May 7, 2006

CBS 60 Minutes - The Ethanol Solution - A Review

When you learn that your favorite cause is about to be given a treatment by 60 Minutes you immediately wonder if you should order catering for a wedding - or a wake. After all, "ethanol" has generated a considerable amount of heat over the years. What America needs right now is more light regarding energy issues.

Looks like we'll need extra champagne bottles, the wedding is on. You can access the written transcript of The Ethanol Solution online.

The 60 Minutes broadcast was simple and educational. By highlighting Brazil's success, it provided the best evidence that a significant energy paradigm shift is possible in America. It explained that ethanol is being blended in gasoline and described what E85 is (85% ethanol mixed with 15% gasoline). It showed the personal story of the farming communities who invest their savings to provide employment and have a stake in what many farmers feel is the salvation of their way of life. It showed the ease with which American automobiles can be converted into flex fuel versions that can run on any mixture of gasoline and ethanol. It interviewed General Motors' head Rick Wagoner and reinforced General Motors' Live Green/Go Yellow commitment to aggressively expand the number of the nation's more than 5 million flex-fuel cars.

The only harsh light was cast on the oil industry whose representative, Red Caveney of the American Petroleum Institute, exaggerated the cost of building infrastructure to support E85 ($200,000 per gas station pump). In counterpoint, energy expert Professor Daniel M. Kammen of U.C. Berkeley's Renewable and Appropriate Energy Laboratory (RAEL) contended that switching over to an ethanol infrastructure was far cheaper than Caveney said ($30-$40,000 per pump) and could take a matter of years, not decades.

There were angles that could have been covered.
- If flex-fuel cars don't cost any more than gasoline-only cars, why not legislate that all new cars, including hybrids, be flex-fuel compatible? Brazil did. As the American Petroleum Institute head, Red Cavaney, said "the market is exceptionally limited" because currently only 5 million of the country's 133 million cars can use E85.
- While it did mention the technological prospect of creating ethanol from agricultural waste, switchgrass, and woodchips, it did not give treatment to the emerging technology of converting urban waste to ethanol.
- The story did not mention that the IRS has just published the Alternative Fuel Vehicle Refueling Property Credit, a tax credit of $30,000 for stations installing ethanol pumps. That was announced last week.
- It could have highlighted the environmental benefits of ethanol compared to gasoline.

Overall, it was a very positive story on ethanol and should help legislators and lobbyists to press their legislative initiatives. The tag line, quoted from farmer Larry Meints, said it best:

"It's a win-win thing for the nation, and for our local economy here to create jobs locally, rather than sending the money overseas, and sometimes to people that really don’t like us very well."



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19 comments:

corndog said...

I wouldn't have seen it if not for your heads-up yesterday. Thanks!

Yes I thought it was fair, the first piece of journalism I've seen ANYWHERE lately which didn't bash GM. I just KNEW they were going to interview David Pemental, but they didn't!

The Brazilian success story was attributed solely to ethanol, and that is a bit of a stretch. There is danger, I believe, in over-hyping ethanol's potential.

I agree flex-fuelers should be mandated now, with a reasonable phase-in time, and the market will then take care of the supply issue.

C. Scott Miller, EDP said...

Thanks Corndog - you have a great site on flex-fuel technology and interesting tips for investors. I've added you to my News Feed.
You are right about Brazil - it doesn't run on ethanol (yet) and the U.S. is clearly not going to see an overnight shift to ethanol. We will be lucky to just tackle energy demand growth within the next 10 years. But the impact of having ethanol as even 20% of the fuel sold has been huge in helping Brazil dampen the effect of price jumps. Having a competing product will help to dampen the arrogance of the oil industry - who have been monumentally tone deaf about P.R. since before Exxon Valdez (when it could have helped). To borrow from Lily Tomlin from Laugh-In in the early 70's,"We don't care - we don't have to. We're the (oil) company."
For California to embrace ethanol, they will have to stop importing 90 million gallons per year. We don't have corn - but we do have plenty of other biomass to convert.

David at Natural Resources said...

The commentary and the comments cover most of it. This was a VERY incomplete coverage of the subject. The one BIG elephant in the room is that we do not have the land to grow enough of anything for everyone to use E85 or Biodiesel! We can all use E10-E20 and maybe B20, but we can't do away with oil yet. The Billion Ton Biomass report gives an idea on the limits and what it will cost to reach them. We can reduce oil imports equally as much by moving to more efficient cars and public transportation.
It is a crying shame that we are not using MSW efficiently. This will have to change. Whether for fuels or power we should be making use of a resource we pay to collect and dispose of.

C. Scott Miller, EDP said...

I think the days of centralized energy solutions (aka oil dependency) is going to come to an end - not a moment too soon. With ethanol we can have a variety of feedstock - wood waste in the pacific northwest, rice straw in the Joachim Valley, bagasse in Brazil, tires in New Jersey, sulfurous coal in east Germany, petroleum and corn in Mexico, etc. - that can be exploited regionally to create a common fuel ethanol. With variations we can get another fuel, biodiesel. That's going to help defuse political tensions globally and raise regional economies.

corndog said...

Yes, Scott, I am sure that bio-fuels do not have to replace all of our petroleum usage in order to bring monopolistic pricing to an end. I think a figure of somewhere around 30% would be sufficient to neuter OPEC, and provide us with relatively cheap liquid fuels for some time to come. As long as oil just bubbles out of the ground, we will buy it.

However, when you are a seller of a commodity like oil, and your customers have an alternative they can turn to, you are relegated to the price level your competitor can deliver, you will restrict your production at your own peril.

Imagine the day when our "strategic reserve" is composed (almost)completely of ethanol, stockpiled when crude is cheap, and millions upon millions of flex-fuelers ready to switch, when crude becomes "not cheap".

C. Scott Miller, EDP said...

From your lips to God's ears.

Gary Dikkers said...

By highlighting Brazil's success, it provided the best evidence that a significant energy paradigm shift is possible in America.

Scott,

The Sixty Minutes article completely glossed over the reasons for Brazil's success and failed to mention that hardly anything in the Brazil model fits the U.S. While Brazil has had great success in using sugar cane ethanol as a motor fuel, what Sixty Minutes neglected to report, and may not even know, is that there are few parallels between Brazil and the United States. Brazil has several advantages in making ethanol that simply don't exist here:

· It is about eight times as efficient to make alcohol from the sugar in cane as from the starch in corn.

· Brazil has the climate and soils conducive to growing sugar cane. (We have the right combination of soils, climate, and latitude in only four states: Florida, Louisiana, Hawaii, and parts of Texas.)

· Brazil has vast tracts of inexpensive, undeveloped land at the tropical latitudes conducive to growing cane. When they need more land, all they do is clear more of the Amazon basin, while ignoring the affect on the environment. (Which do you want? Cane plantations or rain forest?)

· Brazil has a large supply of dirt-cheap, machete-swinging manual laborers. We don't have or want that in the U.S. Our farmers are understandably reluctant to wade into their cornfields swinging a machete, and would rather drive ag machines that burn 25-30 gallons of diesel per hour. (Their photographer did show two of those machete-swinging workers, but then Dan Rather failed to mention that is how Brazil harvests it cane -- using cheap manual labor instead of expensive machines burning fossil fuels.)

· But by far the biggest difference is that on a per capita basis, Brazil uses only 12% as much energy for transportation as we do. If they increased their transportation energy use eight-fold to match ours, they too would have to import oil. (Dan Rather didn't tell us that much of Brazil is still a third-world country. If the standard of living in all of Brazil increased to our level, they would not be self-sufficient on cane ethanol.)

Brazil’s success is instructive, but Dan Rather didn't tell us what that lesson is. They are able to be self-sufficient using ethanol only because they use so little energy for transportation compared to us. If we reduced our use of motor fuels to a level 12% of our current rate, we too could be self-sufficient. Question for you: Did you see any SUVs in the short clip they showed of Brazil's highways?

The lesson to learn from Brazil is conservation.


Regards,

Gary Dikkers

C. Scott Miller, EDP said...

Always great to hear from you, Gary.

I don't think the "Brazil point" that 60 Minutes was making was that we should start growing sugar cane. What they were trying to do was educate the public that there is a precedent for a nation deciding to develop an alternative fuel economy and being successful at it. If Brazil can do it - you don't think America can - even with all the geographic and cultural differences? With 95 biorefineries and counting, we already slightly out-produce Brazil in ethanol.

Everything you wrote is true about sugar fermentation but, again, this is the Bioconversion Blog - about conversion technologies like syngas fermentation for converting - not corn, not sugar cane - WASTE into ethanol and electricity. I am convinced we already have the new technologies in pilot form ready to scale-up to commercial size for deployment. I think we will be heading to Brazil in the near future to teach them how to make ethanol out of their sugar cane bagasse.

I agree that conservation has been totally ignored during this latest run-up in prices especially in light of the extra dimension of being engaged in a war in the Mideast. We should all slow down and drive less and buy better cars (hybrids, flex-fuel, and plug-in flex-fuel hybrids). But enacting conservation measures is not going to slake our growing thirst for oil - not nationally or globally. Finding new oil sources is a canteen in the desert.

We need to develop clean alternative, renewable, fuel technologies for the near present and the distant future. Ethanol from all kinds of feedstock is one part of the answer for the near present.

corndog said...

I disagree, Gary, that the lesson we can learn from Brazil is CONSERVATION. Their edicts in 1973 which embarked them onto their energy solution was from the get go one of REPLACEMENT of imported oil, instead of conservation. In 1999, when Brasilia mandated that by 2003 all new vehicles sold would have to be flex-fuel capable, it made no demand concerning fuel mileage.

The Brazilian triumph was one of fostering domestic exploration of oil. In 1973, Brazil imported 70% of its petroluem, today their liquid fuel usage is 20% ethanol, 80% DOMESTICALLY PRODUCED gasoline. Because of the environmental lobby, our story is simply not going to be one of finding and extracting new domestic sources of oil, we will have to do any and all replacing of oil with other sources. In a way, this may be a blessing in disguise, the fact that our hands are tied when it comes to domestic exploration; it is putting the entire onus for a solution onto renewables.

I believe conservation-as-energy-policy is an illusion, a feel-good placebo, complete with a failed history to observe. For that reason, I am not sure there is ANY lesson for us in the Brazil story.

Gary Dikkers said...

I believe conservation-as-energy-policy is an illusion, a feel-good placebo, complete with a failed history to observe. For that reason, I am not sure there is ANY lesson for us in the Brazil story.

Scott,

You may be right. Brazil can be self-sufficient because much of their country is still in third world status.

To make ethanol from cane, they clear the rain forest in the Amazon Basin (ignoring enviro concerns), convert it to cane plantations, and then use manual labor to harvest it.

Perhaps the lesson is that we could also be self-sufficient if we want most of our country to go back to third world status and we return to an era of manual labor.

Perhaps we just have to convince people that life in the 1880s and 1890s wasn't all that bad. ;)

Best,

Gary Dikkers

C. Scott Miller, EDP said...

Gary -

Corncob wrote the last message, not me.

I think conservation is one biggest reasons we need to press ahead with conversion technologies. Too many people only think of conserving physical matter through recycling or abstinence. But what about conserving energy contained in unrecyclabled waste? Our society is plagued with inefficiencies in how we create things, transfer energy, and dispose of waste using landfills. Those landfills contain energy. Why not intercept the waste before we dispose of it and cleanly capture the energy within? We could even "mine" the landfills of their biomass and return the land to its former condition. Its better than trucking the refuse off to a pile and letting it pollute the land, water and air around us.

About the Gay '90s... I have seen the movies about Cuba and how they had to cope with their own stark energy and fertilizer shortages once the Soviet Union dissolved and no longer propped them up. It might be someone's ideal of a future to resign into but it isn't mine. It could only happen in a repressed society like Cuba's - certainly not the U.S.

Gary Dikkers said...

Corncob wrote the last message, not me.

Yes he did (Corndog). Sorry, I wasn't paying attention.

Too many people only think of conserving physical matter through recycling or abstinence. But what about conserving energy contained in unrecyclabled waste? Our society is plagued with inefficiencies in how we create things, transfer energy, and dispose of waste using landfills.

True. And one of the biggest inefficiencies is how we commute to and from work.

Nothing burns my bacon more than seeing a single person driving a two-ton SUV a few miles to and from work. Almost all of the energy they burn is spent moving 4,000 lbs of steel, glass, rubber, and plastic. Very little of that energy goes to actually moving the person.

Multiply that one driver by millions each day, and most of our daily energy budget does nothing more than shuttle back-and-forth the millions of tons of metal, glass, and rubber with which our commuters surround themselves.

In Europe and Japan they have lightweight micro-cars for commuting with three-cylinder diesel engines that get upwards of 100 mpg. Why aren't we using those kind of micro-cars here?

Regards,

Gary

C. Scott Miller, EDP said...

Survival of the fittest. Remember how the Japanese sold cars to the U.S. market in the early '70s? Oil crisis. This time around it appears to be hybrid cars that have been pushed into the spotlight.

I would love for more people to take public transportation and carpool. But I love more the right for each to choose for themselves. The government might affect their choices through punitive taxes and car registration fees - but that's not a solution. Making cleanly produced renewable fuels and flex-fuel vehicles widely available is the solution.

Gary Dikkers said...

But I love more the right for each to choose for themselves.

But what about when those choices degrade the quality and sustainability of life for those around them?

Along with the freedom to choose, comes and obligation to make wise choices -- especially when those bad choices adversely affect others.

Using a two-ton SUV to carry one person five miles from the suburbs to work on hard-surface roads while using almost a gallon of fuel each way because the engine never gets warmed up is not a wise choice.

This time around it appears to be hybrid cars that have been pushed into the spotlight.

And what if over the entire life cycle of a hybrid it turns out those cars actually use more energy than a compact car would use? There is some evidence that making hybrids is more energy intensive, and that when they role out the factory door, hybrids contain much more embedded energy from the manufacturing process than non-hybrids.

Over the entire life-cycle of the hybrid and battery pack, their TOTAL energy consumption may be more than internal combustion compact econo-boxes, even while getting more miles per gallon.

(By the way: I just made a 300 mile round trip to Chicago and back with my VW Jetta turbo-diesel. At a constant speed of about 65 mph on the Interstate, I averaged over 55 mpg. I'm not that excited about hybrids. I do just as well with the VW TDI.)

C. Scott Miller, EDP said...

Congrats on the 55mpg trip you took. I think bio-diesel is part of the renewable fuel picture. - although not part of my focus.

While I don't think the government should make choices for the individual, I do feel that the government should set standards on emissions and mileage (CAFE). The air is much cleaner now (I live in L.A.) than it was 30 years ago.

I agree with the Daschle/Khosla op-ed piece Miles per Corn that suggests rewarding improved non-petroleum performance. If all cars were mandated to be flex-fuel by, say, 2010 (Brazil's mandate is set for 2007) then gas stations would be more motivated to supply E85.

Hybrids are an in-between technology. Probably the biggest plus for the Prius is that it gave the upper middle class a way to achieve status for environmental consciousness - as opposed to car size or power. It may seem superficial, but it's an important consideration in trend-building. Plug-in hybrids and flex-fuel plug-in hybrids are technological variations on the theme that make more sense to me.

Gary Dikkers said...

Probably the biggest plus for the Prius is that it gave the upper middle class a way to achieve status for environmental consciousness - as opposed to car size or power.

You didn't answer my question:

What if over the entire life cycle of a hybrid, it turns out those cars actually use more energy than a conventionally-powered compact car would use? There is some evidence that making hybrids is more energy intensive, and that when they roll out the factory door, hybrids contain much more EMBEDDED ENERGY from the manufacturing process than non-hybrids.

What if over the entire life-cycle of the hybrid and battery pack, their TOTAL energy consumption may be more than that of internal combustion compact econo-boxes, even while getting more miles per gallon?

And it may turn out that the life-cycle of a hybrid is short. No one is quite sure yet what the life of the battery pack is, but we do know they will be expensive to replace. Just for argument let's say the batteries might last seven years.

What kind of market will there be for used hybrids that are 5, 6, or 7 years old that still have the original battery pack? Who will want to buy a used hybrid if they know they will soon be faced with a possible bill of $10,000 to replace the batteries?

At that point it may be wiser to simply recycle the entire car. But doing that, may also mean a less than favorable return on the energy embedded in the car when it was built.

The old "energy invested on energy returned" argument may apply to hybrid cars just as does to corn ethanol.

C. Scott Miller, EDP said...

I think we look at technology differently. Instead of "What if...?" how about "What can we try...?". I don't believe in perfect solutions. I believe in learning by creating.

You ask about today's hybrid as if it is one model and it will stay static over the next 5-7 years. We both know that is not the case. Competitive models from Toyota and other manufacturers are coming out this year - and we will see a morphosis each year as the market defines what it expects and what it is willing to pay for. Each model has challenges that we won't learn about until we make the necessary mistakes.

We need active development of hybrid technology. We need other technologies. We need to throw more solutions at the problems to see what works. It's survival of the fittest. It's the scientific method. It's free enterprise.

For all the people who believe the status quo is terrible or even less than ideal - stop hangtieing those who have insights that maybe you don't have and those who are willing to invest in solutions. It can be very frustrating and could be counter-productive to your own stated goals.

Gary Dikkers said...

I think we look at technology differently. Instead of "What if...?" how about "What can we try...?". I don't believe in perfect solutions. I believe in learning by creating.

Scott,

I don't think we look at technology that much differently.

I see for a future for cellulosic alcohol (whether methanol, ethanol, or butanol). I see a future for wind power; fluid-bed nuclear reactors; fusion reactors; lightweight, short-range electric commuter cars; compressed air commuting cars; and making liquid fuel from our vast reserves of coal.

But I don't appreciate being sold a bill of goods such as corn ethanol by people who don't understand that there would be no corn ethanol without the energy inputs from fossil fuels. The problem with corn ethanol is that our corn farmers have been subsidized for decades and have gotten into the habit of growing billions of bushels every year. The only reason for making ethanol from that corn is that we have so much of it, and we have to use it for something.

If you started with a blank piece of paper to design a process for making ethanol, people would think you out of your mind to suggest using natural gas and diesel fuel to first grow corn so you could then use more fossil fuels to turn that corn into ethanol.

If you started with a blank piece of paper, and were interested in efficiency and understood thermodynamics, you'd never use corn as the middle stage of the process.

That's why I thought the "60 Minutes" story was very one-sided -- they completely ignored the thermodynamics of growing corn and turning it into ethanol. Like it or not, the laws of thermodynamics and physics rule our lives, and one can neither ignore nor repeal them.

Best,

Gary Dikkers

C. Scott Miller, EDP said...

There is the science. And then there is the industrialization and marketing of the science. We still have a ways to go before we build our first, real commercial-scale cellulosic ethanol refineries. In the meantime we must work on the marketing - "nothing happens until something is sold." We'll never get the necessary legislative permits and investment until marketers help people see the vision - a light at the end of the tunnel. To do that we need a strong, simple message - ETHANOL IS THE SOLUTION TO OUR OIL ADDICTION.

A BIG problem is that there are many groups that are working at cross purposes in the name of "environmentalism" - the Luddites vs. the problem solvers. We need strong, non-partisan leaders and a positive, constructive press - which the concurrent 60 Minutes and Dateline stories were.

From a marketing standpoint we need to establish benchmarks against which to measure improvement and we also need to educate the market that a real alternative to gasoline exists. We really need their support and we need it to be sustained between gas hikes and wars.

Agriculture and the MidWest have been the bleeding edge, early adopters in the biomass energy paradigm shift. They are the managers of the most renewable biomass. They deserve our appreciation, patience, and support. Deployment of cellulosic co-refineries next to the existing corn facilities will help move us toward a higher overall EROIE. The good news is that much of the basic infrastructure for delivery and distribution will already be in place.