Eat your leftovers

Americans throw away about 30% of all food produced domestically each year, and since at least 8% of the U.S. energy budget goes towards bringing food to tables across the country, energy waste is closely tied to food waste [1]. In fact, all of that wasted food equates to about 350 million barrels of oil per year [1].

The energy embedded in food waste comes from many sectors of the food industry: production, transportation, storage, and preparation. Since food waste is a cultural problem, it is not likely that it will stop any time soon. A better solution to waste prevention could be to take advantage of the energy potential of food in our landfills. Rather than sitting in a landfill, organic wastes such as food leftovers are put into anaerobic digesters that produce biogas rich in methane [2]. This biogas can be used as fuel for heat and power generation, and the stuff that’s leftover can be used as composting material [3].

But how useful is this biogas? The EPA estimates that “if 50% of the food waste generated each year in the U.S. was anaerobically digested, enough electricity would be generated to power 2.5 million homes for a year” [3]. What kind of power does that translate to? From a study conducted by the EPA regarding production of biogas rich in methane from anaerobic digestion food waste, anywhere from 730 to 1300 kWh can be harnessed per dry ton of food waste [3].

Since food waste and the push by the federal government via mandates and subsidies to increase the production of biofuels in general are here to stay, biogas produced through anaerobic digestion of food waste may become a larger part of the overall fuel mix for electricity.

References

[1] Cockrell School of Engineering (n.d.). Wasting Food Means Wasting Energy. Retrieved from   http://www.engr.utexas.edu/features/research/wastedfood

[2] International Energy Agency (2007, January). Biomass for Power Generation and CHP. Retrieved  from http://www.iea.org/techno/essentials3.pdf

[3] United States Environmental Protection Agency (2013, February 19). Anaerobic Digestion.   Retrieved from http://www.epa.gov/foodrecovery/fd-anaerobic.htm

Biofuel Feedstock: Corn Vs. Algae

When it comes to biofuel feedstock in the United States, corn is king. In 2012, more than more than 40% of the US corn crop was used to produce corn ethanol, and this percentage continues to grow [1]. Unless the federal government intervenes, the EPA’s new Renewable Fuel Standards (RFS2) program will require the use of 13.8 billion gallons of renewable fuels in 2013, almost double the amount mandated in 2012 [2, 3].

As opposition to the use of corn as a biofuel feedstock grows among a diverse group—including petroleum producers, petroleum refiners, environmentalists and food processors—the need for a stable, environmentally friendly and economically viable alternative remains a necessity.

One such alternative feedstock being considered is algae, which has a number of theoretical benefits over corn when produced at scale. To begin with, they grow quickly and are more efficient than terrestrial plants at converting solar energy [4]. By some estimates, algae produce 2-20 times more oil than corn or similar crops [5]. They can also be grown domestically, on arid land, in brackish water or in saline aquifers, improving US energy security and freeing up valuable arable land [6]. In addition, they can be harvested almost continuously and they consume waste CO2 [7].

What’s the catch? Despite an estimated 200 companies working on algal biofuels in 2010, a scalable and financially viable industry does not yet exist [8]. In order to reach this goal, further R&D is needed to help identify the most productive algae strains, establish suitable locations for development and reduce capital costs and production costs. Additional life-cycle assessment studies also need to be done to ensure positive net benefits for governments and society [9].

So does corn face any competition from algae as an emerging biofuel feedstock? The short answer would be no, at least not yet. Although the algal biofuel market is expected to grow 43% between 2010 and 2015, production projections for 2015 are only a fraction of the current level of biofuel use mandated by RFS2 [10].

It is clear that the nascent algal biofuel industry must first overcome significant technological and economic obstacles before it can be commercially viable on a national level. Nevertheless, it remains a prospective and potentially disruptive alternative to corn ethanol, especially if guided by efficient policy design that promotes technological advancement.

As a component of the American Recovery and Reinvestment Act of 2009, The Department of Energy provided millions of dollars for algae biofuel research to public and private research institutions, including Arizona State University, the University of California, San Diego and Cellana LLC Consortium in Hawaii. Additional funding for research into algal biofuel technology has come from major oil companies, such as Shell, ExxonMobil and Eni.

Nonetheless, the future of algal biofuel or “green” crude remains uncertain. With an estimated breakeven point of $240 a barrel, it still cannot come close to competing with today’s $90-100 a barrel cost for crude oil [11]. On the other hand, assuming that aggressive reductions in capital costs and production costs for algal biofuel occur over the next 5-10 years, a future national energy mix including cheap algal biofuel remains a possibility.

References:

[1] Carter, Colin. “Corn for Food, Not Fuel.” New York Times. Accessed February 21, 2013, http://www.nytimes.com/2012/07/31/opinion/corn-for-food-not-fuel.html?_r=1&.

[2] Zamorano Cadaviz, Alejandro. “US Biofuels in 2013: Stories to Watch.” Bloomberg New Energy Finance. Accessed February 25, 2013. http://bnef.com/WhitePapers/download/280.

[3] Philp, Jim C., et al. “Biofuel Development and the Policy Regime.” Trends in Biotechnology, Volume 31, Issue 1, 4-6, 20 November 2012. doi:10.1016/j.tibtech.2012.10.001

[4] Darzins, Al, et al. “Algae as a Feedstock for Biofuels—An Assessment of the Current Status and Potential for Algal Biofuels Production.” International Energy Administration, September 2011. Accessed February 22, 2013. http://www.ieabioenergy.com/MediaItem.aspx?id=6965

[5] Pike Research. “Algae-Based Biofuels: Demand Drivers, Policy Issues, Emerging Technologies, Key Industry Players, and Global Market Forecasts.” Pike Research. Accessed February 26, 2013. http://www.pikeresearch.com/research/algae-based-biofuels.

[6] National Research Council. Sustainable Development of Algal Biofuels in the United States . Washington, DC: The National Academies Press, 2012.

[7] Darzins, Al, et al. February 2013.

[8] Nash, Keune. “Algae: Fuel of the Future?” National Review. Accessed February 23, 2013. http://www.nationalreview.com/articles/292913/algae-fuel-future-nash-keune.

[9] Philp, Jim C., et al. November 2012.

[10] Darzins, Al, et al. February 2013.

[11] Lundquist, T.J., “A Realistic Technology and Engineering Assessment,” Energy Biosciences Institute, University of California, Berkeley, California. October 2010. http://www.energybiosciencesinstitute.org/sites/default/files/media/AlgaeReportFINAL.pdf

Additional References:

Anoop Singh, Stig Irving Olsen, “A critical review of biochemical conversion, sustainability and life cycle assessment of algal biofuels,” Applied Energy, Volume 88, Issue 10, October 2011, Pages 3548-3555, ISSN 0306-2619, doi:10.1016/j.apenergy.2010.12.012.

Foroohar, Kambiz. “Exxon $600 million algae investment makes Khosla See pipe Dream.” Bloomberg Markets Magazine. Accessed February 24, 2013. http://www.bloomberg.com/news/2010-06-03/exxon-600-million-algae-investment-spurs-khosla-to-dismiss-as-pipe-dream.html.

Fifield, Anna. “Lobbyists Fight Over Ethanol Subsidies.” Financial Times. February 10, 2013. http://www.ft.com/intl/cms/s/0/a2c27506-720a-11e2-896a-00144feab49a.html#axzz2MAAKm0NW.

The Future of Ethanol: How the fuel subsidy’s end has affected the ethanol industry

There has long been a push by the federal government to make gasoline cleaner. One of the ways they have successfully implemented this is by giving out subsidies to oil companies who blended corn-derived ethanol into their fuel, specifically gasoline. Ethanol has been subsidized since 1979, but as of January 1, 2012, the 46-cent per gallon tax credit was not resigned into action [1].

So it would seem that with the end of the subsidy, would come the end of the ethanol boom. This is not the case. While the subsidy was still alive, the federal government passed legislation to increase ethanol production. The Renewable Fuel Standard, or RFS, was created in 2005 and later modified in 2007 [2]. It mandated that 36 billion gallons of renewable fuel be blended into transportation fuels (both gasoline and diesel) by 2022 [2]. For the ethanol industry, the policy meant that 13.2 billion gallons of ethanol had to be produced in 2012 alone [2].

Not only is ethanol (seemingly) here to stay, oil companies are now blending ethanol into their fuels without receiving the government subsidy. This tightening of profit margins is among the causes of increased gas prices to the consumer. However, because ethanol blending is still required, the price of a barrel of oil is actually expected to decrease due to the fact that gasoline will be up to 25% ethanol by 2022, reducing the demand (and price) for crude oil, see Figure 1 [3]. A decrease in oil demand here in the United States coupled with increased domestic production of oil and mandated increased production of ethanol (though production has been slightly affected by the drought in the Midwest) means that we no longer need to import as much oil, see Figures 2 and 3 [4].

Figure 1 [3]

Figure 2 [5]

 

Figure 3 [6]

So what does all of this mean? 1) Subsidies started the ethanol boom, but did not end it; 2) Ethanol as a renewable fuel is here to stay; 3) The U.S. is reducing its dependence on foreign oil, in part because of ethanol blending.

Sources

1. http://usnews.nbcnews.com/_news/2011/12/29/9804028-6-billion-a-year-ethanol-subsidy-dies-but-wait-theres-more?lite, 29 Dec 2011.
2. http://www.epa.gov/otaq/fuels/renewablefuels/index.htm, 28 Nov 2012.
3. “Assessing the Impact of U.S. Ethanol on Fossil Fuel Markets: A Structural VAR Approach,” by Lihong Lu McPhail, in Energy Economics, April 2011. http://www.ers.usda.gov/amber-waves/2011-december/us-ethanol-dampens-global-crude-oil-prices.aspx
4. http://www.iea.org/newsroomandevents/news/2012/august/name,30389,en.html, 13 Aug 2012
5. http://www.eia.gov/todayinenergy/detail.cfm?id=9030, 4 Dec 2012
6. http://www.eia.gov/todayinenergy/detail.cfm?id=3070, 14 Sept 2011.

 

Gasohol, Take Two (the other white aliphatic-alcohol)

On January 5, 1981, President Jimmy Carter signed Executive Order 12261 – Gasohol in Federal Motor Vehicles. This was intended to increase the use of “gasohol,” which is roughly defined as a gasoline blend with 10% anhydrous ethyl alcohol “derived from biomass.”

Since then, use of ethanol in fuel consumption has risen dramatically:

EIA: US Fuel Ethanol Consumption since 1981

The reasons for increasing US use of ethanol in motor fuels range from energy independence and national security to reducing the Nation’s CO2 footprint. However, ethanol is not a direct substitute for gasoline, and there are technical challenges that restrict its use. High concentrations of ethanol can be corrosive and volatile, making it impractical to transport via pipeline and limited to use in vehicles that are made with corrosion resistant fuel systems. Further, ethanol contains only about two thirds of the energy content of gasoline.[1]

However, ethanol is not the only aliphatic alcohol we can burn. Butanol is a 4 carbon alcohol (C4H9OH vs ethanol’s C2H6O) that can be made from the same materials currently being used to produce ethanol in the US. BP and Dupont have formed a 50/50 venture to produce butanol (marketed as Butamax) and sell it as the preferred biofuel alternative.[2] Butamax expects to begin commercial production in 2014.

Unlike ethanol, butanol can be transported using existing fuel pipelines.[3] Also, the current stock of vehicular internal combustion engines could potentially run entirely on butanol, without the need to blend gasoline at all.[3]

Further, while ethanol has around 84K BTUs per gallon, butanol has 105K BTUs per gallon (which is much closer to the ~114K in a gallon of gasoline).[3],[4]

At present, it costs around 25% more to produce a gallon of butanol vs a gallon of ethanol, according to the Butamax CEO.[2] This should not be a cause of concern, because butanol yields 25% more BTUs per gallon. So, butanol currently costs around 2.96 cents per thousand BTU (same as ethanol), and gasoline (at $3.76/gal) is 3.3 cents per thousand BTU.[5],[6]

If Butamax and other producers are able to reduce that cost spread over the cost of ethanol as production scales up, then the price per BTU advantage over gasoline will continue to increase, and as a “drop-in” alternative – butanol may soon be every politician’s darling biofuel of choice.

[1] http://www.eia.gov/energyexplained/index.cfm?page=biofuel_ethanol_use#tab2

[2] http://energy.aol.com/2012/05/01/biofuels-producer-launching-ethanol-replacement

[3] http://peswiki.com/index.php/Directory:Butanol

[4] Gasoline Gallon Equivalent: http://en.wikipedia.org/wiki/Gasoline_gallon_equivalent

[5] AEO2012 EARLY RELEASE OVERVIEW. Table 12. Petroleum Product Prices. http://205.254.135.7/forecasts/aeo/er/tables_ref.cfm

[6] Daily National Average Gasoline Prices Regular Unleaded. http://www.bloomberg.com/quote/3AGSREG:IND

Cartoon Bears, the Fed and Gasoline

From Gas Prices Explained: http://www.youtube.com/watch?v=40hNSJEKUgo

(aka Blaming “the Bernank”)

I recently came across this video, which explains a particular point of view on what is primarily driving gasoline prices in the US.

The gimmick, as you see, is that this particular theory of what is actually an extremely complicated economic global commodity trade model is explained by a few cartoon bears.

Their logic follows this progression:

1) Gas Stations are not to blame, because prices are up across the country, and that many individual business owners could not collaborate to fix prices.

2a) Lack of supply is not to blame; Supply is “so high” that refiners are exporting.

A very interesting anecdote supporting this assertion is the story of the “Alaskan Explorer.” This oil tanker was stuck with 12 million gallons of Alaskan crude (a quarter of its cargo) that it could not unload at a refinery in Washington, because the onshore storage tanks were at capacity. (from the Houston Chronicle, “U.S. awash in oil, but global demand drives prices,” 27 APR 2012)

There has also been a spate of articles reporting headlines like the following:

“Bloomberg writes that to offset weak U.S. demand, refiners exported 439,000 barrels a day more than were imported the year before.”

(from USA Today, “U.S. exported more gasoline than imported last year,” 29 FEB 2012)

2b) Demand is low. Note the significant downward trend starting around 2008.

Note that: “Over the last several years, the refining industry has shut down about 1 million barrels per day of refining capacity aimed at the east coast, the latest of which is the St. Croix Hovensa refinery, closing next month.”

(from USA Today, “Refinery closings could push gasoline prices back to $4,” 28 JAN 2012)

3) Instability in the mid-east is not to blame, because “has there ever not been instability in the mid-east?”

4) It is not “the speculators” because they bet both ways – there are two sides to any trade.

But…

5) The “falling dollar” is to blame. “The price of anything is based as much on what it’s worth as it is on the currency you are using to pay for it.”

At this point, the bears focus on Chairman Bernanke (aka “the Bernank”), and the Federal Reserve. These bears suggest that “the Fed” has been “printing more and more” money to stimulate the economy, leading to a devaluation of the dollar. They note that “the Bernank” claims the Fed is responsible for higher stock prices (as a result of its policies), but that he does not claim responsibility for higher gasoline prices. They then note that gasoline prices and stock prices are generally correlated.

It is true that in this interview, Chairman Bernanke says “the purpose of the monetary policy easing is not to increase stock prices per say, the purpose is to strengthen the US economy, put people back to work and create price stability, but the way monetary policy always works is through interest rates and asset prices. […] So, yes, I do think that by taking these securities out of the market and pushing investors into alternative assets, we have led to higher stock prices and lower stock market volatility.”

from: http://youtu.be/_-Jkgaehkwo

 

 

Is it true that stock prices and gasoline prices are highly correlated? Yes. The correlation between the S&P500 and Gasoline (“Conventional Gasoline: U.S. Gulf Coast, Regular”) (compared daily prices from January 4 2010 through May 1 2012) is a respectable 0.87.

Gasoline Data from: http://research.stlouisfed.org/fred2/graph/?s[1][id]=DGASUSGULF

S&P500 Data from: http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf–p-us-l–

So, does this mean the cartoon bears are correct?

Not necessarily. Note that over the same time period, the correlation between gasoline prices and the value of the dollar (measured as the exchange rate against the Euro) was only 0.44 (U.S. / Euro Foreign Exchange Rate (DEXUSEU)).

US/EU Exchange data: http://research.stlouisfed.org/fred2/graph/?s[1][id]=DEXUSEU

But, then again, maybe the US and the EU policies are too closely related, and currency exchange rates between the two may not capture changes in the value of the US currency against the global market for petroleum based products.

Comparing the exchange rate between the US and the Aussie dollar (U.S. / Australia Foreign Exchange Rate (DEXUSAL)) against the price of gasoline in the US suggests that the bears may be on to something.

The correlation, again over the same time period, is 0.88… which is an even stronger correlation than that between the S&P500 and gasoline prices.

US/AUS Exchange data: http://research.stlouisfed.org/fred2/graph/?s[1][id]=DEXUSAL

So,  maybe we can learn a thing or two from a cartoon bears. I wonder what their stance is on honey-based biofuels…

Corn Ethanol and Ham Sandwiches

In recent years, there has been much discussion about the energy balance of certain biofuels, particularly corn ethanol, cellulosic ethanol, and biodiesel.  Scientists have attempted to establish, using life cycle analyses (LCA), the merits of these fuels–most importantly, their “energy balance” or “energy return on investment” and lifecycle greenhouse gas emissions reduction.

The energy balance of a product is defined as the energy content of the product minus the sum of all energy inputs required to produce the product.  For example, the process to convert one bushel of corn into ethanol requires direct inputs of heat and electricity.  However, it also requires secondary inputs such as diesel fuel to drive the tractor to harvest the corn, as well as energy to build the tractor.  These analyses get very complicated, and it is not clear where the “system boundary” should lie. Does the fuel for the tractor count as an input? Most definitely.  What about the energy content in the ham sandwich the hapless farmer ate for lunch? Maybe–but he has to eat whether or not he is harvesting corn.  Should we count the energy for the tractor to harvest the wheat to make the sandwich? Should we be doing energy balances on ham sandwiches? And if the energy in a ham sandwich is less than the sum of the energy inputs, should we stop making ham sandwiches?

Obviously the answer is no.  Ham sandwiches are delicious, and I like eating them.  I also like putting mayonnaise and mustard on my sandwiches, condiments with abysmally low energy content.  And, of course, drive to the grocery store to buy these things.

The upshot of all this is that people do not use energy–they use heat, light, mobility, and consumable products (like food and toilet paper), all of which require energy inputs.  Thus the energy balance is useful for determining how some goods compare with others, just like price.  It would be useful to compare the price of two supplementary goods (such as gasoline and ethanol) in deciding which one to purchase.  But it would be strange to arbitrarily decide that if a fuel costs more than $1/mile, then it is not an efficient option.

Critics of certain biofuels will often point to the energy balance calculation as the “smoking gun” that these fuels are inefficient and a waste of energy–or indeed, an evil plot perpetrated by the farm lobby, big business, or big government.  What they instead should do is compare the energy balance of ethanol with that of gasoline, a common substitute.  These same critics might be surprised to find out that it requires 1.19MJ of fossil energy to produce 1MJ of gasoline [1], resulting in a negative energy balance.  Corn ethanol, in comparison requires only .77MJ of fossil energy for 1MJ of corn ethanol [1], an improvement of 54%.  The energy balance calculation is therefore best viewed in a relative, rather than absolute sense to avoid confusion.

[1] Farrell, A. E.; Plevin, R. J.; Turner, B. T.; Jones, A. D.; O’Hare, M.; Kammen, D. M. Ethanol can contribute to energy and environmental goals. Science. 2006, 311, 506–508.