Richard Stuebi/Advanced Energy

Archive for November, 2009

November 30, 2009

The immutable principles of energy

As posted to CleanTechBlog.com

Jim Halloran, a financial analyst of the oil/gas industry now with Russell Energy Advisors at Financial America Securities, recently sent his various contacts something he came up with called “The Immutable Principles of Energy.” I liked it and thought it was worth passing on verbatim to readers of my blog:

1. Never confuse reserves with production.

2. The biggest, best fields are discovered first.

3. Commodities are priced at the margin – the last 1 percent dictates the price.

4. E&P companies are serial destroyers of capital. Any appearance to the contrary is a temporary aberration, usually due to hoped-for, unsustainable pricing gains.

5. More than any other sector, time is money with respect to energy.

6. The more efficient we become in our use of energy, the more we will use Jevons’ Paradox.

7. The more society expands and demands greater access to energy, the more it will create roadblocks to its delivery.

8. We desire six qualities in our energy sources: affordability (cheap), abundance, reliability, purity, universal access, and environmentally friendliness. There is no set of circumstances under which all of these can exist simultaneously.

9. There exists at least a “$2 differential” between crude oil and competing sources of energy, regardless of the price of crude oil.

10. In dealing with OPEC, pay attention to what its members do and give little heed to what they say.

11. Governments look at energy fields as sources of revenue, not as sources of energy:

  • Governments have a disincentive to promote efficiency/conservation.
  • Income streams will be protected as to magnitude.
  • Long-term energy planning is incompatible with political realities.

12. Once a field goes into decline, it will not increase production beyond this peak in the future without capex infusions that will prove to be uneconomic.

13. Crude oil is universal. The price you pay for gasoline is determined more by the small producer in Colombia than by the Wal-Mart on the corner.

14. Natural gas is local. The price will continue to be set by continental production even after the lawyers have given up fighting the LNG terminals.

15. The media know nothing about the oil business. The more strident the published predictions of a price extension above (below) extreme levels, the closer the oil market is to a temporary top (bottom).

16. “It’s always something.” - Roseanne Roseannadanna

November 23, 2009

Mercury rising

As posted to CleanTechBlog.com

Unlike some other environmental issues, there is virtually no controversy or skepticism about the perils of mercury in the environment. Not only has mercury been known for centuries to be highly poisonous, it’s also increasingly linked to other physiological ills, including some speculation in recent years that it’s related to certain neurological disorders.

Despite the breadth of constituencies concerned about mercury pollution, it’s evident we have a long way to go. A report just issued by the U.S. Environmental Protection Agency (EPA) found that mercury concentrations exceeded safe levels at 49 percent of U.S. lakes and reservoirs sampled from 2000 to 2003.

From where does all this mercury in our water come? Sources can be classified into two groups: One is legacy industrial facilities from days of yore, in which mercury was either used in or generated as a byproduct of the core production process. Although many of these facilities are now shut down, the mercury often lingers at these sites, even after remediation approaches have been pursued. Over time, the mercury finds its way into aquifers underground or nearby rivers and streams.

Other sources are related to coal use. Mercury is a trace element in most hydrocarbons, but especially in coal. Thus, where it is mined or stored in a pile, rainfall leaches mercury from the coal on the ground. And when it is burned – mainly at powerplants – mercury emissions come out of the smokestack into the air, only to fall somewhere else downwind in a future rainstorm. Inevitably, the mercury ends up in the water – somewhere, someway, somehow.

Related to coal burning, the EPA is cracking down, via its upcoming Clean Air Mercury Rule, which aims to drive a 70 percent reduction in mercury air emissions from large-point sources. Several mercury emission control technologies are under development, including those by companies such as Albemarle and Amended Silicates.

But there’s a problem: Much of the rest of the world won’t be subject to strict mercury emissions limits, so U.S. water supplies will still be fed by new sources of mercury from elsewhere (such as China, which is adding new coal powerplants weekly absent any mercury control technologies), since mercury emissions can stay airborne for a long time. In any event, we’re still exposed to mercury run-off from coal mines and coal piles, plus all of those legacy industrial sites.

Historically, the main approach for dealing with mercury in water streams has not actually involved taking mercury out of the water, but rather introducing large volumes of clean water to reduce overall concentration levels. To employ an old adage from the water industry, “The solution to pollution is dilution.”

In mathematical terms, instead of reducing the numerator, dilution involves massively increasing the denominator. But that approach can only go so far. For example, current EPA limits stipulate that all natural or manmade water streams feeding into the Great Lakes can have mercury concentration levels no higher than 1.3 parts per trillion (ppt). Given some of the nasty sources in the old industrial heartland, enormous volumes of clean water would need to be introduced to reduce concentrations of some of the polluted sources to permitted levels. So let’s just say that something less than 100 percent of the water streams flowing into the Great Lakes are in mercury compliance.

Why not just extract the mercury from water? Until recently, only activated carbon has been known to be effective as an agent for removing mercury, but it leeches, too, so once the carbon has adsorbed the mercury it must be dealt with as a hazardous waste, implying expensive disposal procedures. And carbon quickly saturates with mercury, so lots of carbon is required. All told, a very expensive process.

Because mercury remediation in water has generally been unsatisfactory from an economic (and sometimes also from an environmental) perspective, regulators have often been rather lenient in addressing water streams where mercury levels are above desirable (or even required) levels. Regulators rarely seek to be “bad guys,” so they tend to refrain from forcing corporations to undertake compliance actions that risk putting industrial facilities out of business, thereby eliminating major employers and tax bases – often in poor rural areas. Instead, variances and waivers are often issued, allowing non-compliance to continue.

A good solution for cost-effective removal of mercury from water may now finally be at hand. A Cleveland-area company named MAR Systems has developed a proprietary material of abundant and low-cost supply to use in lieu of activated carbon. It almost instantaneously achieves very high (95-plus percent) mercury capture and binds the mercury so that it can be disposed as ordinary waste. The fundamental intellectual property of MAR Systems is based on research undertaken by the EPA itself.

(Full disclosure: Early Stage Partners, the venture capital firm with which I work, was sufficiently impressed with the MAR Systems technology that it recently made an equity investment in the company, and I represent ESP on the board of MAR Systems.)

Perhaps now the rising concern about mercury can be matched by a corresponding increase of remedial action, driving toward full compliance with the rules and regulations that are already on the books.

November 16, 2009

Reinventing desalination

As posted to CleanTechBlog.com

Many informed observers consider the inadequacy of clean drinking water to be one of the world’s most serious problems. By some estimates, 20 percent of the human population lacks access to good water supplies.

That’s not to say that these people live nowhere near water; indeed, most of humankind lives fairly close to an ocean. However, seawater is saline, and desalination is required to render it usable as drinking water.

Desalination is no theoretical pipe dream. Two desalination approaches have long existed to remove salt from water: distillation and reverse osmosis. Regrettably, both are rather energy-intensive. No problem for the wealthy, but the world’s ultra-poor populations typically cannot afford either the construction or the operation of such desalination technology. And so they go without good drinking water.

As reported in an article titled “Current Thinking” in the Oct. 31 issue of The Economist, two entrepreneur/inventors (Ben Sparrow and Joshua Zoshi) from Vancouver have launched a company called Saltworks Technologies to commercialize a completely novel “thermo-ionic” approach for desalination, based on evaporation and ionic conduction and powered mainly by sunlight.

There are three beauties of this new approach concocted by Saltworks:

1. It is based primarily on solar thermal energy sources – and sunlight is often plentiful in some of the world’s poorest and most remote corners.

2. It theoretically requires only about 30 percent of the electricity requirement of the most efficient reverse osmosis approaches now available for desalination.

3. It should be upward- and downward-scalable, making it a plausible solution for megacities and tiny villages alike.

All three of these factors imply that the Saltworks technology could dramatically reduce the cost of desalination and bring it into economic reach for the untold billions of the world’s thirsty poor.

This is yet another shining example of how high-tech innovators are solving the world’s biggest problems. The future health of our planet and success of our species demands more people like Mssrs. Sparrow and Zoshi. And political, corporate, financial, academic, and civic leaders around the globe would be well advised to keep improving the environments within which those like Sparrow and Zoshi come up with and pursue unconventional and sometimes brilliant ideas.

November 9, 2009

Biofuel beatdown

As posted to CleanTechBlog.com

A few weeks ago, the Wall Street Journal ran an article headlined “U.S. Biofuel Boom Running on Empty,” which presented a blistering, across-the-board slam on biofuels. Perhaps more interesting than the WSJ article itself was an email reaction I received from a prominent energy tech venture capitalist with keen visibility into the transportation fuel space (whom I will keep anonymous), who said:

“The article makes the common mistake of using the broad term ‘biofuel’ when they should be focusing down to ‘biodiesel’ and ‘corn-based ethanol’…Renewable diesel and ‘green’ gasoline are still alive and attracting big VC dollars. Engineered microbes, bacteria, and algae work to produce drop-in fuels is still going.”

Notwithstanding the bad recent press - a virtually forecastable reaction to the excessive biofuels hype of the 2005-07 era - reasonable potential for biofuels still remains. To wit, a new report from the United Nations titled “Towards Sustainable Production and Use of Resources: Biofuels” makes clear that certain biofuel feedstocks and production approaches are much more environmentally friendly than others. And as more of these biofuel production schemes turn away from inputs subject to the vagaries of food market dynamics, the financial volatility facing producers should substantially decline (though price fluctuations in the output fuel markets will always remain).

Biofuels have fallen prone to oversimplification. Because corn-based ethanol and soy-based biodiesel are both environmentally marginally beneficial and economically unattractive at current prices for feedstocks and fuels, many immediately leap to the conclusion that all biofuel technologies are inherently and forever unattractive. Don’t fall prey to that mistake. It’s just not true.

November 2, 2009

Plugging Electric Vehicles

as posted to CleanTechBlog.com

Much has been written about the planned release by General Motors (NYSE: GM) of the Chevy Volt, a plug-in hybrid electric vehicle. When GM launches the vehicle, now slated for late 2010, it plans to sell tens of thousands of them.

As profiled in an article in the August 24 issue of Forbes, the bigger mover in the electric drive vehicles game looks to be Nissan (NASD: NSANY), which is investing several billion dollars to ramp up for producing 300,000-400,000 electric vehicles within a few years. Its entry model is the Leaf, a five-passenger hatchback that it aims to sell in the U.S. by late 2010, at a price point of about $30,000.

A key aspect of Nissan’s surge into electric vehicles is its joint venture with NEC, for their lithium-ion (Li-ion) batteries. The NEC battery design employs a laminated structure that improves cooling performance, which has been a major stumbling point for the use of Li-ion batteries. Indeed, Nissan plans to sell these batteries to other automakers.

Nissan’s CEO, Carlos Ghosn, is by his own words “extremely bullish on zero-emission vehicles.” He is bold enough to predict that 10% of world auto sales will be all-electric within 10 years.

An excellent overview of the electric vehicle realm, entitled “The Electric-Fuel-Trade Acid Test”, was published in the September 5 issue of The Economist. In this article, not only were several of the new electric vehicle makers (e.g., Tesla Motors, Venturi, BYD Auto, SAIC Motors) and battery developers (A123 Systems, Boston Power) put into context, but some all-new technologies and business models enabled by vehicle electrification were highlighted.

For instance, consider the case of Better Place. This California-based firm is launching a business to serve local auto markets with a network of stations that will swap out depleted batteries with fully-charged ones within seconds, and charge the spent batteries for reuse in other vehicles, thereby offering customers a quick recharge akin to a refill at a gas station. Pricing will be akin to “rental” on the battery, until it is returned to a station to be replaced by a fresh one, which will also be “rented.” Each stop at a station thus implies a customer outlay on the same order of magnitude as a tank of gasoline or diesel.

Then there is the case of Michelin, which is developing something called the Active Wheel. Beyond just the tire, Michelin is aiming to embed motors, brakes, suspension and associated systems into wheels, thereby distributing physical control to each wheel and allowing heavy items such as springs and transmissions to be entirely eliminated from the vehicle. Not only will this (theoretically, at least) improve auto performance, but it will reduce weight to increase energy efficiency and possibly lower capital and operating costs of vehicles.

The possibilities for an entirely new industry to emerge in providing and supporting electric vehicle markets are becoming clearer. Earlier this year, a study (accessible here) commissioned by the Electric Power Research Institute (EPRI) – funded by The Cleveland Foundation, the Greater Cleveland Partnership and First Energy (NYSE: FE) – assessed the potential for Northeast Ohio to become a major player in the electric drive vehicle industry. The study makes indicates that many thousands of jobs are at stake for the Cleveland region – but only if (1) the U.S. takes actions to accelerate the penetration of electric vehicles in the transportation sector, and at least as importantly (2) Northeast Ohio organizes itself to more earnestly pursue the business and technology opportunities associated with electric drive vehicles.

This economic potential is not just for Northeast Ohio. Clearly in response to the downturn of the American auto industry, the Obama Administration has made the state of Michigan a major recipient of its largesse, allocating half of a recent $2.4 billion in grants to stimulate electric vehicle and battery production. As reported in the Forbes article, Nissan’s U.S. battery manufacturing will occur in Tennessee, supported by a $1.6 billion loan from the U.S. Department of Energy. A123 and Boston Power are both based in Massachusetts. Along with Tesla, Fisker Automotive – both supported by the Silicon Valley mega venture capital firm Kleiner Perkins – are based in California.

Of course, not everyone is enamored with electric vehicles. In the same issue in which it profiles Nissan’s electric vehicle strategy, Forbes’ editor William Baldwin writes a skeptical opinion about the cost-effectiveness of electric vehicles in reducing greenhouse gas emissions.

When considered solely as an approach for reducing emissions, perhaps electric vehicles aren’t the absolute best solution. However, when one also considers the economic revitalization possibilities, as well as the imperative for reducing reliance on oil (from unstable and unfriendly sources around the globe), electric vehicles seem far more worthy of plugging.