R-Squared Energy Blog

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Follow Me to My New Site

I have noticed a number of people signing up here to get a notice when new postings occur. Note that this site is only for old, archived posts that are at least three years old. All of my new content is posted at my current site, which is R-Squared Energy at Energy Trends Insider. You may also find me on TwitterLinkedIn, or Facebook.

July 19, 2013 Posted by | Uncategorized | Comments Off on Follow Me to My New Site

Redirect on Thursday

Plans are to set up the redirect to the new site for R-Squared on Thursday the 18th. If you subscribe via an RSS feed, you will continue to receive the feed from the new location.

My first post at the new R-Squared will be a position statement. I will briefly cover my views on oil, coal, ethanol (cellulosic, corn, and sugarcane), renewable diesel (green and biodiesel), nuclear power, solar power, wind power, and climate change. That should provide a framework for initial discussions.

As always, suggestions are appreciated. Please let me know if you have questions or comments.

March 17, 2010 Posted by | Uncategorized | 4 Comments

Changes Coming to R-Squared

At the end of the week, I have to go to New Zealand for 10 days. As is often the case, my posting will be limited while I am traveling. Any time I travel, this always highlights one of the major weaknesses with a personal blog: Traffic is driven by new content, and if there is no new content for a week, traffic falls off. For this, and other reasons detailed below, I have decided that I would make some changes to the operation of this blog. I believe that they will ultimately result in a better experience for readers.

There are multiple reasons for making the changes. In addition to the travel issue, the blog is taking up more of my time. But a large portion of that is due to peripheral issues. Each morning I have to clear out a lot of spam, make template changes as needed, and deal with any technical issues.

Second, I don’t like Blogger’s comment structure. It becomes difficult to keep up with who said what, and then when comments exceed 200 in number, it becomes difficult to find the newer ones.

Third, I have a great number of technically savvy readers. My readers have shown that they have a lot to contribute. They frequently bring my attention to new energy stories, and they often post links to new stories. I have always felt like we needed a forum where readers can start their own discussions – and then discussions needn’t fall off if I am traveling.

If there is a noteworthy or controversial energy-related news story (e.g., the Bloom Box), instead of posting a link in the comments following the latest essay, I want readers to have the ability to start that topic themselves. That would also open up the discussions so that they aren’t so dependent upon me posting something new. I am always hesitant to post on areas that I don’t know a lot about, but with more reader-driven content the discussions could become more diverse.

I have been thinking about this change for over a year, but never quite found a good solution. Now I have found a solution (or maybe the solution found me) to all of these issues, but it requires migrating my blog to a different place. After a number of discussions with Sam Avro, founder and editor of Consumer Energy Report (CER), I have decided to base my blog there. CER is a comprehensive site for all things energy-related. It covers the spectrum from fossil fuels to alternative energy to politics to investments.

Over the next week or so, my blog will migrate there. You can read about CER’s mission here, which is consistent with my mission to have serious, thoughtful discussions on energy issues. But by combining with CER, I will have access to more tools than I have now. You can check out the new blog format here:

R-Squared Energy Blog at Consumer Energy Report

There will be a discussion forum for readers to start their own threads:

Discussion Forum

Readers who wish to participate in the forum will need to go through a 30-second registration procedure (Link here). It simply requires a user name and an e-mail address (which will not be shared, nor will it be publicly visible). This should help to minimize the spam. I also believe that this will facilitate civil discussions.

There will be a redirect from this blog starting later this week. Hopefully readers will come and join the discussions there. I will continue to post on a regular basis. It will still be “R-Squared”, just under a different roof with a number of improvements.

I want to build on the foundation that Sam and his staff have put together so that I can take R-Squared to another level. But it is of utmost importance to make sure it is a good experience for readers. We are open to suggestions from readers, and happy to answer any questions you may have. I believe Sam will be stopping by to introduce himself in the comments.

Questions, comments, or concerns?

March 15, 2010 Posted by | Uncategorized | 30 Comments

Strategizing for the Ethanol Industry

A reader recently sent me a link to the following story:

D.C. Discussions Advance Corn Issues

Extension of the Volumetric Ethanol Excise Tax Credit (VEETC) – This blender’s tax credit provides $.45 for each gallon of ethanol blended with gasoline and expires at the end of this year. The credit provides thousands of jobs, fuels economies and helps the U.S. to meet its mandated biofuels-production standard. The elimination of this credit will result in a 38-percent jobs and production loss. VEETC brings dollars back to the U.S. Treasury in the billions, eliminates more than $22 billion in oil imports and has led to a reduction of farm payments of more than $10 billion. Despite the success of the ethanol industry, some members of the Ohio delegation want its advancement to end – even delegates from areas where corn represents the largest economic portion of their district.

Granted, this is from the corn lobby, but that’s just unadulterated nonsense. It is scare-mongering, and given the advantages they already enjoy (and I am not opposed to some subsidies for the industry) it is sad to see corn farmers groveling for welfare like this. (The irony of this is that I grew up on a farm, in a farm community, and farmers love to gather at the local coffee shop to complain about “people on welfare” taking their tax dollars).

As I have been arguing, eliminating the ethanol credit (VEETC) wouldn’t absolve gasoline blenders from their obligations under the Renewable Fuel Standard (RFS). If the credit was eliminated today, gasoline blenders must still blend 12 billion gallons of ethanol in 2010, and 15 billion gallons by 2015. They just wouldn’t get paid to comply with the law.

Most of the attempted rebuttals to my recent essays on eliminating the VEETC completely missed the mark. People acted as if there was no RFS in place, and therefore they argued that eliminating the VEETC would completely destroy the ethanol industry. That was the gist of Growth Energy’s call to arms for their members; the VEETC was just too important to ethanol’s survival. That might have been a valid argument prior to implementation of the RFS, but it is not a valid argument today. If they really require both a mandate and a subsidy in order to compete, then we might as well stop this charade right now.

There was one response to my argument – made by several different people – that does have some merit. That response was that the VEETC helps incentivize blenders to blend more ethanol than what is required by law.

OK, setting aside for a moment the other arguments for and against the subsidies, it is true that the subsidy may result in the blender going above and beyond the law. But the response to that is simple: Only pay for what was blended above and beyond the law. Arguing for a subsidy that will cost almost $6 billion this year by some incremental blending above what the law requires is silly. In fact, that means you would be paying a very high subsidy for that incremental ethanol blending. How much? Try $4.18 per gallon of incremental ethanol blended.

Several related articles have recently been published along the same theme; that not only is a subsidy on top of a mandate redundant, but it subsidizes driving and wastes taxpayer dollars:

Mandates, Tax Credits, and Tariffs: Does the U.S. Biofuels Industry Need Them All?

It is puzzling why the biofuels industry continues to defend these subsidies when it has its mandates in place. Tax credits cost taxpayers more than $5 billion per year, and import tariffs convey the message that the ethanol industry is so uncompetitive that it needs protection against foreign competition. It would seem that there would be major political benefits from simply giving up all subsidies and import tariffs and for the industry to rely solely on the mandates . . .

Pay close attention to this bit: “Expanded mandates under the Renewable Fuel Standard provide ethanol and biodiesel producers a guaranteed future market at volumes that exceed what they have produced in the past.”

Think about what is going on here. Ethanol producers already enjoy mandates that guarantee a growing market. What other industry has that luxury? And on top of that, they want subsidies to complement the mandates? Outrageous.

I am in the middle of preparing my taxes, so tax dollars are much on my mind right now. And I strongly resent my tax dollars being wasted. The issue of taxpayer money has become a bit of a running joke with all of the multi-billion dollar bailouts and stimulus packages, but that money still comes from taxpayers, present and future. I will not sit idly by while we mortgage our children’s futures to pay a redundant subsidy.

That is a perfect lead-in to the theme of this article, which is what I think the ethanol industry’s strategy should be with the VEETC expiring this year. Now the ethanol/farm lobby might be able to push this redundant subsidy through regardless. I won’t be surprised if they do. But it is going to be a nasty fight, and it is going to shine a spotlight on this issue that they would rather have keep at a low profile. They are going to have to resort to scare tactics and exaggerations (as in the corn lobby’s missive above), and major questions will be asked as to why this industry still requires so much protectionism and taxpayer money to survive.

But imagine that instead of spreading a $6 billion subsidy across 12 billion gallons of ethanol (that oil companies are legally obligated to blend), that it was instead targeted at incremental E85 production. So instead of $6 billion, you could maybe spend $2 billion to get an incremental 2-4 billion gallons of E85 into the market. That would be smart politics by the ethanol industry, would save taxpayer dollars, and would still potentially grow their industry above and beyond their already guaranteed future market.

I haven’t been able to find E85 sales statistics for 2009, but there were lots of stories about how demand had dropped off during the year. The major problem here is in pricing; E85 is currently at about a 15 cent disadvantage (with the subsidy) relative to mid-grade gasoline (but only a nickel disadvantage relative to premium gasoline). If the VEETC was focused entirely on the E85 market, that disadvantage could be made to disappear at a fraction of the cost of the current program.

Further, I think E85 would be a much better outlet for the ethanol industry than trying to get nationwide E15 or E20 in the system. Instead of fighting the EPA, boat owners, the oil industry, the auto industry, etc. to force higher ethanol blends into the system (and I haven’t seen them step up and offer to assume the liability from potential damage caused by these higher ethanol blends), use it in cars that were designed for it.

There are numerous E85-ready cars on the road now. If the price is right, the demand will be there. The industry doesn’t even have to rely on the oil companies. There is nothing stopping farmer’s coops from getting together and opening up their own E-85 stations throughout the Midwest.

I am a fan of efficiency, and to me it doesn’t make much sense to produce ethanol in Iowa and ship it to Texas, while shipping finished gasoline products from Texas to Iowa. The Midwest consumes 40 billion gallons of gasoline per year. The ethanol industry should enjoy the largest cost advantage in the Midwest, close to the source of production. If we are going to incentivize ethanol, let’s first focus on getting E85 sales up in the Midwest, in the local markets where ethanol is produced.

I think some version of this argument – only use the VEETC to incentivize incremental ethanol production – would be a win-win for the ethanol industry. But continuing to argue that they need a subsidy for something oil companies are legally obligated to do anyway is not going to sit well with most people.

Note 1: (My recent Range Fuels’ essay has been republished in the current issue of Subsidy Watch).

Note 2: Major changes are coming to R-Squared. Details on Monday.

March 12, 2010 Posted by | Uncategorized | 218 Comments

Catching Up

Folks, I know it has been almost a week since I posted anything new, and it will still be a couple more days. I have had a productive trip to Central America, and am at Stanford this morning to give a talk on sustainability. It will be the first time I have presented my new company’s plans in public (although that is a minor component of the presentation). I fly back to Hawaii on Wednesday, and then should start catching up on a backlog of correspondence.

The title of my presentation today is “Toward a Sustainable Bioenergy Platform.” I am well aware that the word sustainable has lost almost all of its meaning. It is like “being green.” I remember seeing an interview with a Hummer owner a couple of years ago who said he was “becoming green” by putting E85 in his Hummer. I see the same sort of logic being applied toward the concept of sustainability.

Anyway, below is the outline of the talk that I will deliver in two hours at the First Nations’ Futures Program at Stanford. I will host these slides somewhere following the presentation.

Sustainability Basics
A Higher Standard
– Case Study: Sugarcane Ethanol
Caveats
Contenders
Has Brazil Paved the Path?
– Brazil versus U.S. consumption statistics
Building a Sustainable Platform
– Merica Overview
– Strategy
Political Risk Factors
Solutions

October 27, 2009 Posted by | Uncategorized | 34 Comments

Saudi Oil Tanker Hijacked

I don’t know if this is a first, but it’s the first time I have heard of an oil tanker being hijacked:

Pirates attack Saudi ‘super tanker’

(CNN) — Pirates in the Arabian Sea have hijacked a Saudi-owned oil tanker with 25 crew aboard, the U.S. Navy and the British Foreign Office confirmed on Monday.

Eleven vessels are currently being held by pirates hoping to secure ransoms for their release, according to The Associated Press. They include the Ukrainian-owned MV Faina, which was hijacked in September along with 200 crew and a cargo of weapons and T-72 tanks.

That is the picture that accompanied the CNN story. I have a hard time understanding this. How is it that a bunch of guys in speedboats can hijack so many ships?

Why is it that these ships don’t have a few mounted .50 caliber machine guns on board and some guys trained to use them? It looks to me like the boat above would be at a severe disadvantage in a situation like that. Sink a few, and the problem should diminish.

But it must not be as simple as it seems to me. What are the laws on the sea? Could you open fire on pirates and sink their boat? Or are there laws in place that limit this sort of response? There must be some sort of explanation for why this problem persists, but I don’t know what it is.

It will be interesting to see how the Saudis play this one.

November 17, 2008 Posted by | Uncategorized | 360 Comments

Saudi Oil Tanker Hijacked

I don’t know if this is a first, but it’s the first time I have heard of an oil tanker being hijacked:

Pirates attack Saudi ‘super tanker’

(CNN) — Pirates in the Arabian Sea have hijacked a Saudi-owned oil tanker with 25 crew aboard, the U.S. Navy and the British Foreign Office confirmed on Monday.

Eleven vessels are currently being held by pirates hoping to secure ransoms for their release, according to The Associated Press. They include the Ukrainian-owned MV Faina, which was hijacked in September along with 200 crew and a cargo of weapons and T-72 tanks.

That is the picture that accompanied the CNN story. I have a hard time understanding this. How is it that a bunch of guys in speedboats can hijack so many ships?

Why is it that these ships don’t have a few mounted .50 caliber machine guns on board and some guys trained to use them? It looks to me like the boat above would be at a severe disadvantage in a situation like that. Sink a few, and the problem should diminish.

But it must not be as simple as it seems to me. What are the laws on the sea? Could you open fire on pirates and sink their boat? Or are there laws in place that limit this sort of response? There must be some sort of explanation for why this problem persists, but I don’t know what it is.

It will be interesting to see how the Saudis play this one.

November 17, 2008 Posted by | Uncategorized | 60 Comments

Test Your Energy IQ

July 16, 2008 Posted by | Uncategorized | 5 Comments

Americans Responding to $4 Gasoline

A new study has been released by Access America that reinforces the point that $4 gasoline is beginning to impact the driving habits of most Americans. Below is a copy of the complete press release.

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At Four Dollars per Gallon Almost Three Quarters of Americans Report Changing Driving Habits to Cope with Gas Prices

Among those who have changed their driving, the median gas price at which they did so was $3.20 per gallon, a level reached in March 2008

Richmond, Va., June 6, 2008 – A recent national survey commissioned by Access America, a leading travel insurance and assistance provider, asked Americans if they have made changes to their driving habits as a result of rising gas prices.

  • With the price reaching $4.00 per gallon, 74 percent of respondents said they would change their driving habits as a result of rising gas prices.
  • Of those who have already made changes to their driving habits, the pressure price for this group: $3.20 per gallon.

The survey also asked respondents how they are planning to save. The results show that Americans first tend to reduce non-essential driving:

  • 26 percent say that cutting back on travel or recreational driving is the first substantial change they made or will make due to rising gas prices.
  • 21 percent say the first thing they did or will do is to consolidate or reduce errands.

Additionally, fewer Americans first look to alternate forms of transportation such as carpooling (7%), walking or biking when possible (6%), or using public transportation more often (4%). Only 3% say that the first thing they did or will do is buy a more fuel-economic car or a hybrid.

As the price at the pump continues to rise, more and more Americans will be changing their driving habits:

  • At $3.00 per gallon, 35% of Americans had changed their habits.
  • At $3.50 per gallon, it was more than half at 67%.
  • By $5.00 per gallon, 85% of all Americans will have changed their driving habits.

“We know gas prices are a point-of-pain, but this survey puts a specific price pressure-point against the changes being made,” said Mark Cipolletti, vice president for Access America. “With three quarters of the country already making changes, we may see more significant changes to driving habits across the country before summer’s end.”

Those who have already changed their driving habits are particularly prevalent among adults with a household income of less than $50,000 per year (73%), parents of children under 18 (72%), those living in the South (72%) and those saying the country is headed on the wrong track (71%).

Proportions of Americans who first cut back on recreational driving as a response to higher gas prices vary little across age and income groups. However, those aged 55 and older are more likely than younger adults aged 18-54 to mention consolidating or reducing errands (30% vs. 18%). Southerners (12%) and those aged 18-34 (10%) are more likely than others to mention carpooling. Those making less than $25,000 (9%) and Northeasterners (7%) are more likely than others to cite using public transportation as their first response to higher gas prices.

About the Survey

The survey was conducted May 30- June 2, 2008 by IPSOS Public Affairs, an independent global, survey-based research company owned and managed by research professionals. As part of its weekly U.S. Telephone Omnibus Study, IPSOS interviewed 1000 adults ages 18 and older. The margin of error for the entire survey is 3% at a 95% confidence level.

June 10, 2008 Posted by | Uncategorized | 25 Comments

Off to India

Update: March 19 – Updated my travel blog. I will probably have to split that up into two essays when I have time, and I will add some pictures.


Some Local Color

Update: March 18 – I have been without Internet for 2 days, and just got to a hotel in Bombay. (I have been on the road for 20 hours in the past 4 days). It’s 10 p.m., and I have 52 e-mails to answer. I will try to update this tonight, as I have been working on it offline.

Today I spent my entire morning in a sugarcane ethanol plant. I really went over those bagasse boilers. In fact, I am still covered with bagasse as the entire factory had bagasse dust in the air. I have also been in search of jatropha. I am finding that it is like Bigfoot: Everyone has heard about it, nobody has seen it. More later.

Update 3-16: Just a quick update as I briefly have Internet access. I am experiencing sensory overload. The sights and sounds here are amazing. I saw seven people riding a motorcycle today. Seven people at the same time! I have seen some of the worst poverty I could have imagined, and yet people are still incredibly friendly and helpful. I am learning to speak a little Indian. For instance, the word “bland” means “less spicy.” There apparently is no Indian word for what the West would call bland food. I suspect something that they consider spicy might be fatal if I tried it.

I was attacked by one of those famous sacred Hindu cows today, after she figured out I wasn’t packing food. She tore my Blackberry lose with her horn, and then hit me in the arm. I started to take her down like a steer-wrestler, but didn’t want to cause trouble. But my colleague did snap a couple of pictures that I will have to post.

And since I left my hotel in Bombay, I must have seen a million faces. Not a single one of them from the West. People look at me like they have seen Bigfoot. I am told that in the rural areas we have been in, they may have never seen a Westerner before.

————–

I am off to India early in the morning until next Thursday. My Internet access is likely to be spotty until then. However, provided I avoid malaria – and I am told that I probably will since this isn’t the rainy season – I will update on my travel blog as time allows.

March 19, 2008 Posted by | Uncategorized | 78 Comments