Gas extraction hurts

Regarding the issues and controversy surrounding hydraulic fracturing and gas extraction in the US Northeast, it often seems as if I'm looking at two different worlds. I've been trying to make sense of what the information both types of sources are telling me, and cut through the emotional controversy to figure out what, exactly, is happening.

Thought, and the lack thereof, in the dialogue

Immersion in the contentious world of energy policy and politics is, at times, profoundly depressing. When I first decided to specialize in energy and energy policy as my field of study, some 7 years ago, there were only a few grumblings in the English-speaking world that energy might be a problem at some point in the future. As I've studied and worked my way up into the field, I have been confronted with the reality that while the general level of knowledge of the population has gone up, the tone of the conversation has gone down.

The articles about Keystone XL you aren't reading

Obama's delay of Keystone XL is a move to mend bridges with his environmentalist base before the election. Well, that's transparent.

Canadian Finance minister Jim Flaherty says that the delay of Keystone XL will accelerate Canada's efforts to build a pipeline to its west coast to ship to Asia. So, um, again about how delaying the pipeline does nothing to stop extraction or stop oil from going to China.

Stephen Harper, the Canadian Prime minister, is still hopeful. Good for him. I am frankly surprised that he doesn't feel emasculated, given that American environmentalists are attempting to dictate the environmental policy of the country he nominally governs.

I know the tone of this post is more opinionated and angry than usual, but I just have trouble grappling with how the environmentalist movement has been taken over by people with no knowledge of how ineffective their goals are at accomplishing anything.

EROEI and Peak Oil

A Forbes blogger by the name of Tim Worstall wrote one of the most technically illiterate posts that I've ever seen about peak oil theory and its connection to EROEI. Even though his example - showing EROEI has no bearing on the price or quantity produced of a nonfuel, premium value product - is completely irrelevant and total "nonsense," as he put it, he does demonstrate one thing very clearly: the linkage between a declining EROEI and smaller quantities of dearer oil is not intuitive. I'm going to try and explain it.

An Update on Solar Industry Dynamics

When I wrote about what trends in the industry killed Solyndra (that is, barring outright fraud), I covered the aspects of the business that are driving lower profit margins and consolidation. In light of that, I thought I'd share two recent news items that confirm that picture of the industry.

Playing the algae game

Note: I am teaching a one-shot class on advanced biofuels in November. While this class is to high school kids, it will still require a lot of organized content to throw at them, so I am gathering my thoughts here.

Now that the epic saga of the Project From Hell XIX, Return of the Spawn of the Scope Creep is over, it seems an appropriate time to gather my thoughts about other sources of next generation biofuels. One of the ones widely acknowledged to be slightly farther off, but promising, is the use of algae as a feedstock for so-called third-generation fuels. However, I'm very, very skeptical of any of the claims being made about algae (I spent about a year trying to work with the finicky little bastards in the lab and know their peculiarities) and even more so about extremely widespread algal biofuel cultivation. Here's why.

Of Cracked Tar and Crack Spreads

On the days it comes out, I usually review every article on The Oil Drum's Drumbeat series, a quarter-weekly roundup on energy-related news. Most every time, something comes up that ticks me off. There are fairly regular appearances in that from extremists on the petrofuels and environmentalist camps. More infuriating, however, are the articles that attempt to remain neutral but show a frustrating lack of analysis or understanding on relevant issues of the day. The two most recent of these are the buzz around Daniel Yergin and his recent book, The Quest, which I've blogged about before, and the debate over the Keystone XL pipeline, which I've also mentioned. It's the latter which really set me off today.

The general theme of my posts on the Keystone XL Pipeline have revolved around disagreeing that the extraction of the tar sands in Alberta will at all be affected by the blocking of the pipeline's construction. That, and the meme that the sands will simply be transshipped to China (which I've also addressed) are the two most commonly cited nationally relevant arguments against the pipeline; others, such as environmental contamination, are generally local issues. In this post, however, I'm going to try and show how the Keystone XL pipeline will bring a critical benefit to the US independently of energy security concerns.

Gasification as a route to biofuels

Note: I am teaching a one-shot class on advanced biofuels this November. While this class is to high school kids, it will still require a lot of organized content to throw at them, so I am gathering my thoughts here.

The problem of liquid transportation fuels, in many ways, is filled with less than perfect solutions brought on by our limited development of technology. Corn ethanol is the biggest bogeyman, although these days I'm less certain that its demise is inevitable, for other reasons. The other, lesser-known equivalent is biodiesel, which is a much better fuel in terms of EROEI, GHG balance and competition with food resources. Unfortunately, the size of the resource is miniscule compared to fuel requirements of the world. While new methods of biodiesel production are out there that will make the fuel more easily and make better use of its byproducts (an area I once did research in), the fact remains that the amount of oil that can be gotten from plants and animal wastes aren't going to be making up more than 2-3% of the total liquid fuel supply, simply by virtue of the fact that there will never be enough oil to go around (and yes, I am discounting algae). Plant starch is easier to find in nature than oil, hence the scale of ethanol production from starch being much larger than biodiesel production, which can draw only from the pool of oilseed and rendered animal byproduct markets. The largest resource is, of course, lignocellulosic biomass itself, which is the feedstock of choice for all next generation biofuels that you'll see in the next few years.

So what to do with all this biomass? There has been a lot of focus on fermentation routes from the biofuels community. This is the result of a confluence of infrastructure and human capital from the ethanol industry and  amazing players in enzyme engineering. Enzyme engineering is so good these days that tough cellulosic feedstocks can actually be hydrolyzed into sugars and fermented using parts of the corn ethanol fermentation train. A great example of this is POET's Project Liberty, which will derive a great deal of its cost advantage from being built "over the fence" from a corn ethanol plant.

The other route I feel is getting much less attention is gasification. In this general category of processes, fast pyrolysis of biomass quickly turns most of it into carbon monoxide, hydrogen, and ash/char residue, and the gas is swept downstream into other uses. People have been doing fast pyrolysis for a long time. Before oil products became abundant, many chemicals were made using coal tar from pyrolysis. Steam gasification (a process using steam as a heating medium) of lignite is featuring prominently in coal-to-chemicals industry in China. For example, most of the growth in PVC-making over the past few years has been from vinyl production based on acetylene, which in turn is derived from ethylene and coal-bsed sodium carbide.

I'm cautiously optimistic about gasification as a route to biofuels. It has a few things going for it over biofuels and a few things going against it.

A Beacon of Despair

The flywheel grid-stabilization technology company Beacon Power just filed for bankruptcy yesterday, sending another ripple through energy publications. Like Solyndra, Beacon Power had a DOE loan guarantee, though of a much smaller magnitude: $43 million rather than $535 million. Even so, its failure is another indication of the high risk nature of the DOE's loans and, increasingly, the poor management of the loan guarantee program.

From, what I've seen of the DOE's program, the conditions necessary for entry were extremely strict. But then again, that look was had only a few months ago, and applied only to biofuels companies. It is entirely possible that the standards for the program have only been mature for a short time. It is probably also the case that standards for biofuels were more strict than for other, less well-studied industrial sectors or less risky, a suspicion that is borne out by the flow of money to specific industrial sectors from the program. What I'm hearing in the news these days belies my initial impressions.

The thing I actually want to talk about, though, is a larger issue concerned with Beacon Power's technology. Truth is, Beacon Power was one of those companies that I wanted to succeed, not because of anything about the company specifically, but because flywheel grid stabilization technology is so important to the system as a whole. Flywheels can uptake and discharge power faster than any other kind of energy storage technology, and can act as rapid stabilizers for voltage fluctuations caused by renewables, among many other things. It's obvious why this is essential for a modern power grid. The problem is that deregulated power markets make the returns on investment for such an essential service extraordinarily low. Batteries that charge in the night and discharge at peak hours output power slowly but can take advantage of the maximal arbitrage opportunity - not a lot, maybe $15/MWh, but the max. On the other hand, low energy-density flywheels make their money in the minute-to-minute spot market for electricity, buying kilowatt-hours and selling them again at fractions of a cent more expensive than before. But they're also big, heavy, and expensive compared to batteries. Both of the grid stabilization technologies perform essential roles.

Because of that low revenue potential, Beacon Power needed more flywheel farms to get enough revenue to operate, and it needed more capital to build more. It didn't get it. Thankfully, the flywheel technology is still useful and their one current flywheel farm will most likely continue to operate once it is sold for a discount, unlike Solyndra's specialized factories. Even so, I think it highlights an important fact about investment in the electrical grid and what deregulation has done to it.

Without an overall system owner - not just an operator - the positive externalities that result from an otherwise low-return investment in the grid aren't taken into account and underinvestment prevails. Beacon Power provided an important service but it wasn't able to reap all of the benefits of its service to the network; under a regulated monopoly environment, the utility has the overall system in mind and can make those kinds of investments. In contrast, a merchant power environment places the responsibility of the grid on the transmission equipment owner itself, and often regulates the prices it can charge for transporting that power as well. Thus, a grid operator in a deregulated environment gets little revenue and has no incentive to invest in additional infrastructure in order to maximize returns from depreciated capital.

This highlights why I think the 90s-era deregulation blitz was penny-wise and pound-foolish. Sure we got lower electricity prices, but we also got Enron, and ten to fifteen years later a whole lot of crumbling infrastructure and transmission companies in need of government help just to maintain system usability, let alone large amounts of intermittent renewable capacity. It's a fundamental reflection of the "energy is a solved problem" attitude of the 90s that all people cared about was their price point, and not long-run investment.