement,” GM urges. “Go to livegreengoyellow.com.

The U.S. Senate apparently agrees. It voted to increase U.S. ethanol production to 36 billion gallons per year by 2022. The House did not pass the same increase, but the mandate could still make its way into the energy bill Congress gives to the President.

Maybe there’s good reason drivers aren’t demanding ethanol. Performance is an issue. Even with a 10-percent blend of ethanol, a car’s mileage will drop two or three percent. A Congressional Research Service backgrounder on ethanol says 10 percent ethanol blend drops your mileage 2-3 percent. (Link: Report, reference on page CRS-6)

KARE 11 took a road test to find out if ethanol really is a practical alternative to gas. We drove a flex-fuel Dodge Durango, one of about six million vehicles on the road today specially designed to run on either E85 or gasoline, and started with a full tank of pure E85. We drove until the tank was empty.

Using E85, we drove a total of 351.4 miles. The Durango’s tank held 28 gallons. That means our fuel efficiency with E85 was 12.55 miles per gallon.

After the tank had been drained, we re-filled at a gas station in Wisconsin, where the regular unleaded contained no ethanol. We drove back to Minnesota, and with no ethanol in the tank, the car felt the same on the road. But the difference in miles per gallon was huge. With gas containing no ethanol, we averaged about 20.41 miles per gallon. In other words, with E85 in the car, our mileage was 39 percent worse.

The result actually was worse than we expected. Consumer Reports magazine conducted a similar road test and found mileage was 27 percent worse with E85.

(Article The Ethanol Myth)

Either way, the money you save at the pump does not offset the difference in mileage. At the time of our road test, E85 cost 19 percent less than gas. So with E85, you have to spend more money to drive the same distance.

But the conversion of corn into ethanol has been pushed along by billions of dollars in government subsidies. The technology for converting grass is lagging about five years behind. (Link: Minnesota House of Representatives research on ethanol)

I think this ethanol booster has the right idea, though:

Even Don Brown, a former truck driver who calls himself the “E85 Man” and spends his retirement promoting ethanol, said he’d rather use no fuel at all.

“No,” he said, “this is only the first step. We gotta take the first step.”

What is a better way to reduce our oil consumption? “Electrics!” Brown said, snapping his fingers. “I would buy an electric car in a minute.”

Then he paused and said, “If I could.”

I will be the first to acknowledge that price isn’t everything. But I think this is the reason that consumers aren’t demanding E85, which therefore makes it stupid to try to force gas station owners to put in the pumps.

November 9, 2007 Posted by | E85, ethanol, ethanol prices, fuel efficiency | 8 Comments

Sugar Producers Want a Piece

The whiff of ethanol dollars floating around Capitol Hill hasn’t escaped the notice of sugar producers in the U.S. The New York Times reports:

Seeing Sugar’s Future in Fuel

LOREAUVILLE, La. — Todd Landry, a farmer who conjures big stands of sugar cane from the muddy fields of southern Louisiana, has been struggling lately against droughts and freezes and hurricanes. Come January he will confront another peril: expanded sugar imports from Mexico.

Mr. Landry and other sugar producers think they have spotted a life raft, and its name is ethanol. Taking a cue from Midwestern farmers who have improved their lot by selling corn to ethanol distilleries, sugar cane and sugar beet farmers want an ethanol deal of their own, paid for by American taxpayers.

I don’t have nearly the problem subsidizing corn growers that I do subsidizing sugar producers. I don’t want to see farmers of a staple crop like corn put out of business by cheap imports. But I don’t think it would hurt us a bit to do with less sugar. We would probably save money on health care costs in the long run.

But the farm bill that is currently being debated contains a juicy piece of pork designed to keep the hands of sugar producers in the taxpayers’ pockets:

A little-noticed provision in the new farm bill working its way through Congress would oblige the Agriculture Department to buy surplus domestic sugar caused by the expected influx of Mexican sugar next year. Then the government would sell it, most likely at a steep discount, to ethanol producers to add to their fermentation tanks. The Bush administration is fighting the measure.

The Congressional Budget Office calculates the cost at $660 million over five years, relatively cheap as farm programs go. But that is an estimate based on assumptions about how much sugar will come across the border. In truth, no one is sure.

“The U.S. Department of Agriculture would be taking on a limitless commitment,” said Robert L. Thompson, a University of Illinois professor of agricultural policy, “to buy any quantity of sugar offered at a guaranteed price, and that would get very expensive, very quickly.”

Why would such a program even be considered? Why else?

The system has been subjected to withering criticism for decades, but the sugar lobby has clout on Capitol Hill. Sugar producers donated $2.7 million in campaign contributions to House and Senate incumbents in 2006, more than any other group of food growers, according to the Center for Responsive Politics, a Washington group.

The USDA isn’t keen on the idea:

Mark E. Keenum, the Bush administration’s under secretary of agriculture for farm and foreign agricultural services, said administering the ethanol program would be “very cumbersome.” Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. “You can easily do the math and look at the loss potential,” he said.

Nor are ethanol producers:

Ethanol producers, who could be forced to invest in new equipment to process sugar, say they do not have much use for the idea. “In today’s grain-based biorefineries, the amount of sugar you could introduce into the process would be fairly small,” said Matt Hartwig, spokesman for the Renewable Fuels Association.

Hmm. They would be forced to invest in new equipment that primarily benefits a 3rd party. One wonders then why the RFA thinks it is a good idea to force gas station owners to invest in new E85 pumps, when the amount of E85 that can be supplied is very small. I guess it just depends on whether you are doing the giving or the getting.

October 20, 2007 Posted by | E85, ethanol, Renewable Fuels Association, sugar subsidies | Comments Off on Sugar Producers Want a Piece

Sugar Producers Want a Piece

The whiff of ethanol dollars floating around Capitol Hill hasn’t escaped the notice of sugar producers in the U.S. The New York Times reports:

Seeing Sugar’s Future in Fuel

LOREAUVILLE, La. — Todd Landry, a farmer who conjures big stands of sugar cane from the muddy fields of southern Louisiana, has been struggling lately against droughts and freezes and hurricanes. Come January he will confront another peril: expanded sugar imports from Mexico.

Mr. Landry and other sugar producers think they have spotted a life raft, and its name is ethanol. Taking a cue from Midwestern farmers who have improved their lot by selling corn to ethanol distilleries, sugar cane and sugar beet farmers want an ethanol deal of their own, paid for by American taxpayers.

I don’t have nearly the problem subsidizing corn growers that I do subsidizing sugar producers. I don’t want to see farmers of a staple crop like corn put out of business by cheap imports. But I don’t think it would hurt us a bit to do with less sugar. We would probably save money on health care costs in the long run.

But the farm bill that is currently being debated contains a juicy piece of pork designed to keep the hands of sugar producers in the taxpayers’ pockets:

A little-noticed provision in the new farm bill working its way through Congress would oblige the Agriculture Department to buy surplus domestic sugar caused by the expected influx of Mexican sugar next year. Then the government would sell it, most likely at a steep discount, to ethanol producers to add to their fermentation tanks. The Bush administration is fighting the measure.

The Congressional Budget Office calculates the cost at $660 million over five years, relatively cheap as farm programs go. But that is an estimate based on assumptions about how much sugar will come across the border. In truth, no one is sure.

“The U.S. Department of Agriculture would be taking on a limitless commitment,” said Robert L. Thompson, a University of Illinois professor of agricultural policy, “to buy any quantity of sugar offered at a guaranteed price, and that would get very expensive, very quickly.”

Why would such a program even be considered? Why else?

The system has been subjected to withering criticism for decades, but the sugar lobby has clout on Capitol Hill. Sugar producers donated $2.7 million in campaign contributions to House and Senate incumbents in 2006, more than any other group of food growers, according to the Center for Responsive Politics, a Washington group.

The USDA isn’t keen on the idea:

Mark E. Keenum, the Bush administration’s under secretary of agriculture for farm and foreign agricultural services, said administering the ethanol program would be “very cumbersome.” Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. “You can easily do the math and look at the loss potential,” he said.

Nor are ethanol producers:

Ethanol producers, who could be forced to invest in new equipment to process sugar, say they do not have much use for the idea. “In today’s grain-based biorefineries, the amount of sugar you could introduce into the process would be fairly small,” said Matt Hartwig, spokesman for the Renewable Fuels Association.

Hmm. They would be forced to invest in new equipment that primarily benefits a 3rd party. One wonders then why the RFA thinks it is a good idea to force gas station owners to invest in new E85 pumps, when the amount of E85 that can be supplied is very small. I guess it just depends on whether you are doing the giving or the getting.

October 20, 2007 Posted by | E85, ethanol, Renewable Fuels Association, sugar subsidies | 10 Comments

E85 Pricing Reports

Updated: 9/29/07

When I read the following quote, I immediately thought of the recent Business Week article claiming that availability – which they claimed is being hampered by oil companies – is the primary reason E-85 is not taking hold.

I don’t buy E-85 for my flex fuel Ranger even though it is readily available around here with all the ethanol plants. It’s because the price is never less than 80% of the price of E-10. I get 80% of the mileage with E-85 that I get with E-10.

The above quote comes from a devoted ethanol advocate and corn farmer, who frequently posts at The Oil Drum. If he isn’t willing to spend extra money on E-85, then can you really expect the general public to do so? Price is a much clearer explanation than Business Week’s conspiracy theories for why E-85 is not more popular. Price matters.

In addition to gasoline and diesel, AAA has started tracking E85 pricing. Their report is published each day at:

Daily Fuel Gauge Report

Not only do they publish the price of E85, but they also publish a BTU-adjusted price, which is actually a gasoline equivalent price. This price can be used to compare actual per mile fuel costs. AAA explains:

The BTU-adjusted price of E-85 is the nationwide average price of E-85 adjusted to reflect the lower energy content as expressed in British Thermal Units – and hence miles per gallon – available in a gallon of E-85 as compared to the same volume of conventional gasoline. The BTU-adjusted price calculated by OPIS and AAA is not an actual retail average price paid by consumers. It is calculated and displayed as part of AAA’s Fuel Gauge Report because according to the Energy Information Administration E-85 delivers approximately 25 percent fewer BTUs by volume than conventional gasoline. Because “flexible fuel” vehicles can operate on conventional fuel and E-85, the BTU-adjusted price of E-85 is essential to understanding the cost implications of each fuel choice for consumers.

It is of interest to note these BTU-adjusted E85 prices. Despite the fact that ethanol prices (and margins) have collapsed, and gasoline prices remain high, the adjusted E85 price remains higher than that of gasoline. Yesterday’s prices show regular at $2.81, E85 at $2.33, and the BTU-adjusted price of E85 at $3.07. I think ethanol prices will begin to recover as the mandated ethanol levels increase and as the industry goes through a shakeout, so the E85 price gap is not likely to significantly improve.

Is it really a mystery why gas station owners aren’t rushing out to install more E85 pumps? If the demand is there, the pumps will come.

September 29, 2007 Posted by | E85, ethanol prices | Comments Off on E85 Pricing Reports

E85 Pricing Reports

Updated: 9/29/07

When I read the following quote, I immediately thought of the recent Business Week article claiming that availability – which they claimed is being hampered by oil companies – is the primary reason E-85 is not taking hold.

I don’t buy E-85 for my flex fuel Ranger even though it is readily available around here with all the ethanol plants. It’s because the price is never less than 80% of the price of E-10. I get 80% of the mileage with E-85 that I get with E-10.

The above quote comes from a devoted ethanol advocate and corn farmer, who frequently posts at The Oil Drum. If he isn’t willing to spend extra money on E-85, then can you really expect the general public to do so? Price is a much clearer explanation than Business Week’s conspiracy theories for why E-85 is not more popular. Price matters.

In addition to gasoline and diesel, AAA has started tracking E85 pricing. Their report is published each day at:

Daily Fuel Gauge Report

Not only do they publish the price of E85, but they also publish a BTU-adjusted price, which is actually a gasoline equivalent price. This price can be used to compare actual per mile fuel costs. AAA explains:

The BTU-adjusted price of E-85 is the nationwide average price of E-85 adjusted to reflect the lower energy content as expressed in British Thermal Units – and hence miles per gallon – available in a gallon of E-85 as compared to the same volume of conventional gasoline. The BTU-adjusted price calculated by OPIS and AAA is not an actual retail average price paid by consumers. It is calculated and displayed as part of AAA’s Fuel Gauge Report because according to the Energy Information Administration E-85 delivers approximately 25 percent fewer BTUs by volume than conventional gasoline. Because “flexible fuel” vehicles can operate on conventional fuel and E-85, the BTU-adjusted price of E-85 is essential to understanding the cost implications of each fuel choice for consumers.

It is of interest to note these BTU-adjusted E85 prices. Despite the fact that ethanol prices (and margins) have collapsed, and gasoline prices remain high, the adjusted E85 price remains higher than that of gasoline. Yesterday’s prices show regular at $2.81, E85 at $2.33, and the BTU-adjusted price of E85 at $3.07. I think ethanol prices will begin to recover as the mandated ethanol levels increase and as the industry goes through a shakeout, so the E85 price gap is not likely to significantly improve.

Is it really a mystery why gas station owners aren’t rushing out to install more E85 pumps? If the demand is there, the pumps will come.

September 29, 2007 Posted by | E85, ethanol prices | 6 Comments

Debunking Business Week Misinformation

Besides hypocrisy, another thing I hate is the spreading of misinformation. Sometimes, the spreading of misinformation is done without malice, because you may just be repeating something you thought to be true. So, misinformation is in a different category than hypocrisy for me. But I do try to combat the spreading of misinformation when it occurs, particularly when the misinformation causes people to get mad at my industry. After all, we have enough ill will toward us already. We don’t need more heaped on as a result of misinformation.

Which brings me to a very misinformed story in Business Week:

Big Oil’s Big Stall On Ethanol

This is a remarkable collection of half-truths that paint a thoroughly inaccurate picture. Here is the story that Business Week told: E85 is being stalled because the oil companies are fighting against it. Yet they are reaping billions in subsidies from ethanol. And the auto makers are upset about it. After all, they need the oil industry to embrace E85 so they can sell more E85 vehicles.

I was compelled to write to David Kiley, the author of the story, and point out the errors in his argument. I will also point them out here.

For starters, Kiley argues that Big Oil is the beneficiary of the ethanol subsidy. Vinod Khosla has made similar arguments. As I have pointed out in my draft Ethanol FAQ, the ethanol industry is certainly displaying curious behavior on this issue if it is a benefit for the oil industry:

Consider for a moment just who has lobbied to keep the credit intact. Has it been oil companies? No. Has it been politicians from oil states like Texas and Alaska? No. The groups always arguing in favor of the ethanol tax credit have historically been farm state politicians, ethanol lobbying groups, and corn lobbying groups.

Last year I documented the reaction of Brian Jennings, the executive vice president of the American Coalition for Ethanol, when ExxonMobil (XOM) CEO Rex Tillerson called for an end to the subsidies. Jennings said “it is outrageous for an executive for big oil to actually suggest getting rid of the tax credit for ethanol.” That’s very odd behavior if Big Oil is actually the beneficiary.

Kiley then argues that wider availability of E85 is the best way to meet the targets that congress has set:

Despite collecting billions for blending small amounts of ethanol with gas, oil companies seem determined to fight the spread of E85, a fuel that is 85% ethanol and 15% gas. Congress has set a target of displacing 15% of projected annual gasoline use with alternative fuels by 2017. Right now, wider availability of E85 is the likeliest way to get there.

And of course, “Big Oil” is his reason that E85 is not spreading. In my response to him, I asked him to do a calculation:

If you produced E85 with 100% of the ethanol made in the country, what percentage of the nation’s fuel would it supply? Answer that question, and you may understand why there aren’t more E85 pumps.

(The answer to the question is that using the entire ethanol supply to produce E85 could supply 4% of our fuel). Of course you can’t make E85 with anything approaching 100% of the ethanol supply, because most ethanol is blended as an oxygenate. But let’s also consider his claim that E85 is a likely way of displacing 15% of projected gasoline demand.

If we want to displace 15% of of our 140 billion motor fuel supply, we need 21 billion gallons of gasoline equivalent. Because E85 has a lower energy content, we will need more than 21 billion gallons of E85 to displace 21 billion gallons of gasoline. How much will we need? As I reported last year, the DOE showed that a Ford Taurus that gets 29 mpg on gasoline gets 21 mpg on E85. I just checked a number of 2007 models here, and the drop in fuel efficiency from gasoline to E85 is consistently in the range of 26-30%. So, let’s say we lose 28% on our fuel efficiency, which means we need 28% more E85 than the 21 billion gallons of gasoline we are displacing.* This means we need 27 billion gallons of E85, which will consist of 4 billion gallons of gasoline and 23 billion gallons of ethanol.

So we need 23 billion gallons of ethanol to accomplish 15% gasoline displacement. Availability of the pumps is given as a major problem in the Business Week article. I have a question. Can we actually produce anywhere close to this amount of ethanol? Is this like Field of Dreams, where we build the infrastructure and then the ethanol will come? Why on earth would gas station owners sink a lot of money into E85 pumps when the fuel is not available in any significant quantity?

Here’s another way to look at the problem. If you blended all of last year’s ethanol into the gas supply, it would only make a blend of 3% ethanol. Not E85. E3. You could burn E3 in the cars on the road now. In fact, you can triple the ethanol production, put 100% of it in the gasoline supply, and you have an E10 blend that any car on the road today could run. No need for expensive new pumps. No need for E85 capable vehicles.

One other thing I commented on in my response to the author was this claim:

That inconvenient truth is one reason oil companies aren’t rushing to install E85 pumps. Of the 179,000 pumps at U.S. gas stations, only about 1,000 pump E85. Almost none are at oil-company-owned stations.

Remember, this is an article vilifying Big Oil for not putting E85 pumps in their stations. I wonder if the author bothered to check and see the percentage of gas stations owned by oil companies? Probably not, because when he found out that it is less than 3%, it would have taken the wind out of his article. That’s right, most service stations are owned by independent operators, not Big Oil as the author apparently believes. They would be the ones on the hook for purchasing these pumps, and their margins have to justify the pumps.

One final note about the auto companies. The article paints them as a group trying to promote ethanol, but says they are “infuriated” at the oil industries tactics. Please. The auto industry loves making E85 capable vehicles, because there is a CAFE loophole that allows them to exaggerate the mileage of an E85-capable vehicle for CAFE accounting purposes – even if the auto never sees any ethanol. This means that they can meet their CAFE targets and avoid financial penalties by making vehicles like a Ford Expedition E85 capable.

Of course the geniuses at Oil Watchdog have latched onto this article. For them, it provides a simplistic explanation (very important for that audience) for why people are down on ethanol: It’s not actual problems with ethanol, it’s just a Big Oil anti-ethanol campaign. And for them, this qualified as a “solid answer” to the question of why there is so much anti-ethanol sentiment lately. Pathetic.

To conclude (I hadn’t intended to write this much), we have a very misinformed writer misleading a big audience and misdirecting their ire at oil companies over an issue he is wrong about. In other words, just another day at the office.

* Some might argue that engines optimized for E85 (with higher compression ratios, for instance) might not have the steep 28% mileage drop. This is possible, but remember that we are talking about displacing 15% of the gasoline supply, and we don’t know where we could come up with the ethanol to do that. So autos are likely to continue to be optimized for the predominant fuel, not for something like E85.

September 27, 2007 Posted by | Business Week, E85, ethanol, FTCR, oil companies | Comments Off on Debunking Business Week Misinformation

Debunking Business Week Misinformation

Besides hypocrisy, another thing I hate is the spreading of misinformation. Sometimes, the spreading of misinformation is done without malice, because you may just be repeating something you thought to be true. So, misinformation is in a different category than hypocrisy for me. But I do try to combat the spreading of misinformation when it occurs, particularly when the misinformation causes people to get mad at my industry. After all, we have enough ill will toward us already. We don’t need more heaped on as a result of misinformation.

Which brings me to a very misinformed story in Business Week:

Big Oil’s Big Stall On Ethanol

This is a remarkable collection of half-truths that paint a thoroughly inaccurate picture. Here is the story that Business Week told: E85 is being stalled because the oil companies are fighting against it. Yet they are reaping billions in subsidies from ethanol. And the auto makers are upset about it. After all, they need the oil industry to embrace E85 so they can sell more E85 vehicles.

I was compelled to write to David Kiley, the author of the story, and point out the errors in his argument. I will also point them out here.

For starters, Kiley argues that Big Oil is the beneficiary of the ethanol subsidy. Vinod Khosla has made similar arguments. As I have pointed out in my draft Ethanol FAQ, the ethanol industry is certainly displaying curious behavior on this issue if it is a benefit for the oil industry:

Consider for a moment just who has lobbied to keep the credit intact. Has it been oil companies? No. Has it been politicians from oil states like Texas and Alaska? No. The groups always arguing in favor of the ethanol tax credit have historically been farm state politicians, ethanol lobbying groups, and corn lobbying groups.

Last year I documented the reaction of Brian Jennings, the executive vice president of the American Coalition for Ethanol, when ExxonMobil (XOM) CEO Rex Tillerson called for an end to the subsidies. Jennings said “it is outrageous for an executive for big oil to actually suggest getting rid of the tax credit for ethanol.” That’s very odd behavior if Big Oil is actually the beneficiary.

Kiley then argues that wider availability of E85 is the best way to meet the targets that congress has set:

Despite collecting billions for blending small amounts of ethanol with gas, oil companies seem determined to fight the spread of E85, a fuel that is 85% ethanol and 15% gas. Congress has set a target of displacing 15% of projected annual gasoline use with alternative fuels by 2017. Right now, wider availability of E85 is the likeliest way to get there.

And of course, “Big Oil” is his reason that E85 is not spreading. In my response to him, I asked him to do a calculation:

If you produced E85 with 100% of the ethanol made in the country, what percentage of the nation’s fuel would it supply? Answer that question, and you may understand why there aren’t more E85 pumps.

(The answer to the question is that using the entire ethanol supply to produce E85 could supply 4% of our fuel). Of course you can’t make E85 with anything approaching 100% of the ethanol supply, because most ethanol is blended as an oxygenate. But let’s also consider his claim that E85 is a likely way of displacing 15% of projected gasoline demand.

If we want to displace 15% of of our 140 billion motor fuel supply, we need 21 billion gallons of gasoline equivalent. Because E85 has a lower energy content, we will need more than 21 billion gallons of E85 to displace 21 billion gallons of gasoline. How much will we need? As I reported last year, the DOE showed that a Ford Taurus that gets 29 mpg on gasoline gets 21 mpg on E85. I just checked a number of 2007 models here, and the drop in fuel efficiency from gasoline to E85 is consistently in the range of 26-30%. So, let’s say we lose 28% on our fuel efficiency, which means we need 28% more E85 than the 21 billion gallons of gasoline we are displacing.* This means we need 27 billion gallons of E85, which will consist of 4 billion gallons of gasoline and 23 billion gallons of ethanol.

So we need 23 billion gallons of ethanol to accomplish 15% gasoline displacement. Availability of the pumps is given as a major problem in the Business Week article. I have a question. Can we actually produce anywhere close to this amount of ethanol? Is this like Field of Dreams, where we build the infrastructure and then the ethanol will come? Why on earth would gas station owners sink a lot of money into E85 pumps when the fuel is not available in any significant quantity?

Here’s another way to look at the problem. If you blended all of last year’s ethanol into the gas supply, it would only make a blend of 3% ethanol. Not E85. E3. You could burn E3 in the cars on the road now. In fact, you can triple the ethanol production, put 100% of it in the gasoline supply, and you have an E10 blend that any car on the road today could run. No need for expensive new pumps. No need for E85 capable vehicles.

One other thing I commented on in my response to the author was this claim:

That inconvenient truth is one reason oil companies aren’t rushing to install E85 pumps. Of the 179,000 pumps at U.S. gas stations, only about 1,000 pump E85. Almost none are at oil-company-owned stations.

Remember, this is an article vilifying Big Oil for not putting E85 pumps in their stations. I wonder if the author bothered to check and see the percentage of gas stations owned by oil companies? Probably not, because when he found out that it is less than 3%, it would have taken the wind out of his article. That’s right, most service stations are owned by independent operators, not Big Oil as the author apparently believes. They would be the ones on the hook for purchasing these pumps, and their margins have to justify the pumps.

One final note about the auto companies. The article paints them as a group trying to promote ethanol, but says they are “infuriated” at the oil industries tactics. Please. The auto industry loves making E85 capable vehicles, because there is a CAFE loophole that allows them to exaggerate the mileage of an E85-capable vehicle for CAFE accounting purposes – even if the auto never sees any ethanol. This means that they can meet their CAFE targets and avoid financial penalties by making vehicles like a Ford Expedition E85 capable.

Of course the geniuses at Oil Watchdog have latched onto this article. For them, it provides a simplistic explanation (very important for that audience) for why people are down on ethanol: It’s not actual problems with ethanol, it’s just a Big Oil anti-ethanol campaign. And for them, this qualified as a “solid answer” to the question of why there is so much anti-ethanol sentiment lately. Pathetic.

To conclude (I hadn’t intended to write this much), we have a very misinformed writer misleading a big audience and misdirecting their ire at oil companies over an issue he is wrong about. In other words, just another day at the office.

* Some might argue that engines optimized for E85 (with higher compression ratios, for instance) might not have the steep 28% mileage drop. This is possible, but remember that we are talking about displacing 15% of the gasoline supply, and we don’t know where we could come up with the ethanol to do that. So autos are likely to continue to be optimized for the predominant fuel, not for something like E85.

September 27, 2007 Posted by | Business Week, E85, ethanol, FTCR, oil companies | 5 Comments

Environmental Irony in Virginia

I ran across an ironic article today from the Richmond Times-Dispatch. In part, it read:

Oct. 17–Virginia has one public filling station where motorists can fill up with E-85 fuel, and stations providing the gasoline alternative for government vehicles number just five.

Yesterday, Gov. Timothy M. Kaine joined representatives of General Motors and state and federal agencies in launching the first E-85 pump in the Richmond area. The pump, connected to an 8,000-gallon tank, is at a state fleet-vehicle office on Leigh Street.

Kaine touted the environmental and human-health benefits of a cleaner-burning motor fuel and praised the public-private partnerships that promote the fuel’s use.

Bless their hearts. And then they follow up that sentence with:

He then filled up a GMC Yukon sport utility vehicle used by his office from the new pump.

Throughout the article, they tout the “cleaner-burning alternative to gas that benefits the environment and can help cut the nation’s dependence on foreign oil”, but apparently do not see the irony of promoting highly inefficient vehicles. A bit later the article states:

At yesterday’s event, General Motors donated a brightly painted E-85 Chevrolet Tahoe to the state to be used to educate consumers.

Do these people really believe that running big SUVs and pickups on E85 is going to help solve our energy problems? Shall we all rush out and follow their lead? Can we possibly find a faster way to deplete the topsoil than by producing as much corn as we possibly can just to inefficiently convert it to ethanol?

This kind of thinking drives me crazy. Makes a guy want to move to Europe. Which, by the way, I am about to do. More on that later, as well as an essay contrasting biomass gasification with cellulosic ethanol.

October 18, 2006 Posted by | E85, ethanol, General Motors, politics | 6 Comments

Environmental Irony in Virginia

I ran across an ironic article today from the Richmond Times-Dispatch. In part, it read:

Oct. 17–Virginia has one public filling station where motorists can fill up with E-85 fuel, and stations providing the gasoline alternative for government vehicles number just five.

Yesterday, Gov. Timothy M. Kaine joined representatives of General Motors and state and federal agencies in launching the first E-85 pump in the Richmond area. The pump, connected to an 8,000-gallon tank, is at a state fleet-vehicle office on Leigh Street.

Kaine touted the environmental and human-health benefits of a cleaner-burning motor fuel and praised the public-private partnerships that promote the fuel’s use.

Bless their hearts. And then they follow up that sentence with:

He then filled up a GMC Yukon sport utility vehicle used by his office from the new pump.

Throughout the article, they tout the “cleaner-burning alternative to gas that benefits the environment and can help cut the nation’s dependence on foreign oil”, but apparently do not see the irony of promoting highly inefficient vehicles. A bit later the article states:

At yesterday’s event, General Motors donated a brightly painted E-85 Chevrolet Tahoe to the state to be used to educate consumers.

Do these people really believe that running big SUVs and pickups on E85 is going to help solve our energy problems? Shall we all rush out and follow their lead? Can we possibly find a faster way to deplete the topsoil than by producing as much corn as we possibly can just to inefficiently convert it to ethanol?

This kind of thinking drives me crazy. Makes a guy want to move to Europe. Which, by the way, I am about to do. More on that later, as well as an essay contrasting biomass gasification with cellulosic ethanol.

October 18, 2006 Posted by | E85, ethanol, General Motors, politics | 13 Comments

Another Khosla Critic

A reader recently e-mailed me the following link from Reason Online:

An Open Letter to Vinod Khosla

This letter to Mr. Khosla, from a fellow Indian émigré, echoes a number of points I have made regarding Mr. Khosla and California’s Proposition 87. Some excerpts:

Now you have become the prophet of alternative fuels that, you believe, are going to revolutionize the energy industry, much as the internet revolutionized communications. You are impatient to cut by half President Bush six-year timetable to bring cellulosic ethanol produced from farm waste to the market.

But, with all due respect, even a man of your stellar track record can’t simply will markets to do his bidding; an economy is not a machine that can be manipulated according to its maker’s grand designs. If it were, India’s central planners would have made rivers of energy flow into every Indian home.

I understand that there are a lot of Khosla fans out there who think that letters like this, and my debunking of some of Khosla’s claims, are simply due to the fact that we just lack Khosla’s vision. But as I have pointed out, Mr. Khosla’s expertise in computers does not imply credibility on ethanol issues. I agree with Tad Patzek of UC-Berkeley, who said that Khosla may be a great guy, but asked if you would you allow him to do brain surgery on you. Or would you rather have someone qualified do it?

This is the disconnect that we have here. Khosla’s sycophants are quick to hand-wave away the technical problems, because they do not understand them. We aren’t talking about merely being able to throw a lot of money at this problem and solve it, or it would have been solved long ago. It is a tough nut to crack. I believe it will eventually be cracked, but progress will come in bits and spurts. (I also believe that we will eventually colonize Mars; we just won’t do it next year because significant hurdles remain – hurdles that require a lot more than cheerleading to overcome).

For you computer tech guys, consider this analogy. Let’s say I promise to mass-produce a 30 gigahertz personal computer in just 3 years. It will cost less than $500. Let’s say I successfully lobby the government for funding for my venture. Furthermore, let’s say that other important research gets pushed to the borders because people believe that my claim is credible. Now you, being knowledgeable about this sort of thing, start to critique and challenge my claims. Would I be justified in claiming that you are a naysayer and you merely lack vision? Or is it more likely that your criticisms are due to the fact that this is your area of expertise, and you understand the challenges that prevent the promise from being fulfilled in the time frame I have promised?

The bottom line on this is that it will be great if cellulosic ethanol scales up quickly (from essentially zero today) to displace a large fraction of our gasoline demand. I advocate a large amount of funding for cellulosic ethanol. But if we are counting on this, and making energy policy decisions based on this happening with a high degree of probability, then we are making a grave mistake.

(I hadn’t realized until I started formatting this that the following paragraph links to an essay that I did for The Oil Drum on Prop 87). More excerpts from the letter:

Proposition 87—which you are personally spending $1 million to promote—would force oil companies to pay taxes (or royalties, as you call them) for drilling privileges until the state has raised $4 billion for seed money toward alternative fuel ventures. You argue that California is the only state that does not collect drilling royalties, something that oil companies can well afford to pay given their “abnormally” high profits. But California imposes all kinds of other taxes that make its oil among the highest taxed in the country. Proposition 87 would raise these taxes another 50 percent, forcing Californians, who are already paying among the most exorbitant gas prices in the country, to forego energy consumption.

Your cause might involve very cutting-edge technologies, but you are promoting it with curiously outmoded economic thinking. It might be worth questioning your Prop 87 crusade by revisiting the lessons of failed policies from home.

If you have read my previous essays on Prop 87:

California’s Proposition 87

More on California’s Proposition 87

Breaking Down Prop 87

Then you know my feelings. Ironically, the “foregoing of energy consumption” mentioned above is one thing I think is a positive from Prop 87. However, this reduction in consumption is not what the proponents are promising. Furthermore, the proponents are conducting a very misleading campaign. I could give numerous examples, but I will give just one. The proponents claim time and time again that this is an excess profits tax. It is no such thing. It is an extraction tax. In theory, profits could be zero for an oil company, and they are still going to get taxed as long as the price of oil is above $$$.

Now, carefully consider this next passage:

Yet, the issue is, if ethanol has all the advantages you says it does—if it is renewable, cleaner, less volatile, more reliable, easily transportable etc.—surely you of all people could convince enough investors to cough up the $4 billion that Prop 87 would raise. Are you not turning to taxpayers because you don’t want to assume that kind of risk—and can’t convince fellow investors to either? That is hardly socially responsible.

Bingo. I have said this before. If all of the advantages that Khosla is claiming are real (including his claim of lower cost of production than gasoline!), then raising money for this shouldn’t be a problem. This should raise some caution flags.

However, I still think Prop 87 will pass. There is too much anger at oil companies, and the proponents have painted this as a way to get them back. Will the voters get what they think they are getting? I think not. I also think it is possible that there will a voter-backlash well before the fund-raising goals have been met. I am glad that I will get to watch this experiment play out from outside California.

Finally:

Where oil companies have used the government to create barriers or tipped the playing field against alternative fuels, we should fix that. (And, no, it is not an illegitimate barrier, as you claim, when oil companies don’t install enough E-85 pumps in gas stations to distribute ethanol; not carrying products that don’t maximize your profits is not the same as impeding others from offering those products).

I have pointed this out to Mr. Khosla before. If oil companies aren’t installing enough E85 pumps to suit him, then he should build his own stations. Remember, Khosla has claimed a tremendous number of advantages for ethanol. So, why not convince investors to build a lot of E85 stations? Seems like a no-brainer, UNLESS ethanol isn’t quite at the stage Khosla claims it to be. (In fact, as I have pointed out previously, we can’t produce enough ethanol to justify a fraction of the E85 pumps Khosla demands).

Mr. Khosla hasn’t listened too much to what I have said to him during our exchanges. Or perhaps he listened and decided to ignore it. Either way, maybe the same message coming from a different source will garner his attention.

I Can’t Believe My Eyes

In the strange but true category, someone e-mailed me the following link:

Khosla: Ethanol Not Final Fuel

In this story, Khosla is quoted: “Contrary to what you might believe, I think it’s extremely unlikely that in 20 years we will be using any ethanol in cars.”

I simply don’t know what to make of this. He is pushing us to spend billions of dollars to roll out all of this ethanol infrastructure, and he thinks ethanol won’t be fueling our cars in 20 years? What about all of those charts and graphs showing us making 200 billion gallons of ethanol in 20 years? Has he had a change of heart? I don’t know, but this is about the last thing I expected to come out of his mouth.

Over at AutoblogGreen, one of the posters suggested that my debunking/dialogue with Khosla helped prompt a change of heart:

Khosla: Ethanol is just a stepping stone

While I would like to think that our discussions made some difference in his opinion, it was clear from talking to him that he was not going to be easy to budge from his position. At the moment, I am at a loss to explain his apparent about-face. Maybe this is just another example of Dr. Jeckyll and Mr. Khosla?

September 30, 2006 Posted by | E85, ethanol, Prop 87, Vinod Khosla | 52 Comments