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Range Responds

I just became aware that BiofuelsDigest wrote a story on my recent blog on Range Fuels, and got some comments back from Range Fuels’ CEO David Aldous:

Battle of the Falling Timbers

Aldous said pretty much what I would expect the CEO of Range Fuels to say. He defended his company, and complained that the funding includes money for future phases. That may be, but it is true that Range recently went back to the DOE for more money. If they are already funded for future phases, then why not show us what you can do before asking for more money now?

The truth is that the early public statements from those involved with Range – prior to them getting taxpayer funding – don’t remotely reconcile with what they are now prepared to deliver. The costs have escalated, the capacity has been ramped down, and production went from “cellulosic ethanol” to “cellulosic biofuels” to “mixed alcohols” to “methanol.” Those are the facts, and I think Aldous is trying to put the best possible spin on a bad situation that he inherited.

In fact, left unsaid in my original blog is that things have obviously gone horribly wrong from the days of Range’s early claims. Reading between the lines, I think the capacity downgrades are an indication that the gasifier didn’t scale up as expected. Gasifiers are tricky, and one that works fine at one scale and with one feedstock may not work at all at a different scale. I also think Range found out that producing ethanol from syngas is much more difficult than they expected, and they couldn’t get a catalyst to do what they had hoped.

One interesting comment from Aldous was that their methanol would be a qualifying fuel because they will put it into biodiesel. Imagine that. Biodiesel is already struggling to compete, and now we are going to pay a subsidy on the methanol that is used to produce biodiesel, and then we will probably end up reinstituting the subsidy on the finished biodiesel.

That is going to be some expensive biodiesel (from a taxpayer perspective). Methanol presently trades at about $1.10 a gallon, so if we subsidize that as a cellulosic biofuel we would presumable pay a subsidy of $1.01 per gallon on top of the market price. In a nutshell, the real cost of that methanol going into biodiesel would be double what it should be. It all begs the question, of course, of why you wouldn’t just use the methanol directly as fuel.

There was a comment left following the story that allows me to finally tell a funny story that happened at the Pacific Rim Summit last November (here are my slides from my presentation). Alan Propp wrote the following:

Dear Editor,

My comment is this: you describe Mr. Rapier at the outset of your article with these terms, “Noted and widely respected energy writer…” I have met Mr. Rapier, and my description of him would have been, “Controversial, highly opinionated and frequently misinformed energy writer…”

His lack of knowledge or understanding of the Range Fuels project is indicative of his blog and other writings.

Sincerely,

Alan Propp, Ph.D., P.E.
Merrick & Company

That comment is priceless on several levels. First, while Propp is smearing me he conveniently doesn’t mention that his company is the engineering firm for the Range Fuels plant. His company has made a lot of money on all the hype, and his fingerprints are all over the project. Think he might have an axe to grind?

But here is the really priceless part. At the Pacific Rim Summit, I was having a bite with a colleague at an evening conference event. Joining us was David Bransby, a professor from Auburn (and advisor to Range Fuels) who gave a presentation that I really enjoyed. His wife was also present, as well as some members of the Hawaii Science and Technology Council. We were having some interesting discussions around logistics, energy density, and the problems of scaling up biomass-based solutions.

Up walks Alan Propp, Ph.D., and he immediately began to berate me. Shortly thereafter, one person got up and left the table (telling me later that Propp’s behavior was the reason he left the table), and two more later asked “What was that guy’s problem?

We were talking about the difficulties with scaling up biobutanol (which I have blogged on here) and Propp said “You are wrong. They now have a new process which can get butanol titers above 10%.” I looked at him with a puzzled look, and said “That’s impossible. Butanol phases out of water at 7.7% concentration. You can’t have a 10% solution.”

Propp was undeterred. He said that a certain company had given a presentation that day, and if I had attended it “I might have learned a thing or two.” (I would have attended but had a conflict). I was really puzzled, and couldn’t figure out what he was talking about. I decided I would investigate later, but I knew one thing: He was wrong about butanol titers above 10%. That’s like saying “Our water freezes at 40 degrees.”

The conversation turned to energy balances, and Propp’s position was “Energy balances don’t matter.” We were discussing a municipal solid waste project for converting trash into fuel. I said that if the energy inputs into the project were higher than your outputs, then in most cases you don’t do the project (unless you are using non-fungible fuel like coal as an input to produce a liquid fuel output). Propp said (paraphrasing) “If the biomass is free, then usage of those BTUs is what matters.”

I knew that we were looking at this problem in two very different ways. I was looking at it from the long-term viability of an energy project. Propp was locked into the idea that because the BTUs are free, then any usage of them is an improvement over the status quo. I couldn’t get it through his head that if the usage involved consuming more BTUs than you could extract from the free biomass, you don’t do the project. So we had a very fundamental disagreement. For an energy project, I won’t consume more than 1 BTU of fungible fuel to produce 1 BTU of fuel unless there are some really special circumstances (e.g., if the project is really a waste disposal project and energy would have been consumed regardless).

The evening went on like that. Propp was extremely arrogant and condescending. Had I known then of his involvement in some of these biofuel projects, I would have had a better grasp on why he behaved as he did. But then I went back to my hotel and looked up the company he had been talking about. It turns out that the good Dr. Propp was actually confused and had been talking about iso-butanol, a fundamentally different compound than normal butanol (which is almost always shortened to just “butanol”).

From a biological perspective, it is true that i-butanol is less toxic to microbes than n-butanol, but the phasing concentration for i-butanol is also higher. What is needed to crack open the economics of producing butanol biologically (which used to be the case before the much cheaper petro-route came along) would be to get butanol concentrations above the phasing level, so it could be skimmed off instead of having to distill it all. From that perspective, the lower toxicity of i-butanol is offset by the higher phasing concentration.

Further, in the chemical industry the chemical properties of n-butanol are generally preferred over i-butanol. Therefore, butanol production is shifted to the greatest possible extent to n-butanol, and i-butanol almost always trades at a discount to n-butanol. There is still a market for i-butanol, but it is unclear if i-butanol would be an attractive renewable fuel. The published test results I have seen were all of n-butanol.

So I chuckled at the thought that Alan Propp, Ph.D., didn’t know the difference between i-butanol and n-butanol, yet berated me for not knowing about new technology that produced “butanol titers above 10%.” I sent him a note later that night and said “I think you meant iso-butanol.” He responded back “Yes, that’s correct.” (In fairness to Merrick, Propp did have a colleague with him – Steven Wagner, VP from Merrick – who I found to be much more reasonable and more interested in simply have a conversation about technology).

The next day, I saw Propp and his demeanor had changed entirely. Gone was the arrogance from the night before. (I presumed he was feeling pretty sheepish). He had promised to show up for my presentation later that day and put some tough questions to me, and I said “By all means, show up and give me your best.” He was a no-show.

So it is with an extreme sense of irony that I read Propp’s comment above. It is a classic case of projection. Of course the sort of pseudo-knowledge displayed by Propp that night is a big reason that Range is in the position it is in. The initial promoters failed to distinguish between cellulosic ethanol and biomass gasification, and therefore made certain representations that many of us knew were incorrect.

Second, they didn’t understand the chemistry of alcohol production well enough to know that the production of pure ethanol via this route is problematic, and that a mixed alcohol is what they would produce. Pure ethanol would only be produced at a very high cost. As reality began to settle in, we have seen the statements from Range evolve a very long way from the initial claims of what they would do.

So despite comments from Aldous and Propp, the verdict on Range is the same. What they are proposing to deliver is a far cry from the technology (and cost) that they initially went out and hyped. The public statements are there for anyone to read, and don’t need any particular interpretation from me to see that things have not gone according to plan. So whether I understand Range’s grand plans isn’t the issue. I understand what they have said publicly.

March 2, 2010 Posted by | butanol, ethanol, hype, methanol, range fuels | Comments Off on Range Responds

Our Tax Dollars at Work

First off, a couple of announcements. After being able to stay at home for the past two months, I have a very heavy travel schedule over the next two weeks. My participation here will probably be limited. I am off to Seattle tomorrow, on to the Netherlands from there, will visit Switzerland and Germany, back to the U.S. mainland, on to Canada, and then back to Hawaii. I have essentially piled up eight visits I need to make into one big, exhausting trip. My ability to post and respond to comments and e-mails will be spotty at best.

Second, my first essay went up yesterday at Forbes: The Price of Energy. My intention is to put something up there every week or two, and my primary goal is to be educational with the essays. I don’t plan to do any major debunking of company claims there, although I will still do that here occasionally. I will generally first post the stories targeted for Forbes on my blog, modify as appropriate based on the comments (in the case that something is incorrect or unclear), and then post it at Forbes.

Now, on to today’s story. Yesterday I saw a story on what is one of the silliest ideas I have ever heard from a politician. It isn’t the first time I have heard it mentioned, but I believe it is the first time one of our legislators actually announced they were going to take action on it:

Braley Announces Legislation to Require Country of Origin Labeling for Fuels

Washington, DC – In an address to the Iowa Renewable Fuels Association today, Rep. Bruce Braley (D-Iowa) announced he will introduce legislation to require country of origin labeling for fuels. Braley will introduce the bill, Country of Origin Labeling (COOL) for Fuels, tomorrow when he returns to Washington, DC.

The bill will require the Department of Energy to conduct a study and implement its recommendations to ensure American consumers have the ability to decide at the gas pump whether they want to purchase domestic fuel products, such as biofuels produced in Iowa, or gasoline produced in hostile nations that many terrorists call home.

“When we fill up our vehicles, there’s no existing method for us to know where the fuel we’re purchasing comes from and which nations are deriving the economic benefit from that purchase,” Braley said. “When we put food in our bodies or clothes on our backs, we know exactly where those products come from. Americans should have the same opportunity to vote with their wallets at the gas pump.

The intent of the bill is not the reason this is a dumb idea. I think most people would appreciate a choice of the country of origin for their fuel. We would ideally prefer that fuel to be sourced domestically (unless of course we have to pay a premium for it), and beyond that many would prefer to buy fuel from Mexico over Venezuela. So to be clear, I understand the spirit of the bill.

The silly part comes about in the attempted execution. The petroleum supply chain does not segregate products by country. Sure, a supertanker may leave Saudi Arabia with 100% Saudi crude, but once it arrives it gets mixed with whatever else may be left in the pipelines and crude tanks. Then, as it goes through the refinery, there are streams from many different sources. Finally, when it goes into the pipeline and on to the retailer it gets mixed with products from many different locations. In fact, in many places the fuel you put in your car has portions from many locations.

There are exceptions; the Billings Refinery I used to work at only got crude domestically or from Canada because no supertankers have access to the refinery. But then once product ships to Denver or toward the West Coast, it will inevitably mix with product derived from elsewhere (e.g., product coming up from Texas to Denver will probably contain some Venezuelan crude).

I wonder if one of our government leaders will figure out that essentially all of the corn ethanol produced in the U.S. today is enabled by petroleum, and that petroleum is inevitably sourced from imports. So I suppose the corn ethanol should be labeled as well: “This ethanol was enabled by Saudi/Venezuelan/Russian crude.” No, I suppose we will keep that skeleton in the closet.

The purpose of this bill from the Congressman from Iowa is of course to try to tilt the playing field in the direction of corn ethanol. That’s understandable, as that is his job. But the idea is either very poorly thought out, or it is just an example of him posturing for his constituents.

I don’t believe this bill has any chance of passing, but presuming for a moment that it did, the labels would all have to look like those food labels that say something like “This food was processed in a facility that also processed peanuts. It may have in fact touched peanuts at some point.”

Our product label would read like “This crude may have been sourced from the U.S. and/or one or more of the following 30 countries…” This would appear on every gasoline and diesel pump in the U.S., and would therefore be ignored by everyone. In other words, trying to pass such a bill is simply a waste of time and taxpayer money.

Note: This story was also characterized very well at Bnet by Kirsten Korosec:

Label My Crude: Iowa Congressman Wants Americans to Know Where Their Fuel Was Born

In that essay, Kirsten pointed out the impracticality of implementing such a plan, and also linked back to my essay on the Top 10 suppliers of crude to the U.S. to show readers where U.S. crude imports actually do come from.

January 27, 2010 Posted by | energy policy, ethanol, farm policy, Iowa, politics | Comments Off on Our Tax Dollars at Work

My Top 10 Energy Related Stories of 2009

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

1. Volatility in the oil markets

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

2. The year of natural gas

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

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

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

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

4. Shifting fortunes for refiners

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

5. China

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

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

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

7. EU slaps tariffs on U.S. biodiesel

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

8. Big Oil buys Big Ethanol

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

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

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

9. The climate wars heat up

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

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

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

10. Exxon buys XTO for $41 billion

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

Honorable Mention

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

The IEA puts a date on peak oil production

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

AltaRock Energy Shuts Down

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

The biggest energy bill in history was passed

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

The Pickens Plan derails

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

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

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

How to Break Through the Blend Wall

By now you have probably heard that the EPA has postponed issuing guidelines on whether to allow ethanol blends of higher than 10% into the gasoline pool. Going up to 15% ethanol blends would allow ethanol producers to put a lot more of their product into the market, which is currently bumping up against the limits of the current 10% ethanol blend allowance.

Ethanol producers and proponents have assured us that the higher blends will not damage engines. Small engine makers and boaters are very worried that the higher blends will damage their engines. In fact oil companies, having been mandated to use ethanol, are now facing a class action lawsuit over ethanol blends damaging boat motors. Even the auto industry has voiced concerns that they could be liable if the higher ethanol blends damage engines.

So how to break this impasse? A reader forwarded a link to a letter that appeared in the Financial Times that I think proposes a reasonable solution. The ethanol industry will be the main beneficiary of raising the amount of ethanol that can be blended. Since they are also the industry who has requested this increase, have them assume the liability if anything does happen. If they are correct and there are no problems, then they have nothing to worry about. If they are incorrect, then they can pay for the fallout instead of having it fall to the oil companies, car companies, and small engine makers.

How to do this? I think you have to get an ethanol trade organization like the Renewable Fuels Association to step forward and say “We are prepared to accept the liability risk for the potential reward.” Because the potential liability could be enormous, that would probably also need to be backed up by the U.S. government.

I think it is a reasonable suggestion that those who are proposing this change and who stand to benefit should accept any potential liability. But my guess is that the EPA will ultimately rule in favor of increasing the ethanol blends anyway, and the ones who reap the reward aren’t going to be the ones stuck with the bills if there are unforeseen problems.

December 8, 2009 Posted by | blend wall, EPA, ethanol, litigation | 61 Comments

The Questions I Didn’t Ask

I have been asked to submit a video question on ethanol policy that will be potentially answered in a video blog by someone who is very well-known in the energy business. I will keep the details quiet for now, including the question I did submit. (I thought I would be able to record my question with stunning Hawaiian scenery in the background, but alas it has been raining for two days).

I really had to brainstorm on exactly which question I would ask. I made a short list, and finally honed it down to one that I think is fair, but tough. But I had a number that I decided not to ask, either because I already knew how it would be answered (even if I disgreed with the expected answer) or the questions/answer to the question was so complex that it couldn’t be answered in a short video clip.

Here I discuss what I didn’t ask, but it really gets to the heart of the issues I have with U.S. ethanol policy. First, a bit of framework. I believe that I am, and have always been objective, and a realist. I don’t believe that we are ever going to have a moment where government leaders say “Let’s abandon this ethanol pathway.” We had an example of that with MTBE, but there was clear evidence that MTBE was getting into groundwater and lingering.

The issues around ethanol are more complex. Corn ethanol has been U.S. policy for the past 30 years, and it will be policy for the next 30 years. It is too embedded in agriculture policy, and I think it would be devastating for Midwestern economies if we changed direction on corn ethanol. Thus, I think we continue down that path, for better or worse.

I am not pro-ethanol nor am I anti-ethanol. In one of my earliest essays in this blog, over 3.5 years ago, I talked about some of the things I would like to see happen in the grain ethanol industry, mostly aimed at improving the energy balance. I came out in favor of the approach of E3 Biofuels, who were trying to build a highly integrated ethanol complex that minimized fossil fuel inputs. I have endorsed such approaches on multiple occasions.

My concerns are, and have always been: What are the long-term consequences? I don’t limit this to ethanol; this is a question that I ask of all energy options. Dependence on oil has some significant long-term consequences. The most serious of which, for me, is the potential for building a world that is only sustainable as long as oil production continues to expand. I see significant risk there, so it has always been my position that we need to reduce our dependence on fossil fuels in general.

With respect to ethanol, consider this thought experiment that I posed following one of my previous essays: Would you consume 2 BTUs of natural gas to produce 1 BTU of ethanol? I think most people would conclude that this would be foolish; that your natural gas supplies would stretch much further if instead you simply use the natural gas in CNG vehicles (acknowledging of course that there are lots of things you have to evaluate in that scenario). For those who would answer “Yes” to that question, I would argue that your view of ethanol is entirely one-dimensional. You probably only care that it is homegrown, and you don’t worry much about the long-term consequences.

Of course the truth is more complicated than the example above. It doesn’t take 2 BTUs of natural gas to produce 1 BTU of ethanol. Estimates vary, but it is still safe to say that most ethanol operations in the U.S. continue to have substantial fossil fuel inputs. That is the way they were built, and that is the way they will continue to operate. Over the long-term, there is potential to change that equation by using biomass boilers, but those are more expensive to operate than a standard natural gas boiler.

So on average the ethanol industry does still have a heavy fossil fuel dependence, albeit largely domestic coal (for electricity) and domestic natural gas – with some petroleum inputs for trucks, tractors, etc. (One thing to note is that more than 50% of our fertilizer supplies – derived from natural gas – are in fact imported). So what if the question was “Would you spend 1 BTU of natural gas to make 2 BTUs of ethanol?” If you are doing a holistic analysis, the answer should be “It depends. What are the other impacts?”

There are those who wrap U.S. ethanol policy in patriotism and the American flag, and who would rather not get into those questions. These questions are hand-waved away with clichés like “I would rather support American farmers than Saudi sheiks.” I try to look at it from the perspective of an engineer, a scientist, and an environmentalist. I want to stack the columns up and figure out what is really happening as a result of our ethanol policy and subsequent rapid expansion of corn production. I want to look at it from the perspective of “What is going to be the impact on the world my children will inherit?”

Just a few of the key questions for me are the following:

  • Are we depleting fossil aquifers as a result of the expansion of corn in areas requiring irrigation – putting future food supplies at risk?
  • Are we at risk of contaminating water supplies with herbicides, pesticides, and fertilizer run-off?
  • What has been the measurable impact on our oil imports – the generally stated reason for our ethanol policy?
  • What is the long-term impact on soil as a result of erosion and pesticide usage?
  • What is the risk of major weather events impacting the corn crop, and subsequently causing a shortage of corn for ethanol and driving food prices much higher?
  • What are the other risks of closely linking together food supplies with fuel supplies?
  • In a nutshell, I want to know if we are compromising the future relative to other options, and/or relative to the status quo. These sorts of issues are generally ignored by most advocates. They believe our ethanol policy is the right thing to do, and then nothing else matters. I have debated people like this before, and they are simply not interested in the holistic picture. Often, it is because they are vested interests.

    Chief ethanol lobbyist Bob Dineen isn’t going to be at the forefront, trying to determine the answers to these questions. His job is to promote ethanol, period. He will get involved when one of these questions becomes persistent enough and loud enough, and his position will typically be that of defense attorney: Deflect the question if you can, and try to raise doubts that the question even matters.

    But I am not a vested interest dug into a bunker. If our ethanol policy is better than the status quo, then I am all for it. But you can’t know that unless you take a really comprehensive look. I would like to see an independent analysis of all of these issues, now that we are some 11 billion gallons per year into this experiment.

    The problem is finding an independent agency to do such an analysis. The ethanol lobby hires their consultants, who conclude, “It’s all good.” Big surprise there. (By the way that is the same guy who wrote a paper stating that ethanol with the energy value of 64 million barrels of oil displaced 206 million barrels of oil).

    Energy policy in general is a complicated issue, and it is wrapped up deeply in politics. I doubt we will ever get the independent review I would like to see – and even if we did the lobbyists would immediately go to work trying to discredit the study. But I hope you can see why I decided not to ask that question. It might take 10 minutes to ask it, and then an hour to answer it – and I don’t think the answer would really get into the fine details that I am interested in.

    You will have to stay tuned to see the question I did ask.

    December 5, 2009 Posted by | energy policy, environment, ethanol, farm policy, politics | 201 Comments

    Ethanol and Petroleum Imports

    This is the concluding post in a series looking at the impact of increased ethanol production on petroleum imports. Previous posts concluded that there has been little measurable impact on our petroleum imports as a result of increased ethanol production. In this post, I provide a spreadsheet to all the data and graphics used, and delve a bit deeper into the issue.

    Previous posts in the series were:

    Does Ethanol Reduce Petroleum Imports?

    Ethanol, Imports, and the MTBE Effect

    The spreadsheet that was used to tabulate all of this information is archived here:

    Oil Imports Versus Ethanol Production

    (For some reason the graphs don’t show up in the Google Documents link. However the data and calculations are all there).

    Audacious Claims

    One of the most frequently cited reasons for our U.S. ethanol policy is that it will reduce our dependence on foreign oil. Some of the more audacious claims actually suggest that one barrel of ethanol will displace more than one barrel of foreign oil. Here is a sampling of some of the claims. From the Renewable Fuels Association’s (RFA) “Energy Facts”:

    FACT: The production and use of 9 billion gallons of ethanol in 2008 displaced the need for 321.4 million barrels of oil. It also saved American consumers and taxpayers $32 billion, an average of more than $87 million a day. This is the equivalent of eliminating oil imports from Venezuela for 10 months, or looked at another way, it would mean that the U.S. would not have to import ANY oil for 33 days.

    The RFA’s page on industry statistics shows that ethanol production in 2006 was 9 billion gallons, which is 214 million barrels. Once refined, a barrel of oil will turn into products with an average BTU value of 126,000 BTUs/gal, versus 76,000 BTUs/gal for ethanol; therefore 214 million barrels of ethanol contain the BTU equivalent of 129 million barrels of oil. (Source: ORNL). The claim then is that ethanol with an energy equivalent of 129 million barrels of oil (BOE) displaced more than twice that much oil – 321 million barrels!

    The RFA’s source on that was the consulting firm LECG, where director John M. Urbanchuk consults for the Renewable Fuels Association and the National Corn Growers Association. Thus, Urbanchuk is expected to spin a positive ethanol story, but one would hope he could do so without completely sacrificing his credibility. He has also been quoted:

    The production of nearly five billion gallons of ethanol means that the U.S. needed to import 206 million fewer barrels of oil in 2006, valued at $11.2 billion. This is money that stayed in the American economy.

    Source: Contribution of the Ethanol Industry to the Economy of the United States in 2006 (PDF download)

    Even grander claims have been made by the U.S. Government. From DOE Assistant Secretary Alexander Karsner’s keynote address to the RFA’s National Ethanol Conference (link now dead) in Tucson, Arizona:

    Last year, we contributed something on the order of a displacing 500 million barrels of oil, oil that we didn’t have to import from regimes that are hostile to our interest or might leverage energy economics over our future.

    Here’s the same claim (that link has also been taken offline) by Paul Dickerson, Chief Operating Officer at the DOE’s Office of Energy Efficiency and Renewable Energy:

    Over 6 billion gallons of ethanol were produced in the United States last year, and we have an additional 5 billion gallons of refining capacity under construction.

    That effort means 500 million fewer barrels of oil that we have to import from the Middle East.

    That’s from the U.S. Department of Energy. Those are pretty bold claims. How on earth are people coming up with these numbers? More importantly, can we go to the data and actually see this impact?

    Probing the Data

    The import situation is complicated by several factors, the biggest of which is the rapid run-up in petroleum prices over the past few years. The increase in prices caused overall demand to fall, which can be seen in Figure 1 below:

    Figure 1. Net Imports Versus Total Demand

    It is important to note that “demand” includes all crude oil, natural gas liquids (ethane, propane, butane, etc.), ethanol, fuel gas (offgas from the refinery used as fuel or feedstock), and asphalt. (See the full list of products covered here). This is important to understand, because if ethanol displaces petroleum, it has no impact on overall demand – since it is already included. What you would see in that case is merely a shift between ethanol and gasoline, for instance, with total demand remaining constant (actually it would have to go up a little due to ethanol’s lower BTU content).

    The conclusion one draws is also influenced by the time period over which one looks. In the first post in this series, I looked at imports, demand, and ethanol production over the time period 2002 through 2007. The reason for choosing that particular time period was that this was when ethanol was ramping up sharply.

    I left off 2008 because of the very sharp drop in demand due to the recession. However, as one reader pointed out, since ethanol is included in the demand number, it doesn’t really matter whether demand went up, down, or stayed constant. If ethanol is displacing imports, we should see that effect even if demand drops sharply. For example, if demand fell by 1 million barrels a day, then all else being equal I would expect imports to fall by 1 million barrels a day. Now add in expanding ethanol production, and I expect imports to fall by more than 1 million barrels a day.

    What I observed was that between 2002 and the end of 2007, our petroleum imports do not appear to have been impacted at all by the increase in ethanol production. But that time period is complicated by a couple of things. First, the largest increase in ethanol production took place in 2008. Thus, the largest impact would be expected to show up in 2008 – a year I left off because of the recession effect.

    Second, the phase-0ut of methyl-tertiary-butyl-ether (MTBE) took place during this time. I went into detail on how this would have impacted the issue in the second post in this series. The bottom line was that even when MTBE was taken into account, it still did not appear that ethanol production had a measurable impact on petroleum imports.

    However, the MTBE phase-out was completed in the first half of 2006. So for the rest of this post, I want to focus on 2007 and 2008. (And as I write this, I don’t know what the answer is; I will work it out as I put the rest of this post together).

    During 2007 and 2008, total demand fell by 434 million barrels. Domestic production fell by 74 million barrels. (You can see all of the data in this spreadsheet; there are comments indicated where different data originated). So then all else being equal, I would expect imports to fall by 434 million barrels, but then they also need to make up for the 74 million barrel domestic production deficit. That modifies the expected import change to (-434 million + 74 million) = – 360 million barrels.

    Over that two-year time period, net imports actually fell by 466 million barrels. This is the first time period I have looked at over which the import change was less than the demand change, which is what I would expect to see if ethanol was displacing imports. The change certainly isn’t the often exaggerated 200 million or 500 million barrels, but over the course of 2007 and 2008 imports did fall by 106 million more barrels (53 million barrels per year) than would be expected on the basis of demand and domestic production changes. Over the longer time frame of 2002 through 2008, the cumulative increase in imports (+207 million barrels) is very close to what would be expected based on changes in demand and domestic production (-225 million barrels), still implying no measurable impact from ethanol.

    How much ethanol was produced over that period of time? Per the RFA’s ethanol statistics, a total of 15.5 billion gallons of ethanol was produced in 2007 and 2008, which amounts to 369 million barrels. On an energy equivalent basis, this is equal to about 215 million barrels of finished petroleum products. Yet the measured fall in imports was less than half that value.

    One of the problems here is that we may be looking for a needle in a haystack. By that, I mean that the contribution of ethanol is so small relative to that of overall demand, that any actual displaced imports would be lost in the noise. Figure 2 illustrates:

    Figure 2. Ethanol Production Versus Total Demand

    For this graphic, I have put ethanol production on the same scale as total demand to show the relative contribution. The production for ethanol in 2008 amounted to 0.59 million barrels per day of a total demand of 19.5 million barrels per day. For people who claim that the oil companies are threatened by the ethanol companies, that graphic puts things in perspective.

    One could argue that the ethanol impact should show up most strongly in a comparison with gasoline demand. Figure 3 shows that effect:

    Figure 3. Ethanol Production Versus Gasoline Demand

    In fact, gasoline demand* did dip in 2008 by 300,000 bpd. Ethanol may have been part of the reason, but the increase in ethanol production was quite a bit less than the fall in gasoline demand. Corrected for energy content, the ethanol increase was less than half the drop in gasoline demand (which can be mostly explained by higher prices and recession, as shown below).

    One thing Figures 2 and 3 show is the dip in demand in 2008, which followed a flattening of demand for a few years prior. Recall that since ethanol is included in the demand number, ethanol can’t be a cause of the drop in demand. Figure 4 shows part of the culprit:

    Figure 4. Average World Crude Price Versus Total Demand

    As crude prices began to climb in 2004, crude demand flattened. As the price skyrocketed in 2008, we were also entering a recession. The combination caused a sharp drop in demand. One interesting thing to consider is that since ethanol is mandated in increasing volumes each year, it is not impacted by the drop in demand. While total demand fell by 1.2 million bpd in 2008 relative to 2009, “demand” for ethanol actually increased by nearly 200,000 bpd – because the mandated increase has no allowance for overall drops in demand.

    Conclusions

    What to conclude from this exercise? The easiest conclusion is that the claims of petroleum import displacement have been at a minimum grossly exaggerated. It may even be that ethanol hasn’t backed any petroleum imports out, or that the impact is so small as to be unnoticeable.

    All of these conclusions, however, point toward a common theme: Even our biggest source of alternative fuel is taking very little bite out of our petroleum consumption. Much more effective has been high prices and recession. In fact, I believe it unlikely that any combination of biofuels will ever replace even 50% (net) of our present petroleum consumption. That points toward the need for conservation as a critical component of any major effort to wean off of fossil fuels. Perhaps some combination of conservation, electrification, mass transit, and biofuels can make a significant impact on our fossil fuel consumption. But the graphics above should demonstrate that it isn’t a trivial matter to significantly impact our petroleum consumption.

    *Total gasoline demand contains the ethanol contribution. Therefore, Figure 3 shows gasoline after subtracting out the ethanol volumes.

    Special thanks to the Energy Information Administration for answering some of my questions about the data.

    October 15, 2009 Posted by | EIA, Energy Information Administration, ethanol, ethanol production, oil imports | 82 Comments

    Ethanol, Imports, and the MTBE Effect

    I am traveling later this week, and will be on the road for nine days (Colorado, New York, Massachusetts). I was trying to wrap up the loose ends from my previous post with a much more comprehensive look at the ethanol/import issue before I travel. However, there are a couple of questions I had for the EIA before I finish up. As soon as I hear back from them, I will post a number of graphs and I will put my spreadsheet up so everyone can pick through it. But if I don’t hear back within a couple of days, it may be a while before I can put up the final installment.

    But so far, it still looks like my initial observation was correct: Ethanol has not reduced our oil imports. Our oil imports have fallen over the past couple of years, but here is why:

    Net Crude Imports Versus Total Demand. Source: EIA

    I will clean that graph up in the final posting. It should be obvious, but the import scale is on the left. Bear in mind that the ethanol production numbers do show up in the demand numbers. Thus, whether petroleum demand was impacted by ethanol displacement is irrelevant in that demand number, since whatever is no longer counted as petroleum is counted as ethanol.

    If you notice, “Imports” track “Demand” very closely, except demand fell faster in 2008 than did imports. If ethanol was actually impacting imports, what I would expect to see is the import line negatively trending away from the demand line. For instance, since ethanol began to really ramp up in 2002, we are producing an incremental 7 billion gallons per year with an energy content of over 250,000 bbl/day of finished petroleum products. The change in demand through 2002 was down slightly. Yet imports actually rose slightly. If ethanol was impacting imports this is where I would expect to see it; with imports falling faster than demand fell (or rising more slowly than demand rises as ethanol makes a contribution).

    The MTBE Effect

    One reader asked a great question – just the kind of question I like to get following these essays. The blending of the oxygenate methyl tertiary butyl ether (MTBE) was phased out in 2006. In order to meet the oxygenate requirements for specific areas of the country, ethanol replaced MTBE in the gasoline blending pool. So is it possible that the reason petroleum imports didn’t fall as ethanol ramped up was that ethanol was being used to replace MTBE? If MTBE was being made with domestic products that are not captured in the liquid demand summary, then it would be theoretically possible for ethanol to replace MTBE with no impact on imports. That sent me on a mission into the EIA archives digging through historical MTBE data.

    The MTBE picture is complicated, and thus I expect there to be many opinions on how to handle it. Until 2008, the EIA published a monthly supply/demand picture on MTBE. The report is called Monthly Oxygenate Report, and the historical data are still all there. Figure 29 of this USGS report confirms that MTBE production had plateaued in the years 1999-2002 at just over 3 billion gallons per year. During 2002, production dropped sharply as it started to be phased out. If you look at this year end 2003 report, they show historical production separated into merchant plants and captive plants. (See Table D-4). The EIA defines a merchant plant as one that isomerizes normal butane to isobutane, dehydrogenates isobutane to isobutylene, and then reacts the isobutylene with methanol to produce MTBE. The definition of a captive plant is one that takes isobutylene, produced as a byproduct of refinery operations, and reacts it with methanol to produce MTBE.

    The previous definitions are important for understanding how the MTBE phase-out should have impacted the import picture. Because butane is captured both in the import numbers and in the petroleum demand numbers, any ethanol that displaced MTBE should have backed out butane imports – thus lowering total imports. But, MTBE is partially produced from methanol, which is generally produced from domestic natural gas. Natural gas is not captured in the petroleum imports number, nor is it captured in the demand number. Thus, ethanol that backed out MTBE would not have impacted the natural gas piece that went into MTBE. So what we have then is that some of the ethanol ramp-up would have been diverted into MTBE replacement without being expected to have impacted demand.

    How much? The portion that came from the natural gas. The MTBE reaction as stated above requires isobutylene and methanol. One molecule of MTBE has one molecule of embedded methane (via methanol). Let’s make the best case assumption that all MTBE production was replaced by ethanol. In 2002, ethanol production was really ramping up and MTBE was falling off the plateau. So let’s take the last year of strong production, 2001, and assume that must be replaced by ethanol. In 2001, MTBE production averaged 212,000 bbl/day for the year (per the previous historical report). The EIA did a comprehensive study of the MTBE replacement issue in 2006, and they concluded that from the oxygenate perspective, it takes 9 barrels of ethanol to replace 10 barrels of MTBE.

    So to replace 212,000 bbl/day of MTBE was going to require 191,000 bbl/day of ethanol, which is 2.9 billion gallons per year. 191,000 bbl/day of ethanol production has the energy content of about 115,000 bbl/day of oil. In the absence of the MTBE issue, this is how much petroleum product imports I would expect to be backed out as ethanol displaced MTBE. But we need to prorate it by the isobutylene content, which is 64% of the mass of MTBEs. Thus, I would still expect the ethanol that backs out MTBE to displace imports equal to 64% of the 115,000 barrels, which would be 74,000 bbls.

    There are two other factors that complicate matters even more. Since ethanol has a lower energy content, when ethanol displaces MTBE other components need to be added to compensate for the loss of energy. That may result in addition imports to keep the BTU content of the gasoline pool constant. Further, because the vapor pressure of ethanol is higher, certain components like butane and pentane must be backed out of the gasoline and replaced with other components that may need to imported. However, the latter shouldn’t have much impact on imports, because butane and pentane are already captured in both the import number and in the product supplied number.

    Bottom line? We should still expect to see imports backing out even as MTBE is replaced by ethanol. Further, the MTBE phase-out was completed in the first half of 2006, so there is no longer any complication from that. And 2007 and 2008 also show no compelling case that ethanol is backing out imports.

    Conclusion

    It still appears to me that ethanol has had no impact on oil imports. However, it is not yet clear to me why this would be the case, so I am digging to better understand. It may be that we are just trying to see a change that amounts to noise in the overall demand picture. In that case, the ethanol contribution is really put into perspective and readers may understand why I am focused on other solutions; solutions that I think can ultimately make a bigger impact.

    It may be that something is still missing from the picture, which is one of the reasons I have contacted the EIA for some additional clarifications. I think the conclusion in any case is that ethanol backs out approximately zero imports, plus or minus some very small number.

    So those like the RFA who make claims like thisFACT: The production and use of 9 billion gallons of ethanol in 2008 displaced the need for 321.4 million barrels of oil – are simply promoting misinformation.

    September 30, 2009 Posted by | EIA, Energy Information Administration, ethanol, mtbe, oil imports, Renewable Fuels Association | 75 Comments

    Does Ethanol Reduce Petroleum Imports?

    One of the main arguments in favor of ethanol production in the U.S. is that it supports the goals of energy independence by getting us off of foreign oil. After all, we could just tell the entire Mideast to take a hike while we grow our own fuel. In fact, there have been some truly grandiose claims made around this theme. Of course if we are making more ethanol, we are importing less oil as a result. Right? Maybe not. Has anyone actually taken a good look?

    A couple of years ago, I looked at total gasoline consumption in an essay called The Mythical Ethanol Threat. My conclusion from that was that despite the rapid ramp up of ethanol, there was no apparent drop in gasoline demand. In fact, gasoline demand (which was corrected for ethanol content by backing that out) actually grew at a steady pace even as ethanol was ramping up sharply. But a couple of years have passed, and some comments following my last essay got me curious: Has U.S. ethanol production actually impacted petroleum imports?

    From 2002 through 2007, ethanol production in the U.S. more than tripled: From 2.1 billion gallons per year to 6.5 billion gallons per year. (SourceRFA: Historic U.S. Fuel Ethanol Production). Yet total net petroleum imports (oil, gasoline, diesel, etc.) increased over that time period by 2.1 million barrels per day – from 10.2 million bpd in 2002 to 12.3 million bpd in 2007. (SourceEIA: Weekly U.S. Total Crude Oil and Petroleum Products Net Imports). So what does this mean?

    I wasn’t going to jump to a hasty conclusion, so I started to dig. I started with several hypotheses. Perhaps U.S. oil production had fallen by 2.1 million barrels per day over that period of time, and the increase in imports were merely to compensate for that. So I checked. No, domestic production did fall over that period of time, but only by 682,000 barrels per day. Domestic production fell from 5.746 million bpd in 2002 to 5.064 million bpd in 2007 (SourceEIA: U.S. Field Production of Crude Oil). But one could allocate that much of the 2.1 million barrel per day import increase to the lower U.S. production.

    Had demand growth accounted for the additional 1.4 million barrel per day increase in imports? Yes, in fact petroleum demand did grow (partially rebounding from the 9/11 attacks that reduced demand) from 19.8 million barrels per day in 2002 to 20.7 million barrels per day in 2007. (SourceEIA: U.S. Product Supplied of Crude Oil and Petroleum Products.) So of the remaining 1.4 million barrels per day of the increase in imports, 900,000 could be explained away as being due to an increase in demand. That still leaves a real increase in petroleum imports of 500,000 barrels per day – despite a tripling of ethanol production.

    So how to explain this discrepancy? How can petroleum imports rise above and beyond the total increase in demand plus the drop in domestic production? There are two possibilities that I can think of. If the product in storage increased from 2002 to 2007, that can explain part of it. And we did in fact put a lot of oil in the Strategic Petroleum Reserve during those years (but not enough to account for 500,000 barrels per day).

    Another portion can be allocated to declining energy returns as oil becomes heavier, and as we switch to lower energy return options like ethanol. For instance, as the quality of crude oil worsens – higher sulfur and lower gravity – it takes more energy inputs to refine it. Likewise as sulfur standards for clean products tighten; energy inputs increase and the net energy falls. This can result in some cannibalization of the oil. In a case with light, sweet crude you may end up with 9 BTUs of net products for 10 BTUs of petroleum inputs. As the crude gets heavier, the net BTUs may drop to 7 because of the need for higher energy inputs for processing. This can explain more of the discrepancy.*

    The same is true of ethanol. It does take some liquid petroleum to grow corn and process ethanol, and as ethanol ramps up some of the petroleum imports will now be required in the ethanol industry. This is similar to the case of light, sweet crude gradually becoming heavier, more sour crude. You may have to increase the imports just to net out the same amount of fuel.

    But one thing is pretty clear. Our petroleum imports have not fallen as ethanol has ramped up. So it is really hard to make a strong case based on the data that increased ethanol production is reducing our dependence on foreign oil. One reason for this is something I have talked about before, and that is scale. In 2007, our oil demand was 20.7 million barrels per day. When the lower energy content of ethanol is factored in, the 6.5 billion gallons of ethanol produced in 2007 is only worth 0.26 million barrels per day – just over 1% of our total petroleum consumption.** Factor in that some petroleum (and other fossil fuels as well) was used in the manufacture of the ethanol, and the net contribution falls even further.

    Factor in all of the fossil fuel inputs that can also be used as fuels (diesel, natural gas, gasoline) and the total net contribution of ethanol toward our petroleum consumption ends up at under 0.5% (and that includes the energy credit from by-products). This relatively low contribution is another likely reason that there is no obvious impact on our imports from ethanol: The contribution may be simply too small to measure.

    Conclusions

    In closing, this more than anything explains why I often come out against our ethanol policy. It is being presented as a bigger solution than I think it can ever be – and yet we are throwing a lot of taxpayer money at it. That doesn’t mean that I am against ethanol. If you read a post like this, you might come to that conclusion. But I think ethanol is a fine fuel, and if we had a more efficient way to produce large amounts of it, I would happily support that. I strongly support attempts to get the fossil fuel inputs out of ethanol production. In fact, in my current job I keep a very close watch on ethanol developments – ready to jump in if I see one that I think has major long-term potential.

    I also believe – as stated in my essay on Biofuel Niches – that corn ethanol may work out well in specific situations. For instance, it may never provide more than around 1% of net U.S. petroleum needs, but it may be able to supply a fair fraction of the needs in the Midwest. But then I also think that a local solution for Iowa – if it must be subsidized – should be subsidized by the taxpayers of Iowa. If the fuel is produced and consumed in Iowa, and the jobs are created in Iowa, then Iowa should support it. Try to scale it across the U.S., and again I think the net contribution will be lost in the noise – and money from taxpayers outside the Midwest won’t be well-utilized. In the latter case you essentially have a transfer of wealth from taxpayers across the nation into the Midwest.

    I actually wanted to be wrong about my initial suspicions as I worked through this, because I don’t like the idea that there has been no measurable impact on imports from our massive ethanol ramp-up. But maybe a reader can spot a mistake that will change the overall conclusion.

    Methodology

    In this exercise, I used data available from the Energy Information Administration website. I used annual averages to dampen out any noise. I looked at net petroleum imports, which includes those destined for the Strategic Petroleum Reserve (SPR). The reason for using net imports is that this subtracts out the imports that simply went into increased exports. For example, our exports of fuel oil have increased over the past few years, so the imports that ended up being fuel oil exports are excluded.

    I only considered data from 2002 through 2007 for two reasons. First, the ethanol ramp-up was pretty steep over those years. An impact should be noticeable as ethanol production tripled. Second, the end of 2007 approximately defines the beginning of the current recession. Imports definitely fell during 2008, but overall consumption fell even more. So inclusion of 2008 would make it more difficult to separate out cause and effect, especially considering the speed at which demand fell. But it will be interesting as we come out of the recession – and as ethanol continues to scale up – whether we eventually see a sustained drop in net petroleum imports.

    Notes

    * While it can explain some of the phenomenon, it can’t explain a whole lot, because most of the energy used to remove the sulfur from oil is derived from natural gas. Some may be cannibalized from fuel gas produced as the oil is refined, and in that case it would show up as an incremental increase in the barrel inputs into a refinery to produce the same amount of net products. That could translate into higher imports in order to keep production steady.

    ** A barrel of oil contains around 5.8 million BTUs of energy. It takes approximately 500,000 BTUs to process that barrel into finished products, for a net energy content of finished products of 5.3 million BTUs, or 126,000 BTUs per gallon. Ethanol contains 76,000 BTUs per gallon, so one gallon of ethanol is worth 76,000/126,000 = 0.6 gallons of oil.

    September 27, 2009 Posted by | EIA, Energy Information Administration, ethanol, ethanol subsidies, gasoline imports, oil imports | 202 Comments

    Corn Ethanol Breakthrough?

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

    UK technology could turn U.S. ethanol industry green

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

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

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

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

    Continuing:

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

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

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

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

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

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

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

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

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

    An Urban Legend Falls

    Figure 1. Classical Outlier or Amazing New Discovery?

    On November 16, 2007 a study was released that stirred up a lot of excitement in ethanol circles. The study was titled Optimal Ethanol Blend-Level Investigation. The study was commissioned by the American Coalition for Ethanol (ACE), and the work was carried out by the University of North Dakota Energy & Environmental Research Center (EERC, a branch of the University of North Dakota) and the Minnesota Center for Automotive Research (MnCAR, a branch of Minnesota State University).

    The study made some remarkable claims. Based on some data points – such as the point corresponding to E30 in Figure 1 above (which is Figure 10 in their report), they claimed that higher ethanol blends could get better fuel economy than pure gasoline. ACE captured their interpretation in a press release:

    Study Finds Certain Ethanol Blends Can Provide Better Fuel Economy than Gasoline

    “Optimal Blend” Is Likely E20 or E30; Coalition Calls for Further Government Research

    Sioux Falls, SD (December 5, 2007) – Research findings released today show that mid-range ethanol blends— fuel mixtures with more ethanol than E10 but less than E85—can in some cases provide better fuel economy than regular unleaded gasoline, even in standard, non-flex-fuel vehicles.

    Previous assumptions held that ethanol’s lower energy content should always directly correlate with lower fuel economy for drivers. Those assumptions were found to be wrong. Instead, the new research strongly suggests that there is an “optimal blend level” of ethanol and gasoline—most likely E20 or E30—at which cars will get better mileage than predicted based strictly on the fuel’s per-gallon Btu content.

    Some of their “key findings:”

    Ethanol’s energy content was not found to be a direct predictor of fuel economy. A fuel’s energy content in British Thermal Units (Btu) is current standard practice for estimating fuel economy, a method that, because of ethanol’s lower Btu value, leads to estimates of decreased fuel economy in proportion to the percentage of ethanol in the fuel blend.

    • This research, however, did not find ethanol’s Btu content to be a direct predictor of fuel economy. All four vehicles tested exhibited better fuel economy with the ethanol blends than the Btu-value estimates predicted.

    E20 and E30 ethanol blends outperformed unleaded gasoline in fuel economy tests for certain autos.
    Contrary to Btu-based estimates of fuel economy for ethanol blends, three of the four vehicles tested achieved their highest fuel efficiency not on gasoline, but on an ethanol blend. Mid-level blends of ethanol E20 (20% ethanol, 80% gasoline) and E30 (30% ethanol, 70% gasoline) offered the best fuel economy in these tests.

    • E30 offered better fuel economy than gasoline (a 1% increase) in both the Toyota and the Ford.

    • E20 offered better fuel economy than gasoline (a 15% increase) in the flex-fuel Chevrolet.

    • The non-flex-fuel Chevrolet more closely followed the Btu-calculated trend for fuel economy, but did experience a significant improvement over the trend line with E40 (40% ethanol, 60% gasoline), indicating that this may be the “optimal” ethanol blend level for this vehicle.

    Standard, non-flex-fuel vehicles operated well on ethanol blends beyond 10 percent – All automakers currently cover the use of up to E10 (10% ethanol, 90% gasoline) by warranty for standard, non-flex-fuel vehicles. In this preliminary research, the three non-flex-fuel vehicles tested each operated successfully on ethanol blends significantly higher than this 10% ethanol level.

    • The Ford Fusion operated on E45, the Toyota on E65, and the non-flex-fuel Chevy on E55. No engine fault codes were displayed until these levels were surpassed.

    Of course these results are quite counter-intuitive, and I am always very careful when dealing with counter-intuitive results. Adding to the unusual results was the fact that the research was funded by a group whose purpose is to further ethanol, and the results of the study were certainly to be taken with a grain of salt. Note as well the spin. Look at Figure 1, and then consider the claim from the ACE press release: All four vehicles tested exhibited better fuel economy with the ethanol blends than the Btu-value estimates predicted. This is on the basis of that one point that looked to me like a classical outlier.

    But that didn’t stop ethanol boosters from promoting the results. I have discussed these claims on numerous occasions, dealing with comments like these:

    Ethanol has an Octane Rating of 113 AKI (compared to 86 for straight gasoline.) This means that even though it’s “energy content” is lower, it can achieve much greater Efficiency than gasoline when burned in a proper engine.

    That’s why recent tests, such as the one performed by N.Dakota Univ, and Mn State, show that, when burned in newer vehicles, E20 gave slightly better mileage than straight gasoline in three of four cars tested.

    If I had one of these three cars, and access to a blender pump, like they do in areas of S Dakota, Mn, Ia, and Wi, I could choose an ethanol product that would give me better mileage than straight gasoline.

    If you can take any other conclusion out of that study You’re not being honest.

    Some of my comments in response:

    Now, what I would say about the study – but again, this is the objective view – is “That’s an interesting finding. Let’s replicate it in an independent lab that isn’t paid for by the ethanol lobby.”

    Look at Figures 10-13. Here is the reality of the tests:

    Figure 10. 2007 Toyota Camry, 2.4-L engine – 6 of 7 tests show worse fuel efficiency on an ethanol blend. There is one apparent outlier, which was the basis for the claims. (And it looks like a classic outlier, with almost all of the other points falling as predicted).

    Figure 11. 2007 Chevrolet Impala (non-flex fuel), 3.5-L engine – 5 of 5 tests show worse fuel efficiency on an ethanol blend.

    Figure 12. 2007 Chevrolet Impala (flex fuel), 3.5-L engine – 8 tests, 2 show better fuel efficiency, 2 show the same, and 3 show worse fuel efficiency on an ethanol blend.

    Figure 13. 2007 Ford Fusion, 2.3-L engine – 4 of 5 tests show worse fuel efficiency on an ethanol blend. There is one apparent outlier.

    So, what can we conclude? Of 25 data points, 18 confirm that the fuel economy is worse on an ethanol blend. That is 72% of the tests, and these tests were paid for by the ethanol lobby (which is why I suspect the results were spun as they were). The outliers are interesting enough for further investigation, but you have vastly overstated the test results. In reality, if you pulled the results out of a bag, you have only a 28% chance of improving your fuel efficiency on the basis of any particular test. Further, the outlier didn’t always occur at the same percentage, which would be quite problematic even if the result is confirmed.

    So the ethanol boosters were perhaps not surprisingly ready to take these results at face value, arguing that it makes sense to boost the ethanol blended into our gasoline. I will say that if you could get better gas mileage on E20 than on pure gasoline, it would in fact be a strong argument in ethanol’s favor. But given that it is such a counter-intuitive result, it needed to be replicated. As a reader recently pointed out to me, NREL tried and failed:

    Effects of Intermediate Ethanol Blends on Legacy Vehicles and Small Non-Road Engines

    The key findings from the NREL test:

    • All 16 vehicles exhibited a loss in fuel economy commensurate with the energy density of the fuel.*

    • Limited evaluations of fuel with as much as 30% ethanol were conducted, and the reduction in miles per gallon
    continued as a linear trend with increasing ethanol content.

    *This result was expected because ethanol has about 67% of the energy density of gasoline on a volumetric basis.

    Note that NREL is pro-ethanol, and the goals of blending more ethanol into the U.S. gasoline supply would be more easily accomplished had the ACE-sponsored study been confirmed. Instead, the NREL study gave the expected results: As more ethanol was blended, the fuel economy fell commensurate with the energy density as a linear trend. None of the outliers found in the previous study were observed.

    My calls for caution on the initial tests were sometimes misrepresented:

    I post a test conducted by two fine Universities, and you denigrate the students, and professors who conducted the tests (using the EPA cycle) as Biased.

    Of course I never denigrated the students or professors involved. I said that based on the counter-intuitive results, and the fact that a vested interest paid for the research, we needed independent confirmation. There are all kinds of possible sources of error in scientific testing, which is why unexpected results need to be confirmed. The cold fusion fiasco is a perfect example of why we do this. Instead of waiting for confirmation, Pons and Fleischmann took their very unexpected results to the press. This tactic blew up in their face when other researchers failed to replicate the results.

    A call for replicating results is not an insinuation that anyone faked the tests; it is instead simply because tests can be wrong for many different reasons. I can tell you that if the American Petroleum Institute conducted a test and found the opposite – that fuel economy dropped more than one might expect – I would expect ACE to denounce the tests and call for more testing.

    At this point, I think it would be foolish for ethanol boosters to continue pushing the results of the initial tests. I would still like to see some additional work done in this area, because there is evidence that ethanol can perform at a higher economy than expected if it is used in a high-compression engine. But there is no reason to believe that an ethanol blend in a normal gasoline engine can give better fuel economy than can pure gasoline – which is exactly how the results of the ACE study were spun.

    September 13, 2009 Posted by | American Coalition for Ethanol, American Petroleum Institute, ethanol, fuel efficiency | 144 Comments