David Strahan, an author whom you should definitely read on a regular basis, has a longish, excellent post on his site delving into the nooks and crannies of the problems higher oil prices and the growing pressure to omit less CO2 present to airlines.
I can’t hope to do his post, How do you solve a problem like jet fuel?, justice, but let me give you just a taste:
First, the airline industry is rightly seen as the cuckoo in the nest of carbon reduction. Britain is now legally bound to cut CO2 emissions 60% to 65MtC by 2050, but under the government’s “best case” projection UK aviation alone will emit 15.7MtC in that year, almost a quarter of the economy’s entire carbon ration. According to the Tyndall Centre for Climate Change, if the additional “radiative forcing” impacts of aviation are taken into account, that figure could rise to over 100%. Either forecast is of course entirely unsustainable.
Second, aviation is uniquely exposed to peak oil. Whereas ground transport could in theory be completely electrified and run on renewable power, for jet engines there is no alternative to energy dense liquid fuels. And while soaring crude prices are already hammering airline finances at $110 per barrel, analysts Goldman Sachs now forecast potential spikes of $150-$200, a risk Sir Richard acknowledged during his biofuel launch: “In about four or five years’ time there’s going to be more demand for fuel than there is fuel on this planet. So fuel prices will go through the roof, and we’ve all got to come up with alternatives”.
If airlines are to have any chance of staying aloft in post-peak, carbon-constrained world, they must quickly find an alternative fuel with low emissions, but one which also matches the stiff technical standards of jet kerosene. Because planes have to lift their fuel into the sky, and carry every gallon for the entire journey, it has to be energy dense. Because they fly at altitude, it needs to remain fluid at minus 50C. Because they fly long distances, chemically identical supplies must be available all over the world. And because they have long lives, the new fuel must be compatible with the existing fleet. What’s needed, in other words, is an exact replica of fossil jet kerosene – a so-called ‘drop-in’ replacement – which also emits substantially less carbon. “Meeting all these conflicting demands is a very tall order” says Dr Mike Farmery, Global Fuel Technical and Quality Manager at Shell Aviation. “There are lots of exciting ideas, but it will be hard to achieve quickly”.
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In the context of global aviation, the numbers are even more daunting. To produce the world’s current jet fuel from BTL would require – assuming the average European crop yields suggested by Mr Blades of 10 tonnes of biomass per hectare - nearly 1.2 million square kilometres. That’s well over three times the size of Germany, and makes no allowance for the predicted rapid growth in aviation. On the same assumptions, replacing all current transport fuel requires more than 10m km2 – bigger than China – demolishing any claim that second generation biofuels would not compete with food production.
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The biggest shortage may be not so much space as time. At the Virgin launch, Sir Richard suggested that algae might produce enough fuel for the entire airline industry, and that such technological breakthroughs represented the only chance of mitigating peak oil, which he said could arrive within six years. But when asked if fuels like jatropha or algae could be ready by then, he did not sound so confident: “we have to try our best to make them available as fast as we possibly can”.
One of the things I’m grateful for in this life is that I’m not the one tasked with finding a way to keep commercial airlines flying anywhere near the same number of seats in five or ten years as they do today.
Barring some sort of techno-econo miracle, I can’t see how the airlines avoid a significant reduction in their passenger volume in the coming years. Flying is getting more expensive and far less pleasant, thanks to more crowded planes and passengers feeling like they’ve been nickeled and dimed to death, which will only push people to using alternatives, like making more use of trains and teleconferencing.
One of the biggest changes will simply be people not making trips. Very few people in the US can afford the time to travel from NY to LA via train, and teleconferencing isn’t much good as a substitute for attending a relative’s wedding, for example.
Tyler Hamilton has an intriguing article in Monday’s Toronto Star, It’s time to ‘flex’ our energy muscles, about a proposal from Robert Zubrin that all cars (and, I presume, light trucks) made in North America to be flex-fuel capable, meaning they could run on gasoline or E85, a blend of 85% ethanol and 15% gasoline.
Zubrin points out, quite correctly, what a disaster it is for countries like the US to continue importing incredible amounts of oil (about 12.2 million barrels of the 20.5 the US consumes every day, according to the US Dept. of Energy’s latest Annual Energy Review). It truly is a national security issue, from money being funneled to people we would like to see not funded to trade deficit issues. His solution is to force flex-fuel vehicles onto the market, which he says would cost about $100/vehicle, thereby blowing open the market for E85, which would greatly reduce the US’ imports of oil.
Sorry, but I’m not buying it, and not just for the reasons Hamilton brings up, such as the questionable environmental impacts of ethanol production, at least as we do it today. Let me elaborate:
There are already about six million flex fuel vehicles on the US roads, including most (all?) Chrysler minivans sold here for years. I used to own one when I had my woodworking business, and I never once put E85 into it, because despite being surrounded by other flex-fuel capable vehicles in NY State, there were precisely zero gas stations that sold E85 anywhere close. I wanted to try E85, and I would have if I had had the chance, but I was out of luck. (Rochester now has two gas stations that sell E85, although my minivan is long gone. But those gas stations are about 20 miles away, round trip, and far out of my normal travel pattern, so I wouldn’t bother using the fuel, anyway.)
The problems with ethanol go far beyond the classic chicken-and-egg issue of how you sell a fuel before the vehicles that use it exist. Those vehicles do exist, and in numbers that would support the sale of E85, but transporting ethanol beyond the corn belt is expensive, thanks to difficulties in shipping it via pipeline.
Transportation and retail infrastructure problems pale in comparison to production. The US is already consuming 20% of our entire US corn crop to make about 7.2 billion gallons of ethanol. (Other numbers I’ve seen quote the 2007 production at only 6.4 billion gallons.) What would happen if we wanted to fuel all those newly mandated vehicles on E85? Selling about 16 million vehicles/year in the US over three years would ensure about 20% of the rolling stock (currently about 241 million vehicles) was flex-fuel capable. And 20% of the US’ yearly motor fuel consumption of 140 billion gallons is 28 billion gallons of E85, or 23.8 billion gallons of ethanol.
Where will that additional 16.6 billion gallons of ethanol/year over the amount we currently produce come from? And what happens in another three years when we’re trying to come up with not 23.8 but a total of 47.6 billion gallons of ethanol/year? Converting the entire US corn crop into ethanol, every last kernel, would still produce “only” 36 billion gallons/year.
How much would this scheme help our basic problem of importing so much oil? Ignoring the relatively small amount of ethanol currently used as an oxygenate in regular gasoline, in three years we would be replacing 23.8 billion gallons of gasoline/year with ethanol, or about 1.6 million barrels of oil per day. That would still leave the US importing 10.6 million barrels of oil per day. After six years, we’d be displacing about 3.2 million barrels of oil/day and importing 9 million barrels/day.
Assuming, of course, that we could find a way to produce and distribute that enormous amount of ethanol, which simply won’t happen without a truly astounding technological breakthrough coupled with a massive and exceedingly quick infrastructure change. By far the more likely scenario is that the overwhelming majority of those millions of new flex-fuel vehicles would simply be run on regular gasoline, as I fueled my minivan, and for the same reason–a lack of available E85.
Zubrin and Hamilton mention PHEV’s and the potential to run their on board engines with E85. This is clearly a winning combination, and it’s one I’ve written about in the past. But that’s an entirely different option than the proposed mandate, given that non-PHEV vehicles will dominate sales for a long time. Plus, those PHEV’s are likely to be flex-fuel capable, anyway. GM has already stated that the Volt will be, for example.
If you think that I’m judging Zubrin’s plan by a too strict set of rules, then use your own numbers. Make your own assumption about the percentage of those mandated flex-fuel vehicles that will actually use E85, and see what the numbers tell you about how much ethanol we’d have to produce (and remember that detail about 20% of the US corn crop turning into only 7.2 billion gallons of ethanol) and how much it would therefore reduce the US’ oil imports.
I agree completely with Zubrin’s goals, but I don’t see any way that the numbers support it. You just can’t get there from here, no matter how much we’d like the destination.
In talking with various other writers and visitors to this site, the question of “OK, so where do you think we’re headed?” often comes up. Since I think this is a useful way to address all these interlocking issues in the energy + environmental arena, I will lay out my views on all the various sub-topics in two posts, beginning with this one.
Please note that in this sweeping exercise I’m focused mostly (but not entirely) on the US, and mostly (but not entirely) on the next 10 years. I also reserve my right, as detailed in the US Constitution, to be wildly, laughably, stupefyingly wrong.
Oil
The world production of oil will peak around 2011/2012. It won’t be a sharp peak-and-decline, but an undulating plateau as rising prices make it economical to bring ever more expensive supplies online and also constrain demand. In particular, those rising prices will provide the political pressure needed to make the US drill wherever we can find oil. And drill we will–ecologically sensitive offshore areas, ANWR, etc., will all be tapped, in time. The same basic conclusion applies to oil extraction in the Arctic or anywhere else on the planet. This is an inescapable conclusion once you accept that peak oil is real and imminent.
The price of oil will fluctuate a lot, with a generally upward path. There may be a slight dip in the next couple of years, but this will be a short-term anomaly, not a “return to the good old days of cheap oil”.
The biggest wild cards in oil demand over the next decade will be China and the domestic consumption of the exporting nations. Both of these factors could make the tight world oil market effectively much tighter from an oil importer’s viewpoint.
The war of words over peak oil will continue and get ever louder and more annoying. Every time someone finds a new oil field, it will be trumpeted by the cornucopians as proof that peak oil is “wrong”, and every shortage or price spike will be paraded around the blogosphere as proof that we’re all going to die shivering in caves in five years. I will continue to detest both groups and complain about them here, or on whatever online form this blog evolves into during the next decade.
Coal
The big political battle in the energy and environmental world will be in the building of new, non-CCS coal plants in the US, as the pressure to “do something” about coal will become overwhelming, even as CCS technology looks less and less promising.
The third rail of US enviro-politics will be what we do with the nearly 1,500 coal plants already in service here. No one will come up with a good plan to retrofit them with CCS (carbon capture and sequestration) technology, and any attempt to replace them with natural gas or nuclear or renewables will be an extremely hard sell, thanks to the sheer number of coal plants.
The US coal-fired electricity issues will be nothing compared to the growing mess in China. Getting Kansas to forgo new coal plants was a struggle; getting China to stop using coal in dirty plants will be virtually impossible.
As oil prices continue to rise, possibly with some supply interruptions added to the mix, the pressure to convert some of the US’ vast coal reserves into liquid fuel will be overwhelming. Can it be done in a way that doesn’t aggravate the global warming situation? Can it be scaled up to replace a meaningful portion of US transportation fuel demand?
Natural gas
The very general price trajectory will follow that of oil, but with less volatility and likely less of a percentage increase. But the overall scenario–higher prices, more difficulty in meeting worldwide demand, more exploration and development of previously off-limits or marginal reserves, and some perverse above ground factors (such as local opposition around the US to the building of new LNG terminals)–will look hauntingly familiar to anyone who follows oil issues.
It’s not clear to me how much new electricity generation will rely on natural gas. Utilities will like the greatly reduced CO2 emissions, relative to coal, but they’re probably quite nervous about the prospects for prices decades from now.
Ethanol
The boondoggle of starch-based ethanol in the US will continue. The political influence of corporate agriculture and Iowa (thanks to its early position i the US presidential primary process) will guarantee it.
Cellulosic ethanol will continue to develop, and we’ll likely see the first large scale plants online within five years. That’s when things will get interesting, as the market interaction between starch and cellulosic ethanol supplies, plus the change in the biomass supply infrastructure, all begin. Will we see land currently used for growing food converted to growing genetically modified poplars and switch grass? Probably not on a large scale, but such effects are influenced by so many other factors–public policy, world oil price, the food/fuel interaction potentially pushing some farmers to revert corn acres back to wheat and other grains–that it’s almost impossible to make a firm prediction.
Unless there is a stunning advance in cellulosic ethanol production (with a matching transformation of the infrastructure), it will become obvious pretty quickly that the US government mandate for producing 35 billion gallons of ethanol per year won’t be reached and was a ridiculous goal.
Hydrogen
Hydrogen fuel cells for cars will continue to draw lots of research money (i.e. government grants), and will never be able to answer the simple question: How can you fuel a significant number of such vehicles at a lower price/mile than plug-in hybrids or electric vehicles, and without creating an unacceptable amount of CO2 emissions? It may well take more than a decade for the hydrogen fairy tale to die.
Algae biofuels
This is one of the biggest unknowns in our energy future. Current work in this area seems extremely promising, and I would love to see algae farms popping up near coal plants worldwide turning some of those CO2 emissions into something that can then be refined into motor fuel. But how well will it really scale, and at what cost? This could turn out to be anything from a “niche of a niche”, a parlor trick technology that never makes a meaningful contribution to our energy needs, to a game-changing breakthrough. I’m optimistic, as it seems like the technology is simple enough and inherently scalable enough that it should be a significant player in just a few years.
US consumers
US mainstream consumers will continue to present a very mixed picture. Many more of them will become much more efficient in their transportation choices: More efficient vehicles, less driving, more use of public transportation, etc. Similarly, we’ll see a lot more interest in improving the performance of homes through better insulation, windows, and doors, more efficient heating and cooling systems, more adoption of solar thermal water heaters, plus more use of alternative strategies, including zone heating and cooling, using auto-setback thermostats, etc.
Some will even take the astonishing steps of educating themselves about energy and environmental issues and getting involved in the political process. They will write to their elected representatives, volunteer and vote for better candidates, and work to help educate others about the myriad of issues involved in our consumption of energy.
Sadly, not nearly enough Americans will take these steps. Many will continue to insist that high oil prices are just another example of “the oil companies screwing us” and spend all their time complaining about their gasoline and heating bills instead of taking action. There will be no end of peak oil and global warming deniers getting more than enough free press to help feed these perverse, uniquely American, tendencies.
US politicians and public policy
A far greater disappointment than US consumers will be US politicians. Nearly all of them will continue to shun “peak oil”, at least openly, and will focus on global warming and the every candidate’s favorite canard, “achieving energy independence”.
This head-in-the-sand approach is partially due to demographics–politics is dominated by old, rich people who have never studied economics or energy issues in any detail outside of the legislative process or campaigning for office, so they can’t grasp that such fundamental shifts are happening right before their eyes. But mostly it’s the influence of money, which badly warps the entire US political system in favor of those entities with the resources and the most to gain from buying politicians.
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Reduced corn crop forecast plants fears:
The U.S. Agriculture Department sent shudders through much of the food industry Monday when it released estimates that showed farmers would plant 8% less corn this year.
With corn prices already pushing up food prices, a spokesman for the Grocery Manufacturers Assn. called the projection “alarming” and warned that the estimate bodes ill for consumers at the supermarket.
“Food prices are rising twice as fast as inflation, placing significant pressure on American families who are already suffering from economic uncertainty,” spokesman Scott Faber said. “It’s time for Congress and the administration to offer families some relief and stop food inflation.”
In particular, the association is protesting federal energy policies that have created increased competition between the nation’s food producers and energy companies for corn.
But don’t put all the blame on corn-based ethanol, the USDA said. Competing demands for farmland from high-priced wheat and soy crops also play into reduced corn plantings, officials said.
The decline in the amount of farmland that will be devoted to growing corn this year will worsen the effect of “food-to-fuel mandates which are resulting in massive increases in food prices,” Faber said.
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Federal officials said corn plantings have fallen as prices have soared for wheat and soy. Farmers are looking for the best payoff for their investments.“There is a set amount of farm acres, and every crop competes for them,” said Elaine Kub, grains analyst for DTN, an Omaha-based agriculture information firm.
The acreage also has dipped because of the high cost of the petroleum-based fertilizers and agricultural chemicals that are used to grow corn as well as the standard practice of rotating crops to sustain farmland.
“Despite the decrease, corn acreage is expected to remain at historically high levels as the corn price outlook remains strong due in part to the continued expansion in ethanol production,” the USDA said in its report.
So, higher oil prices make corn-based ethanol more cost competitive, but those same higher oil prices increase the cost of planting and harvesting that corn, which puts downwards pressure on the number of acres in production. At the same time, higher corn prices make it a more attractive crop compared to some other grains, but they’re also rising in price, mitigating that shift in desirability.
Welcome to the dynamic, maddening world of economics.
On a slightly more serious note, can we all finally agree that:
My guess: We’ll be riding this hyper-speed price roller coaster for corn and other food crops for a long time.
See also: U.S. Biofuels Subsidies: Not for Farmers, but for Europeans
In recognition of April 1st, see: Coal Power: Warming America, Warming the Planet
Report: Four Key Clean Energy Markets Increased 40% in 2007:
Solar photovoltaic products, wind power, biofuels, and fuel cells collectively experienced a 40% growth in revenues in 2007, according to a new report from Clean Edge, Inc. Global revenues for the four clean energy markets increased from $55 billion in 2006 to $77.3 billion in 2007. And although the fuel cell and distributed hydrogen market remains relatively immature, with revenues of $1.5 billion in 2007, the three other renewable markets each exceeded $20 billion in revenue. Of the four energy markets, wind power earned the highest revenue, at $30.1 billion. In terms of production, the biofuels industry produced 13 billion gallons of ethanol throughout the world, as well as 2 billion gallons of biodiesel, while solar photovoltaic system installations fell just short of 3,000 megawatts.
The Clean Energy Trends 2008 report looks ahead ten years and predicts that global installed solar photovoltaic capacity will increase eightfold, to 22,760 megawatts, global wind power capacity will nearly quadruple, to 75,781 megawatts, and biofuel production will nearly triple, to 45.9 billion gallons. It also projects a tripling of the three clean energy markets over the next ten years, with the largest growth rate in the nascent fuel cell and distributed hydrogen market, which grows more than tenfold to $16 billion. But for biofuels, wind power, and solar photovoltaic products, the projection actually represents slower growth compared to recent years. For instance, the solar photovoltaic increased fivefold in the past four years and is projected to increase by a factor of 3.6 over the next ten years. That’s a 13.8% average annual growth in the coming decade, compared to 50% average annual growth over the past four years. See the Clean Edge press release, report summary, and full report (PDF 1.9 MB).
The report anticipates continued revenue growth in 2008, and highlights five major trends: the growing participation of overseas companies in the U.S. wind power market; a renaissance for geothermal energy; the launch of new electric vehicles by relatively small startup companies, rather than the large automakers; the use of new, clean technologies for oceangoing ships; and the design and construction of entirely new sustainable cities.
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In this episode: US economy, China’s fuel demand, melting glaciers, two views of biofuels
Futures tumble on Bear Stearns fire sale:
Stock futures plunged on Monday after JPMorgan Chase (JPM.N: Quote, Profile, Research) bought Bear Stearns (BSC.N: Quote, Profile, Research) for just $236 million and the Federal Reserve took emergency action to provide cash to Wall Street, raising concern that the credit crisis is spiraling out of control.
The Fed made an emergency quarter-percentage-point cut to its discount rate to 3.25 percent and expanded lending to a wider range of big financial firms, in the first such move since the Great Depression of nearly 80 years ago.
JPMorgan is buying Bear Stearns for $2 per share, or just one-fifteenth of the price the shares closed at on Friday. Shares of Bear, the fifth-largest U.S. investment bank, reached a high of $172.61 last year.
Once again, remember the basic causality chain: Housing and credit sector problems = lower interest rates = weaker US dollar = higher oil prices contributing to a much greater inflationary push than would be normal for rates at this level. Add to that the parallel vector of recession = lower stock prices = money looking for a safe haven = increased demand for US treasuries = more downward pressure on interest rates, and the story just gets uglier.
The FOMC (Fed. Open Market Committee) will be making another interest rate change tomorrow, widely assumed to be somewhere between a half and a full percentage point.
Related:
Wall Street in crisis of confidence
JPMorgan to buy Bear Stearns for $2 a share
Global stocks plunge after Bear Stearns news
Oil prices jump to new record peak
China’s Fuel Demand May Rise 8% This Year, Sinopec Group Says :
China’s fuel demand may rise 8 percent this year as the nation’s biggest manufacturing hub restarts oil-fueled power generators to ease shortages, said an official with state-owned China Petrochemical Corp.
“Shortages in regions like Guangdong will boost diesel use,” Ke Xiaoming, vice director of the Marketing Department of the Economic and Technology Research Institute at Sinopec Group, as China Petrochemical is known, said in the eastern city of Jinan, Shandong province, on March 15. Fuel demand rose 7.3 percent to 192 million metric tons in 2007, he said.
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Guangdong has reopened 7,000 to 8,000 megawatts of oil- fired generation capacity to meet shortages that could reach as much as 10,000 megawatts by June, Yuan Maozhen, chairman of China Southern Power Grid Co. said March 13. Southern Grid supplies electricity to five southern provinces including Guangdong.
This takes a little deconstructing. What does this article mean by “fuel”? Just diesel? All oil? How much of the total oil demand is diesel?
The article mentions a yearly demand of 192 million metric tons. Multiplying that by 7.14 to convert to barrels (for the benefit of most oil geeks who use that unit) gives us 1,370 million barrels/year, or about 3.75 million barrels/day. According to the most recent BP Statistical Review, China’s oil consumption in 2006 was 7.4 million barrels/day, so it seems reasonable to assume that this is talking about just diesel fuel and not gasoline or other products derived from oil.
That 7.3% increase in diesel consumption for 2007 works out to about 13 million metric tons/year or 93 million barrels/year, about 0.25 million barrels/day or an increase of about 3.3% in China’s total oil consumption.
The world’s glaciers are continuing to melt away with the latest official figures showing record losses, the UN Environment Programme (UNEP) announced today.
Data from close to 30 reference glaciers in nine mountain ranges indicate that between the years 2004-2005 and 2005-2006 the average rate of melting and thinning more than doubled.
The findings come from the World Glacier Monitoring Service (WGMS), a centre based at the University of Zurich in Switzerland and that is supported by UNEP.
It has been tracking the fate of glaciers for over a century. Continuous data series of annual mass balance, expressed as thickness change, are available for 30 reference glaciers since 1980.
Prof. Dr. Wilfried Haeberli, Director of the Service said: “The latest figures are part of what appears to be an accelerating trend with no apparent end in sight”.
The Service calculates thickening and thinning of glaciers in terms of ‘water equivalent’. The estimates for the year 2006 indicate that further shrinking took place equal to around 1.4 metres of water equivalent compared to losses of half a metre in 2005.
“This continues the trend in accelerated ice loss during the past two and a half decades and brings the total loss since 1980 to more than 10.5 metres of water equivalent,” said Professor Haberli. During 1980-1999, average loss rates had been 0.3 metres per year. Since the turn of the millennium, this rate had increased to about half a metre per year.
This is the UNEP item I mentioned yesterday but couldn’t locate.
See the linked article for more detail and a link to the data and graphs, which make the US financial news look like a picnic.
See this page on the Khosla Ventures web site for their papers related to biofuels, coal, etc. Khosla is, of course, Vinod Khosla, one of the most important and visible venture capitalists, particularly in the alternative energy field, and he’s also one of the most outspoken proponents of ethanol.
For a slightly different take on this topic, see the American Petroleum Institute’s alternative fuels resource page.
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