Turning Oil Into Salt (3): Intellectual consistency

The authors more than once deride other points of view as lacking intellectual consistency. Sadly, I cannot give them high marks for intellectual consistency themselves. While there is much to like in both their thesis and how they defend it, there are numerous examples where they take both sides of an approach in different parts of the book to suit their persuasive goals.

(I differentiate this from couching arguments in politically/emotionally charged terms, such as referring to Obama bowing to King Abdullah as a “symbolic act of self-denigration.” This is also rampant, and I find it quite irritating for a book aspiring to be a clear-headed policy brief, but I don’t feel dissecting this is worth much further effort.)

One major inconsistency is their selective thinking on fungibility – to them oil is fungible, but corn and other agricultural commodities (and the resources used to grow them) are not.

Second, they dismiss some energy sources up front, only to subtly return to them later. They reject the Pickens Plan to build wind power and run vehicles on displaced natural gas since, despite currently producing 98% of its natural gas consumption, the U.S. only has 3% of world gas reserves and a reserve-to-production ratio of less than 10 years. And yet, in plugging methanol two chapters later, they cite natural gas as one likely feedstock (specifically the 5 tcf of natural gas that is flared each year, especially in Nigeria).

Similarly, they demolish the argument for hydrogen cars based on the energy intensity of producing elemental hydrogen, but later propose a plan to produce methanol from CO2. It sounds win-win, but aside from the energy intensity of splitting CO2 into CO and oxygen, the process then requires… you guessed it… the resulting CO to be reacted with… hydrogen.

Finally, while they generally acknowledge the importance of economics, this emphasis is not consistent through (for example, when extolling the vast photosynthetic potential and CO2-consuming benefits of algae, a more fair-handed author would have felt compelled to at least mention that algae is nowhere near cost-competitive at commercial scale).

A different timeline for commercializing second-gen biofuels

In the NYT:

With the twin goals of making fuel from algae and reducing emissions of heat-trapping gases, a start-up company co-founded by a Colorado State University professor recently introduced a strain of algae that loves carbon dioxide into a water tank next to a natural gas processing plant. The water is already green-tinged with life.

The Southern Utes, one of the nation’s wealthiest American Indian communities thanks to its energy and real-estate investments, is a major investor in the professor’s company. It hopes to gain a toehold in what tribal leaders believe could be the next billion-dollar energy boom.

Long-heralded as the innovation around the corner which will make biofuels actually good for the earth, second-generation biofuels have struggled to make the jump from demonstration plants to commercial scale. Among the difficult hurdles is the return that private investors would have to expect to justify a large capital expenditure with a high degree of associated risk. One potential solution? Find capital from partners with different metrics and timelines:

The Colorado State professor, Bryan Willson, who teaches mechanical engineering and is a co-founder of the three-year-old company Solix Biofuels, said working with the Southern Utes on their land afforded his company advantages that would have been impossible in mainstream corporate America. The tribe contributed almost one-third of the $20 million in capital raised by Solix, free use of land and more than $1 million in equipment.

“If you’re going with strict venture capital, they’re looking for a blistering return on capital in three to five years,” Dr. Willson said. “The Utes have a very long economic view. They’re making decisions now for future generations as opposed to the next quarter, and that is just fundamentally different.”

In theory this is the perfect match, and this sounds very promising. The hard part will of course be finding other chunks of capital which aren't looking for what those crazy business folks consider to be a good return on investment.

Algae flavor of the week

Algae is hot these days, and Green Inc. covers the latest apparent innovation:

A California start-up, Aurora Biofuels, says it has cultivated algae that doubles production of biodiesel by absorbing more than twice as much carbon dioxide as conventional strains.

According to Robert Walsh, the chief executive of the company, Aurora’s breakthrough was to develop algae mutations that can ingest carbon dioxide regardless of the intensity of sunlight.

“Algae have a built-in mechanism to be effective at low light and as it gets brighter during the day their uptake of carbon dioxide levels off,” said Mr. Walsh. “We’ve been able to go in and alter strains by natural mutation to cause the algae to deal with light across the whole spectrum. The algae continue to uptake CO2 through brighter light and are more productive.”

He said Aurora has built a pilot facility “between a 7-Eleven and the beach” near Melbourne, Fla., and that for the past several months the new algae strains have been producing a gallon of biodiesel a day in an Olympic pool-sized pond.

I'm not trying to be overly harsh, but that doesn't sound like a very good yield. There are about 42 gallons in a barrel, which means this technology would appear to need 40 Olympic pool-sized ponds to produce 1 barrel of biodiesel per day.

The company plans to have a demonstration plant capable of producing 1,000 gallons of fuel a day in operation by the second quarter of 2010. A full-scale production facility is to follow in 2011.

By the same math, this demonstration plant will produce <25 barrels per day. By comparison, world petroleum production is 85 million barrels per day, of which the U.S. consumes in the neighborhood of one quarter, or about one million times the size of the output of the demo plant. (To be fair, not all of these petroleum products are diesel but that's the order of magnitude.) So let me know if my back-of-the-envelope is off, but this "breakthrough" doesn't appear to get algae anywhere near where it needs to be to scale effectively.

Win-win renewable power opportunities

Given that wind power disturbs wildlife, wave power kills dolphins, and transmission to any sort of renewable energy creates all sorts of problems, one could be pardoned for thinking there aren't any win-win renewable solutions out there. I'm not saying these latest two are, but it's certainly encouraging to hear ideas that actually alleviate existing environmental problems (or, for the latter, seem to have a minimal footprint).

First, in the WSJ, entrepreneurs are looking to harvest the algae that flourish in the dead zones created by excess nitrogen fertilizer run-off in the Gulf of Mexico. The dead zones move around, so the operators would be a sort of modern maritime shepherds:

"This is the sea equivalent of traveling goats: you have algae, we'll bring the fish," [LiveFuels] says, referring to companies that rent out goats to eat up grasses on California hillsides to reduce the danger from wildfires. They would truck in the fish and release them into a cordoned-off area. Cages would be used to keep carnivorous fish out.

The idea is that the fish oil would be harvested and converted to biodiesel. I'd want to see a rough EROEI calculation of a fuel production technique that involved driving a boat trailing catfish cages before committing any capital, but the idea of capitalizing on the dead zones and reducing the algal blooms has a nice ecological elegance.

The second idea, in Green Inc., is to retrofit existing dams for power generation. What?!? That was my first reaction too. Turns out:

Only 3 percent of the 80,000 dams in the United States are used to generate power, according to Norm Bishop, a vice president at MWH, a water engineering firm. They were built for other purposes, such as flood control, recreation, irrigation or water storage.

Umm... if true, yeah!!! The 3% number seems absurdly small to me, though (maybe it's number of dams, rather than a better metric like cubic meters of water flow? i.e. Hoover Dam counts the same as a small dinky dam). And if my calculations are right, $1.9bn for 350 MW comes to about $5,400/MW, which is not nuclear but not exactly cheap. A utility in Ohio appears to be going ahead, though, so maybe the economics can be made to work...

Algae roundup

There's been a flurry of news around algae since Exxon announced its $600m investment in Synthetic Genomics two weeks ago.

About that $600m... I recently learned from an industry source that the investment is conditional on multiple technological breakthroughs which are considered to be quite far-fetched. Turns out the most important words in the press release were "if research and development milestones are successfully met," which should temper excitement about "Exxon's big bet."

More companies are popping out of the woodwork - the latest, OriginOil, promises higher yields through "live lipid extraction."

Just in time, it looks like the EPA will count algae as an advanced biofuel under the RFS mandates - kudos to Jeff Bingaman for standing up against picking winners.

Finally, Geoff Styles, who can be counted on for deeper reflection and analysis than the average commentator, thinks through the implications of Exxon's investment. He concludes that Exxon was unlikely to make the move for PR purposes alone and must like the potential for scale (based on much higher per-acre yields). He also cautions:

If Exxon has concluded correctly that algae--which faces many serious hurdles of its own--is the best bet, then the entire US alternative fuels strategy could be in trouble.

I somewhat agree, but given what I recently learned about the conditionality and hence risk profile of the investment, I don't take it as a particularly strong signal of Exxon's belief in algae.

Exxon lends credibility to algae

I was under the impression that most of the big boys had looked at algal biofuels and passed, and that the space was dominated by start-ups like Sapphire, but now the biggest skeptic of them all, Exxon, has announced a substantial partnership and investment:

ExxonMobil Research and Engineering Company has entered into a research and development alliance with SGI, a privately held company focused on developing genomic-driven solutions and founded by genome pioneer, Dr. J. Craig Venter, to develop advanced biofuels from photosynthetic algae that are compatible with today’s gasoline and diesel fuels.

Under the program, if research and development milestones are successfully met [my emphasis added later], ExxonMobil expects to spend more than $600 million, which includes $300 million in internal costs and potentially more than $300 million to SGI.

Maybe things have just been quietly chugging along - both Chevron and Shell announced similar partnerships about 18 months ago, and I have not heard anything about them since. My own limited understanding is that algae is technically attractive because of its super-high photosynthetic rate, but that unless you can figure out how to grow it in the ocean it runs into the same space/scaling issues as other biofuel feedstocks.

Update: Looks like this play still has a long time horizon:

Exxon’s Mr. Jacobs said it would be “five to ten years” before small-scale plants are up and running. And neither company wanted to put a pricetag on the fuel produced from algae, which with today’s technology is still vastly more expensive than gasoline.

Update 2: Earth2Tech has a nice cheat sheet of major investments in algal biofuels. At $650m, Exxon's is the second-largest behind Algenol Biofuels' $850m plant in Mexico, and the two are the only ones above $100m.