Energy and Transportation
Recent natural gas developments in shale formations around the United States have been touted as “revolutionary”. Similarly, shale oil, while not quite on the massive scale of shale gas, is complementary. These taken together, the hackneyed term revolutionary is, for once, appropriate and accurate. Fuels derived from oil and gas (diesel, gasoline, LPG, CNG, LNG) will clearly be the direct beneficiaries of the shale revolution. Alternative fuels via non-biogenic routes (methanol, ethanol, butanol, DME) may also be ramped up with the advent of cheap natural gas.
Conversely, many have predicted that alternative and renewable fuels will face headwinds brought on by an abundance of natural gas. Last October, the share prices of a number of alternative fuels companies swooned to the drumbeat of multiple National Academy of Sciences findings(1) that renewable fuels are neither competitive with conventional fuels, nor are they necessarily environmentally superior.
However, it is true that increased oil and gas production and lower prices can boost unconventional options as well. Oil and gas are in fact major, probably dominant, cost components in the production of biofuels. Some have suggested that corn ethanol production is essentially a natural gas to ethanol conversion process, albeit a low efficiency one. Cheap conventional fuels support expensive, exotic fuels analogously to the way reliable, boring conventional power plants backstop the use of unpredictable and erratic wind generated power.
Figure 1. Federal Clean Tech Spending (billions)
But the political appeal of biofuels has worn thin since the U.S. has spent $22 billion on biofuels over 2009-2011 alone as shown by the black bar segments in Figure 1. Figure 1 also shows a rapid decline (“collapse” might be more accurate) in federal biofuels spending beginning in 2012. Federal biofuels programs and subsidies have been recently allowed to expire with more likely to expire in the near future as shown in Figure 2. Another bellwether: biofuels darling Coskata Inc. is switching from a biomass source to natural gas (in either case, their product is ethanol). “Advanced biofuels” such as cellulosic ethanol would hopefully have lower impact on food prices than corn ethanol, but they remain a pipe dream, i.e., commercially unavailable. We can look forward to a long slow decline in biofuels, certainly in relative importance and probably even in actual volume. Renewable energy is failing in other areas, too. In spite of the wind farms stretched to the horizon, massive federal and state subsidies, and questions of federal investments propriety (e.g., Solyndra), renewables have still declined as a percentage of total power generation of the past twenty years(2).
Natural gas can make a major contribution to clean electric power generation, which in turn can enable a higher penetration of plug-in electric vehicles than would be otherwise practicable. But the EV star is rising only for very light duty vehicles. The public’s EV infatuation may soon wane since a recent OECD report has questioned their environmental benefits(3).
Continuance of one very long-term trend seems quite clear: a proliferation of fuel options. A single, undifferentiated gasoline served for the first twenty years of automotive history until premium “ethyl” (leaded) gasoline became available in the late 1920s. More choices came on the market in U.S. around 1960: diesel and multiple octane rating gasolines. In the 1970s, ethanol-gasoline blends first became widely available and by the 2000s, those blends were available in multiple mix ratios. Meanwhile, the US EPA balkanized the gasoline market by specifying “boutique” fuels with multiple specifications for vapor pressure and octane rating for multiple markets.
This is sensible. It was never logical to use the same fuel / engine for a 2000 lb four passenger vehicle used occasionally to pick up groceries as for an 80,000 lb long-haul truck racking up 100,000+ miles per year. And it is definitely the latter vehicle that stands to benefit or suffer most from fuel optimization or misapplication in spite of the political class’ obsession with passenger vehicles.
So, there will be plenty of action over the next ten years in LPG, CNG, LNG, and fuel alcohols and ethers synthesized from natural gas applied to heavy-duty vehicles. In fact, displacement of petroleum based fuels by gas based fuels (compressed natural gas, CNG) in the U.S.’s nine million trucks would cut oil imports by as much as three million barrels per day, over 1/4 of the total imported volume.
Figure 2. Federal Ethanol and Advanced Biofuels Federal Programs Nearing Expiration
(1)”Renewable Fuel Standard: Potential Economic and Environmental Effects of U.S. Biofuel Policy,” National Academy of Sciences, 2012
(2)Sean Casten: “How wind power fits into our energy diet,” http://grist.org/wind-power/how-wind-power-fits-into-our-energy-diet/(2012)
(3)Grist, Philippe: “Electric Vehicles Revisited -Costs, Subsidies and Prospects”, International Transport Forum, Leipzig, 2012