The Oil Drum

As an opening warning, today I am going to write a piece of fiction. Not that it suggests that I am trying to emulate James Kunstler, nor is it going to have the drama of the Science fiction/Fantasy by authors such as David Weber, Lois McMaster Bujold, or Jim Butcher that, to pick but three I avidly devour. No what I want to do is to try and explain is why it takes new ideas about 20-years to go from idea to significant market impact. I thought it might be amusing to do this by following a totally fictitious idea *cough* from concept to impact level to show some of the barriers to progress. Dixie Lee Ray once tried to do this in explaining why, even if cold temperature fusion worked, it could not be an instant contributor to the national energy supply. Unfortunately I have lost that reference and so you are stuck with this, should you choose to read it.

Let’s begin by saying that our protagonists are three faculty members: you, a young female electrical engineer called Angela, me, a somewhat old plant biologist called Burt, and Charlie, a medium career nuclear engineer. We are having a beer after classes end and I comment that in some work I was doing in Russia on birch trees I had noticed that one of the ponds on site had a thin oily scum on it. I’d brought samples back for testing and it seems as though the cause was algae, in the water, that was weeping a lipid. We all troop back to the lab for a look, and on top of the little reactor that I have built there is this thin film, but the water below is quite muddy and turbid, and this has been sitting there for quite a while. You suggest cleaning up the layers with a little applied electrical potential, and Charlie suggests a little radiation might weaken the algal cell wall and increase yield.

Back at the beginning of January I changed cars, and now drive a Camry Hybrid. It came with the usual displays for mpg, where the power was flowing and such, and for a month I played with looking at the different displays and then, as with most new toys, started to ignore them. However, pulling into the garage one night just over a month ago, I switched off the engine and a little “Excellent” appeared in a hitherto un-noticed final display on the dash. Now how do I confess this? Since then my driving habits have changed - more than I would freely admit - by the wish to be praised by a machine. The commute home is under three miles, and in somewhat hilly country so this requires a little effort on my part, but more often than not I now get that little glow of satisfaction from such a sign as I enter the house, generating a feeling that I am doing my part.

Well, not completely, and in terms of the greater scheme of things not even at any level of significance. The problem that we are coming to face is much larger, and more imminent than can be solved with simple small measures. Yet by touting the gains in efficiency through use of hybrid cars, or the growth rates of the solar and wind industries, one can convey to the general public that there is a considerable amount of technical progress being made in solving what “short term inconvenience” we might face as this “peak oil thingee” comes to pass and we have to live through it. The scale of the problem is glossed over, and the inadequacy of currently proposed solutions in their impact on the overall size of the problem is lost in the debate over issues that may be resolved with additional investment and time.

The fun thing about conferences is that there are also sorts of individual lines that presenters say that could be pulled to the headline, and perhaps be more mischievous than helpful. I was thinking that today, when the opening speaker began with explaining why she couldn’t start her talk with a joke. Turns out that when she tried to Google “ethanol and Joke” all she got was pages of citations of “ethanol is a joke” or “ethanol is a big joke!” Conference, you say, speaker, you say, but I thought the ASPO Conference didn’t start until tomorrow?

Well yes, that’s true, but sometimes if you want to catch some of the developing stuff, or the stories that never make it to the National Meetings, you can learn a lot from smaller conferences, and so I came to Dubuque. Today is the first of two days on “The Impacts of Increased Bio-Fuel Production on the Midwest Landscape.” At a time when the current ethanol situation has been described as “the farmer’s version of the gold rush,” it was interesting to hear what is happening down at the farm level and in planning within the Midwest to look at answers to the looming problem. Some of the papers today discussed switchgrass, and algae, and biodiesel and how to effectively harvest the “crappiest wood” in the U.S. and turn it into useful energy. And in the discussions, in a town where the corn grows right up to the airport runways, there was a lot of realism in the discussions of water needs, and soil nutrition replacement and bottom line cost levels.

Today's headlines lead with coverage of the on-going crisis in the debt markets, and an explanation of the financial engineering underlying much of the global liquidity bubble. Debt ratings have not been adjusted to reflect current market conditions, meaning that 'asset' valuations are over-stated. No institution wants to force asset sales for fear of revealing just how much real valuations differ from nominal ones, but eventually such a sale will occur - with the potential to cause an abrupt repricing of a wide range of 'assets' (many of which will actualy be revealed to be essentially worthless). Leverage will magnify the losses, leading to a very serious financial crisis. One estimate (below) puts the potential losses, once assets are eventually marked to market, at 20 times the sum involved in the LTCM crisis in 1998 - so far, and getting worse by the day.

The Round-Up is also convering the Canadian energy scene, as well as environmental and international news, in that order. Oil companies leaving Venezuela and aiming for the oil sands are finding that all is not clear sailing, while China is entering the oil sands for the first time. Nunavut seeks control over future oil and gas revenues, Newfoundland and Labrador wants to bypass Quebec in selling electricity to the US, and the slow down in natural gas drilling is hurting frontier communities in Alberta and BC.

Credit crunch will 'shred investment portfolios to ribbons'

The near collapse of two Bear Stearns hedge funds has lifted the rock on our 21st century mutant capitalism, exposing the bugs beneath to a rare shock of naked light.

When creditors led by Merrill Lynch forced a fire-sale of assets, they inadvertently revealed that up to $2 trillion of debt linked to the crumbling US sub-prime and "Alt A" property market was falsely priced on books.

Even A-rated securities fetched just 85pc of face value. B-grades fell off a cliff. The banks halted the sale before "price discovery" set off a wider chain-reaction.

"It was a cover-up," says Charles Dumas, global strategist at Lombard Street Research. He believes the banks alone have $750bn in exposure. They may have to call in loans....

....Wobbles are turning to fear. Just $3bn of the $20bn junk bonds planned for issue last week were actually sold. Lenders are refusing "covenant-lite" deals for leveraged buy-outs, especially those with "toggles" that allow debtors to pay bills with fresh bonds. Carlyle, Arcelor, MISC, and US Food Services are all shelving plans to raise money. This is how a credit crunch starts.

"This is the big one: all investment portfolios will be shredded to ribbons," said Albert Edwards, from Dresdner Kleinwort.

The following is a guest post by John Benemann. John has many years of expertise in biomass conversion, and previously co-wrote a guest piece on cellulosic ethanol. On the subject of biodiesel from algae, he literally wrote the book.

I originally wrote an article over a year ago in which I mentioned the potential of algal biodiesel. I still believe, as I did then, that biodiesel (or more broadly, renewable diesel) is a far superior fuel to ethanol for reasons I outlined in that essay. However, over the past year, the more I learned about the prospects of biodiesel from algae, the more it started to look to me like cellulosic ethanol: Technically feasible? Yes. Commercially feasible? Nowhere close, and the prospects don't look good any time soon. (However, as in the case of cellulosic ethanol, I believe the technology has some potential, so the government should fund the research).

This was a bit disheartening for me, because I had high hopes that we had an option for replacing a large amount of our fossil fuel usage. I no longer believe that, and recent work by Krassen Dimitrov (PDF warning) had reinforced my doubts. When I read the guest post by fireangel, "Has the Algae Cavalry Arrived", my first thought was "Nice work." My second thought was, "I should have jumped on this and investigated thoroughly eight months ago when those nagging doubts started to creep in." One nagging question I have had since I first read about biodiesel from algae is "Why would NREL terminate the project if the prospects really were good?"

But should there be any further doubts, here is a guest post from a man who knows as much about this subject as anyone else in the world. And he bears bad news for those who had visions of driving around in algae-fueled transportation.

Editor’s note by HO: There has been the occasional discussion of algae as a possible source of biofuels. The interest in this topic is continuing to increase, and thus, when fireangel sent in this piece, it seemed to me to be appropriate to consider allowing the piece to be posted as a guest post. At the end I will have some concluding remarks (I had mentioned that I would, and this is acceptable), but for now, let me step back and yield the floor.

The last 2 years have seen a major global push towards the use of biofuels. This has included corn, soybeans, sugarcane, sunflower and rapeseed among others. The U.S. Government has mandated an increased usage of ethanol in gasoline, which has resulted in a boom in the construction of corn-to-ethanol plants. The short-sightedness of this policy can be seen by anyone not standing for reelection to the US Senate. Soaring demand has led to a more than 60% increase in corn prices. These price increases have, however, not deterred the ethanol industry, which continues to add more and more corn-to-ethanol plants to the drawing board. While industry estimates vary it is quite likely that we could be using more than 50% of the total domestic corn production to supply less than 10% of the national demand for gasoline by 2010.

Given the relatively low overall yield of corn ethanol per acre, several alternatives have been proposed. These include the growing of soybeans, rapeseed and safflower to produce biodiesel. With some of these crops yields can range anywhere from 3-7 times that from corn ethanol per acre and have several other advantages including a much better EROEI. The one that caught my eye though was the proposal to convert algae into biodiesel. Several posts on TOD have referred to algae as holding more promise for biodiesel production, but I had yet to see any substantive proof of its feasibility. I spent several hours over the last few days researching this and I found some interesting facts that I thought I would share on TOD. The bulk of these findings are based on Dr. Krassen Dimitrov’s work. I invited him to present a summary of his work at TOD but he suggested I do it. He even suggested I “link it’ to me. Talk about not taking credit! My role was to verify his calculations, make a synopsis and add additional information that I learned on this subject. I also communicated with Dr.Briggs at UNH about this and his views are included.

Grin, while working away on the third segment about Abqaiq I noticed that the cellulosic ethanol post was getting a fair few comments on the use of algae. Having been directed to a recent radio talk on the subject, with a slightly different twist, I thought I would pass it on. It is here, under the 7/21/06 transmission date. (Sorry I am not technically literate enough to give the actual audio stream or podcast URL).

With a postulated 2+ barrels/acre/day of product (if I do the arithmetic right) even if the acres are "special" makes it sound as though it might be a somewhat intriguing approach.

UPDATE: Well I guess I hadn't better laugh about this, but what the broadcast was about related to the benefits of growing the algae in the unused sections of old mines, and in cross-cuts, where the climate can be easily controlled, and the infrastructure (walls, roof etc) are already in place. It resolves some of the issues that were a problem in New Mexico, and allows the use of the third dimension (height) in the creation of the reactors - hence the high level of productivity, and it does not conflict with land-use requirements, etc etc. Ah, well!