Navigant Research Blog

In Severe Drought, A Silver Lining for Advanced Biofuels

— August 7, 2012

With much of the arable land in the United States experiencing a significant and extended drought, the question arises: Why would we sacrifice food production for fuel crops such as corn?  Underlying this question are two major concerns about the use of corn ethanol for gasoline substitutes or additives.

The first issue is that of rising food costs, and the complications added by biofuel production.  Droughts reduce crop yields, driving up the cost of primary foodstuffs, such as grains and vegetables.  Furthermore, corn planted in the U.S. for fuel ethanol is inedible for humans, reducing the area of land dedicated to food production; approximately 40% of the U.S. corn harvest is for ethanol.  The net effect is, then, straightforward: food costs more because of grain-based fuel production.

The second issue is more subtle.  Since corn used for fuel is also affected by the drought, yields decrease, the cost of ethanol increases, and ethanol as a source of renewable fuel becomes less competitive.  Unfortunately for industrial distillers, the federal subsidies for corn ethanol expired at the end of 2011.  Such subsidies might otherwise be able to help the producers cope with these decreasing margins.  To compound this distress, the supply of ethanol (though not necessarily corn-based) as a gasoline additive is required to grow at the same rate as gasoline consumption.  This bodes poorly for corn’s future as an economically viable renewable fuel source.

There may be a bright side to this story, however.  Expensive advanced biofuels could benefit from the current economic conditions to gain traction in the market.  Advanced processing of biofuels tends to utilize the waste products of food production, minimizing the impact of droughts on food prices compared to the current situation.  Furthermore, these new fermentation methods utilize robust crops, such as switchgrass, that are generally drought resistant, and precursor crop yields would not be negatively affected by the current climate conditions.   These properties alleviate the concerns about reduced food production as well as the direct effects on yields for fuel production.

Unfortunately, while various enzymatic methods are being developed to turn cellulose into sugar for fermentation, these advances have not yet reached economies of scale.  Supporting the industry’s development, the U.S. departments of Energy (DOE) and Agriculture (USDA) have recently announced a $41 million investment in diversifying feedstocks and the technologies that allow them to produce ethanol.

Thus, though the circumstances facing many U.S. farmers and ethanol refiners are unfortunate, the long run implications of the current drought may be positive.  While ethanol necessarily contains less energy than gasoline, cellulosic biofuels reduce greenhouse gas emissions by about 86% compared to gasoline and, like all forms of ethanol, are biodegradable.  Since the fuel is produced using food byproducts or inedible vegetation from non-arable lands, its cultivation doesn’t impact food production. More than a dozen advanced biofuel refineries are currently in operation in the U.S., with more coming online in the near future.


No Hydrogen Please, We’re British

— August 6, 2012

Every Olympics has its notable no-shows.  For the 2012 London Olympics, this group includes Rafael Nadal, Brittney Griner, and five large red fuel cell buses.  Transport for London (TfL) has been running the buses on a route near the Olympic Park since the end of 2010, and has three more set to join the fleet this year.  There had been some expectation that running the buses in and around the Olympics would provide a showcase for the benefits of fuel cell technology.  Unfortunately, the buses have been grounded for the Olympics due to “security concerns.”  According to press reports, the Olympic Delivery Authority put the kibosh on hydrogen deliveries to the buses’ fueling station, which is in an area under tight security restrictions for the Olympics.  What’s not noted in the press accounts is that there are also restrictions on conventional liquid fuel deliveries in the Olympic perimeter.  This is all part of the extremely stringent controls put in place to secure a major global event in a city that has been hit by terror attacks in the past.

The good news is, the Olympic authorities approved the use of the fuel cell buses themselves.  But stopping fuel deliveries to the hydrogen station effectively shut down the buses, as the closest alternative hydrogen station is some distance away from the buses’ route.  Worse, a mistaken impression has been created that the hydrogen fuel might be dangerous.

The fleet will be back in service in September, when it can resume the important work of testing out the buses in real world operations.  Reports are that the buses have suffered down time previously due not to the fuel cells but to maintenance and spare parts issues.  This mirrors some problems with an early fleet of fuel cell buses at AC Transit; these had reliability problems due to the ZEBRA batteries, not the fuel cells.  But these are the kinds of issues that get worked out with new technologies in real world service.

Meanwhile, a local official has already taken the opportunity to complain about the fuel cell buses and instead call for adopting a “here-and-now” technology: all-electric buses.  This response is symptomatic of a larger problem.  Public officials, and the public, keep falling in love with the “perfect” green technology, setting themselves up for disappointment when their technology love turns out to be less than perfect.  Both fuel cell and battery buses need more real world deployments to allow manufacturers to refine the technology further for the demanding transit market and to drive down costs.  As I will discuss in my upcoming report on the market for electric drive buses, price is still the biggest obstacle for battery electric, fuel cell and even hybrid buses, which have captured a large share of the U.S. market and seen major growth in the past two years in the U.K., thanks to stimulus funding.  But transit agencies are going to be reluctant to pay significantly higher prices for buses as they face tighter budgets and stimulus funding ends.  This, not terrorists out to pilfer hydrogen, is the real challenge for fuel cell buses.


Is Demand Response The Wrong Strategy?

— August 6, 2012

Warren Causey, who has earned his right to provocative punditry, postulated recently on Smart Grid News that perhaps demand response and dynamic pricing are wrongheaded ideas.  He’s not the first to make this argument; this question is at the heart of the industry’s hand-wringing over “consumer engagement” for the last several years.  In fact, you could say that the wisdom of driving consumer behavior change is perhaps the only rational consumer argument worth having.

A while back, I argued that opponents on both end of the political spectrum should have reasons to embrace dynamic pricing: Tea-Partiers should support free market-based energy pricing, and Occupy-movement types would surely embrace forcing wasteful power users to “pay their fair share.”  So I believe linking consumers with the real cost of electricity is good idea that, if done well, will benefit many across the value chain.

However, what if the fundamental premise is wrong? The concept of demand response is based on the assumption that electricity, which inconveniently requires generation and consumption to be time-synchronized, is a scarce and expensive resource.  Hence it needs careful optimization.  Will this always be true?

Earlier in my career, my job was defining product requirements for networking equipment and associated silicon.  I argued the finer points of media access protocols, quality-of-service mechanisms, and advanced queuing algorithms, all in the name of “bandwidth optimization,” because, as everyone knew, bandwidth was a scarce and highly valued resource.  That was less than 15 years ago.  Then came cheap, plentiful, high-capacity fiber, dense wave division multiplexing, and advanced digital signal processing for twisted-pair copper wires, and suddenly bandwidth wasn’t so scarce anymore.  And simple (and wasteful) Ethernet, alongside simple (and wasteful) IP, trounced the ATM, FDDI, Token-Ring, and myriad other “bandwidth efficient” protocols of the age.  Eventually this simple but wasteful technology became responsible for dismantling and rearranging the entire telephone industry.  Fortunately, I had the opportunity to ride the fun side of that wave, but many experienced the more destructive side.

One of the commenters on Causey’s SGN article mentions the “Enernet” pitch developed by Bob Metcalfe (Ethernet inventor, venture capitalist, and industry pundit), who claims that the same market dynamics behind the telecom revolution can apply to energy, if we get the incentives right.  Having witnessed Bob’s talk evolve during a stint at one of his companies, I agree with his major points, though the parallels he draws can be overdone.

So what technologies could end the scarcity of electric power?  Today’s fracking-enabled, cheap, and seemingly abundant natural gas is already upsetting the energy management apple cart, at least in North America.  Advances in energy storage and net-zero energy buildings and homes (whether via green construction, local renewable generation, small fuel cells, or a combination) are other potentially disruptive examples.  Even straightforward energy efficiency initiatives may have the side effect of reducing the percentage of load available for demand response.

Does this mean that we should ignore the near-term benefits of dynamic pricing, demand response, and other supplier-grid-consumer connections? I think not.  But Causey is right that our industry must be open to challenging fundamental assumptions, and be on the watch for inevitable waves of creative destruction.


Tortoise-Like, Ford Joins the Plug-In EV Race

— August 2, 2012

Toyota’s persistence with the Prius has paid off handily for the company.  The model line has dominated the hybrid market since hybrid light-duty vehicles were first commercialized, and has cemented Toyota’s title as the premier maker of fuel efficient automobiles.  Despite the best efforts of GM, Nissan, Mitsubishi, and Honda to capitalize on the next wave of fuel efficiency with plug-in vehicles, the Prius is having its best year, ever becoming the third best-selling car globally, thanks to four new models in the series including a plug in hybrid vehicle (PHEV) with an 11-mile all-electric range and a $32,000 MSRP.

Of the major auto OEMs, Ford has seemed somewhat apathetic to Toyota’s predominance, as it has never debuted an advanced hybrid or plug-in model with the marketing hype of its competitors.  Ford was the first Detroit automaker to offer a hybrid domestically and internationally, though, and its 2013 line-up of plug in vehicles for the U.S. market is arguably the most impressive of any major automaker’s.  Headlines are generally reserved for the automakers first to market with plug in vehicles, i.e., Chevrolet and Nissan.  Ford seems to be quite content with its slow but steady role, and the strategy may well pay off.

Ford’s 2013 lineup for passenger vehicles includes the all-electric Focus, the plug-in hybrid Fusion Energi and C-MAX Energi, and updated versions of both its hybrid models, the Fusion and the C-MAX.   None of these models are “new” – they’re simply updated versions of models that have been successful for the company.  The only thing new about this line-up is that the C-MAX, which has been available in Europe since 2003, will be available to the North American market.  And the C-MAX is the key.

While the all-electric Focus was the company’s first foray into plug-in market, the company has only sold 89 in the last two months.  Ford, however, seems to be more enthusiastic about the C-MAX Energi, which is entering a plug-in hybrid market that is meeting, if not exceeding, expectations for Chevrolet and Toyota.

The C-MAX Energi can hardly be described as flashy, but it should have an impact on the market.  The vehicle’s starting price ($32,950) is slightly higher than the Prius Plug-In ($32,000), but significantly lower than the Volt ($39,145).  Its all-electric range (20) is almost twice the Prius (11) and half the Volt (38), and it not only matches the Prius MPG equivalent rating of 95 miles, but also has the longest combined range at 550 miles.

Though Ford’s entry to the plug in market comes relatively late, the company’s hesitation has served it well, limiting its risk by avoiding a big, Leaf-like gamble.  Ford has followed Toyota’s approach to plug-ins, outfitting old models with the new technology in order to reduce costs, and now the company is finally set to compete against the Japanese auto giant stateside.  The C-MAX Energi is the third plug-in hybrid to hit the market for the general public, and it gives Ford the opportunity to accelerate down the road that Chevrolet and Toyota paved.


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