August 08, 2006
Ethanol Seen As Cheaper Than Gasoline

An article in the Christian Science Monitor claims that ethanol cost less than half the price of gasoline to produce.

The economics make sense. Middle East tensions and other factors have pushed the oil price higher: In June it averaged $65 a barrel. At that price, it cost $2.20 to produce a gallon of gasoline - about $1.56 for the oil itself and 64 cents for refining costs, according to the federal Energy Information Administration.

By contrast, it costs just under $1 to produce a gallon of ethanol at current corn prices of about $2 a bushel, Professor Gallagher estimates. That means ethanol would continue to be profitable even if oil prices drop dramatically and corn prices increase, he says.

But a straight across dollars per gallon comparison between gasoline and ethanol is not a simple apples to apples comparison because ethanol has about two thirds the BTUs of energy per gallon of gasoline. Ethanol at $1 per gallon is therefore about equal to $1.50 per gallon gasoline. This makes it less convenient since it produces lower miles per gallon. Still, $1.50 per gallon is still less than $2.20 per gallon. But this suggests that as corn demand rises and corn prices rise the price gap may narrow - unless oil prices go higher still.

Getting back to the original article, corn ethanol does not scale.

But ethanol made from corn faces a supply problem. Even if the entire US corn crop were devoted to producing E85 (a blend of 85 percent ethanol and 15 percent gasoline), it would supply only about 12 percent of US needs, studies say.

More land can (and probably will) get put into production to grow corn. But the land currently in production can produce higher yields at lower cost than the additional land available for growing corn. Plus, we will pay in higher costs for corn and meat for food.

Biodiesel from soy and animal fats similarly hits scaling problems. The use of plant cellulose to create ethanol will eventually boost ethanol per acre of crops. Maybe that'll be able to scale far enough to replace most gasoline. But better batteries to enable fully electric cars looks much more attractive to me:

Using electricity to power vehicles is so efficient and cheap that, even if the juice flows from a mix of power plants including coal-fired boilers, it would still pollute less on a national basis than using gasoline, say Greene and others who have studied the issue.

Driving 20 to 40 miles a day on electricity stored in a modern lithium ion battery would be like driving on gasoline costing just 75 cents per gallon, Luft says.

We won't all have to walk to work in the future.

Elon Musk of Tesla Motors says that electricity generated from natural gas to charge car batteries delivers far greater efficiency of energy input to miles moved than even hybrid vehicles.

The H-System combined cycle generator from General Electric is 60% efficient in turning natural gas into electricity (Combined cycle is where the natural gas is burned to generate electricity and then the waste heat is used to create steam that powers a second generator). Natural gas recovery is 97.5% efficient, processing is also 97.5% efficient and then transmission efficiency over the electric grid is 92% on average. This gives us a well-to-electric-outlet efficiency of 97.5% x 97.5% x 60% x 92% = 52.5%.

Despite a body shape, tires and gearing aimed at high performance rather than peak efficiency, the Roadster requires 0.4 MJ per kilometer or, stated another way, will travel 2.53 km per mega-joule of electricity. The full cycle charge and discharge efficiency of the Tesla Roadster is 86%, which means that for every 100 MJ of electricity used to charge the battery, about 86 MJ reaches the motor.

Bringing the math together, we get the final figure of merit of 2.53 km/MJ x 86% x 52.5% = 1.14 km/MJ. Now let's now compare that to the Prius and a few other options normally considered energy efficient.

The fully considered well-to-wheel efficiency of a gasoline-powered car is equal to the energy content of gasoline (34.3 MJ/liter) plus the refinement & transportation losses (18.3%), multiplied by the miles per gallon or km per liter. The Prius at an EPA rated 55 mpg therefore has an energy efficiency of 0.56 km/MJ. This is actually an excellent number compared with a "normal" car like the Toyota Camry at 0.28 km/MJ.

The Tesla Roadster is not an apples-to-apples comparison to the Prius or Camry for passenger space, trunk space, or general comfort. On the other hand, it accelerates like a bat out of hell. But even if a fully electric full sized car had half of the efficiency of the Roadster it'd still

The Tesla Roadster weights 1140 kg (2508 lb). By contrast, the Toyota Prius weights 1325 kg (2921 lb). That is only 16% more. Though the Prius loses some efficiency as compared to the Roadster due to more wind drag. Still, when much lighter batteries become available if a pure electric Prius-like vehicle can get built with the same weight as the existing Prius then the effective fuel efficiency (using Musk's calculations above) could easily exceed the Prius's by 50% or more. Rumours about a 94 mpg Prius with lithium batteries by 2008 suggest that pure electric cars will have to compete against much tougher hybrid competition. High efficiency hybrids will be more convenient than pure electric cars, especially for road trips where long recharge time would slow travel.

Cellulosic technology will drive down the cost of biomass liquid fuels. Battery advances will both make hybrids more efficient and eventually enable the manufacture of high energy efficiency mass market electric vehicles. Pure electric vehicles will allow coal, nuclear, solar, wind, geothermal, and wave electricity to all compete to power vehicles. Given the increased competition and higher energy efficiency from these coming developments I expect the fuel cost per mile travelled to drop in coming years. Even if the price of oil continues to climb the price of oil will matter less for ground transportation.

Share |      Randall Parker, 2006 August 08 06:30 PM  Energy Biomass


Comments
Rick said at August 8, 2006 8:18 PM:

Here is the question I want answered: Is ethanol a net energy loser or not? Imagine a farm, farm equipment, and ethanol plant all powered by the crops grown on the farm. By the time you pay the energy inputs, how much is left? Is that enough to make a dent in our liquid fuel consumption? If so, why the hell are we subsidizing ethanol? If not, why are we paying billions to turn gold into lead? I may be naive, but I cannot imagine that there would be more than a 10% net energy return on this kind of enterprise.

Wolf-Dog said at August 8, 2006 9:46 PM:

We must note that besides burning coal, burning plants in these furnaces to spin turbines (to generate the electricity that will be used to charge car batteries) is a FAR more efficient way of obtaining energy from vegetables, instead of converting vegetables such as corn into ethanol.

I do not have the figures, but probably the final efficiency of burning the vegetables directly to generate electricity to charge car batteries, would probably be by an order of magnitude.

Wolf-Dog said at August 8, 2006 9:57 PM:

Randall Parker:
"High efficiency hybrids will be more convenient than pure electric cars, especially for road trips where long recharge time would slow travel."
---------------------------------------------------------------------------------------------------

The future nanotechnological lithium batteries are supposed to get recharged very quickly within a few minutes. These new batteries will be commonplace and in mass production at a low cost, long before 2010.

And note that Tesla Motors is already getting ready to reveal a 4-door sedan by 2008, in anticipation of better batteries.

I am more concerned about the tentacles of the oil companies that will sabotage progress, I am not worried about the lack of science.

rsilvetz said at August 9, 2006 6:33 AM:

Just to remind everyone: The energy markets suffer severe price distortion due to excessive regulations and controls. If we simply ignored the environmentalists and re-opened the continental shelves to oil+gas exploration we would be energy independent in 5 years flat at low, market clearing prices. All this political bs about alternative fuels also ignores the immense methane reserves all over the ocean floor.

Energy is a problem for one and only one reason: supply is constrained for political reasons.

Here's another proposal: Micro-solar. Every damn time folks want to deploy solar on a home, they do it big-style, cover the whole damn roof at egregious cost. Go small. Get enough solar panel up there to take care of the refrigerator, the tv, the pc and the air conditioner. Period. That's $600/yr electricity right there, but the panels to do it are about $1400 @ do-it-yourself. You are net positive in 2 yrs with 15-yr lifespan left on your solar.

Just my 2 cents.

Wolf-Dog said at August 9, 2006 9:07 AM:

"That's $600/yr electricity right there, but the panels to do it are about $1400 @ do-it-yourself. You are net positive in 2 yrs with 15-yr lifespan left on your solar."

But how exactly do the solar panels get degraded in 15 years? Do you think that solar panels can be built to last a lot longer? Can the solar panels get recycled when they are in mass production? If the whole world starts using solar panels, we have to calculate these issues...

Ivan Kirigin said at August 9, 2006 12:17 PM:

The price of corn and sugar could be _far_ lower if farm subsidies were eliminated and 3rd world nations started greater production. Those markets are artificially small because of US & CAP policies.

It would be great if the oil as a security threat issue could be mapped into making ethanol cheaper by reducing farm subsidies. The rates of poverty in the third world could also decrease -- which could _also_ be considered an anti-extremism/anti-terrorism policy.

Ivan Kirigin said at August 9, 2006 12:22 PM:

Wolf-Dog:
"I am more concerned about the tentacles of the oil companies that will sabotage progress"

Let me guess, you just watched "who killed the electric car".
Read this:
http://www.tcsdaily.com/article.aspx?id=062906B

Dave said at August 9, 2006 12:36 PM:

Ivan, the Africans setup a biofuels groups to get around the food restrictions of CAP, seems like a good idea.

http://english.aljazeera.net/NR/exeres/A0E08B63-0A3C-4FC6-92F1-BFD7F2D96096.htm

Dezakin said at August 9, 2006 1:19 PM:

"An article in the Christian Science Monitor claims that ethanol cost less than half the price of gasoline to produce."

Then they're wrong. Oil from saudi arabia costs about 2 to 5 dollers per barrel to produce. They're totally ignoring the demand pricing of oil. Just how much biodiesel can we supply? I guarantee the US cant make 20 million barrels per day of the stuff.

Biofuels are interesting for waste disposal; Otherwise they're pork givaways to farmers.

"Energy is a problem for one and only one reason: supply is constrained for political reasons."

Wowee. Someone missed econ 101. We have 85 million barrels per day of supply and for the first time in the last century 85 million barrels per day of demand. Energy is a problem because the developing world is really developing fast now and theres only so much oil that can be pumped. Infrastructure for producing energy takes years or decades to complete, and the hands holding the purse strings have been worried about demand dropping out from under them in a new asian financial crisis.

Randall Parker said at August 9, 2006 6:00 PM:

Dezakin,

Saudi production costs are irrelevant because the Saudis are either unwilling or unable to expand production. The market price of oil is the appropriate marker to compare ethanol against. Right now farmers and ethanol producers can scale up profitably because gasoline from oil costs so much more than ethanol.

Are these investors supposed to ignore that market signal just because Saudi production costs are so low? By that logic it also makes no sense to drill in deep water or on the north slope of Alaska. Both locales have higher production costs than the Saudis do.

Farm subsidies: Some of those subsidies are for not producing. Abolition of farm subsidies would not make corn uncompetitive for ethanol production.

Even if corn ethanol can't displace all oil whatever oil the ethanol does displace causes the price of oil to be lower than would otherwise be the case. Also, the money spent on farmers is money not sent abroad.

Corn production might be able to double or even triple at a cost of corn that would still allow corn ethanol to compete with gasoline. Cellulosic technologies will probably triple or quadruple the energy output per acre of crop as a larger percentage of each plant and more types of plants get used for biomass energy production.

As for 85 million barrels a day in demand: That's dependent on price. Another doubling in the price of oil would create a world economy where the demand would be far lower than 85 million barrels.

Dezakin said at August 9, 2006 6:31 PM:

"Saudi production costs are irrelevant because the Saudis are either unwilling or unable to expand production. The market price of oil is the appropriate marker to compare ethanol against."

No its not. The price of competing infrastructure is more appropriate. We can produce coal based synthetic fuels for 40 dollars per barrel or less, and far more of it than you can produce from biofuels.

"Right now farmers and ethanol producers can scale up profitably because gasoline from oil costs so much more than ethanol."

Without legislation I doubt it. Its a politically supported farce. From the article:

"By contrast, it costs just under $1 to produce a gallon of ethanol at current corn prices of about $2 a bushel, Professor Gallagher estimates."

Which may be from subsidized farms, corn waste, and not include other amortized costs. 'scaling up' may not produce such favorable economics; And lets not forget ethanol is not a perfect or even a good substitute for gasoline.

"Even if corn ethanol can't displace all oil whatever oil the ethanol does displace causes the price of oil to be lower than would otherwise be the case. Also, the money spent on farmers is money not sent abroad."

Money spent on farmers is money wasted on political protection rackets. Money sent abroad on a competitive market makes everyone richer.

"As for 85 million barrels a day in demand: That's dependent on price. Another doubling in the price of oil would create a world economy where the demand would be far lower than 85 million barrels."

Not even wrong. I was saying the price is high today because its demand driven rather than supply driven. For decades OPEC managed price by artificially restricting supply, and now they have the taps on full because the demand has outpaced their pricing targets. If we see another demand driven doubling in price in the next decade it will still consume 85 million barrels per day if not more.

Ethanol and biofuels have a part to play, but its not nearly as wide reaching as many believe. The danger from biofuels is simple corruption of good intentions with state sponsorship leading towards more pork politics. The farm lobby loves the idea.

rsilvetz said at August 9, 2006 9:16 PM:

Dezakin, I can tell by what you wrote that you missed the lecture on the differences between statics and dynamics and not only that, you seem to misunderstand market-clearing equilibriums and the effects of forced pricing.

The reason you have a ceiling of production where none should be is the reason I gave: political interference. Price escalation thru supply restriction is a government/force phenomenon and not a market phenomenon. It always pays to expand supply to get marginal income. Thus, in a normal market, supply is expanded to meet demand on a regular basis by the players involved. The fact that this IS NOT happening should give you severe pause and make you ask "why?". And that why takes the form of force of law, artificial restriction and regulation. In other words, it was obvious to every human in the oil game that hitting the xx-million barrel ceiling was inevitable in 2000-2010 ten years ago. They took no action. Why not? They were essentially prohibited from doing so. By whom? .gov. Period. End of story. Like the artifical crisis of the 1970's this is another artificial crisis that could be cleared up in record time by letting the reins lose and letting freedom reign.

Worldwide capacity against known reserves is so large there shouldn't even have been a blip. Add in real alternatives like the nuclear, continental shelves, shale oil, ocean-floor methane, windpower, tide power and solar, noone anywhere should be losing sleep. Instead everyone watches the prices and squeals "but it takes decades to bring an oil field online". Please... just throw out the enviromentalists, dereg refining, dereg exploration, dereg distribution and you won't know what to do with the oil.

YMMV.

Wacki said at August 9, 2006 9:57 PM:

There are a lot of people that think ethanol is a boondoggle. And frankly, I'm having a very hard time not believing them.

http://i-r-squared.blogspot.com/

summer zephyr said at August 9, 2006 11:12 PM:

It is interesting that the EIA predicted back in 1996 that world demand would *peak* at 74 million barrels in 2005 and then decline. That was when oil was going for under $20/barrel. Now, with prices 4 times as high, we consume 85 million barrels a day. So, this is the true peak, right?

There is no way to predict where either the price of oil or amount consumed will be in 2020 since new technologies, both in oil extraction and in alternative energy, will develop.

The fictitious energy crisis has been with us since 1973 and won't go away soon because journalists refues to take science or economics classes.

PacRim Jim said at August 9, 2006 11:32 PM:

If all you econannies would just remain home all day, we would save millions of barrels of oil every day. Think of Gaia. Think of the children.

Russ said at August 10, 2006 6:42 AM:

Sure, you got it, rsilvetz. I live in Texas. I'd **LOVE** to convert even 16 s.f. of my roof to doing something besides heating my house all summer. Where is this nifty solar that costs less than 2 grand and is dyi for a liberal arts grad?

Emma said at August 10, 2006 9:42 AM:

This could be a really stupid comment, but I'm only beginning to get into all of this information about fuel and all. I have a friend who altered his car to run on vegetable oil...is this similar to the way we could change a car to run on ethanol? Or, is this a completely different process, and something that would not be fathomable for large groups of people to use as fuel?

RueHaxo said at August 10, 2006 4:26 PM:

Emma, I believe cars can be converted to ethanol, but you'd need to modify the engine and other equipment a bit to cope with higher operating temperarures.
Take a look at this site
http://running_on_alcohol.tripod.com/
I don't use ethanol myself those, so I can't endorse anything the site says. Interesting reading though.

Franco said at August 10, 2006 5:45 PM:

When you consider that the massive yields of corn currently produced are a result of the use of Ammonium nitrate as a fertilizer, which is itself produced with the use of fossil fuels, and is responsible for the pollution of the water table and the massive deadzones in the lower Misssissippi, one has to reconsider the short term benefits of ethanol vs the long term reality of the oil-based energy supply chain.

In the very short term it may be an answer, but long term the human race needs to find a more sustainable and reliable energy supply chain.

dezakin said at August 10, 2006 6:10 PM:

"The reason you have a ceiling of production where none should be is the reason I gave: political interference. Price escalation thru supply restriction is a government/force phenomenon and not a market phenomenon. It always pays to expand supply to get marginal income."

It only pays to expand supply when you can acurately predict future prices; Otherwise today we would see rather large investment into coal liquefaction plants all over appelachia, but you dont because those who hold the purse strings worry about a collapse in demand. Sure it pays to expand supply where the cost of production is very low.

"Worldwide capacity against known reserves is so large there shouldn't even have been a blip. "

Cite. I'm familiar with known reserves.

I agree that government interference limits supply, but not to the extent you're suggesting. Your speach against the greenies strikes a chord, but they're not responsible for the lack of new oil infrastructure in the countries with the greatest reserves.

Randall Parker said at August 10, 2006 9:13 PM:

Franco,

I agree we better energy sources than corn. Once we can make cheap enough photovoltaics with high enough conversion efficiency then we'll be able to use a much smaller land area to generate electricity. Also, much of the used area will be on already existing buildings rather than on bare land.

Wolf-Dog said at August 10, 2006 10:46 PM:

"long term the human race needs to find a more sustainable and reliable energy supply chain."
-------------------------------------------------------------------------------------------

It seems that if we burn various vegetables in furnaces to produce electricity for charging electric vehicle batteries, then not only would this method would be almost 10 times more energy-efficient than converting vegetables into ethanol or even diesel fuel, but additionally, this would be self-sustaining, since the ash of the burned vegetables produced in the furnaces, can be used as fertilizer, which means that this vegetable cycle would be an indirect form of using solar energy.

Moreover, this method would be carbon-neutral, since the growing vegetables would absorb 100 % of the CO_2 that was created by their combustion (or rather their previous re-incarnation's combustion... but the word reincarnation would be incorrect in the case of vegetables, maybe we should say "reinvegetatition").

mox said at August 11, 2006 4:43 AM:

Does that $1 per gallon account for the government subsidies that ethanol producers receive? Likewise for cost of gasoline?

Dr. Steel said at August 15, 2006 5:41 AM:

Ivan:

"Let's go over this one more time, class: Range. Range is the problem. Electric cars do not have sufficient range to be the practical, versatile, every day car most people want."

The Saturn EV-1, even with it's limited range of 125 miles, had thousands of people on waiting lists for the thing.


"They don't have range because they operate on batteries -- those mysterious sealed devices that convert chemicals into stored electrical energy. And batteries can't store enough energy to keep an EV going more than 50 or 60 miles, or in rare cases (with experienced drivers and the latest and very expensive nickel-metal-hydride battery packs) 150 miles, before they have to be recharged."

To some of us batteries aren't mysterious. See the Tesla motors roadster for an example of an electric that gets over a 200 mile range. That's *not* using the most recent breakthroughs from Altairnano, A123 and the like. Expect that the range of Lithium-ion batteries (all produced of materials that do *not* have that "my laptop caught on fire!" business) will increase further while the recharge time will get to about 15 minutes...long enough for me to stop at a station, take a whizz and get a cup of coffee before continuing on. All of that using electricity that's much cheaper than $3.14 gas.


"Put it this way. I can drive my wife's big Lexus 55 miles on two gallons (about 16 pounds) of gasoline that cost me six bucks. An electric car like the one featured here could travel the same distance by exhausting its 1000-pound battery pack (lead-acid, costing $2000) which would then have to be recharged. The recharging would take about four hours. I could replace the two gallons of gasoline in about 30 seconds, but I wouldn't have to because my wife's car can easily go another 450 highway cruising miles on a tank of gas."

Even with this guy's lead-acid battery pack car, I and every dude I know where I work could commute home and back in that old-ass car. As for a car like the Tesla that gets over 200 miles? My freakin' 1998 Ford escort doesn't go much further than that on 1 tank of gas. Yeah, I drive an old-ass car, that's because I'm too poor to afford the big Lexus the author's wife drives.

Lean said at February 16, 2007 1:23 AM:

so is ethanol cheaper or not????????
----student anxiously waiting a respond :D-----

steve said at August 13, 2008 1:50 PM:

Are the new batteries capable of withstanding cold temp. That was one reason electric vehicles never caught on in the first place.Also there add weight.

if Ethanol could be mass produced and sold for just about $0.90 less than gassoline the loss in energy wouldn't matter
still think that a controlled enviroment to produce fuel would be for effient than trying to make cars or trucks ,ore effceint

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