Very nice piece on the electric car on CBS:
http://www.cbsnews.com/stories/2007/09/06/sunday/main3239838.shtml
Features the Tesla roadster and the Chevy Volt.
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Monthly Archives: September 2007
Let the games begin!
Representative John Dingell (Michigan’s 15th District) has developed a draft Carbon Tax legislation.
Let’s look at the highlights:
A tax on carbon:$50 / ton of carbon (phased in over 5 years and then adjusted for inflation)
- Coal, including lignite and peat
- Petroleum and any petroleum product
- Natural gas
A tax on gasoline:
$0.50/ gallon of gas, jet fuel, kerosene (petroleum based) etc…(added to current gas tax) (phased in over 5 years and then adjusted for inflation)
- Exemption for diesel – The fuel economy benefits of diesel surpass even its emissions benefits; it provides about a thirty percent increase in fuel economy and a twenty percent emissions reduction
- Biofuels that do not contain petroleum are exempt. Biofuels blended with petroleum are only taxed on the petroleum portion of the fuel.
**The $0.50 gas tax is in addition to what is derived from the per ton carbon tax in the previous bullet.
And more:
Phases out the mortgage interest on primary mortgages on houses over 3000 square feet.
Expansion of the Earned Income Tax Credit
The revenue from the gas tax goes into the high way trust fund, with 40 % going to the mass transit and 60 % going to roads. The revenue from the tax on jet fuel goes into the airport and airway trust fund.
Finally, the revenue from the fee on carbon emissions will go into the following accounts:
- Medicare and Social Security
- Universal Healthcare (upon passage)
- State Children’s Health Insurance Program
- Conservation
- Renewable Energy Research and Development
- Low Income Home Energy Assistance Program
Wow…. Where to start.
Magnitude
These are huge numbers. $50/ton is a huge number. Just so we have a baseline, the U.S. emits 2Billion pounds of CO2/year from burning coal alone. That would mean a $100Billion year tax on the coal industry.
Further, the U.S. also emits 2Billion pounds CO2/year from driving. That’s another $1Billion in taxes (albeit more manageable).
Tack on another $60Billion to cover natural gas emissions (1.2 Billion pounds CO2/yr).
The kicker is really the fact that the auto pollution tax is added on to the CO2 pollution. So that indicates that individuals will be accountable for their own car pollution. That adds another $100Billion.
Wow. That’s really far-reaching.
That adds up to $261 Billion/yr in taxation. That’s extraordinary.
That would amount to a huge financial burden for individuals and industries over time.
Lifestyle tax
Interestingly enough, this bill also taxes consumers of coal/natural gas electricity via the mortgage tax. Essentially, it asserts that 3000 sq ft is all that is required for the average American family and anything above that is egregious (and presents a harm to the environment). This makes sense from the standpoint of putting a price on a house holds’ carbon footprint. But it also seems like a tax on success. Or, more to the point, it would be a tax on people in older communities. Many homes in places like Cleveland or Detroit have fairly large homes – they’re old, rather large brownstones or the like that were once owned by the city elites. This could be an undue burden on these families.
It’s good that they are also taking poor people into account by improving the earned income tax credit (as though poor people knew how to get the most out of their tax write-offs). They even have a fund for low-income home efficiency programs. That’s a nice touch.
Bold Move
This Bill certainly is bold. It would prove an impetus (urgency really) to cut emissions fast. But it’s also clearly politically unfeasible. I mean, the government is still infected by lobbies. I don’t expect this one to be able to pass the lobby test.
I don’t really expect this Bill to go anywhere. It’s a little too radical – but I like the boldness. What this bill will really do is create more panic. While a crisis is probably what we need, it’s important to note that we don’t have very good alternatives. Companies don’t have a lot of good sequestration options – it’s only in its seminal testing phases now. Individuals don’t really have good alternatives for their lifestyle choices. I mean, at these prices, even a Toyota Prius would be a heavy tax burden. And hydrogen technology still isn’t ready yet (in spite of my previous post). So I actually don’t think this bill is done in the appropriate context.
Good show. We’ll see what happens.
Technology Review is reporting some interesting work going on at UC Berkeley attempting to make hydrogen from algae. The 3rd grade explaination is that they are creating mutant strains of algae that produce more or less chlorphyl during the photosynthesis process. Reducing the chlorphyl levels increases the amoung of hydrogen that algae naturally give off during photosynthesis.
Here’s an exceprt:
The researchers manipulate the genes that control the amount of chlorophyll
in the algae’s chloroplasts, the cellular organs that are the centers for
photosynthesis. Each chloroplast naturally has 600 chlorophyll molecules. So
far, the researchers have reduced this number by half. They plan to reduce the
size further, to 130 chlorophyll molecules. At that point, dense cultures of
algae in big bioreactors would make three times as much hydrogen as they make
now, Melis says.
This sounds like a compelling process, but it’s still a little foggy for me in terms of the assumed application. Producing hydrogen in bioreactors sounds okay, but it’s the capture and refinement that is always the hard part. This could ultimately determine how effective this process could be in terms of commercialization. Or in other words, it has to scale beyond what their current assumptions are before commercialization becomes viable. But that’s a little way off at the moment. They’re doing some good science for now.
The article goes on to say:
Switching 100 percent of the algae’s photosynthesis to hydrogen might not be
possible. “The rule of thumb is, if we bring that up to 50 percent, it would be
economically viable,” Melis says. With 50 percent capacity, one acre of algae
could produce 40 kilograms of hydrogen per day. That would bring the cost of
producing hydrogen to $2.80 a kilogram. At this price, hydrogen could compete
with gasoline, since a kilogram of hydrogen is equivalent in energy to a gallon
of gasoline.
These numbers don’t quite sound right to me. While I’m sure his comparison of energy with a gallon of gas is correct, it doesn’t seem to match consumption to me.
The 2006 Honda FCX fuel cell prototype (2008 will be a production model) could go 210 miles on 3.75 kg of hydrogen. If 1 gallon of gas = 1 Kg of hydrogen, then the range of the FCX (let’s assume 35 mpg – around what a Civic gets) should be around 131 miles. So obviously, comparing energy equvalence isn’t a good evaluation. This should be evidence given that we’re also comparing two different drive trains as well (fuel cell vs ICE) – that matters in comparing the economics.
Let’s think of it another way. A 35 MPG car will use 6 gallons of gas to travel 210 miles. That’s around $18 worth of gasoline (at $3/gallon). The FCX will use 3.75 kg of hydrogen to travel 210 miles. At a price of $18 for 3.75 kg of hydrogen (a service equivalent given , the price (not the cost mind you) for hydrogen would be around $4.80/kg of hydrogen. This would be an equivalence point that hydrogen production would need to beat in order to be economically viable with respect to gasoline. If the stated $2.80 / kg of hydrogen is bottoms-up cost of production for this process, then it might be way ahead of where it needs to be (if it’s an energy comparison then I’d be skeptical of it). That’s a great sign and offers high hopes for hydrogen.
CNN published an article on biodiesel yesterday (thanks Dave and Andy). Essentially, the article is cheerleading for biodiesel as it ought not impact food prices the same way ethanol has. It’s an ok article, but it misses several subtleties.
Here’s an excerpt:
The U.S. market for [biodiesel] has more than doubled every year since 2004 and will hit $1 billion this year. The number of retail pumps nationwide has grown from 350 in 2005 to more than 1,000 today. A couple of biodiesel IPOs are in the offing – and opportunities abound.
Biodiesel is 30 percent more fuel-efficient than gasoline, which in turn is 30 percent more efficient than ethanol. And while most ethanol produced in the United States comes from a single feedstock – corn – biodiesel has many sources: the oil of seed plants, such as soy and canola, french-fry grease and animal fat. That means the market can weather a price increase in any one raw material.
These are true statements, but it misses some key points.
Feedstocks
It’s true that you can make biodiesel from a number of different feedstocks. What’s not mentioned is that the yields – more specifically the costs associated with low yields – are not all the same.
A “good” grown feedstock tends to be a very “juicy” vegetable or nut. Algae is being investigated as well due to its ability to convert CO2 into relatively large amounts of oils suitable for biodiesel.
So knowing this, there are clear front-runners for biodiesel feedstocks in terms of current production scale and energy density (amount of oil you can get for an acre of land). Soy beans, Canola, and palm oil lead the list. And that’s essentially how the industry has developed throughout the world: Soy beans in the US and South America, Canola in Europe, and Palm Oil in SE Asia. Jatropha is also coming on strong in a couple different places (UK, Mali), but is biggest in India.
The problems here are that all of these commodities have relatively high prices. They’re actually on par (from a $/gal standpoint) with diesel fuel. For there really to be a lot of money to be made, then you need a very cheap feedstock. It’s not terribly expensive to process this stuff. And transportation isn’t that easy either. So a cheap feedstock allows for more margin to be attained given the mandatory transportation and processing costs). Right now, none of the ag plays provide this. Jatropha is compelling because it’s essentially a worthless weed. Algae has an energy density orders of magnitude higher than other sources, but doesn’t scale well in terms of growing large quantities of it.
The end result is that economics don’t really work out for biodiesel alone. If you can keep your costs low on all fronts, then you have some opportunities. But just like with ethanol, most of the money comes from the government subsidies.
Market dynamics
Biodiesel has kind of stalled out at the moment. REG is still the largest player by volume (with 300+Million gallons of capacity). Imperium Renewables just opened a 100Gal/yr plant in Washington. But that’s about it for that story. Imperium is going to Argentina next (a good move given their great soy bean industry and their spot in the economic development cycle). Minnesota has a 2% biodiesel mandate in all of its diesel fuel. But that’s about all the news there is. There aren’t dozens of companies building 100Mil Gal/yr plants. There aren’t huge hedge funds buying up dozens of smaller players. The feedstock issue – mixed with reservations over impacts to food prices sparked by the ethanol…unpleasantness – seems to be keeping things at bay.
It’s interesting to note, too, that much of the ethanol industry is driven by the need to replace MTBE – an additive that is suspected to be harmful to humans and the environment. Ethanol is a good substitute for it. One could argue that the ethanol industry up until earlier last year was driven by creating enough capacity to replace MTBE altogether. From here on out, I think it will be a bigger push to try and get higher ethanol % in gasoline (like E85).
Biodiesel, by comparison lacks such a non-market driving force. I don’t think you’ll get wide spread.
So while this article is all true, it’s trying to paint a picture that just isn’t coming to fruition. There are a lot of things that need to fall into place with biodiesel. It’s a compelling choice because it’s so accessible to the common man. But for it to be really made into a big enterprise, there needs to be some different economics associated with it – mainly cheaper and easy to manage feedstocks. We have some options, but they’re coming along slowly.
While the earth is steadily warming up, hell is apparently getting a little frosty. NRG has applied for a new nuclear reactor permit…and the government is taking it seriously.
You need to read the press releases to get the real gist.
9/24: NRG Energy Submits Application for New 2,700 Megawatt Nuclear Plant in South Texas
9/25: Department of Energy Releases Conditional Agreement for New Nuclear Power Plants
9/25: Statement by Deputy Secretary of Energy Clay Sell on NRG’s License Application
But here’s some out-takes.
NRG:
NRG Energy, Inc. (NYSE:NRG) and South Texas Project Nuclear Operating Company (STPNOC) will file a Combined Construction and Operating License Application (COLA) today with the Nuclear Regulatory Commission (NRC) to build and operate two new nuclear units at the South Texas Project (STP) nuclear power station site. The total rated capacity of the new units, STP 3 and 4, will equal or exceed 2,700 megawatts (MWs) – enough to power more than two million homes. NRG expects to bring the units on line in 2014 and 2015 in order to provide reliable and affordable power to fuel Texas’ continued growth and economic prosperity.
NRG has chosen Advanced Boiling Water Reactor (ABWR) technology for the new units to be built at the STP site. The technology reflects 50 years of continued evolution of boiling water reactor (BWR) technology and combines the best features of the worldwide BWR fleet with advanced technology enhancements that improve safety, performance and longevity. ABWR technology is certified by the NRC and has an impressive construction and operational track record. This includes setting world records for construction time and bringing the units in on budget.
DOE (1):
EPAct authorizes DOE to enter into contracts with the first six sponsors that begin construction of new nuclear facilities and meet all other contractual conditions to provide risk insurance for certain regulatory and litigation delays in the full power operation of their facility. Up to $500 million in coverage is available for the initial two plants for which construction is started and up to $250 million is available for the next four plants. The Conditional Agreement, the first step in the process toward a risk insurance contract, is available to sponsors of advanced nuclear facilities once its application for a Construction and Operating License (COL) is docketed by the Nuclear Regulatory Commission (NRC). Companies can enter into a Conditional Agreement with DOE, however, only the first six that are issued a COL and begin construction are eligible for the risk insurance contract with DOE.
DOE (2):
DOE is confident that with NRG’s reactor design selection and cooperation with their partners, General Electric and Toshiba, this project will likely result in the first of many new reactors being constructed and operated in the U.S. This reactor would join an American nuclear industry that is safe, secure and has a strong record to prove it.
Hell hasn’t completely frozen over. There’s still a lot more to this story.
This is the first nuclear plant application submitted in 29 years. Something tells me it won’t be the last. But while this is big news, it’s not really real until a plant gets built and turned on. Then it’ll be “real”. There’s still a lot of red tape to get through. The difference now is that people may actually want NRG to make it through all the red tape. That could be the big difference.
Al Gore has been in the news lately saying that new scientific findings say that we have until 2030 (not 2050) before the ice caps melt. Movements like this are a good start to fighting climate change (and making some extra loot in the process).
Originally aired late last year. More from Amory Lovins on the Charlie Rose show. No surprises here, but for those not familiar with his messages, this is a good conversation.
Alcoa and Zhengzhou Yutong have teamed up to develop light-weight bus designs.
From the press release:
“Our companies believe that through the combination of aluminum spaceframe design and advanced manufacturing technologies, we can achieve 15 to 20 percent weight reductions while maintaining the safety and enhancing the sustainability performance of a new family of buses,” Mr. Chen [Alcoa Asia-Pacific President] added.
So obviously the reduced weight improves the fuel efficiency of the bus designs. Prototypes are targeted for completion by the 2008 Olympics in Beijing.
If you’ve been to Beijing in the last few years, you’ll know how polluted it is. You might also notice how old (and overcrowded) their busses and subways are. This type of technology would go a long way in improving both Beijing’s pollution problem as well as the reduced cost of fuel.
What’s also interesting to know is that this development is occurring in China where they are eager to commercialize these types of technologies (it’s also probably a good publicity stunt for Alcoa, but I can’t knock them for that). Meanwhile, GM is having some success with its hybrid bus program (although it already faces competition from CNG models, etc). This development could add additional elements to this market and further push this technology to be cleaner and more cost efficient for cities to utilize. That’s going to be a great thing for cities around the world.
Technology Review is reporting that work done by researchers at the University of Campinas in Brazil showing that applied magnetic fields has increased ethanol fermentation yields by 17%.
You can read the paper to be published here, but the TR article gives a quick overview:
The researchers at the University of Campinas, in Brazil, say that they boosted ethanol yield 17 percent and shaved two hours off of a 15-hour fermentation process simply by circulating the fermentation brew past six magnets, each about the size of an overstuffed wallet. “The fermentation time can be reduced, and consequently, the production cost can also be reduced,” says Victor Haber Perez, the University of Campinas food engineer who led the research team.
The article cites some speculation based on previous tests of this phenomenon:
In 2003, Brazilian researchers at the Federal University of Pernambuco, in Recife, created a stir with a report that a static magnetic field caused marked increases in the growth of yeast and the ethanol concentration in laboratory-scale fermentations that used Saccharomyces cerevisiae. (S. cerevisiae is the yeast most commonly used in the Brazilian biofuels industry to produce ethanol from sugarcane.) A year later, however, Spanish radiobiologists at the University of Malaga threw that work into doubt, reporting that they had observed no stimulation of S. cerevisiae when it was subjected to a (much weaker, admittedly) magnetic field. They also failed to observe any impact from the alternating magnetic fields used in some earlier studies.
In simple terms, these researchers found that if you recycle a fermentation tank’s contents through an applied magnetic field (the paper describes the specifics in more detail), then the fermentation yield goes up significantly.
While this is a great observation, it’s not clear as to what the causal relationship is. There’s speculation on weather the applied fields are causing a metabolic improvement within the organism, if it’s impacting the pH of the medium, or some other unobserved occurrences.
But science is the business of figuring out why. Engineering is the business of making it work for you. So regardless of the pathways, the work done here shows significant evidence to develop technology around these observations and put them into production. This would be a great boon for ethanol producers looking to improve their yields. It’s easy, relatively cost effective (although applied magnetic fields do consume electricity), and could instantly improve a business’ gross margins.
CNN has an interesting article on a new ‘pre-fab condo’ going up in Miami.
Essentially, pre-fab designs provide for much more efficient construction. Newer designs tend to be more energy efficient as well (a big impact on electricity demand).
From the article:
The $40 million, 15-story Cube, located in Miami’s Design District, lets its residents-to-be choose the layout and size of their units by buying small cubes of space in the building.
Each cube costs around $400,000, and you can stack them horizontally or vertically.
(photo from CNet)
I was reading an article about Imperium Renewables’ new 100MM gal/year plant in western Washington. While it claims to have an edge on capital cost effectiveness, it’s a bit dubious as to weather or not that is important.
Let’s look at a few things.
Cheap Processing Capital Cost
Imperium will spend approximately $78 million on the plant, and $45 million of the cost is associated with holding tanks and distribution infrastructure. Only $30 million goes to equipment for processing fuel. Put another way, that’s 30 cents per gallon in capital equipment for producing fuel–relatively low, [CEO Martin] Tobias says.
I think this is a case of where segmenting of costs, as VCs tend to do, sounds smarter than it actually is. While this point is correct, it’s not really relevant. I mean, do you need the storage tanks for the plant to work? What difference does it make what % of the overall cost is? This statement is like comparing the cost of your tires with respect to the rest of the car – it doesn’t particularly matter as long as you have them – it’s all a packaged deal.
Given the photos of this plant, they probably paid a lot for those storage tanks. They’re very big – probably on the order of 100,000 gallons (maybe more, it’s hard to get an idea of scale). Those have to be fabricated in-place. That’s lots of workers with lots of field welds which runs up the costs. Smaller tanks (say, 20,000 gallon range) can be prefabricated and shipped. So depending on how the numbers break out, the big ones may have been cheaper. Maybe Martin is just having sticker shock.
It also begs the question as to why you need a lot of large storage tanks to begin with. Inventory of any kind of frowned upon in manufacturing (it’s capital tied up in an illiquid material). It’s better, especially for a one-product plant, to run straight through from the rail cars (if you can design it properly). You might only need a few storage tanks for surge capacity. So what’s the need for a lot of big, expensive tanks? It could be that the raw material, soy bean oil, is only a seasonal product. They may also need it for all the glycerin they’re producing and can’t off-load. They may need to keep a lot on hand-for the off season. That’s just a guess though.
Why the focus on capital cost?
While having a low capital cost for the capacity is a good thing, it shouldn’t, in my opinion, be the most important thing. In all fairness, what this metric Tobias refers to really relates to capital costs relative to the operational expense of the plant. In this sense, he’s saying that the real capital “meat” of this plant is the $45 million associated with the processing units (little does he know that storage tanks can have just as many issues with them as processing equipment). This may indicate that the operational costs of the facility may not be that high. This is a false assumption of course – they are dependent on the actual design of the facility, not how much it cost to install.
The capital equipment of a company is a balance sheet item. But these companies are measured cash flow in the market place. Capital depreciation is a non-cash event so it’s taken out of the cash flow statement. Capital expenditures (building new plants or extending the life of current ones) also takes away from current cash flow making it expensive to update/improve plants if there’s not a lot of cash being produced. So it’s always better to design for very low operational expenses – energy usage, plant personnel, annual permitting, maintenance, and repairs. As the article states, this is a low/no gross margin business:
Thus, the raw material alone can cost more than $2.50 a gallon, above the wholesale price of refined, regular diesel. That now hovers around $2.40 per gallon. Without the federal subsidy (the federal government gives subsidies of 50 cents per gallon for used oil and animal fat and $1.00 a gallon for fresh oil) most biodiesel manufacturers would lose money.
So in this sense, having a $45 Million facility with high operational expenses is not better than, say, a $70 Million facility with very low operational expenses. The $70 Million plant will stay in business – the $45 Million won’t. So it’s not clear that any of the costs Tobias mentions is particularly relevant towards this business being sustainable in the long run – especially since they’re trying to go public. They need to design for cash flow, plain and simple.
Or find free vegetable oil.
If you’re doing so well…
It’s strange that they want to go to off-shore, niche markets next. Hawaii is understandable, because it services the maritime industry. They also have a lot of diesel-generators there. Argentina is understandable because they have a very well developed soy-bean market (2nd only to the U.S.) and they can get cheap SB oil and become a big player – perhaps a global player. They’re also going to the east coast – also understandable. They can operate on both coasts.
But that’s it.
No California? No Minnesota? No Texas? I guess this underscores the fact that biodiesel development in this country has stalled. While there’s certainly a lot of it being made and sold, it’s not really growing at the clip that ethanol is (by comparison). Perhaps Imperium is making these strategic moves (good ones mind you) because they see this dynamic as well. The international community has a much higher passion for diesel (especially Europe). So the U.S. may just continue to be further behind. Imperium will need to manage this going forward, but it seems like they’ve got some good plans to follow.
