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Friday, September 30, 2011

BIOFUELS FOR ELECTRICITY

It was only two weeks ago that I said:

  c.  While biofuels for power generation are also baseload, and Hawaiian Electric installed a liquid fuel combustion system expressly for this purpose, I think biofuels are too valuable for this application.  They should ALL be used for vehicles.  However, that 300% factor will weigh in and we will also burn this precious fuel for electricity.  Not smart!





  d.  The difficulty, in any case, is that, with federal subsidies soon to disappear for ethanol (a fight has begun to qualify this fuel if produced from non-food biomass--but in these debt reduction days that could turn out to be difficult).  This is the problem with the renewables.  The rules change over time, as it could take a decade from R and D to commercialization, and while the investment might have made sense in the first year, by the time you are about ready to make money, you go bankrupt. 

  e.  The biggest hurdle faced by biofuels producers is the cost factor.  I doubt that they will be able to produce this sustainable option cheaper than oil...for the next decade at least, if not much longer.  Externalities do not count today, which is shortsighted and unfortunate.  While it is admirable to plan for the total life cycle (that is, oil surely will increase to $150/barrel and higher sometime in the future, so you might as well start now--but will it, for the Chicago Mercantile Exchange never shows oil beyond $100/barrel through December 2019, and only at $96/barrel that month).

2.  Renewable ground transportation will advance, but I don't know if this mode will proceed much in Hawaii because we only pay from 10-20% more for gasoline than the national average.  If you run through the calculations using the "Gasoline Prices" section to the right, you will get 12% today.  The plug-in electric car is getting a lot of good publicity.  I'm more happy than not, but I worry, because I don't think this is the optimal path.  Biomethanol makes more sense, but the Department of Energy has been prevented by lobbyists from developing the direct methanol fuel cell, and this is the key to the next few generations of ground transport.  Maybe in a century it will be hydrogen fuel cells or cold fusion.







The most promising future biomass is marine algae. We will re-visit this option in Chapter 4 on the Blue Revolution, but to quote a colleague, Jaw Kai Wang, from personal notes (gallons oil / year / acre):

o Corn 18
o Soybean 48
o Sunflower 102
o Palm oil 635
o Marine algae 10,000

Thus, the most productive biomass is algae. Efficiencies of greater than 10% have been shown in the laboratory, and one way to help the environment while making a profit is to bubble fossil fuel power plant stack gases into an algae raceway so that carbon, sulfur and nitrogen oxides can be reduced, while producing a marketable product. I was involved with several such projects beginning in the 70’s, and the prospects are now improved with genetic engineering and the future possibility of a carbon tax.


Actually, the above is a direct quote of the biomass section from SIMPLE SOLUTIONS for Planet Earth, which had a paragraph particularly relevant to what is happening with biofuels and electricity today, especially in Hawaii:




 Don’t! It would be a waste to produce ethanol, for example, and burn it for electricity.  Use any liquid biofuel for transportation. 

Utility companies have been known to propose the utilization of ethanol and biodiesel for a combustion turbine, with a caveat, usually not well publicized, that this will be done if the fuel is cost-effective. Solicitations are floated, but the awardees never get to actually build anything because, unless there is a government-provided incentive, a locally produced biofuel will not be able to compete with fossil options. Thus, the utility, while certainly showing good citizenship for being a partner in helping to reduce fossil fuel consumption, is, actually, more than anything else, minimizing static in the installation of a new fossil-fired power plant, while gaining some public relations points.

Unless the $500/ton carbon tax becomes real, in the near term, any liquid fuel for any facility of this type will invariably be petroleum-based. But what can a conscientious utility company do if the public utility commission and ratepayer demands the lowest price?


Apropos to all the above the Honolulu Star-Advertiser and Pacific Business News today had two articles on biofuels for electricity:

  1.  PUC rejects biofuel plan as too expensive:  as much as I continue to remain a skeptic on any program that wants to convert any type of biomass into a liquid fuel to power a combustion turbine for electricity, one of my long-time colleagues, Melvin Chiogioji, I thought had a relatively sensible plan, and, of all the locations:  the environs of Hutchinson Sugar Company in Kau on the Big Island, the site of my very first job after graduating from college.  For Aina Koa Pono to be denied can only omen the worst for this pathway, for if this system is not deemed commercial, than all those other minimal (restaurant wastes) and exotic (algae) plans have no chance to make a real difference.  Which leads to the second article.

  2.  HECO inks biofuels deal with algae-based producer:  reading the Star-Advertiser version was like deja vu, for the details have not changed from three years ago.  The problem is that, today, a fuel from terrestrial feedstocks is much cheaper than anything from algae.  If #1 above did not make the cut, there is no chance for #2 to eventually gain approval.

Mind you, liquid fuels from algae will someday be competitive, but only for ground and air transport.  What distorts the current reality is that Hawaii pays 300% more for electricity than the mainland average.  You no doubt have noticed that the media these days harp on the unfair high price of gasoline in Hawaii, when the reality is that our gas only costs 20% more (you can make this calculation by going to the "How Much Does Gasoline Cost?" section to the right, and, true, this differential has increased from my previous calculation of 12%).



So here is the bottom line analysis.  Liquid fuels from cane, palm oil, jatropha, algae, whatever, will not compete with oil at $100/barrel (it is $79/barrel today), and will have difficulty even, perhaps up to $150/barrel.  Certain tax and other governmental incentives can help, but how long will this be justified (remember ethanol)?  

What is my current attitude about biofuels and electricity?  Actually, I've shifted my views and see some of this encouraging commercial activity as  more good than bad.  I think it will bad for the companies, but good for developing the field.  I do worry that some of these empty pocket new firms are breathing some of the ethers they're producing and are hoping for the imminence of Peak Oil so that they can sell out to an oil company or equivalent.  The risk is that the Chicago Mercantile Exchange has oil futures in December of 2019 at $93/barrel.  But how often have those oil guessers been right?  This current anomaly of Hawaii and electricity does serve as a bridge for these pioneering biofuels companies, so nothing wrong with that.  Maybe the timing will all work out at the end. 

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Another bad day on Wall Street, as the Dow Jones Industrials dropped 241 (-2.2%) to 10,913 (high for year was 112,876), now nearly 6% below what it was at the beginning of 2011.  World markets were also all down.  The worrisome factors are volatility, Greece (short term) and China (long term).  Gold dropped a buck to $1623/toz, while the WTI Cushing is at $79/barrel and the Dated Brent at $104/barrel.



I noticed that Kodak was down as low at 54 cents today, but ended at about a buck/share.  Five years ago on this day, Kodak was at 22, having dropped from nearly a hundred less than ten years prior.  However, it looked like they were ready to recover by shifting away from film cameras, and I therefore considered investing a few bucks.  However, against my normal tendency (I only invest when things are down--which Kodak was) I decided to go with Amazon.com (which I had bought five years earlier, in 2001, for around $5--so it was way, way, way up) at $32.  Well, amazingly enough, Amazon today is at 216.  For around the same general cost of investment in 2006, the difference today is $216 versus $1.04.  Luck and gut feeling sometimes work.  The leadership at Kodak pronounced bankruptcy was not an option.  I guess that means bankruptcy.  Conversely, Amazon has a new browser considerably cheaper than the latest Apple iPad.  Amazon could well yet double.

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Hurricane Ophelia, 115 MPH, in the Atlantic is now at Category 3, but seems to be following the previous storms, and will slowly weaken, brush Newfoundland and go on towards Scotland:


Typhoon Nalgae, 130 MPH, is now a Category 4 and will slam into northern Philippines in a few hours and will skirt by southern Hainan in a few days.




Interesting how these ocean storms are following the same general track as their predecessors even though there should be a cooling effect caused by the upwelling.

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The Blue Revolution Hawaii Board met today and, in addition to helping solve the problems of Hawaii and the World, had a photo taken, with Guy via the power of electronics




Fujio Matsuda - Patrick Takahashi - Guy Toyama - Leighton Chong - John Farias


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Then dinner at Ming's with Christina, Grace, Ed and Jeff




The bon voyage gathering was hosted by Grace and Ed Cheng (with a Yellow Flower Fish from China in the foreground):




Ming's specializes in Shanghai cuisine.  An excellent meal with bottles of Meritage and Pinot Noir.


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