April 24, 2010
Energy Research Spending Seen As Chump Change

Microsoft co-founder Bill Gates and former Dupont CEO Chad Holliday say we spend too little on energy R&D and energy is a big problem.

But our country is neglecting a field central to our national prospect and security: energy. Although the information technology and pharmaceutical industries spend 5 to 15 percent of their revenue on research and development each year, U.S. companies' spending on energy R&D has averaged only about one-quarter of 1 percent of revenue over the past 15 years.

And despite talk about the need for "21st-century" energy sources, federal spending on clean energy research -- less than $3 billion -- is also relatively small. Compare that with roughly $30 billion that the U.S. government annually spends on health research and $80 billion on defense research and development.

There are two problems here. One problem is the approach of Peak Oil, exacerbated by rapid industrialization in high population countries. The amount of extractable oil in the ground is finite and most oil producing countries have already peaked in production. Oil is hard to substitute for in transportation. I expect Peak Oil to cause an economic contraction that will last for several years until substitutes start to make a substantial difference.

The other potential problem is global warming. The time line for that is longer. In the next 20 years we'll feel the effects of Peak Oil much more severely than changes in climate. If Peak Coal comes sooner than expected (see Richard Heinberg's Blackout for an overview of pessimistic views on coal reserves) then global warming isn't going to become as important a political issue as Peak Oil. Though if James Hansen's more bleak assessment of climate sensitivity to CO2 levels (i.e. 350 ppm is allowable max) even the coal reserve estimates reported by Heinberg end up being too much if we want to avoid a big sea level rise.

I am more worried about Peak Oil. If push comes to shove we can always do climate engineering to cool the planet (admittedly that doesn't stop ocean acidification). But our dependence on oil amounts to an Achilles Heel for industrialized nations. Kicking that dependence is going to be painful.

Share |      Randall Parker, 2010 April 24 11:31 AM  Energy Policy


Comments
th said at April 24, 2010 4:39 PM:

parker, where on your list of priorities is spreading the wealth around. Let's see, big pensions, big govt payrolls, big benefits, big health care, you don't see that as a much bigger immediate problem to wealth destruction even as it unfolds right in front of all of us?

Randall Parker said at April 24, 2010 5:12 PM:

th, Are you asking me how important it is to use government to force the redistribution or are you asking me how important is it to stop the government from doing so much destructive redistribution?

All that stuff you list is small potatoes compared to what's going to happen when oil production drops year after year. All those big government programs will become far heavier a burden when government revenues shrink every year and outlays balloon. I am predicting sovereign debt crises in most Western countries, like Greece but without big daddy countries to do bail-outs.

Dan P said at April 24, 2010 10:35 PM:

Randall,

On R&D: I'd expect that IT and pharmaceuticals have much, much lower marginal costs of production than the energy industry; isn't comparing IT/pharmaceuticals research spend to that of energy industries based on proportion of revenues a real apples-and-oranges comparison? Also, R&D for a pharmaceutical company is analogous to exploration costs for an oil & gas company.

On peak oil: I'm far happier with markets determining the response (if necessary!) than with governments deciding what's best for everyone (or whatever special interest group fronts the most cash/votes). Unlike climate change, I see no reason why raw market forces aren't appropriate for peak oil.

Lastly, as a long time reader/first time poster, thanks for the effort you put in here; this is a fantastic blog!

Fat Man said at April 24, 2010 10:51 PM:

I have no idea if we really need more R&D. I tend to think our problems are not technical, but political. No one wants to bear the costs of new infrastructure, no matter what the benefits are. And by costs, I mean to include every inconvenience no matter how slight. The Kennedy family doesn't want to look at wind turbines on the horizon. New Yorkers don't want to bear the almost zero risk of keeping Indian Point open. Senator Feinstein doesn't want to spoil the desolate wilderness of the high desert with solar thermal plants. And Senator Reid will not countenance nuclear waste storage in the territory we used for nuclear weapons testing 60 years ago.

Well if the pooh-pooh is going to come down, we will all have to pay some costs. How about this for a deal: If New York wants to shut down Indian Point, fine, but they will not be permitted to import fossil fuels or electricity to make up for the lost ~15 TWh. Ditto on Massachusetts and the Nantucket wind farm. I'll bet that would change the politics.

AlanK said at April 25, 2010 10:07 AM:

The shame of it is that we have had a network of national energy laboratories available to do a lot of research on new sources of energy, but we have made inadequate use of them for decades. Presidents of both parties and various ideologies have found energy research unsexy and not very useful politically. So the national energy labs have scraped by with inadequate funding.

Market solutions usually are preferable, but they have a few obvious limitations here. One is that the markets don't look far enough forward. Investors tend to have horizons limited to maybe five years, while the peak oil problem is longer-term than that. (Or it has been. Estimates to time of peak vary, of course.) Venture capitalists have sprinkled a lot of money around, but they too have their time horizons, maybe a little longer than the standard investors but not greatly longer. And actually I suspect most of the venture capital really is for incremental advances, such as a nice little computer software program, that make no fundamental changes to anything at all.

Markets also tend to work by the unfortunate method of allowing prices to rise excessively, so that the higher prices incentivize development of alternatives, such as new energy sources. But the trouble is that high prices do a lot of damage to people and industries along the way, before the fundamental transition is accomplished. The good they stimulate does not necessarily justify the harm they cause. Energy, for example, is maybe a third of the cost of making steel, and about a third of the cost of making aluminum, and a large basic cost for metal product fabrication, chemicals, paper, glass, agriculture. Want to see a lot more U.S. jobs die? Just watch energy prices rise. (Or drive them up with taxes.)

We should be turning our national energy labs into R&D crown jewels. Make them the envy of the world. Use many of those partnerships with industry that are called cooperative research and development agreements. That is the positive way to approach both the peak oil AND the climate change subjects. The cost could practically be lost in the background noise of our federal budgets. (And no, I don't work for an energy lab, though on occasion I've written about them.)

Randall Parker said at April 25, 2010 4:20 PM:

Dan P,

But there's a big overlap between what to do for Peak Oil and what to do for Global Warming.

As for the markets: Humans have discount rates that are too high. This is the result of evolution. We are not adapted to deal rationally with longer time lines. To put it another (and more understandable) way: Our time preferences are very short term. One can see this with credit card debt. The average American household has over $7k of credit card debt. Why? The desire to get goods now is so strong that people will pay the high interest and have less in the long run.

It is this cognitive bias for the short term that makes me expect markets to fail in preparing for Peak Oil. In fact, the markets are obviously failing right now.

Government policies have been extremely productive in changing time preferences with energy efficiency policies. Watch David Goldstein's lecture that I link to there. Very impressive results. We are all wealthier and breathe cleaner air as a result.

AlanK,

Agreed about time horizons. I see this as one of several reasons for government funded energy R&D. Another big reason: Fossil fuels have big external costs that aren't reflected in their prices. Given the power of the lobbies for coal, oil, and natural gas I do no expect their external costs to show up in prices any time soon.

Nick G said at April 25, 2010 5:52 PM:

I agree that more energy R&D would pay very big dividends.

I agree that we already have good-enough energy tech to replace our current FF-based industries, and that political resistance from the current FF-based industries is the major problem.

A note: Heinberg assumes that environmental problems will prevent the use of most of our coal reserves - see the bottom of page 47 and the top of page 48. It seems clear to me that no one will allow the lights to go out while there is still coal available, and there are enormous amounts of coal available. This says to me that peak energy isn't a realistic possibility: our problems are Peak Oil and Climate Change, but not Peak Energy.

Randall Parker said at April 25, 2010 8:47 PM:

Nick,

Pages 47 and 48 are in the chapter on the United States. My guess our Peak Fossil Fuels isn't as bad as it is for most of the world. Peak Coal for the world is still not clear to me.

If Peak Fossil Fuels isn't far away then I'm concerned about EROEI of alternatives. Jeff Vail captures the essence of the problem:

At the end of 2008, global (nameplate) wind generation capacity was 121 GW.  That works out to roughly 42 GW-years of total global wind generation, of which 35 GW, or about 12 GW-years of wind generation was added in 2008.  Combining solar and wind, we added about 13 GW-years of renewable generation capacity in 2008.  That's a bit over 10% of the rate at which we'll need to add new renewable capacity each year just to compensate for a 5% global oil production decline rate (not to mention future natural gas decline, coal decline, etc.).  There are two take-aways from this:  1) the current rate at which we are increasing renewable energy generation is an order of magnitude lower than that necessary to mitigate peak oil, and 2) the amount of energy invested in renewable energy projects at present does not pose the kind of energy drain that will be presented by investment sufficient to mitigate peak oil.

On this last point, mitigating a decline of 4.4 million barrels of oil per day each year with new renewable generation capacity will impose a significant up-front energy cost.  If the energy payback time is 1 year for the mitigating renewable source, and this represents a 90% increase in current renewable energy investment, then we need to invest the equivalent of an additional 3.96 million barrels of oil each day to facilitate the transition.  That's like adding another half of China to global demand, and that 1-year payback time assumes an EROEI of 40:1 on a 40-year generating life.  If the energy payback time is 2 years (or a 20:1 EROEI) then you can add another full China to global demand.  If it's 10 years (an EROEi of 4:1), then go ahead and add 5 Chinas.  You can see where this is going--getting an accurate measure of EROEI, and properly understanding the mechanics of scalability, are critical before we can determine if it's possible to mitigate peak oil with renewables...

Also, if we constrain ourselves on coal due to climate change we end up hitting the renewables and nuclear EROEI problem in a big hurry. With nuclear even a moderately high EROEI isn't as good as it looks because the payback period is so long.

xxd said at April 26, 2010 9:10 AM:

Randall Parker,

You're making the same mistake that many on the doom side of the camp make.

For each five million barrels of oil we only need to replace between one and two and a half million barrels.

Why?

Because electric transport is 2X to 4X as efficient well to wheel as compared with oil based infrastructure.

And before you say peak oil isn't just a transport problem: YES it is.
There are substitutes for everything else except transport.

Nick G said at April 26, 2010 4:00 PM:

My guess our Peak Fossil Fuels isn't as bad as it is for most of the world. Peak Coal for the world is still not clear to me.

It looks to me like the US, UK, Europe and Australia still have enormous amounts of coal. The real question: China. Will they run out, and if so will others (esp Australia) sell to them? I don't think any country will choose to allow significant economic damage due to electricity shortage while there is enough domestic coal to prevent it (nor should they, though of course the coal should be mainly used to build renewable replacements...). OTOH, exporting coal in the presence of AGW is a whole nother question. On the 3rd hand, stopping critical energy exports is the traditional way to start a shooting war...

More later on Jeff Vail...

Randall Parker said at April 26, 2010 5:57 PM:

xxd,

I've always argued that Peak Oil is primarily a transport problem. Though there are substantial costs for substituting away from it in all areas of its usage. Dupont and Dow still use it as chemical feedstock to make plastics, glues, etc because it is still cheaper than alternatives. Migration to alternatives will raise prices and therefore lower living standards.

Electric transport: It costs more and will take a long time to phase in. The US has about 250 million registered vehicles. Currently we are buying about 10 million per year. Mass market electric car production is just starting. Most people who drive a car can't afford to buy a new one.

Also, trucks use about 2.5 million barrels of oil per day in the US (as compared to about 220,000 barrels per day used by trains). We can shift some of that over to rail and the electrify rail. But what percentage of all truck shipping can be shifted to rail and at what cost and with what lag time?

Robert Hirsch thinks the amount of time it takes to do the transition is what is going to cause a long deep recession. Nick G is much more optimstic on this score.

Nick G,

Hey optimist. ;>

Of course Australia will sell coal to China. In such a scenario Australia would be faced with high prices offered by ravenous growing power. Why would they say no?

AGW: The Chinese will offer to emit enough silicon dioxide to cool off the planet. The cost for them will be chump change. Sell us coal and we'll keep you from being flooded by rising sea levels.

On the bright side, China's not infected by our NIMBY disease. Once they decide that coal supply is a problem they'll make hundreds of nuclear reactors. At some point they'll ramp up to the point where they are starting construction on a new nuke plant every week. But nukes take years to build and take a lot of energy in their construction.

Nick G said at April 27, 2010 11:37 AM:

Dupont and Dow still use it as chemical feedstock to make plastics, glues, etc because it is still cheaper than alternatives. Migration to alternatives will raise prices and therefore lower living standards.

Yes, but how much? There is a basic paradigm that's useful here: "viability" vs "competitiveness". In most industries a very small cost difference can make you uncompetitive. That means that slightly higher cost solutions will be avoided, which can give the impression that those solutions are higher cost than they are. OTOH, if changes in the business environment (or natural environment!) change the costs of alternatives for everyone, suddenly alternatives can become acceptable in that industry.

So, for instance, recycled materials are in general slightly more expensive than virgin materials, plastic included. But, if oil becomes more expensive then recycled materials may suddenly become the standard. If something can be recycled with only 10% loss at each generation, that can reduce the consumption of virgin materials by 90%, with only a very small additional cost for the industry.

Electric transport: It costs more

Once EVs hit large production volumes, I'd estimate that their lifecycle costs won't be higher than those of ICE vehicles.

The US has about 250 million registered vehicles.

IIRC, 230M are light vehicles - the rest are motorcycles, and other smaller categories.

Currently we are buying about 10 million per year.

That's recovered to 12M, lately.

Most people who drive a car can't afford to buy a new one.

50% of vehicle miles come from vehicles less than 6 years old. That's not bad.

what percentage of all truck shipping can be shifted to rail and at what cost and with what lag time?

I guess the real question is what % is long-haul trucking that can go to inter-modal. That can be done relatively quickly (leaving a lot of bankrupt trucking companies and unemployed drivers, of course). I would guess that 75% is long-haul. Most of the rest can go to local plug-in trucks, but of course those will take a long time to phase in.

Re: China: they have a pretty good wind resource, and wind can be built quickly.

Re Vail: He does underestimate the efficiency of electricity: the current annual rate of wind installations in the US could power 230M EVs over 28 years - if you expected to transition in 14 years, you'd only need to double the current rate of wind installation. He also underestimates how easily renewable power developers can out-bid other users for energy, especially personal transportation. Personal transportation accounts for 45% of oil use in the US, and could be cut in half in months, if that was really essential.

Nick G said at April 27, 2010 3:28 PM:

Randall,

Hirsch is a flake. He thinks because there was an historic 1:1 correlation between oil and GDP that changes in oil consumption caused changes in GDP, when it's the other way around. He thinks that because that correlation has weakened lately to something like 1:2.5 (oil consumption has been growing much more slowly than GPD) that this suggests that the causal relationship now is 2.5x as strong!!! IOW, small amounts of the magic oil are needed for economic growth, so if the oil is taken away, that will cause disaster.

It's easy to falsify this kind of argument: in the US, oil consumption fell by 19% from 1978 to 1983, and yet GDP grew slightly. Similarly, world oil consumption was flat 2004-2008, but GDP growth was quite strong, stronger than for the US (which itself grew 8% 2005-2008, with flat oil consumption). Oil consumption in the US fell much faster in 2008 and 2009 than GDP. Lately, in the 4th quarter of 2009, US oil consumption continued to fall by 1.1% over the previous quarter, while GDP grew by 5.8%.

xxd said at April 27, 2010 6:00 PM:

Randall,

Thanks for the reasonable response.

"I've always argued that Peak Oil is primarily a transport problem. Though there are substantial costs for substituting away from it in all areas of its usage. Dupont and Dow still use it as chemical feedstock to make plastics, glues, etc because it is still cheaper than alternatives."

Agreed.

"Migration to alternatives will raise prices and therefore lower living standards."
Not necessarily. There is a large amount of waste in the system because we have been on the upslope of hubbert's curve for the last 100 years. On the downside there will be terrific pressure for the most efficient use of resources. Model societies already exist that are based on electric transportation. Oslo is a prime example of this.

"Electric transport: It costs more and will take a long time to phase in."
It currently costs more in upfront costs yes, but this can be handled by a different pricing model such as that suggested by project better place. The TCO of an electric vehicle is already lower than that of an equivalent ICE vehicle at least in the light duty truck sector as per the data from Smith Electric Vehicles. As for a long phase in, it doesn't really matter. What we need is a replacement in utility equivalent to the loss in utility we will have as oil production depletes. If we lose ten million ICE vehicles a year from the North American fleet but this is replaced by five million people using mass transit and five million people using electric vehicles then we may see ever diminishing price shocks for the remaining ICE fleet.

[quote]
Also, trucks use about 2.5 million barrels of oil per day in the US (as compared to about 220,000 barrels per day used by trains). We can shift some of that over to rail and the electrify rail. But what percentage of all truck shipping can be shifted to rail and at what cost and with what lag time?
[/quote]
Ironically, this is the easiest part of the puzzle. How much of that 2.5 million barrels per day are on medium or light duty? The numbers I have seen indicate around 40% with the rest being heavy duty cycle trucks. If we can replace half of the heavy duty cycle with some kind intermodal roll-on-roll-off containerized system like they have in Scandinavia then we could go a long ways to replacement by using medium and light duty electric trucks and vans for local delivery combined with natural gas or coal-to-liquids powered heavy duty for those applications that absolutely require heavy duty trucks.

I think peak oil is challenging but doable.

Randall Parker said at April 27, 2010 10:58 PM:

xxd,

My argument for lower living standards due to Peak Oil:

- Huge amounts of existing capital get written down due to dependence on oil to operate it. Airplanes, bulldozers, water pumps (big diesel guzzlers in agriculture), cars, trucks, farming tractors, and other equipment becomes worthless. That generates huge costs for replacement equipment.

- The replacement equipment will cost more on average and will require more infrastructure (e.g. electric power running where it does not currently run) than currently exists.

- The remaining oil will have lower Energy Return On Energy Invested (EROEI). So we will need to divert more energy toward extracting the remaining oil while we simultaneously divert more energy toward creating the new electric-based economy. That leaves less energy for consumer products and daily life.

Nick G said at April 28, 2010 9:25 AM:

Huge amounts of existing capital get written down due to dependence on oil to operate it.

This depends on the pace of replacement. Light vehicles use 45% of oil, so that's the big item. 50% of light vehicle miles traveled come from vehicles less than 6 years old. That's a pretty fast pace of replacement. If we replace on the basis of attrition, there's no additional cost from obsolescence.

bulldozers, water pumps (big diesel guzzlers in agriculture), farming tractors, and other equipment becomes worthless.

These are used for very long times. OTOH, they don't use a very small % of oil. They'll outbid other users, especially light vehicles, and stay in use for a very long time.

trucks

Here, the cost of replacement with rail is substantial. OTOH, the total cost of operation of rail at $80 oil is lower than it is for trucking. Capital expenditures will rise, but operating costs will fall, especially oil imports which leave the country and therefore don't circulate in the US. That's a net benefit over the status quo.

Airplanes

Certainly new planes are more efficient, so capex to replace planes will go up somewhat. OTOH, there are other ways to reduce fuel costs (longer descents, reduced time in the air waiting to land, electric "tugs" on the ground). Fares will go up and outbid light ground vehicle consumption. Ridership will go down slightly. I don't see dramatic short-term changes.

The replacement equipment will cost more on average

Again, total cost of ownership won't rise.

and will require more infrastructure (e.g. electric power running where it does not currently run) than currently exists.

That doesn't look large to me. Most drivers can charge at home, and they will be the early-adopters. The cost of public charging stations isn't that large, and can be spread over many years.

we will need to divert more energy toward extracting the remaining oil

Some. If 3% of all employees in the US are doing drilling, that might rise to 4%. That would reduce GDP by roughly 1%. OTOH, that reduction will happen over several years, so it's not big.

Don't forget: right now the US's economy is underutilized. Any increase in production of capital goods, and in general increases in employment will increase overall income. If the new production doesn't contribute net value because of falling net E-ROI, it still doesn't reduce overall real income. Only when the economy gets to the point of full employment and full utilization of capital equipment would it be realistic to say that we are losing income due to these new activities (FF, renewable and EV investments).

Nick G said at April 28, 2010 10:59 AM:

I was interested to find out that an Airbus 380 has a max capacity of 853 pax, and uses 81,890 gallons to fly 9,400 miles, for 8.7 gallons/mile and @90% utilization = .0113 gallons/pax mile or 88MPG.

http://en.wikipedia.org/wiki/Airbus_A380

th said at April 28, 2010 3:46 PM:

parker, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.htmarker I bet the US has made it into the top 25 by now, look at all the brilliant western democracies and what their bagdad bob approach to everything has gotten them.

Chris T said at April 30, 2010 4:26 PM:

People here are overlooking natural gas, existing vehicles can be converted to it and a large scale distribution network already exists in the form of pipelines. Electric vehicles are good for short range travel at this time (what most people do on a day to day basis), but NG beats it out for long range.

Nick G said at May 1, 2010 3:19 PM:

And, yet, the conversion from gasoline to NG isn't really happening very much. From what I can see of the behaviour of vehicle fleet managers, they aren't very interested.

Why is that, do you think?

Chris T said at May 3, 2010 11:46 AM:

It was only recently that natural gas was even a potential economically viable alternative. The actual ability to transfer natural gas to a vehicle doesn't exist on a large scale yet.

Electric is attractive for short range applications, but is hampered by long recharge times currently. The other problem with a large scale conversion of the fleet to electric is the requirement for a massive expansion of the energy grid.

The infrastructure costs for either one are not trivial, but must eventually be borne.

Nick G said at May 3, 2010 12:01 PM:

It was only recently that natural gas was even a potential economically viable alternative.

NG has been substantially cheaper than oil/gasoline for a very long time.

The actual ability to transfer natural gas to a vehicle doesn't exist on a large scale yet.

So, fueling infrastructure is the big barrier? That doesn't explain why large fleet users aren't using it.

Electric is attractive for short range applications, but is hampered by long recharge times currently.

EVs with onboard generators like the Chevy Volt, and plug-ins like the Prius plugin, are effective solutions.

The other problem with a large scale conversion of the fleet to electric is the requirement for a massive expansion of the energy grid.

Not really. Most charging would happen at night, when the grid is underutilized. Very little expansion of the grid would be needed.

Nick G said at May 3, 2010 12:05 PM:

Chris T,

You're right on one point: oil has been dirt cheap until recently, so really no alternative was worth thinking about, at least as far as most people were concerned. My problem: I still see very, very little interest from vehicle fleet managers. So, what are the practical barriers?

Chris T said at May 3, 2010 2:49 PM:

"NG has been substantially cheaper than oil/gasoline for a very long time."

Not really, a 6:1 ratio in price between Oil and NG is considered parity based on BTU content. Through the 90's to about the mid-'00s the ratio was fairly variable and above 6:1, but occasionally dipped below parity in favor of oil. Combined with the lack of infrastructure and high up front cost of switching, there was no good justification for switching based on price and expected volatility. During the last major NG conversion boom in the early '80s (mostly non-transport), the ratio was more like 20:1. It is currently 22:1 according to current commodity prices.

http://www.cxoadvisory.com/commodity-futures/crude-oil-and-natural-gas-prices-reliably-intertwined/

"So, fueling infrastructure is the big barrier? That doesn't explain why large fleet users aren't using it."

The cost advantages have only really shown up in the last year or so. Fleet owners may not trust that the price ratio will stay high enough to justify it right now (large companies tend to be risk averse if they can help it). If it remains low or if it proves successful for others (ie: municipalities), you'll likely see a pick up in interest.

"EVs with onboard generators like the Chevy Volt, and plug-ins like the Prius plugin, are effective solutions."

Except it still makes long range trips rather problematic and the Volt doesn't completely eliminate the requirement for gas. People may mostly use their cars for short range travel, but they do occasionally like to go for long trips and many may not want to maintain two vehicles.

Electrification also won't work at all for freight vehicles, which are the most important vehicles to get off of oil.

"Not really. Most charging would happen at night, when the grid is underutilized. Very little expansion of the grid would be needed."

One would hope, but it can't really be counted on. Power demands are not flat throughout the year and power companies are going to want to avoid brownouts like the plague, especially on particularly hot nights (telling everyone to not plug in their cars is not likely to work). A large amount of capacity expansion is inevitable if EVs come into widespread use. Some of this will be in the form of windmills and solar, but most of it will be drawn from conventional sources, including NG.

This brings up another problem, efficiency. A lot of the existing peak infrastructure is in the form of NG plants. A disadvantage of using EV when compared to on-board vehicle NG conversion is the inevitable transmission losses and therefore higher energy prices.

EVs have a bright future and will certainly be part of the mix that we turn to as we give up oil, but it would be a mistake to dismiss natural gas. As ever, human ingenuity will decide what the best approach is.

Chris T said at May 3, 2010 3:04 PM:

Nick - In answer to your last question, I would guess that the reasons for the lack of uptake by fleet owners are a combination of the recent nature of NG competitiveness, historical price volatility, lack of existing infrastructure, and little experience anywhere else to examine.

Nick G said at May 3, 2010 3:28 PM:

Chris T,

Thanks for the info. I agree - it's too soon for people to trust that oil prices will stay high, NG prices will stay low, and that the investments will pay off.

Now, a few quibbling details:

Except it still makes long range trips rather problematic and the Volt doesn't completely eliminate the requirement for gas. People may mostly use their cars for short range travel, but they do occasionally like to go for long trips and many may not want to maintain two vehicles.

An EREV with 40 mile electric range reduces fuel consumption by 90%, to an average of about 1 gallon every 230 miles. I'd say that's good enough.

Electrification also won't work at all for freight vehicles, which are the most important vehicles to get off of oil.

It will work well for rail. It's pretty straightforward to move from long-haul trucking to intermodal rail. Of course, NG may work reasonably well for long-haul trucking, so there's not reason not to do both.

telling everyone to not plug in their cars is not likely to work

Actually, you just need to charge more for peak periods. Think how well this works for cell phones.

A large amount of capacity expansion is inevitable if EVs come into widespread use. Some of this will be in the form of windmills and solar, but most of it will be drawn from conventional sources, including NG.

Very little grid expansion would be needed. Now, we may well build more conventional generation, but EREV/EVs will provide demand when wind needs it, at night. Plus, dynamic EREV/EV charging will help deal with wind intermittency.

inevitable transmission losses

Only 7%, which really isn't a big deal.

Chris T said at May 3, 2010 4:52 PM:

"An EREV with 40 mile electric range reduces fuel consumption by 90%, to an average of about 1 gallon every 230 miles. I'd say that's good enough."

I would agree, but NG could fill this role as well. If NG comes into widespread use, it might wind up making more sense just to just buy a NG vehicle rather than investing in an EV since it can handle the typical short range and occasional extreme long range trips.

"Very little grid expansion would be needed. Now, we may well build more conventional generation, but EREV/EVs will provide demand when wind needs it, at night. Plus, dynamic EREV/EV charging will help deal with wind intermittency."

Hot nights often come with little wind movement. The first time a brownout 'kills grandma' and generates bad press and litigation, utilities across the country are going to go nuts with infrastructure expansion. The scenario you want is ideal, but it also requires ideal human behavior that I don't think is likely to happen.

"It will work well for rail. It's pretty straightforward to move from long-haul trucking to intermodal rail. Of course, NG may work reasonably well for long-haul trucking, so there's not reason not to do both."

Rail already accounts for 42%* of US freight haulage. Trucks offer flexibility that trains lack, as the amount of freight they have to carry to be economic is fairly large and they have to adhere to set schedules. Quite a few companies rely on the flexibility of trucks to be competitive (Fedex and UPS come to mind). Trains are also restricted in the terrain they can traverse, since every 1% increase in grade halves the load they can carry.** Maglevs are a possible answer to this, but seem to be the transportation equivalent of fusion. As you say though there is no reason to do both. It's just that trucking will result in NG infrastructure being set up and a concurrent rise in the economic attractiveness of NG light vehicles.

*http://www.nationalatlas.gov/articles/transportation/a_freightrr.html
**http://en.wikipedia.org/wiki/Grade_%28slope%29#Railways

"Actually, you just need to charge more for peak periods. Think how well this works for cell phones."

True, but vehicles are less likely to allow much flexibility here (what happens when you have an emergency in the middle of the night and can't charge?).

"Only 7%, which really isn't a big deal."

It's huge on the scales we're talking about. American power production was 4.1 terawatt hours in 2007*; 7% of that is 287 gigawatt hours, enough to meet the projected consumption of Australia and New Zealand combined in 2010**!

*http://www.eia.doe.gov/cneaf/electricity/epa/epates.html
**http://www.eia.doe.gov/cneaf/nuclear/page/forecast/elec.html

Randall Parker said at May 3, 2010 8:19 PM:

Chris T,

If memory serves then natural gas for a long time traded at 70% of oil's price when adjusted for BTU content. That gap was not large enough to cause a big shift to natural gas given the downsides of natural gas and cost of conversion. Current prices mark a departure from the long term trend. Whether this departure from trend will continue is not clear to me. Henry Groppe expects natural gas prices to double.

Since a barrel of oil contains 5.8 million BTU you can convert to a 1 million BTU equivalent by dividing oil's price by 5.8. If you do that with $85 per barrel oil you get $14.6. So at today's prices for natural gas oil costs over 3 times as much per million BTU.

One item that holds up vehicle NG conversions in the aftermarket is the EPA's insistence that converted vehicles be recertified on emissions. Each make/model/year vehicle would have to have one of it converted to NG and run thru EPA's certification process. This has been done for only a few vehicles by some aftermarket conversion companies.

Honda offers some NG vehicles and people aren't flocking to those vehicles. Honda even put the Phill natural gas compressor home fill station company into bankruptcy for liquidation. So it is even harder to switch to natural gas now. Of course, given large enough financial incentives this could change. But so far the price of oil isn't high enough to incentivize this change.

Chris T said at May 4, 2010 9:06 AM:

"Whether this departure from trend will continue is not clear to me. Henry Groppe expects natural gas prices to double."

Yeah, I figure NG prices need to stay low versus oil for an extended period of time (a couple years) before we see any real movement. Investors hate uncertainty, and the energy markets are highly uncertain right now.

"But so far the price of oil isn't high enough to incentivize this change."

Currently the oil/gas ratio is about where it was in the late 70's and early 80's, the last major NG boom. However, it has only been there for a few months, not nearly enough time to inspire confidence in investors or vehicle owners. I expect we'll see coal to NG conversion first.

I was just trying to point out that focusing on EVs doesn't necessarily make sense versus other alternatives when you consider all of the economics and other considerations. An oil replacement(s) will be selected, but it will be based on economics and consumer preferences, not what we wish people adopted.

Chris T said at May 4, 2010 9:11 AM:

Coal to NG power plant conversion, not coal gasification.

Nick G said at May 4, 2010 10:08 AM:

Chris T,

a NG vehicle...can handle the typical short range and occasional extreme long range trips.

What's the state of the art in NG storage? I have the impression that CNG requires large tanks reduce interior space or limit vehicle range.

Hot nights often come with little wind movement.

Have you seen data? I'd be interested in seeing that.

The first time a brownout 'kills grandma' and generates bad press and litigation, utilities across the country are going to go nuts with infrastructure expansion.

1) The current grid has brownouts. That seems to be holding wind power to a higher standard, and 2) wind power variance isn't that hard to handle, with geographic dispersion and demand side management. EV's will help with DSM a great deal.

The scenario you want is ideal, but it also requires ideal human behavior that I don't think is likely to happen.

I'm not sure what you mean. Is there any question that cell phone pricing strongly controls calling behavior?

Quite a few companies rely on the flexibility of trucks to be competitive (Fedex and UPS come to mind).

Sure. OTOH, when they built their business models, fuel was much cheaper. Now, they're moving to intermodal shipping, at least to some extent.

Trains are also restricted in the terrain they can traverse, since every 1% increase in grade halves the load they can carry

I'm not aware that this is a barrier to rail shipping these days. Are you sure this is a problem?

Alan Drake, a strong rail advocate, feels that almost all shipping that goes via long-haul trucks could go by rail. Do you have any other info on the barriers to moving from trucks to rail? I'd be very interested. Alan will tell you that I have no hesitation to criticize rail if I see a problem there. Heck, I have no hesitation criticising just about anything where I see a problem - no sacred cows here.

Actually, you just need to charge more for peak periods. Think how well this works for cell phones." - True, but vehicles are less likely to allow much flexibility here (what happens when you have an emergency in the middle of the night and can't charge?).

That's the value of Extended Range EVs and Plug-in hybrids: there's no fear of running out of power. I think EREVs will be the dominant form of EV for quite a while.

"Only 7%, which really isn't a big deal." - It's huge on the scales we're talking about. American power production was 4.1 terawatt hours in 2007*; 7% of that is 287 gigawatt hours, enough to meet the projected consumption of Australia and New Zealand combined in 2010

You can't really compare in that way. You have to compare the generator-to-wheels efficiency of electric drive to NG drive. I think you'll find that using NG in a central generation plant is far more efficient: the central plant is roughly twice as efficient as the NG-powered ICE light vehicle, and the 7% loss doesn't change that much.

Chris T said at May 4, 2010 3:55 PM:

"What's the state of the art in NG storage? I have the impression that CNG requires large tanks reduce interior space or limit vehicle range."

They do, which means you'd have to trade range for a smaller tank. This is less of an issue for trucks of course. The advantage is, if a large scale fueling system gets set up for trucks, then NG cars also have a place to refuel. The range issue becomes less of a problem, especially if it's combined with hybrid technology.

'Hot nights often come with little wind movement.'

"Have you seen data? I'd be interested in seeing that."

They're actually independent. I was making the point that having little wind at a peak time would be rather bad if you were reliant on it.

"1) The current grid has brownouts. That seems to be holding wind power to a higher standard,"

Indeed it does, and sometimes power companies get sued over them:

http://www.naplesnews.com/news/2010/jan/13/south-florida-homeowners-sue-fpl-over-cold-spell-o/

Wind will be singled out if the reason for a power failure was a lack of wind speed.

"and 2) wind power variance isn't that hard to handle, with geographic dispersion and demand side management. EV's will help with DSM a great deal."

I have no doubt such a system could be set up, I only question whether or not the price and trade-offs will be judged worth it when alternatives are considered.

"I'm not sure what you mean. Is there any question that cell phone pricing strongly controls calling behavior?"

None, however transportation needs may be more inflexible (keep in mind businesses will have to account for this too). If there are alternatives, consumers may will opt for the more flexible system rather than make behavioral changes.

"I'm not aware that this is a barrier to rail shipping these days. Are you sure this is a problem?"

Oh yes, unfortunately physics puts fundamental limits on conventional rail. The Wikipedia entry I linked to lists only ten railways with grades exceeding 3.7% in the world. American highways can go up to 6%.*

*http://www.interstate-guide.com/interstate.html

"Alan Drake, a strong rail advocate, feels that almost all shipping that goes via long-haul trucks could go by rail. Do you have any other info on the barriers to moving from trucks to rail? I'd be very interested. Alan will tell you that I have no hesitation to criticize rail if I see a problem there. Heck, I have no hesitation criticising just about anything where I see a problem - no sacred cows here."

At this time, mostly infrastructure setup costs and physical limitations on where you can run a rail. How much rail is favored over trucks will be determined on how readily trucks can be moved to a new fuel source. If NG proves competitive as a fuel, trucking may continue to be seen as better than running more trains.

"That's the value of Extended Range EVs and Plug-in hybrids: there's no fear of running out of power. I think EREVs will be the dominant form of EV for quite a while."

Which could use NG instead of gasoline for the generator.

"You can't really compare in that way. You have to compare the generator-to-wheels efficiency of electric drive to NG drive. I think you'll find that using NG in a central generation plant is far more efficient: the central plant is roughly twice as efficient as the NG-powered ICE light vehicle, and the 7% loss doesn't change that much."

Do you know of any comparisons, I couldn't find any.

Nick G said at May 5, 2010 4:11 PM:

CNG requires large tanks reduce interior space or limit vehicle range." - They do, which means you'd have to trade range for a smaller tank. This is less of an issue for trucks of course.

Any idea how much space tanks would actually take up? Have any semi conversions actually been done?

The range issue becomes less of a problem, especially if it's combined with hybrid technology.

Once you've gone hybrid-electric, you're most of the way to an EREV. The question becomes: convert to a new fuel system, or expand the battery and downsize the ICE? I suspect the simpler choice is expand the electrical drive train. After all, that's the long-term end-point in any case. NG seems like a bit of detour.

Indeed it does, and sometimes power companies get sued over them:

FPL called the suit frivolous, and it probably was. Anybody can sue - the question is, what happened to the lawsuit? More importantly, windpower won't cause blackouts if properly managed.

and 2) wind power variance isn't that hard to handle, with geographic dispersion and demand side management. EV's will help with DSM a great deal." - I have no doubt such a system could be set up, I only question whether or not the price and trade-offs will be judged worth it when alternatives are considered.

The price is very, very low. Geographical dipersion is free up to a certain point, and long-distance transmission is relatively inexpensive for the benefits (it benefits conventional generation as well).

"I'm not sure what you mean. Is there any question that cell phone pricing strongly controls calling behavior?" - None, however transportation needs may be more inflexible (keep in mind businesses will have to account for this too). If there are alternatives, consumers may will opt for the more flexible system rather than make behavioral changes.

Again, I'm not sure what you mean. DSM is used across the country right now. It works beautifully. It can generally be made completely invisible to home-owners.

physics puts fundamental limits on conventional rail.

That's theoretical. What practical problems does it cause?

At this time, mostly infrastructure setup costs and physical limitations on where you can run a rail.

Again, that's general - have you seen specifics? As I understand it, expanding rail typically involves adding a 2nd track next to an existing one. There's no need for additional Right of Way, and the costs are reasonable.

EREVs will be the dominant form of EV for quite a while." - Which could use NG instead of gasoline for the generator.

That's possible, but very unlikely. An EREV like the Volt only uses 10% as much fuel as the average car. That means that the value of using standardized, off-the-shelf ICEs far outweighs additional fuel savings.

Do you know of any comparisons, I couldn't find any.

The comparison is easy: ICEs run about 10-30% efficient, and central utilities run 30-60% efficient. The difference overwhelms any transmission losses. Not to mention, that the efficiency costs of compressing NG have to be included.

Chris T said at May 6, 2010 10:16 AM:

I can't find anything on semi NG tank sizes. I was assuming that given trucks much larger size, it would be less of an issue finding places to put a tank.

"Once you've gone hybrid-electric, you're most of the way to an EREV. The question becomes: convert to a new fuel system, or expand the battery and downsize the ICE? I suspect the simpler choice is expand the electrical drive train. After all, that's the long-term end-point in any case. NG seems like a bit of detour."

Mostly I see it coming down to large vehicles, since electric drive trains can't power them. If they're converted to NG, then the infrastructure gets set up and NG light vehicles become much more attractive. It will take quite a long time to fully turn over the light vehicle fleet, and existing vehicles are convertible (albeit with some trade-offs). I agree that electric is the preferred choice for the long term, but it will come down to what makes economic sense in the short term.

"FPL called the suit frivolous, and it probably was. Anybody can sue - the question is, what happened to the lawsuit?"

True, although it would only take one large settlement and a lot of bad publicity to scare utilities.

"Again, I'm not sure what you mean. DSM is used across the country right now. It works beautifully. It can generally be made completely invisible to home-owners."

I was referring to its use on a wide scale for transportation. I don't think we have much in the way of data on how consumers behave with recharging EVs.

"That's theoretical. What practical problems does it cause?"

Mostly where you can lay the rails; you have to go around or tunnel through slopes you could run a highway over or find a much more powerful locomotive or run a smaller load.

"That's possible, but very unlikely. An EREV like the Volt only uses 10% as much fuel as the average car. That means that the value of using standardized, off-the-shelf ICEs far outweighs additional fuel savings."

That depends on fuel availability. If NG becomes widespread for trucks, building EREVs that use it instead become an option.

"The comparison is easy: ICEs run about 10-30% efficient, and central utilities run 30-60% efficient. The difference overwhelms any transmission losses. Not to mention, that the efficiency costs of compressing NG have to be included."

Does that account for energy lost during conversion into mechanical energy? I'm not clear as to the chain of conversions these are measuring.
ie: Is the central figure just thermal -> electrical (pre-transmission) or does it also account for losses during the conversion to mechanical in the vehicle?

Since the United States is unlikely to centrally plan a conversion to anything; I'm mostly interested in determining what market forces are likely to result in. We know large scale NG transportation works, since a number of countries have done it (Brazil and Argentina). I don't know if we can say the same for electric. Any process is going to be drawn out.

This has been an interesting conversation; I've learned a great deal about energy and transport I didn't know.

Nick G said at May 6, 2010 4:15 PM:

I was assuming that given trucks much larger size, it would be less of an issue finding places to put a tank.

There's no question that we can do it. But, what's the penalty in terms of payload capacity? This is an important question, when comparing trucks to intermodal trains.

I see it coming down to large vehicles, since electric drive trains can't power them.

I'm not sure why you would assume that. First, trains are easy to electrify, and 2nd, trucks are fleet applications, so battery swapping would be relatively easy at a relatively small number of highway locations.

If they're converted to NG, then the infrastructure gets set up and NG light vehicles become much more attractive.

There's something to that, but as I noted above, trucks would need far fewer "gas" stations than would light vehicles, so I'm not sure how far that gets you.

It will take quite a long time to fully turn over the light vehicle fleet

50% of miles travelled come from vehicles less than 6 years old.

it would only take one large settlement and a lot of bad publicity to scare utilities.

Yes, but if it's not a realistic possibility, then we shouldn't worry about it.

I don't think we have much in the way of data on how consumers behave with recharging EVs.

People respond to price signals - that's quite clear. I think it's worrying way too much to think that they won't.

you have to go around or tunnel through slopes you could run a highway over or find a much more powerful locomotive or run a smaller load.

Ok - have you seen any examples lately? I think we have track going pretty much everywhere we need it to go - it's just a matter of laying down a parallel 2nd track, and adding rolling stock.

That depends on fuel availability.

But if there's very little savings from going to NG, then it's not worth it, even if the NG is conveniently accessible.

Does that account for energy lost during conversion into mechanical energy?

Yes, it does. The most efficient vehicle on the road is a Prius, which uses about .2 KWH/mile from the battery, and charging losses raise that to .25KWH/mile - that includes all mechanical losses. A gallon of gas has 35KWH based on a straight BTU conversion, so in theory a Prius should get 170MPG. Instead, it gets about 45MPG, so that's about 30% conversion efficiency. Now, the most efficient central gas generation is about 60% efficient.

We know large scale NG transportation works, since a number of countries have done it (Brazil and Argentina).

Do you happen to have information on their experience?

This has been an interesting conversation; I've learned a great deal about energy and transport I didn't know.

My pleasure!

Post a comment
Comments:
Name (not anon or anonymous):
Email Address:
URL:
Remember info?

                       
Go Read More Posts On FuturePundit
Site Traffic Info
The contents of this site are copyright