Saturday, September 30, 2006

BIOHOLS - Should You Invest?

If I were a betting man, and I'm not, I would not put any money on the future of carbon based energy. The Russians and Middleasterners and Venezuelans have kept the price of oil too high for too long, and they are going to pay the price.

You see, oil and gas have been this pricey (in constant dollars) before. When the price gets out of whack, risk takers start putting bucks into alternative energy, alternative motors, engines, etc., and conservation methods. The last couple of times we had these energy crises, the price didn't stay high long enough for the risk takers to get a return, so they bailed. Alternative approaches and conservation have basically only been happening because of government intervention through incentives and disincentives.

But this time, the risk takers have had enough time to actually make progress and begin to see serious profit opportunities down the road . . . and not that far down the road.

Better batteries, better light bulbs, more efficient jet engines, hybrid engines, clean burning diesel, changes in attitudes about nuclear, potential monumental breakthrough technologies in hydrogen, ocean heat pumps, wind, solar, and on and on.

As pointed out in the October issue of Wired Magazine, however, one very, very old approach may be the big winner - Biofuels. The most familiar of these is ethanol. If ethanol were cheap enough, and the production facilities were in place to produce enough of it, and if there was enough raw stock (currently primarily corn) to feed these facilities, we could end the use of carbon based gasoline tomorrow. Currently ethanol based flex fuels, which combine ethanol and gas, are providing an ever increasing, though still small, portion of the total gas supply.

Right now, there are three major hold ups on using 85% ethanol in the US.

1. Not enough feed stock. If the entire corn crop was used for this purpose, it wouldn't be nearly enough.
2. A substantial amount of oil based energy is needed to grow, harvest, and transport the corn to distilleries. Then, more oil based energy is used to turn the corn into gas. In fact, the most optimistic numbers are about 1 gallon of oil to produce 1.3 gallons of equivalent ethanol.
3. Cost. The most efficient facilities claim to produce ethanol for about $1.00 per gallon. This is too high to compete with gasoline in "normal" times (say $30 per barrel.)

Now comes three major breakthroughs as reported in Wired. First is the use of manure as the energy source for the distilling process. Second is the increasing yield per acre of the corn feedstock. The writer of the article (who has major investments in this technology, therefore has an axe to grind) indicates that $.75 per gallon ethanol is now possible. Further developments in hybrid corn are promising to increase the yield even more. At $.75 per gallon, ethanol is competitive with crude-based gas.

The big breakthrough, however, would be the development of one or more alternative feedstocks that would dramatically increase the yield per acre. It would appear from this article that biohols produced from switchgrass or other higher yielding plants are going to be available very soon. Already sugar beet ethanol has allowed Brazil to become a net exporter of energy products, as they have rapidly shifted their automotive industry to flex fuels using 85% ethanol.

A bit further out, but not the stuff of science fiction, is gasoline made from raw sewage, wood chips, and other biomass waste products. There are several small scale projects already doing this, and it is becoming more efficient at a rapid rate. A company called Kergy is on the verge of producing 15,000 gallons of ethanol per day using anaerobic thermal conversion. This process is faster than fermentation and uses less energy. And they have already made ethanol from municipal waste and hog manure.

I will provide a link to the specific article on October 3 when it becomes available. If you want to read the entire article sooner than that, you'll need to buy the magazine. For now, here is a link to Wired's homepage.

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