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On Tesla’s Early Loan Repayment Earns Praise From Energy Department
Tesla’s management has done an outstanding job of developing their company and obtaining funds needed to build/expand their business. They are also truly an exceptional company by repaying their loans guaranteed by the Federal government. A WSJ article today (May 24, 2013; “The Other Government Motors”) provides some interesting information on some of the formula to their success. It will be interesting to see how well Tesla’s “relatively affordable Tesla Model S” ($60K-$80K each) competes with Nissan’s Leaf ($20K) and GM’s Volt ($30K) in future years; particularly for CA ‘zero emission credits’.
On Busting Big Oil Myths on the Renewable Fuel Standard: Part I
Let’s begin with the CAA 1970 and its subsequent amendments. The EPA originally approved MTBE as a gasoline oxygenate additive. It was not until gas station buried tank leaks led to water contamination issues (MTBE does not biodegrade readily) that the Oil Industry initially-voluntarily stopped the use of MTBE to avoid the obvious environmental issues. Benzene and other aromatics that were also uncontrolled early-on, are only toxic in pure-concentrated form (a fueling respiratory exposure issue that has been addressed by a combination of fueling pump/auto VR technologies). The original aromatics regulatory focus had to do with light vehicle CO/VOC tailpipe emissions, which involved the Auto & Oil Industries working with the EPA and state Governments to develop effective improvements. Hydraulic fracturing & Tier 3 is off subject.
I personally experienced the refining-pipeline-terminal-customer issues/equipment failures that developed with the original EPA oxygenate requirements (E-7.5 replaced MTBE). Ethanol is very corrosive to rubber and many synthetic materials (seals, tubing, etc.). Eventually the Oil and Auto Industries made material upgrades needed to avoid equipment failures (leaks). New vehicles and FFV’s don’t have an issue with increased E-10 to E-15, it’s the older vehicles that are at risk to leaks/fires. The EPA’s current solution is to post warning labels and place the responsibility on producers and customers. The EPA/DOE may believe the issue is resolved, but those ultimately responsible are not convinced yet. By the way, ethanol is definitely corrosive, but it can take a couple years for the failure to occur since the corrosion of fuel lines and seals can be relatively slow.
Ethanol full lifecycle cultivation-production-consumption is definitely very energy intensive. Corn ethanol consumes about 0.78 MBtu of fossil fuels for every 1.0 MBtu finished ethanol product. Read my post, it contains all the references including the DOE/EIA and the Argonne Lab (Wang’s outfit). The fossil fuels mix of course depends on where the corn ethanol bio-refinery is located (power grid fossil fuels mix) and how it’s designed. Some bio-refineries actually have coal fired steam plants used to provide process heat. As far as petroleum, its consumption is very significant. Beside corn fertilizer/cultivation equipment consumption ethanol must be transported (neat) via rail, marine and truck around much more efficient petroleum pipeline systems, for blending into gasoline at the local petroleum fuel terminals just prior to final truck shipment to retail outlets. Ethanol must be segregated due to its corrosive properties once again and its affinity for picking up water and solids.
I analyzed Wang’s GREET model in detail a few years ago. The corn ethanol lifecycle was reasonably accurate at that time, but the fossil fuels lifecycles were significantly in error (they used inaccurate international data rather than more accurate U.S. Refining data; which I shared the sources with them, but they have yet to correct the obvious errors in their model). Sugarcane (restricted by tariffs strongly supported by the U.S. Corn/Ethanol lobbies) and cellulosic ethanol are once again off subject. By the way, sugarcane ethanol production is much less energy intensive than corn ethanol, and cellulosic ethanol consumed (full lifecycle) fossil fuels are significantly greater than the finished biofuel's heat content (i.e. it has a large ‘negative’ NEV based on current state-of-art technologies).
On Busting Big Oil Myths on the Renewable Fuel Standard: Part I
It is interesting how business contract disputes can apparently develop into claims of big oil conspiracies. In the case of Zarco 66 they appear to have contracted with Phillips 66 for a franchise deal and to become a ‘branded’ Phillips 66 dealer (service station). Independent station owners typically agree to sell branded motor fuels with specific operations/quality controls and marketing standards, in return for some combination of capital (station upgrade investments) and operating expense (supply discounts) compensation. In the case of Zarco 66, their franchise contract obviously allowed them to sell Phillips 66 regular gasoline and E-85 initially. When they wanted to unilaterally blend and sell E-15, this plan probably violated their franchise contract.
Unlike E-85, E-15 is blended to very strict formula standards in refineries and terminals only. Zarco 66’s apparent plan to blend conventional regular gasoline and denatured ethanol (from their two buried regular gasoline/denatured EtOH tanks) would very likely violate State and Federal gasoline specification regulations (starting with RVP). Phillips 66 obviously objected to potentially violating Federal regulations for marketing their branded gasoline and appear to have exercised their franchise contract right to require Zarco 66 to use their two tanks for regular & premium gasoline (normal configuration for most dealers; also allows blending/selling medium grade gasoline; 50/50 reg./prem.).
The RFA letter to the EPA/FTC/DOE/USDA appears to over look Zarco 66’s franchise contract obligations and the issue of blending & selling potentially off-spec. gasoline in violation of Federal regulations. How Zarco 66 and RFA hooked up to work this obvious political strategy rather than through arbitration or a contract lawyer is curious.
On Busting Big Oil Myths on the Renewable Fuel Standard: Part I
As usual the non-myth truth is in the actual details. The recent oil company concerns with the RFS2 annual standards has to do largely with consumer safety, not supposed market share monopoly considerations. The EPA recently (and possibly prematurely) set annual conventional (corn) ethanol required blending targets at levels that require implementing the potentially risky new E-15 standard. Refer to my comment on a recent TheEnergyCollective post. Blindly blending and selling E-15 in order to meet the EPA RFS2 blending target could cause fuel leaks and fires in older vehicles and equipment not designed to operate on more corrosive E-15 blended gasoline. If such an incident was to occur and a consumer were injured or worse, who do you believe will be held accountable?
As far as Myth #1, the combination of increased domestic oil (and natural gas liquids) production, increased vehicle & building efficiencies, and the 2007-2009 economic recession have accounted for the majority of the 3.3 million barrels per day (MBPD) reduced U.S. net oil imports over the past 5 years. Refer to my past TheEnergyCollective post “Why Have US Oil Imports Declined in Recent Years”. In 2012 13 billion gallons of ethanol were produced-blended as a result of the RFS2 requirement. This represents about 25% of total reduced oil (2008-2012) imports, which is quite significant. However, conventional corn ethanol cultivation-production is very energy intensive. About 78% of the total energy content of corn ethanol comes from consuming domestic natural gas, coal and petroleum fossil fuels during the full cultivation-production-consumption lifecycle. Refer to my past TheEnergyCollective post “Is Ethanol a Cost Effective Solution to Climate Change”. This makes the net U.S. energy security benefit of RFS2 fairly small compared to increased domestic oil and natural gas liquids production in recent years.
On The Renewable Energy Reality Check
Schalk, very good post. As you state, many organizations and individuals generally believe that by aggressively supporting renewables and/or discouraging fossil fuels (and most often nuclear) that the world will more rapidly make the transition to non-fossil fuels energy sources and stabilize atmospheric carbon dioxide concentrations at acceptable levels. Assuming the needed technology improvements become a reality to rapidly and substantially increase the penetration of lower energy density and variable/non-dispatchable power generation in the near future, the primary barrier will continue to be increased energy costs. Besides increasing the cost of all consumer goods & services in Developed (Annex 1) countries, these economic impacts will very likely accelerate the consumption of cheaper fossil fuels in Developing (non-Annex) countries (with or without carbon leakage considerations).
Another renewable energy reality is that generally only richer Developed countries are capable of making significant transitions to lower carbon and non-fossil fuel energy sources. Developing countries fossil fuels consumption and associated carbon emissions are projected to increase at rates far greater than Developed countries can feasibly contain or reduce theirs. Refer to my past TheEnergyCollective post “Can Developed Countries Reduce Future Total World Carbon Emissions”; (based on the EIA IEO 2011). Even if Developed countries totally replace all fossil fuels with zero carbon alternatives, world total carbon emissions and atmospheric carbon dioxide concentrations are still likely to increase up to 500+ ppm levels. Can Developed countries in addition afford to support all Developing countries’ transitions from fossil fuels to renewables?
On ExxonMobil’s Tentative Algae Biofuel Adventure
Exxon, like most major oil companies, routinely invests in a broad range of fuels based projects, including biofuels. The obvious challenge is return-on-investment for their shareholders. Algae based biofuels fuels have made significant progress in recent years, but appear to be still challenged by ‘net energy values’, and of course, production costs vs. alternatives. In Exxon’s case, their focus on ‘gas-to-liquids’ (GTL) is obviously due to their natural gas hydraulic fracturing successes. As you are probably aware, for them to continue to support algae fuels research requires that the appropriate executive be persuaded that past research has shown reasonably attractive (potentially rewarding) results.
On ExxonMobil’s Tentative Algae Biofuel Adventure
IK, the obvious barrier to vegetable oil based biodiesel is production cost. Vegetable oil could be very economically processed into diesel by blending it into petroleum distillate and charging the blended feedstock into existing petroleum refineries diesel production units. Past Federal renewable fuel standard regulations, however, required that the vegetable oil be processed in ‘neat’ form, which requires building new bio-refinery production facilities; at substantial costs. These costs have apparently been too high to encourage-support large expansion of new bio-refineries (despite generous Government subsidies), which would potentially make much more vegetable oil based biodiesel available for retail markets.
Today, most U.S. biodiesel is produced from soybean oil. Vegetable oil most often is used in food/feed markets.
On Wind Energy and the Myth of Widespread Negative Pricing
‘Nobody disputes the fact that adding more wind energy to the grid displaces more expensive sources of generation’ is a highly debatable opening statement. While the direct energy costs for wind power are zero, this statement or assumption appears to ignore the many cost factors involved in building, operating and maintaining the stability of uninterruptable power-supply grids. Unless the vast majority of the power customer base can accept fully interruptable power supply most of the time (when the wind conditions do not allow significant wind turbine power generation), non-dispatchable wind power absolutely requires substantial (80%+/-) fossil fuel peaking and intermediate power backup (or backup hydropower pumped storage if available).
Direct energy costs of wind may be zero, but this cost omits the substantially costs of wind turbine maintenance, capital amortization, operations/controls, etc., and the cost of idling (reduced efficiency at lower/minimum rates) backup fossil fuels power. When one includes full variable and amortized/fixed costs (excluding renewable subsidies), wind power incremental costs rarely are less than fully amortized, incremental fossil fuels generation costs.
Don’t miss understand my position on wind power. I fully support wind as being the ultimate replacement of baseload coal power generation, but the costs will be significantly greater in the short- and medium terms. The long term cost depends on how aggressive the EPA is on future carbon emission restrictions. Until some economical form of non-hydro power storage becomes a reality, natural gas (and possibly nuclear) will be absolutely required for centralized power grids operations and operating stabilities.
On Taking on the EPA and E15 Testing
Mark, as you are aware, the issue or problem of increasing ethanol blending from E-10 to E-15 goes back to the original Federal regulation (Energy Independence and Security Act of 2007; EISA 2007), which created the current Renewable Fuel Standard (RFS2). When Congress passed EISA 2007 their purpose was to ‘replace’ petroleum (imports) with domestic, alternatives to petroleum; biofuels. The best Federal projection of gasoline consumption at the time was the DOE/EIA AEO 2007 that projected total U.S. gasoline consumption would increase by 4% 2007-2012. Congress also was led to believe that E-85 ‘flex-fuel vehicles’ (FFV) fuel consumption would also increase very significantly. Unfortunately, the 2007-2009 economic recession and slow recovery caused total actual gasoline consumption to decline by 6% 2007-2012. In addition, the many owners of FFV’s rarely operate their vehicles on E-85 due to a combination of significantly lower fuel efficiency and perhaps limited (fueling station) availability. The combination of these factors contributed to the ‘ethanol blending wall’, which has apparently become the primary incentive for the EPA aggressively pushing forward with the E-15 standard.
It’s disappointing and increasingly concerning that the EPA is apparently ignoring or attacking the critical analysis needed to ensure increasing (corrosive) ethanol blending from 10 to 15% does not created significant safety hazards (fuel leakage/fires) for older vehicle/equipment owners. The EPA’s only solution to date is to require warning labels; and shift the potential safety hazard responsibility to U.S. consumers?
On Should the U.S. Implement a Carbon Tax?
Paul O, thanks for the feedback. How Mr. Engebretson concludes anyone could be anti-natural forests or against healthy environments, especially an avid outdoorsman like myself, is baffling. As far as my bias it’s pretty straight forward, separating feasible solutions and facts from fiction, and analyzing the basic costs to determine if proposed solutions are reasonably economic and can be developed-sustained (eventually) in a free market.
On Should the U.S. Implement a Carbon Tax?
So, you are referring to ‘thermal efficiencies’ in specially designed (high compression, direct injection laboratory/bench ICE’s, possibly with super chargers). That makes sense for comparison to 87 regular gasolines. As you are aware, these required ICE modifications are much greater than current FFV standards. We are getting significantly off the post’s subject, so we should save further discussion on the cost effectiveness of NH3, MeOH, EtOH and different petroleum blends for a future discussion on these alternatives to petroleum. Thanks for the references.
On Third California Cap And Trade Auction Sells Out, At Record Price
Unfortunately CA State Government raiding of carbon allowance funds was very predictable. Re. my past post on the subject. Possibly linking CA carbon allowances to world market is also problematic. Re. my past post on this subject. The problem with existing cap-n-trade programs is that they are based on Government emission allowance certificates that do not directly represent the actual cost to reduce existing carbon emissions. The EU carbon credits sell for less than $10/MT and CA’s recent $14/MT. Actual average and fully amortized costs to reduce actual current carbon emissions are on the order of $50-$100/MT. Re. my past post on this subject. The impact of $10-$14/MT carbon credits is basically a small increase in fossil fuel energy costs (i.e. more of a consumption tax) and related consumer goods and services. If Governments were truly serious about reducing their current carbon emissions they need to directly base their programs on actions that actually replace fossil fuels energy and associated carbon emissions with lower (and unfortunately more expensive) or zero carbon alternatives.
Those that appear to have benefited the most from the recent CA carbon allowance auction are the Traders and Hedge Funds. Buying carbon allowances at $14.00 yesterday and trading/selling them for $14.50 today is an amazing short-term profit margin (3.6%) for a couple days work.