Chief Blogger’s Favorite Cleantech Blogs

I’ve personally written hundreds of articles over the years.  I selected a few I thought were pretty timeless or prescient, and worth rereading:

What is Cleantech?  Always a good starting point:

or try, The Seminal List of Cleantech Definitions


The “Rules” in Cleantech Investing – Rereading this one after the cleantech exits study we just did, wow, was I on the money!


VeraSun IPO analysis – Read this carefully, I predicted exactly what would happen, and try the later version Beware the Allure of Ethanol Investing


Cleantech Venture Capitalists Beware, What You Don’t Know about Energy CAN Kill you – The title says it all.



Corn Flakiness

The historic drought this summer across most of the United States has severely damaged this year’s corn crop.  According to the U.S. Department of Agriculture, corn production is expected to be down more than 10% from last year.

Not surprisingly, corn prices have surged.  What may be surprising is how much they’ve surged:  up to record levels exceeding $8.00/bushel, up 60% over the past few months.  

Since prices have risen (60%) far more than volumes have fallen (10%), this is great news for corn farmers.

Of course, what’s good news for corn farmers is not necessarily good news for corn consumers.  The two biggest consumers of corn are livestock farmers/ranchers and ethanol production plants, and these twin pillars of corn demand are butting heads. 

Yes, this is another manifestation of the “food vs. fuel” debates so prevalent a few years ago.

By various measures, 28-41% of U.S. corn supply is used for ethanol production.  In turn, ethanol production is strongly influenced by U.S. energy policy — specifically, the Renewable Fuels Standard (RFS) implemented as part of the Energy Independency and Security Act of 2007, passed under the Bush Administration.  In 2012, the RFS stipulates that 13.2 billion gallons of ethanol must be produced and blended into gasoline for automotive use.

Without the RFS policy, it’s pretty clear that ethanol production would fall considerably under current market conditions.  Even with the RFS setting minimum levels, ethanol production is on the ropes, simply because the cost of the corn feedstock has risen much more than the price of ethanol has risen.  Put another way, ethanol margins have dramatically deteriorated — and in many cases are now negative.  In response, marginal ethanol plants are being idled.

Even with these adverse conditions, it’s widely expected that the ethanol quantities stipulated by the RFS for 2012 can still be met.  Pre-existing inventories of ethanol can be drawn down, ethanol exports from the U.S. can be reduced, and there are leftover Renewable Identification Number (RIN) credits from last year that can be applied to this year’s requirements.

Although financially bleak for this year, the ethanol markets won’t break.  Same with the livestock markets, but that isn’t stopping farmers/ranchers from raising objections:  they are pressing the U.S. EPA to at least temporarily relax the RFS to help alleviate the upward pressure on corn prices.  In the past few weeks, 156 House members and 25 Senators have written EPA Administrator Lisa Jackson seeking intervention.

A waiver on the RFS is probably not gonna happen right now, both because of economics and politics.

A recent study by Bruce Babcock of Iowa State University entitled “Preliminary Assessment of the Drought’s Impacts on Crop Prices and Biofuel Production” indicates that eliminating the ethanol mandate of the RFS would only reduce corn prices by $0.28/bushel, or less than a 5%.  In short, it doesn’t seem that relaxing the RFS will have that much beneficial impact on corn prices, as livestock interests are assuming. 

Representing the ethanol industry, the Renewable Fuels Association released a statement arguing that there is no need to waive the RFS requirements in the face of a tough corn crop.  The Obama Administration seems to be on the same page:  USDA Secretary Tom Vilsack continues to staunchly support the ethanol market.  Corn farmers do too — and there are a lot of voting corn farmers in swing states like right here in Ohio.

Given that it’s politically controversial during an election season and doubtfully effective anyway, it seems unlikely that Obama will relax the RFS.  And then, by November, a lot of the pressures caused by ethanol on the corn markets will have eased, since the demand for fuels peaks in the summer.

Now, if we have another serious drought during the 2013 growing season…?  The Dust Bowl years of the mid-1930’s tell us that unpleasant scenario is not unprecedented.

Top 10 Cleantech Subsidies and Policies (and the Biggest Losers) – Ranked By Impact

We all know energy is global, and as much policy driven as technology driven.

We have a quote, in energy, there are no disruptive technologies, just disruptive policies and economic shocks that make some technologies look disruptive after the fact.  In reality, there is disruptive technology in energy, it just takes a long long time.  And a lot of policy help.

We’ve ranked what we consider the seminal programs, policies and subsidies globally in cleantech that did the helping.  The industry makers.  We gave points for anchoring industries and market leading companies, points for catalyzing impact, points for “return on investment”, points for current market share, and causing fundamental shifts in scale, points for anchoring key technology development, points for industries that succeeded, points for industries with the brightest futures.  It ends heavy on solar, heavy on wind, heavy on ethanol.  No surprise, as that’s where the money’s come in.

1.  German PV Feed-in Tariff – More than anything else, allowed the scaling of the solar industry, built a home market and a home manufacturing base, and basically created the technology leader, First Solar.

2. Japanese Solar Rebate Program – The first big thing in solar, created the solar industry in the mid 90s, and anchored both the Japanese market, as well as the first generation of solar manufacturers.

3. California RPS – The anchor and pioneer renewable portfolio standard in the US, major driver of the first large scale, utility grade  wind and solar markets.

4. US Investment Tax Credit for Solar – Combined with the state renewable portfolio standards, created true grid scale solar.

5. Brazilian ethanol program – Do we really need to say why? Decades of concerted long term support created an industry, kept tens of billions in dollars domestic.  One half of the global biofuels industry.  And the cost leader.

6. US Corn ethanol combination of MTBE shift, blender’s, and import tariffs – Anchored the second largest global biofuels market, catalyzed the multi-billion explosion in venture capital into biofuels, and tens of billions into ethanol plants.  Obliterated the need for farm subsidies.  A cheap subsidy on a per unit basis compared to its impact holding down retail prices at the pump, and diverted billions of dollars from OPEC into the American heartland.

7. 11th 5 Year Plan  – Leads to Chinese leadership in global wind power production and solar manufacturing.  All we can say is, wow!  If we viewed these policies as having created more global technology leaders, or if success in solar was not so dominated by exports to markets created by other policies, and if wind was more pioneering and less fast follower, this rank could be an easy #1, so watch this space.

8. US Production Tax Credit – Anchored the US wind sector, the first major wind power market, and still #2.

9. California Solar Rebate Program & New Jersey SREC program – Taken together with the RPS’, two bulwarks of the only real solar markets created in the US yet.

10. EU Emission Trading Scheme and Kyoto Protocol Clean Development Mechanisms – Anchored finance for the Chinese wind sector, and $10s of Billions in investment in clean energy.  If the succeeding COPs had extended it, this would be an easy #1 or 2, as it is, barely makes the cut.


Honorable mention

Combination of US gas deregulations 20 years ago and US mineral rights ownership policy – as the only country where the citizens own the mineral rights under their land, there’s a reason fracking/directional drilling technology driving shale gas started here.  And a reason after 100 years the oil & gas industry still comes to the US for technology.  Shale gas in the US pays more in taxes than the US solar industry has in revenues.  But as old policies and with more indirect than direct causal effects, these fall to honorable mention.

Texas Power Deregulation – A huge anchor to wind power growth in the US.  There’s a reason Texas has so much wind power.  But without having catalyzed change in power across the nation, only makes honorable mention.

US DOE Solar Programs – A myriad of programs over decades, some that worked, some that didn’t.  Taken in aggregate, solar PV exists because of US government R&D support.

US CAFE standards – Still the major driver of automotive energy use globally, but most the shifts occurred before the “clean tech area”.

US Clean Air Act – Still the major driver of the environmental sector in industry, but most the shifts occurred before the “clean tech area”.

California product energy efficiency standards – Catalyzed massive shifts in product globally, but most the shifts occurred before the “clean tech area”.

Global lighting standards /regulations – Hard for us to highlight one, but as a group, just barely missed the cut, in part because lighting is a smaller portion of the energy bill than transport fuel or generation.


Biggest Flops

US Hydrogen Highway and myriad associated fuel cell R&D programs.  c. $1 Bil/year  in government R&D subsidies for lots of years,  and 10 years later maybe $500 mm / year worth of global product sales, and no profitable companies.

Italian, Greek, and Spanish Feed in Tariffs – Expensive me too copycats, made a lot of German, US, Japanese and Chinese and bankers rich, did not make a lasting impact on anything.

California AB-32 Cap and Trade – Late, slow, small underwhelming, instead of a lighthouse, an outlier.

REGGI – See AB 32

US DOE Loan Guarantee Program – Billion dollar boondoggle.  If it was about focusing investment to creating market leading companies, it didn’t.  If it was about creating jobs, the price per job is, well, it’s horrendous.

US Nuclear Energy Policy/Program – Decades, massive chunks of the DOE budget and no real technology advances so far in my lifetime?  Come on people.  Underperforming since the Berlin Wall fell at the least!


Will the 21st Century be the Fossil Fuel Century?

Will the 21st century be the fossil fuel century?

Whether it’s peak oilers, climate scientists, renewable and sustainable gurus, or cleantech venture capitalists, we all talk like that’s not an option.  We’ve preordained that the 21st century is a green energy, renewable power, cleantech century.

And I’d like to believe that.  But it’s not a done deal yet.  There are 3 points all of us need to keep in mind before declaring victory.

  1. China, the second largest and fastest growing large economy in the world consumes half the global coal consumption, powered in part by North American and Australian coal supplies, and by a huge increase in Chinese domestic coal production.  This year’s EIA reference case 2035 projection has China’s coal consumption doubling by 2035, driving most of a 50% increase in world coal consumption – and virtually no change in coal’s proportion of the energy equation.  Powered of course with current recoverable coal reserves at some 900 billion tons, or 120+ years of current production.
  2. Brazil, the poster child of biofuels potential the last 10 years, is making a play with its deep water subsalt discoveries to be one of the oil exporting superpowers.  And check out the announcement of its $224 Billion 5 year oil investment program.  That’s like a couple of thousand ethanol plants ,or one major oil company.  The Brazilian offshore finds to date represent production something like 5-10x the current Brazilian ethanol production.  Some poster child.
  3. And then there’s shale gas, its potential exemplified by the Marcellus Shale.  By some estimates this resource is big enough to change the entire game in fuels for power. And most of it’s located right down the street from the heart of the US population centers, just like the coal beds were.  Hard to see how electricity prices keep rising to help renewables in the face of that, with natural gas prices being  moderate and all, (unless of course China eats all the coal and drives coal prices up –  a global fossil fuels century either way?).

Imagine a 21st energy century where the US growth is powered by cheap natural gas, and exports our coal to China to even out the balance of payments.  Where increases in ethanol production and offshore oil production and slightly higher gasoline prices and mpgs balance out most of the transport fuel equation. A world where renewables play an important part, but still stay at margin of the King Fossil.

It’s not a world unimaginable.  And it’s not much different that the imagination might have done seen in 2000, or 1990, or 2050.  This shouldn’t be doom and gloom, nor should it be time to declare a cleantech victory.   The 21st energy century will be a long century.  And it’s just business as usual.

Why Corn-Based Ethanol Sucks

by Richard T. Stuebi

While it is increasingly recognized that subsidies for corn-based ethanol are bad policy, a nod must be given to C. Ford Runge, a professor at the University of Minnesota, for his pithy and merciless analysis in his note “Biofuel Backlash” published in the May/June issue of Technology Review.

In the space of just a few short paragraphs, Prof. Runge cites the work of Earth Track (a firm dedicated to exposing subsidies detrimental to the environment) projecting $400 billion of U.S. subsidies to ethanol between 2008-2022, notes a recent estimate by the Earth Policy Institute that the 2008 U.S. corn crop diverted for ethanol production would have been sufficient to feed 330 million people for a year, and provides a reference to modelling that indicates a near-doubling of greenhouse gas emissions due to changes in land-use patterns associated with corn-for-ethanol production.

It’s amazing that such awful policies, which are so adverse on so many dimensions, can survive. But, in the gameboard that is U.S. energy, environmental, and agricultural policy, only grand compromises supported by the big boys can get enacted — which are then extremely difficult to overturn when they are seen to be nothing more than gifts to their well-positioned and deep-pocketed sponsors and supporters.

Reiterating a point I’ve made before: I have nothing against ethanol per se. Cellulosic ethanol, if it can be accomplished cost-effectively, is a promising prospect for reducing greenhouse gases and reliance on Middle Eastern petroleum without chewing up valuable foodstuffs. But corn-based ethanol plainly sucks. And, the notion of using corn-based ethanol as a bridge to cellulosic ethanol is dubious at best.

The old adage says that a camel is a horse designed by committee. Would it were that U.S. biofuels policies were as lovely as a camel.

Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.

Biofuel Beatdown

by Richard T. Stuebi

A few weeks ago, the Wall Street Journal ran an article entitled “U.S. Biofuel Boom Running on Empty”, which presented a blistering across-the-board slam on biofuels. Perhaps more interesting than the WSJ article itself was an email reaction I received from a prominent energy tech venture capitalist with keen visibility into the transportation fuel space (whom I will keep anonymous), who said:

“The article makes the common mistake of using the broad term ‘biofuel’ when they should be focusing down to ‘biodiesel’ and ‘corn-based ethanol’….Renewable diesel and ‘green’ gasoline are still alive and attracting big VC dollars. Engineered microbes, bacteria and algae work to produce drop-in fuels are still going.”

Notwithstanding the bad recent press — a virtually-forecastable reaction to the excessive biofuels hype of the 2005-2007 era — reasonable potential for biofuels still remains. To wit, a new report from the United Nations entitled “Towards Sustainable Production and Use of Resources: Biofuels” makes clear that certain biofuel feedstocks and production approaches are much more environmentally-friendly than others. And, as more of these biofuel production schemes turn away from inputs subject to the vagaries of food market dynamics, the financial volatility facing producers should substantially decline (though price fluctuations in the output fuel markets will always remain).

Biofuels have fallen prone to oversimplification. Because corn-based ethanol and soy-based biodiesel are both environmentally marginally beneficial and economically unattractive at current prices for feedstocks and fuels, many immediately leap to the conclusion that all biofuel technologies are inherently and forever unattractive. Don’t fall prey to that mistake. It’s just not true.

Richard T. Stuebi is a founding principal of the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.

Biofuel Industry – No Money, No Respect

For the moment, the price at the pump is reasonable. A spike in demand or a terrorist disruption, however, will quickly remind us that we are desperately dependent on oil as we continue to consume 140 billion gallons of gasoline per year. Even in these recessionary times of moderate demand, we are running out of easy to extract oil from dessert sands. We are turning to sources of unconventional oil, such as tar sands in Canada, to produce oil with ever increasing greenhouse gas emissions.

For a while corn ethanol looked like a promising way to end our addiction to oil. Now we are like the character in a Woody Allen comedy who explains, “I used to be a heroin addict; now I’m a methadone addict.” At a time when a billion people go hungry, many as a result of disappearing water on this heating planet, fuel from food is not the answer.

Needed is fuel from wood and waste, not food and haste. Some of the world’s best minds are focused on fuel from cellulosic and waste sources, in some cases from biological sources that remove CO2 from the air and enrich depleted soil. I am writing this article from the 31st Symposium on Biotechnology for Fuels and Chemicals sponsored by NREL. 800 global bioscientists have gathered in San Francisco to share their research and showcase their progress.

Many at the conference expressed concern and discouragement. Companies that were once darlings of Wall Street have gone bankrupt. Dozens of ethanol plants have closed as oil prices dropped. Many promising second generation plants cannot get built due to lack of project financing. People with the money see the risk as too high.

There continue to be zero commercial scale (20-million gallon per year and bigger) cellulosic ethanol plants, despite past glowing press releases that declared that they would now be running.

The biofuels industry is also under attack due to food-from-fuel and land use issues. Over one billion people are hungry or starving. Agricultural expert Lester Brown reports, “The grain required to fill an SUV’s 25-gallon tank with ethanol just once will feed one person for a whole year.” Scientific American: Could Food Shortages Bring Down Civilization?

Europe, now California, and soon many U.S. states, now insist that land use must be considered in evaluating biofuels.

During the middle of the conference, a workshop for the media was held. The theme of the workshop quickly became clear – the industry problems were the fault of regulators and we the press.

Professor Bruce Dale, Michigan State University, dismissed corn/soy land use change as an “emotional issue.” He continued, “The California Low Carbon Fuel Standard is intellectually bankrupt.” To demonstrate the flaw of land use, he stated that replacing a gasoline powered vehicle with an electric vehicle would only increase the demand for coal power and therefore do nothing to reduce greenhouse gases.

The example is quite flawed. Automakers consistently tell me that their gasoline powered vehicles are about 15 percent efficient and their electric vehicles are 60 to 70 percent efficient. EVs need much less energy. Even if you could find an EV powered purely with coal, it would produce less lifecycle emissions than a comparable gasoline or corn ethanol fueled vehicle. According to the latest figures published by the U.S. Energy Information Administration (EIA), non-hydro renewable sources of electricity enjoyed double-digit growth during the past year while coal was down by 1.1 percent. Incremental demand for electricity is bringing more renewable energy on-line.

In fact, the California Low Carbon Fuel Standard (LCFS) is based on the peer-reviewed work of scientists using Argonne National Labs GREET model. The work, industry comments, and findings are all available at

The LCFS encourages the reduction of greenhouse gas emissions per unit of energy delivered to the wheels of vehicles. The scientific analysis behind the LCFS includes these examples of grams of CO2e emissions per mega joule of energy:

Ø Gasoline Oil Refined 92
Ø Diesel ULSD Refined 71
Ø Diesel Coal-to-Liquid 167
Ø Biodiesel Midwest Soy 30
Ø Ethanol Corn with Coal Electricity 114
Ø Ethanol Cellulosic from Poplar Trees -12
Ø Electricity California Average 27

If the biofuels industry sees a future in biodiesel and cellulosic ethanol, the industry should be encouraged by the findings of the scientists contributing to the LCFS. On the other hand, if the industry is only betting its future on corn ethanol, then the regulation is a threat.

LCFS will not help the expansion of E85 stations for flexfuel vehicles. For the 2009 model year, the best rated car running on E85 in the United States was the Chevrolet HHR, with a United States EPA gasoline mileage rating of 26 miles per gallon, and an E85 rating of only 19 miles per gallon – and that’s the best from Detroit with mileage on all other U.S. flexfuel vehicles being worse. In other words, if you passed on using E85 and drove a hybrid with good mileage, you would double miles per gallon and produce far less greenhouse gas emissions than any U.S. flexfuel offering. Top 10 Low Carbon Footprint Four-Door Sedans for 2009

While the press was being scolded and air regulators were being metaphorically burned at the stake, most conference attendees had an afternoon to enjoy San Francisco. Many traveled using electric-powered buses and the hydro powered BART rapid transit system that carriers 100 million riders annually. So much for the press conference dismissing electric powered transportation as not being feasible.

Although attacking regulators, environmentalists, and advocates for the hungry will not save the biofuel industry, the federal government may save it. As the conference unfolded in California, a major announcement was made in Washington, DC, by U.S. Secretary of Energy Steven Chu when he announced that $786.5 million would be made available to accelerate advanced biofuels research and to help fund commercial-scale biorefinery demonstration projects.

One irony for the biofuel industry is that as oil prices increase, their economic model improves, but consumer demand for fuel moderates as consumers drive fewer miles, use more public transportation, and soon switch in growing numbers to electric vehicles. For decades, however, fuel will be in demand for many passenger vehicles, heavy-vehicles, long-distance goods movement, ships and airplanes. The opportunity is ripe for delivering fuel with lower lifecycle emissions. Promising cellulosic biofuel companies will be covered in my next article.

John Addison publishes the Clean Fleet Report. He is the author of a new book about the future of transportation – Save Gas, Save the Planet.

Ethanol in the Tank

by Richard T. Stuebi

The news seems everywhere these days that ethanol is dead as a doornail:

October 21, Financial Times: “Investors Suffer As U.S. Ethanol Boom Dries Up”
November 5, Bloomberg: “VeraSun Doomed; Goldman Stops Ethanol Stock Coverage”

It’s easy to pin the tough times for ethanol on the left-right combination of precipitous declines in oil/gasoline prices and the global credit crunch. True, ethanol plants are capital-intensive, and a reduction in product price is never a good thing for any producer.

But I believe the issue is less about fuel prices and capital markets than about corn.

Many have long been skeptical about corn-based ethanol purely from an economic perspective. Of course, as has been amply documented, corn ethanol has been the beneficiary of some pretty substantial subsidies, without which much less ethanol would have made it to market. But earlier this year, even when oil was nearing $150/barrel and gasoline was over $4.00/gallon, a number of U.S. ethanol producers were having financial difficulties.

Why? Because corn prices were rising even faster than fuel prices. Remember: these refineries make money as a function of the spread between feedstock and product price, not of the product price itself. If the feedstock price is rising faster than the product price, then even if the product price is at historical highs, producers can be squeezed.

Until ethanol demand surged in recent years (propelled by increasing government mandates), the linkages between corn and fuel prices were weak. However, as a recent article by columnist Doug Saunders of The Globe and Mail in Toronto points out, “food is no longer just food”. In Saunders’ terms, “there has been a “bushels-to-barrels-to-Btus convergence”. After all, both oil and bread have calorific content, and technologies now are allowing one to be swapped for the other, depending upon which is more economic in a particular market.

This then leads to the other “black mark” against (corn-based) ethanol: the so-called “food vs. fuel” debate. To many observers, it is unethical to be using products fundamental to human food consumption as a substitute for petroleum-based fuels, as this added demand for foodstuffs bids up prices and makes eating more expensive — especially problematic for the world’s poor (see 2007 article on this topic by C. Ford Runge and Benjamin Senauer in Foreign Affairs). This has led Jean Zigler of the United Nations to recently declare that biofuels are a “crime against humanity”.

A strongly argued counterpoint is offered by Robert Zubrin and Gal Luft. With pretty significant substantiation, they claim that increases in the price of corn have not been driven by any push to produce ethanol. Instead, they find that all of the increase in corn prices has been due to the combined factors of increased natural gas prices (thereby raising the price of fertilizer), increased transportation and processing costs (due to higher gasoline/diesel prices), and increased demand for corn in massive rapidly-growing developing economies (e.g., China). In short, according to Zubrin and Luft, ethanol is not to blame for woes facing corn consumer.

That may or may not be so. But, it seems unarguable that corn is to blame for the woes facing ethanol.

President-elect Obama may be a “supporter” of ethanol, but unless and until cellulosic ethanol technologies become viable, ethanol will have a hard time becoming — and staying — a major player in the transportation fuel game.

This is especially the case when factoring in the massive investment required to convert the U.S. infrastructure of distribution, retailing and vehicle tanks from gasoline to ethanol-capable. And, this is even more so the case considering that biofuels innovators are actively working on technologies that enable biogasoline — gasoline from bio-feedstocks.

With all these strikes against ethanol, it’s no wonder all the obituaries are being written.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

When In A Hole, Stop Digging

by Richard T. Stuebi

I never cease to be amazed by the frequency and vehemence of opinions expressed on energy and environmental matters by people who are spectacularly underinformed. So in this exposition about oil, let’s first begin with a Top Ten List of clear-cut facts.

1. World oil production (which is essentially equal to consumption) is at approximately 85 million barrels per day, or 31 billion barrels per year — and has essentially remained at these levels continuously since mid-2005, even though oil prices have doubled (from about $60/barrel) since then.

2. The U.S. consumes about 25% of the world’s annual oil production, implying U.S. demand levels of about 21 million barrels/day (almost 8 billion barrels per year), but holds under its territory only about 2% of the world’s proven oil reserves of 1.2 trillion barrels.

3. In contrast, the Oil Producing and Exporting Countries (OPEC) control almost 80% of the world’s oil reserves, yet produce only about 40% of annual oil supplies.

4. OPEC production was 31 million barrels/day in 1973, and 32 million barrels/day in 2007, despite the world economy having doubled in the intervening years.

5. OPEC includes among its members the following countries that are unstable, corrupt and/or unfriendly to the U.S.: Saudi Arabia, Iraq, Iran, Venezuela, Nigeria.

6. The Middle Eastern members of OPEC represent over 75% of total OPEC capacity, of which the single largest player (without which the world oil markets would collapse) is Saudi Arabia, alone accounting for 22% of the world’s remaining proven oil reserves.

7. This year, the U.S. will send an estimated $700 billion to the Middle East to purchase oil — more than the U.S. defense budget (about $600 billion).

8. An unknown portion of these proceeds, but widely-agreed to be a significant amount, funds anti-American (and anti-women, and anti-Semitic, and anti-homosexual, and so on) sentiment — including outright terrorist activities.

9. About 99% of the energy consumed by the U.S. transportation sector derives from petroleum.

10. The vast majority of American citizens live and work in a manner requires oil-fueled transportation to maintain their basic lifestyles (commuting, shopping, etc.)

So, here we are, the United States of America, utterly reliant on one strategic commodity supplied mainly by a powerful cartel that doesn’t hold American long-term interests at heart. What is our response to this predicament?

We complain. We complain about high energy prices, and ask the government to do something about it. When, in fact, there’s very little the government can do about energy prices. OPEC makes it abundantly clear that we are price-takers, not price-setters. Why else would President Bush travel to Riyadh, hat-in-hand, to effectively beg the Saudis to supply us more oil? And, how else could the Saudi’s rebuff their best customer?

This, of course, is the same President Bush that declared famously in 2006 State of the Union speech that the U.S. is “addicted to oil.” Factoring in all the negative connotations of the word “addiction”, that’s a strong statement, coming from a proud Texan.

As Thomas Friedman so aptly noted in a recent editorial, the President has revealed his implicit strategy for dealing with our addiction to oil: “Get more addicted to oil.”

You might ask what else we might do, beyond pandering to our pushers.

Cutting demand certainly helps. Unfortunately, we can’t quickly/easily/cheaply reconfigure our infrastructure of buildings and roads, so we’re stuck for a long time with the landscape we’ve created: we’ll unavoidably need to move around lots of people and goods for quite a while. (See Fact #10.) So, our need for vehicle-based ransportation will not diminish rapidly.

The recent passage of Energy Independence and Security Act of 2007 tightens fuel economy standards to improve efficiencies of new vehicles – including, for the first time, SUVs. And, higher fuel prices are clearly beginning to discourage U.S. demand.

Unfortunately, U.S. demand-reduction measures won’t help much in the grand scheme of things. First, over its 35 year history, OPEC has clearly learned an ability to withhold production to keep oil prices high: when others produce more, OPEC produces less. (See Facts #3 and #4.) Second, the incessant growth in energy demand from the developing world (most notably, China and India) will probably eat up any declines in oil demand the U.S. might be able to achieve on its own.

So, this leads us to what has become the hottest topic in the Presidential campaign: drilling for more oil in the U.S.

You’ve probably seen the bumper stickers: “Drill Here, Drill Now, Pay Less”. I recently overheard someone in a bar claim with pride that the recent modest drop in oil prices can be attributed to OPEC’s cowering in fear now that the U.S. is getting serious about drilling for more oil domestically.

Get real. As Executive Director of the Institute for the Analysis of Global Security Dr. Gal Luft, arguably one of the most knowledgeable observers of the world oil situation, said in a recent speech in the Cleveland area: “Go ahead, drill all you want, it won’t make any difference.”

This is because the U.S. only has about 3% of the world’s reserves, but demands 20% of current world production. (See Fact #2.) Bluntly, we want way more than our share of the oil allotment, but there’s no way around this inconvenient truth: we can’t change our geography or our geology. (This reminds me of another bumper sticker: “What’s Our Oil Doing Under Their Soil?”)

It is true that there are significant reserves untapped offshore in the Gulf of Mexico, in Northern Alaska (Arctic National Wildlife Refuge, ANWR), and elsewhere in the U.S.: in ANWR alone, perhaps as much as 16 billion barrels. This sounds like a lot, and at $120/barrel, it is financially worth a lot. But, even with a bonanza of 50 billion new barrels heretofore inaccessible, this only supplies current U.S. requirements for not even 7 years. It supplies global requirements for less than 2 years.

Moreover, as noted previously, OPEC is capable of reducing its supply to compensate for whatever incremental production the U.S. is able to achieve, thereby nullifying the effect of the U.S. exertions to open up these assets to extraction.

With this as backdrop, let me ask a simple question: is it worth pinning the country’s hopes on a multi-year project to drill some new holes, only to find that it doesn’t solve our underlying problem? According to analysis by the U.S. Department of Energy, opening up new areas to drilling “would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017.” This doesn’t sound to me like any significant solution for our dilemmas.

It sounds like all I’m offering is problems, not solutions. Well, what do you expect? With a long-held conviction to pursue an energy policy of “cheap oil, at all costs”, the U.S. has painted itself into a nasty corner. Everyone wants easy answers, but unfortunately there are none.

One ray of hope is offered by unconventional hydrocarbon production. The U.S. is the so-called “Saudi Arabia of coal”, with hundreds of years of reserves at current demand levels (although this “runway” would be reduced dramatically by a concerted move to coal-based fuels for transportation). In addition, the U.S. holds huge amounts of oil-equivalents in the form of shale in the Rocky Mountains, estimated to be far larger in quantity than the oil in Saudi Arabia. Both of these sources can technically be extracted and converted into transportation fuels — but possibly at significant financial and environmental costs. Hopefully, new technologies under development will eliminate (or at least significantly) reduce these costs — but if not, are we willing to pay them?

More fundamentally, I believe that Dr. Luft is onto the central problem: unless and until we sever the link between transportation and petroleum, the U.S. is doomed to declining power and ultimate subjugation.

Right now, just about every car and truck sold in the U.S. is constructed to run only on a petroleum-based fuel. Since each vehicle has about a 16 year operating life, and since over 7 million new vehicles a year are sold in the U.S., each consuming hundreds of gallons per year, every additional year that virtually all cars sold in the U.S. are oil-dependent “locks in” tens of billion barrels of U.S. aggregate demand for oil.

Dr. Luft’s solution: eliminate the strategic value of petroleum, by taking low-cost and rapid steps to make vehicles fuel-flexible. Only with competition among fuel types for the transportation market will OPEC lose its stranglehold on our economy.

As has been widely documented, it is possible to make gasoline powered vehicles able to run on a limitless variety of alcohol/petroleum blends with the addition of equipment that is about $100 per vehicle. Dr. Luft and other luminaries (e.g., James Woolsey, Robert “Bud” McFarlane) have formed the Set America Free Coalition to promote the Open Fuel Standard Act, which would require that 50% of all vehicles sold in the U.S. in 2010 must be fuel-flexible. According to Dr. Luft, the major automakers say this is doable.

(Interestingly, Dr. Luft claims that the big oil companies are discouraging their affiliated retailers from installing ethanol-capable pumps. This sounds like something worth investigating.)

In addition, Dr. Luft argues compellingly for the end of ludicrous U.S. agricultural policies that tax imported ethanol (but not, notably, imported petroleum or petroleum-based fuels) and that place quotas on sugar imports. The effect of these policies is to discourage or prevent the possibility of cost-effectively importing sugar-based ethanol from over 100 countries in the tropics around the globe where sugar (a highly efficient feedstock for ethanol production, much better than corn) can grow abundantly.

These countries tend to be poor, based on subsistence agriculture, and they are being killed by high oil prices. In Dr. Luft’s view, this represents “the worst regressive tax in history”, and he thinks we should send a few hundred billion dollars a year to those countries – “some of whom still like us” – instead of to OPEC countries. As an incidental benefit, this would increase economic aid to the developing world by about an order of magnitude.

(As an aside, Dr. Luft is convinced that the now-heated arguments against ethanol — food vs. fuel, too-lucrative incentives — are overhyped bunk, and has some interesting analyses to prove his point, but that is a subject for another day.)

So, it seems that some important answers to our energy crises may be found in skewed agricultural policies — a non-intuitive target for critical attention. If you want to take this on, contact Dr. Luft: he is looking for fellow revolutionaries to help us claw our way out of the hole we’ve dug for ourselves with our oil addiction.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Beware the Allure of Ethanol Investing

I am a fan of ethanol. The addition of corn ethanol to our US fuel supply chain has had a significant impact in keeping gasoline prices way lower than they otherwise would have been, and has paid for the subsidies many times over. But that has not translated to gains for ethanol stocks, which are down on the order of 50% over the last year according to the Camino Energy index, and it won’t change anytime soon.

As the bellwether US ethanol pureplays are finally down to earth, and my predictions have come to pass. Two years ago ahead of Verasun’s (NYSE:VSE) IPO, I blogged an analysis saying I thought Verasun should trade in the $3 to $8 range, depending on the margin, PE, and growth assumptions. The bankers and the market thought I was nuts, treating VSE and Aventine (NYSE:AVR) which listed near the same time as technology style growth stocks. The company listed at several times my target range, and then traded way up from there. But as I had predicted, the margin pressures from a range of commodity price movements and the relatively low barriers to entry for capacity additions came to bear. But the fall is probably not over.

I stated then and reiterate now that ethanol companies are basically small refiners with potentially worse economics. And refiners traditionally trade at single digit PEs, and single digit PE. Worse, refiners don’t always do well when commodity prices rise or their markets grow fast, as the spreads they make their margin on are often affected as much by relative capacity contraints as the raw commodity prices themselves. In fact, fast moving commodity prices in either direction in either refined products or feedstocks can sometimes bode ill for refining profits, depending on what’s happening in capacity.

VSE now trades under $5. Right in the middle of range I predicted it should. And the PEs for VSE and AVR are finally down in the range close to the independent refiners group I follow, Valero (VLO), Sunoco (SUN), and Tesoro (TSO). BUT. And there is a but. The TEV/EBITDA multiples for VSE and AVR, which are way down, are still 2-3x those of the refiners, and the PEG ratios are still richer as well. This likely means more room to fall, or at least languish.

The next wave of venture backed ethanol companies, mostly cellulosic, are beginning to break ground on pilot plants, and given the penchant for certain ethanol crazed venture investors to IPO deals when windows open, it is likely we will see some of these soon. And it is likely that they will be sold to the market the same way, as high growth stocks based on great technology and macro conditions justifying stratospheric PEs on unsustainable margins. Then they’ll hit their first commodity cycle, the margins will compress, the bloom will come off the rose, the multiples will come down, and the investors who bought and held post IPO will get crushed.

We’ve seen it before and we’ll see it again. Try not to get caught this time.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is the founding CEO of Carbonflow, founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of, and a blogger for CNET’s Greentech blog.

Is Corn Ethanol Lowering Gas Prices at the Pump?

Despite providing the largest portion of alternative fuel in the US, corn ethanol gets a lot of flack in the circles Cleantech Blog runs in. The usual culprits go something like this: Corn ethanol is heavily subsidized (yes it is). Corn ethanol does not reduce greenhouse gas emissions (sort of, it really, really depends on your assumptions). Corn ethanol contributes to the fertilizer driven “deadzone” in the Gulf of Mexico (maybe, another complicated topic). Corn ethanol drives up the price of food (a topic for another day).

But the main argument for supporting corn ethanol production has always been about energy independence and fuel switching. Enabling a new source of supply into our gasoline supply chain should in theory, put some some downward pressure on gasoline prices at the pump, and keep those energy dollars at home rather than send them overseas.

So the real question is, does it?

A very interesting paper was published at Iowa State last month says yes, US ethanol production (almost all from corn) has reduced gasoline prices at the pump $0.29-$0.40 per gallon, depending on the region. Further, that the reduction came largely at the expense of profits the refining industry would otherwise have made (indicating perhaps that our ethanol production helped US consumers at the pump, but did not impact world oil prices).

In their paper entitled The Impact of Ethanol Production on US and Regional Gasoline Prices and on the Profitability of the US Oil Refinery Industry, authors Xiaodong Xu and Dermot Hayes analyzed the impact on price at the pump and refining profits of adding ethanol to the US gasoline fleets by separating the impact of ethanol from the major variables like gasoline imports, refining capacity, refining utilization rates, hurricanes, market concentration in refining, stocks, and seasonality, that generally affect gasoline price.

I find their $0.29 to $0.40 per gallon results a surprisingly large number, indicating that ethanol production, while providing on average well less than 5% of our gasoline supplies over their study period, could have affected prices at the pump downward to the tune of greater than 2 to 3 times that percentage level. That result is a huge win for ethanol proponents, as it suggests that adding ethanol to the US fleet has significantly benefited consumers (as one would expect), and also suggests that the ethanol subsidy program (at about $0.40 per gallon for 5% of the US gasoline production works out to around a 1 to 2 cent effective tax on gasoline at current levels) may well have paid for itself up to 20x over or more. The studies authors are careful not extrapolate too much from the results, but they are certainly interesting enough to warrant significant further research, and argue a strong case for further corn ethanol support.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of, and a blogger for CNET’s Greentech blog.

Is Ethanol’s Carbon Footprint Bad? It Depends.

In the cleantech and carbon worlds, the carbon footprint of ethanol, whether from corn or sugar feedstocks and fermentation processes, or enzymatic or thermochemical cellulosic sources, is always good fodder (or perhaps, “fuel”) for debate.

And depending on which process and which study you personally ascribe to, the answer on how carbon clean ethanol looks depends. In most debates centering on corn fermentation, for example, the studies cite a range from say, 20 to 30% less carbon intensive than gasoline, to 20 or 30% more. This begs one very big question in my mind, what’s the difference? How does the same ethanol in my car have a possible carbon footprint range that wide?

The true answer lies in the ground we walk on. When I started to read a few of the studies and articles about them, an interesting fact emerges, the difference depends in large part on which land gets counted. Most of ethanol’s carbon footprint falls into one of several categories, in roughly ascending order (depending on the source and process), the fuel used to make it, the fuel used to grow the feedstock, the carbon content of the fuel itself, and the lost carbon not sequestered in the vegetation that would have been on the land used to grow the feedstock.

The last one, land use change, is the bugaboo. For example, if you assume that all the land used to produce the ethanol feedstock is already in production, you tend to find a carbon footprint at the low end of the range, since there is little net reduction in the carbon sink, and ethanol looks pretty good. If you assume that all the land used to produce the ethanol feedstock came from forests that had been chopped down, or marginal land that produces very low yields, you tend to find a carbon footprint at the high end of the range, and ethanol looks bad. Thought about another way, ethanol made from corn or sugar that displaces human or animal food production is likely to be relatively greenhouse gas friendly comparedd to ethanol made from corn or sugar that comes from new land put into production just for ethanol. The same logic applies to cellulosic ethanol sources, though not quite to the same degree. Interesting conundrum.

As usual, the devil’s in the details, and people tend to use the case that best addresses their agenda. Personally, I’m buying all my ethanol from land that is already in production, so my carbon footprint must be good. The rest of you can buy the OTHER ethanol with all the bad carbon footprint.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of, and a blogger for CNET’s Greentech blog.

Ethanol Under Pressure

by Richard T. Stuebi

A good friend of mine sent me a provocative email the other day:

“Last year, your government spent more than $8 billion of your tax dollars to achieve the following results:

  • Dramatically increase the emissions of carbon dioxide and other greenhouse gases into the atmosphere
  • Accelerate the destruction of the Amazon rainforest
  • Raise the price of milk, bread, beef and other grain-dependent products by more than 20%
  • Increase world hunger

How did they do this? Two words: ethanol subsidies. Did I mention that the amount of corn it takes to produce enough ethanol to fill the tank of your typical SUV one time could feed the average person for one year (350 days)?”

This is one person’s “grabber” for an April 7 article by Michael Grunwald in Time magazine entitled “The Clean Energy Scam”. It presents yet another negative portrait of corn-based ethanol as a flawed technology — and flawed policies to support it.

However, to avoid throwing the baby out with the bathwater, it’s important to emphasize to the phrase “corn-based”. While it’s increasingly clear that corn-based ethanol is of dubious merit except to the major agri-businesses like ADM (NYSE: ADM) and Cargill that benefit from the government’s largesse, that’s not to say that the potential future emergence of cellulosic ethanol wouldn’t be a good thing all-around.

The only debate is whether the current push for corn-based ethanol is really a useful bridge to — or even a propelling force for — the advancement of cellulosic ethanol. Certainly, ethanol proponents like uber-VC Vinod Khosla (see some of his papers and presentations) think that corn-based ethanol is helping pave the way to a cellulosic future, by helping change the fueling infrastructure from gasoline to ethanol. Meanwhile, a growing chorus of contrary voices doesn’t see the cellulosic promise at all, and focus their angst on the real and present problems generated by corn-based ethanol.

If cellulosic ethanol never makes it out of the lab and into the market, then the rush for corn-based ethanol will indeed have been an expensive dead-end — and will provide more food for the fodder of those who claim that government policy involving preferential subsidies should not pick technology winners.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Cellulosic Ethanol – Always the Bridesmaid?

I have a new set of predictions for ethanol technology, and so far my predictions on ethanol have been dead on. Cellulosic ethanol has been the thin film of the ethanol industry, always the bridesmaid. But perhaps, like with the breakthrough by First Solar (NASDAQ:FSLR), it’s time is coming.

I have written extensively on the topic of ethanol and biofuels, including an early 2006 analysis of the VeraSun (NASDAQ:VSE) IPO right before its pricing that predicted an appropriate price at the time in the range of $2.77 to $8.82 share. The business has grown since then, but EBITDA margins have slipped even farther than I predicted they would, but the forward PE has come right into line with my predictions way back then. After listing well above my range, the stock hit a high north of $30 before pulling back until it is finally in my original lrange, trading in the $7-8 per share range.

Nearly two years ago in mid 2006 I did another article on predictions for cellulosic ethanol:

My Predictions on the Ethanol Market:

  1. The corn market will likely be able to handle significantly more corn based ethanol production through substituting corn from the animal feed market than is currently anticipated.
  2. Cellulosic ethanol will come on line to replace a lot slower than anticipated – even when the technology arrives.
  3. The early cellulosic plants will likely be residual based, perhaps corn stover from fields already producing for corn ethanol – NOT purpose planted fuel crops.
  4. Cellulosic technologies that allow fuel switching and co-firing will have an advantage.
  5. Because of the transport issues – cellulosic ethanol will be relegated primarily to vertically integrated plants like the biomass power industry for the near future (where the operator owns its own fuel supply). They will struggle to compete on price with corn based ethanol.
  6. And if ethanol succeeds like DOE expects, our beef prices are headed up.”

And then I wrote an article in late 2006 entitled “Are Ethanol Companies Risky Investments?” for The conclusion – yes, of course.

“In the short run ethanol stocks are in a land grab phase ramping to meet demand, and some of these stocks may do well while demand still outstrips supply and the industry is still small, but when this dynamic changes – watch out as the margin pressure will be brutal, and could turn already aggressively valued stocks into a dot bomb style free fall as per gallon profits get crushed. So, make your profits while you can!”

So here are my new cellulosic ethanol predictions:

Prediction #1 – Both market entry and market share for the next several years in ethanol will roughly be governed by this ranking on preferred processes (with some allowance for process that involve more than one), and given feedstock, scalability, yield, and transport issues, sugar cane and corn fermentation will remain the market and cost leaders for some time.

  1. Fermentation
  2. Thermochemical
  3. Catalytic
  4. Enzymatic
  5. Wildcards

Roughly the farther down we go on this ranking the higher the risk of failure, the higher the current cost, the more difficult the scalability (if you swap #1 and #2), the higher the reliance on future technological advances, and the higher the requirements for vertical integration to make the economics work.

Prediction #2 – As ethanol and biofuels scale into significant portions of our fuel supply chain, most of the profits will be made by energy, refining companies, and Ag companies, who are more likely to build rather than to buy when it comes to expansion.

Prediction #3 – Despite all protestations to the contrary, ethanol and biofuels will continue to be our highest cost liquid fuel for at least a decade, though at $100 crude oil prices, even a high cost fuel can be competitive. Note: As I have said many times before, on a fully integrated direct cost basis, gasoline from oil can be profitably found, manufactured and distributed down well into the sub $0.50/gallon range, depending on the nature of the resource base in question, where as even the lowest cost forms of ethanol today are well over double that. Just because crude oil prices are north of $100 per barrel, does not mean that the COST of gasoline is higher than that of ethanol, it means that the PRICE of gasoline is high enough that the higher cost ethanol can be economically produced and sold. The implication is obviously that he who owns the reserves (either oil in the ground or corn in the field) will continue to do well.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of, and a blogger for CNET’s Cleantech blog.

California’s Low Carbon Diet

By John Addison (12/5/07). When Coke and Pepsi were in the middle of their diet wars, California was an early battle ground. It is a state which tends to do much in excess, including drinking colas. In fact, only a handful of countries spend more money on beverages. Parties of happy and surprisingly fit youth were shown on TV commercials drinking their beverage of choice.

Now millions of Californians are being targeted as early adopters for a low carbon fuel diet. More miles, less carbon emission. It is the law. Executive Order S-1-07, the Low Carbon Fuel Standard (LCFS), calls for a reduction of at least 10 percent in the carbon intensity (measured in gCO2e/MJ) of California’s transportation fuels by 2020. Low Carbon Fuel Standard Program

Successful implementation of the LCFS will be critical to California’s even more ambitious law, the California Global Warming Solutions Act (AB-32), which requires California’s 2020 greenhouse gas emissions to not exceed 1990 emissions. The challenge is that in 2020, California’s population will be double 1990.

Because transportation is the main source of greenhouse gases in California, it is urgent that Californians use vehicles with better miles per gallon and that less greenhouse gases be emitted from the use of each gallon of fuel.

The world will learn from the successful implementation of LCFS because gasoline and diesel are currently becoming more carbon intense. There has been a shift from oil that is easy to get, to extraction and refining that increases greenhouse gases, as we make gasoline from tar sands, coal-to-liquids, and a future nightmare of shale oil. For example, monster earth movers strip-mine northern Alberta, extracting tar sands. Elizabeth Kolbert reported in the New Yorker that 4,500 pounds of tar sand must probably be mined to produce each barrel of oil. The converting of tar sands to petroleum will require an estimated two billion cubic feet of natural gas a day by 2012. Carbon intensity includes all the emissions from the earth movers and all the natural gas emissions from refining.

“All unconventional forms of oil are worse for greenhouse-gas emissions than petroleum,” said Alex Farrell, of the University of California at Berkeley. Farrell and Adam Brandt found that the shift to unconventional oil could add between fifty and four hundred gigatons of carbon to the atmosphere by 2100. Article

So, how can California reduce the carbon emission from fuel use? As a major agricultural state, E10 ethanol will be part of the solution. E10 can be used in all gasoline vehicles including 40 mile per gallon hybrids and in the new 100 mile per gallon plug-in hybrids being driven by early adaptors. Higher percentage blends of next generation ethanol are even more promising. Biodiesel is better at reducing carbon intensity than corn ethanol. Most heavy vehicles have diesel engines, not gasoline. Exciting new European diesel cars are also starting to arrive.

There are over 25,000 electric vehicles in use in California. Heavy use of electricity for fuel would take California far beyond the minimal target of a ten percent reduction in carbon intensity. This is especially true in California where coal power is being phased-out in favor of a broad mix of renewable energy from wind, geothermal, solar PV, large-scale concentrated solar, ocean, bioenergy and more.

California Low Carbon Fuel Standard Technical Analysis documents that there is a rich diversity of sources for biofuels within the state and in the USA including the following in million gallons of gasoline equivalent per year:

In-state feedstocks for biofuel production Potential volume
California starch and sugar crops = 360 to 1,250
California cellulosic agricultural residues = 188
California forest thinnings = 660
California waste otherwise sent to landfills = 355 to 366
Cellulosic energy crops on 1.5 million acres in California = 400 to 900
California corn imports =130 to 300

Forecasted 2012 production capacity nationwide Potential volume
Nationwide low-GHG ethanol = 288
Nationwide mid-GHG ethanol = 776 to 969
Nationwide biodiesel = 1,400
Nationwide renewable diesel = 175

A variety of scenarios have been examined with detailed analysis by U.C. Berkeley, U.C. Davis, and stakeholder workgroups that include technical experts from the California Energy Commission and the California Air Resources Board. Several scenarios are promising including one that would achieve a 15% reduction in carbon intensity with the following percentage mix alternate fuels and vehicles of some 33 million light duty vehicles by 2020:

Low-GHG Biofuel 3.1%
CNG 1.7%
Electricity 0.6%
Hydrogen 0.4%
Low-GHG FT Diesel .9%
Sub-zero GHG Biofuel 3.9%

CNG vehicles 4.6%
Plug-in hybrid vehicles 7.4%
Flex-fuel vehicles 34.7%
Diesel vehicles 25.5%
Battery electric vehicles 0.5%
Fuel cell vehicles 1.9%

The ultimate mix will be determined by everyday drivers in their choice of vehicles and fuels. Low emission choices are becoming more cost-effective with the growth of electric vehicles, waste and renewable hydrogen, fuel from biowaste and crops grown on marginal land, and even fast growing poplar trees that absorb more CO2 than is emitted from resulting biofuels. The alternatives make fascinating reading for those interested in future scenarios for fuels and vehicles:

California Low Carbon Fuel Standard Technical Analysis and Scenario Details
California Low Carbon Fuel Standard Policy Analysis

California’s ambitious goals to reduce greenhouse gas emissions will benefit by the increased motive energy per CO2e that is described in these scenarios. California will also benefit from vehicles that will go more miles with the same energy input. Vehicles are getting lighter and safer as high-strength carbon fibers and plastics replace heavy metal. The shift to hybrids and full electric-drive systems allow replacement of heavy mechanical accessories with light electric-powered components. Hybrids allow big engines to be replaced with smaller, lighter engines. Pure electric vehicles can eliminate the weight of engines and transmissions. Less fuel weight is needed. Aerodynamic vehicles are becoming more popular.

Employer programs are leading to more flexible work, less travel, and increased use of public transit. Demographics may also cause a shift to more urban car sharing, use of public transit, bicycling, walking, and less solo driving. It can all add-up to a celebration of low-carbon living.

John Addison publishes the Clean Fleet Report which includes over 50 articles about clean transportation.

Micro Fuel Cell Killer – What’s Next?

About 4 or 5 years ago micro fuel cells were quite a hot topic in cleantech. They were going to power our laptops, cell phones, PDAs, blackberries, hand held multimedia devices, etc.

The story ran like this:

The digital age and increasing customer demand for more power hungry features like bandwidth, multimedia, et al on mobile devices like laptops, PDAs and cellphones mean the increase in power requirements are outstripping the pace of technology of lithium ion battery – therefore the only solutions will be micro fuel cells. And since battery manufacturers are a plodding, unimaginative lot, silicon valley and smart scientists can build a company to leapfrog them.

We saw major players like Motorola, Toshiba, Intel, and others taking a look, and startups like Smart Fuel Cells, Medis and MTI Micro seeking to make their name on a fuel cell the size of a credit card (or thereabouts) .

Today, still no micro fuel cell powered devices are on the market, many of the larger players have gone quiet, and all the startups are talking up battery charger (not device power pack) products – especially for the military and first responders.

What happened? What killed the micro fuel cells? Can they come back? And is something similar lurking around the corner for solar, electric vehicles, biofuels, next generation batteries or one of today’s other darlings of the cleantech sector that we can learn from?

Well . . . let’s see:

The technology is actually hard – Micro fuel cell technology proved a harder nut to crack than everyone thought (at least at anywhere near the same cost point) – and the product development issues given the state of the technology proved to be a real challenge.

Rational expectations – Market reaction to the underlying drivers has been aggressive. We’ve got global warming and high energy prices making people like Sun, Dell, and others hell bent on designing power saving devices – which the consumer is now interested in buying as a premium product. Once the electronic product companies actually put their minds to reducing power usage – well, it turned out that you actually CAN optimize a device to save power, and still pack enough features in to sell product.

The incumbent technology – Despite high profile thermal issues, the incumbent lithium ion technology turned out not to be so bad, and has continued to keep pace (as far as us lowly consumers can tell) – Bottom line: I now carry 2 very small 4 hour battery packs for my laptop – I can last a transocean plane flight without needing to plug in.

Infrastructure, infrastructure, infrastructure – And yes, having to make infrastructure changes is very costly in anything energy-esque, whether its in fuel, entrenched distribution, or tooling. As usual, winning technologies in energy tend to be owned by businesses that find a way to work with existing infrastructure, not to try and replace it.

And in the end, the batteries (and the big battery makers) still rule the roost, for now.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Author for Inside Greentech, and a Contributing Editor to Alt Energy Stocks.

Blogroll Review: Bottles, Biobutanol, Bagasse

by Frank Ling

DIY Solar Water Heater

The Chinese have done it again. In a country that puts waste to good use, they have found another use for beer bottles: solar water heating.

Matt James writes about a Chinese farmer who made his own solar heater in the EcoGeek blog:

“…we get the story of a man who made his family a solar hot water heater from 66 recycled beer bottles. He should have called, I could have helped him empty the bottles.”

In this setup, 66 bottles were linked by hose to collect solar energy from the sun to heat up water. The farmer says this is enough to provide water for all 3 members of his family.

Bottoms up or as the Chinese say “ganpei.”

Biobutanol Bust?

While ethanol received more attention than any other alcohol out there, it’s time to rectify situation. Methanol, which causes blindness, has a bad rap. Propanol is best known as a disinfectant.

But butanol with four carbons could be the next alcohol rock star. Scientists say it is superior fuel to ethanol.

However, it may be years until we see biobutanol pumps along the highways. Robert Rapier at R-squared Energy Blog argues that biobutanol’s time has not come yet. He says:

“Sad to say, but I believe biobutanol is dead. While research will (and should) continue, the process is currently at least 10 years from any sort of commercial feasibility. And I would point out that ‘never’ falls under the umbrella of ‘at least 10 years.'”

One of the problems with biobutanol is the energy intensive process needed to remove water from the product. Nevertheless, companies like DuPont and BP are investing heavily to develop butanol from biological processes.

Bagasse Hope

At the end of the day, ethanol still holds the spotlight. Brazil has now shown how to make ethanol even more competitive. Toward realizing energy returns from the cellulosic components from sugar cane, Dedini SA has developed a process to convert bagasse or leftover can stalk into ethanol.

Jim Fraser at the Energy Blog explains:

“The technology uses two pretreatment steps to convert bagasse, the lignocellulose-rich byproduct from cane processing, into ethanol: (1) pretreatment of the biomass with organic solvents, and (2) dilute acid hydrolysis. The innovation consists of adding a first stage pretreatment step which allows the diluted acids to do their work much faster and more efficiently. The liquid hydrolyzates are then easily fermented and distilled into ethanol.”

Now if there was only a way to convert Spam into fuel. :)

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

Gas Misers or Corn Guzzlers

By John Addison (5/15/07)

People buying new cars are asking if they should get a high mileage hybrid that runs on gasoline, or a flex-fuel vehicle that could run on E85 ethanol. The United States DOE’s and EPA’s, made it easy for car buyers to compare choices.

When you drive, there is most likely ethanol in your fuel tank. Ethanol is a fuel from a plant source that is normally mixed with gasoline. The percentage varies widely. All current U.S. vehicles can run on a blend of up to 10% ethanol (E10).

GM launched a national campaign, “Live Green Go Yellow.” GM and Ford (F) have sold millions of flex fuel vehicles (FFV) on the road. GM is prepared to make up to half its vehicles ethanol capable by 2012.

Although FFVs are hot sellers in the USA, most have never had a drop of E85 in their tank. They are only fueled with standard gasoline blends. There are over 6 million vehicles on the U.S. streets that could run E85. Most never have.

Most FFVs are fuel guzzlers; fueled with E85, they are corn guzzlers. In 2007 the best rated car running on E85 was the Chevrolet Impala, with a United States EPA mileage rating of 16 miles per gallon in the city and 23 on the highway when fueled with E85. For a typical U.S. year of driving, the annual fuel cost would be at $1,657 and 6 tons of CO2 would be emitted by this FFV when running on E85.

By contrast, the EPA rating for a Toyota (TM) Prius running on gasoline was 60 miles per gallon in the city and 51 on the highway. The Prius would have an annual fuel cost of $833 and only emit 3.4 tons of CO2, compared to 6 tons from the most fuel efficient E85 offering.

A big problem is that ethanol cuts miles per gallon by about 27%. The energy content of E85 is 83,000 BTU/gallon, instead of 114,000 BTU/gallon for gasoline. Even by 2030, the U.S. Energy Information Administration (EIA) projects that only 1.4% of ethanol use will be E85. The vast majority will be for small percentage blending with gasoline.

The EIA forecasts that ethanol use will grow from 4 billion gallons in 2005 to 14.6 billion gallons in 2030 (about 8 percent of total gasoline consumption vs. today’s 2%). Ethanol use for gasoline blending grows to 14.4 billion gallons and E85 consumption to only 0.2 billion gallons in 2030. In other words, agriculture will be a big winner without any need to spend millions of tax dollars funding E85 stations.

There is a heated debate about whether ethanol helps the environment. In the U.S., the vast majority of ethanol is processed from corn. There is no current environmental benefit if the source-to-wheels use of ethanol includes diesel farm equipment, fertilizer from fossil fuel, coal produced electricity, diesel delivery trucks hauling ethanol over 1,000 miles to refineries, and then fueling a vehicle with poor mileage.

The amount of U.S. corn that became ethanol exceeds 20 percent. The Corn Growers Association says that by 2015 a third of all the corn grown – or 5.5 billion bushels – likely will be for ethanol. Food prices have increased.

World Watch Institute warns “Conventional biofuels will be limited by their land requirements: producing half of U.S. automotive fuel from corn-based ethanol, for example, would require 80 percent of the country’s cropland.” Thus, large-scale reliance on ethanol fuel will require new conversion technologies and feedstock.

A broad coalition is more enthusiastic about cellulosic rather than corn ethanol. Ethanol and other biofuels can be made from a wide range of plant fiber and waste. Currently corn kernels are more easily processed into fuel than cellulosic corn stover, but new enzyme technology can change that. Future stalk for ethanol may include prairie grasses, Miscanthus, Poplar, Willow and algae. Cellulosic sources could produce ten times the yield per acre of corn.

Cellulosic ethanol could account for all 14.6 billion of forecasted consumption, and even more, without needing special E85 pumps. It could all be blended with existing gasoline and fueled into current and future gasoline vehicles. Such blended cellulosic ethanol creates major opportunities for farmers in the United States and the world. It is incremental business, rather than business that competes with existing food business.

The Natural Resources Defense Council has concluded that with “an aggressive plan to develop cellulosic biofuels between now and 2015, America could produce the equivalent of nearly 7.9 billion barrels of oil per day by 2050. That is equal to more than 50 percent of our current total oil use in the transportation sector and more than three times as much as we import from the Persian Gulf alone.”

Increasingly biofuel will not be made from food; rather it will be made from sources such as waste, grasses, fast growth trees, algae, and biotechnology.

Fueling all current high-mileage cars with E10 helps reduce global warming when the ethanol is from cellulosic sources. Putting E85 ethanol in a vehicle with poor mileage does not help. It does not even help the nation with energy independence.

Until flex-fuel vehicles offer the same high mileage as many current cars, do not buy a FFV. The FFV will not help your pocketbook, the nation’s energy security, nor will it help the environment. When you buy your next vehicle, get high miles per gallon.

John Addison is the author of the upcoming book Save Gas, Save the Planet and publishes the Clean Fleet Report This article is copyright John Addison with permission to publish or excerpt with attribution.

Blogroll Review: CO, Surveys, & Phones

Conservation of energy
Carbon monoxide or CO is not your friend. It binds to your hemoglobin and your brain starves from a lack of oxygen. But like all molecules out there, it’s not really good or evil. It’s just trying to maximize its entropy.

With biofuels now in the spotlight, some have proposed converting CO into ethanol. Not all are convinced. Robert Rapier at R-squared says the fermentation methods are inefficient. He discusses the thermodynamics:

“Let’s say 340 BTUs of CO get fermented to 340 BTUs of ethanol, and then it takes 340 BTUs of natural gas to purify the ethanol. In effect, what we have is an input of 680 BTUs of CO plus natural gas to produce 340 BTUs of ethanol.”

Looks like someone is trying to make the world’s most expensive drink. :)

Acting locally
Earth day, as far as I can tell, is not yet a Hallmark Holiday. It’s interesting to look at how attitudes are changing with regard to the environment. Or are they?

On his blog, Joel Makower writes about recent surveys on America’s perception of the environment. The results are fascinating but perhaps not so surprising:

“Hope or Hypocrisy? An ABC news poll found most Americans consider global warming the world’s biggest environmental problem and that an whopping 94% say they are willing to make personal changes to help the environment. However, 8 in 10 Americans say they oppose increasing taxes on electricity to encourage energy conservation, and about two-thirds are against raising gasoline taxes and prices at the pumps.”

Can we breathe now?
Mobile phones have come a long ways. Not only do they come with a whole array of applications, they are becoming socially enabling devices. One company makes software that helps you find dates. Another even claims they have the best mp3 player in the world.

But who would have thought they could tell you if the air you breathe is good or bad? Ecogeek reports on an app that gives you air quality reports:

“The ecogeeks at have created a cell phone widget that will provide live air quality reports that update automatically as the cell phone (and its breathing owner) moves about. Using data from Environmental Protection Agency air monitoring stations, the cell program will harness GPS technologies available through uLocate Communications’ WHERE Platform. That means no more sending textys offering up your current city or zip code – your phone will know where it is – and it will know if you should be wearing a SARS mask.”

Now if only these devices could tell me where I left my keys. :)

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

Cleantech: The Problem and Solution

Two interesting cleantech reports came out in the last couple of days. One talking about the problem, the other the solution.

On the problem side, as reported in USA Today, a team of researchers working at Texas A&M found that increased pollution in Asia, primarily from the rise of industrialism in China over the last 10 years, is affecting weather patterns over the Pacific and even into the US West Coast.

I guess the last 10 years of environmentalists harping over the growth in “dirty Chinese coal plants” had some real merit.

On the solution side, the 2007 Clean Energy Trends report authored by Clean Edge, came out this week.

The highlights from my review of their document:

$2.4 Billion in clean energy (as distinct from cleantech) venture capital investment in 2006, up 2.4x from 2005.

They project $220 Billion in market for Clean Energy by 2016.

Their 5 Trends to Watch:

  • Carbon Finally Has a Price…and a Market – They note the major advances including California’s GHG law push. We agree. But like wind and solar, we pioneered it, but Europe is leading it today.
  • Biorefineries Begin to Close the Loop – They are big on the advances of cellulosic ethanol. We remain cautious here.
  • Advanced Battery Makers Take Charge – They note the coming rise of lithium ion in the automotive sector. We agree.
  • Wal-Mart Becomes a Clean Energy Market Maker – They note major moves by Wal-Mart to go green. Long a shareholder of Wal-Mart myself, I definitely agree. We have been saying for a while that when it comes to cleantech, startups talk the talk, the big boys walk the walk.
  • Utilities Get Enlightened – They note that utilities are getting on the climate change band wagon. We would add that corporate venture is back, in a new and possibly smarter form.

You can download their report from the Clean Edge website. We have written on each of these topics before. Onwards and upwards in cleantech.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.