While I'm turning over the microphone to Vinod Khosla, he also sent along his thoughts on the prospects for alternative fuels and clean tech in 2007. Lots of interesting and contestable stuff therein. It's below the fold; have at it.
- Ethanol
- Cellulosic plants are real -- at least six in construction
- Tariffs on their way out -- global market for ethanol
- Congress sets much more aggressive RFS for ethanol -- all the 2008 presidential candidates adopt an ethanol friendly policy
- Next generation fuels (like butanol) and energy crops get attention
- Renewable power
- Photovoltaics and wind continue their march
- Solar thermal technology starts to dispel the myth that coal is the cheapest long term central "utility grade" power source
- Risks around coal based power generation
- Supply, costs, regulatory risks, carbon costs start to shake investor confidence in new coal power plants
- Calif. AB32 and similar state regulations start to stem the "coal rush"
- Carbon dioxide gets classified as a pollutant by the U.S. Supreme Court
- Financing
- Venture capital in cleantech goes through the roof
- First cellulosic technology IPO set for 2008
- Private equity and hedge funds starts participating in biofuels
- Efficiency
- First "high profile" startups in "efficiency"
- Green homes become visible as "real alternatives" at moderate cost
- Startups start in new renewable materials
Q&A
Biggest trend in '07?
There are a few major areas: biofuels to replace oil, replacement of coal with clean coal, wind and solar, new renewable materials, and efficiency. The pace of progress in each of these areas cannot be predicted a priori.
I suspect this will be the year of cellulosic ethanol. Biodiesel is a good product but fundamentally non-scalable unless it can be made form biomass instead of the seed product. Ethanol has had a good start and it will transition quickly to mostly cellulosic based production. But I suspect new fuels like butanol will come along, produced from the same biomass, brewed in the same fermenters, and running in the same flex-fuel engines. I would not be surprised to see bio-gasoline either, made initially from corn and later from biomass.
But 2007, we will see the emergence of cellulosic ethanol as a reality and biofuels moving from their role as an additive to gasoline to a primary fuel for automobiles. At the same time you will see critics, often funded by the petroleum interests, increase their attacks on biofuels through surreptitious PR campaigns, while publicly supporting these renewable fuels. We might even see oil prices manipulated down to thwart this transition which is essential for our planet, for our national security, and probably for increased global harmony. You will see the naïve campaigns of people with fancy names like the Earth Policy Institute which intentionally appear to use bad data or ridiculous assumptions but make good press headlines, move to attacking cellulosic ethanol.
We will soon see the end of tariffs and protectionism, global markets, and aggressive adoption of these new fuels. Why should we tariff biofuels when we don't tariff oil? And despite popular belief, oil gets more subsidies than ethanol!
On the coal front, we will continue to see a push for "clean coal" as a way for a few of the traditional power generation firms to delay action. There are electric utilities like PG&E in California and Duke Energy that are proactively looking at real clean coal efforts as well as all other forms of clean power, especially wind and solar. We will see a serious division between these two types of utilities, one trying to start coal plants and hoping to use political lobbying to grandfather their carbon emission and count them as an "asset," while the more progressive firms will try and use the cleanest technologies and push for treating carbon emission as a liability. Clearly we want to support the Dukes and PG&Es of the world and not punish them just because they have been investing in cleaner power.
On the technology side, we will see a horse race between clean coal, solar thermal (not photovoltaic), and wind for central utility-grade power generation. I would personally handicap this in favor of solar thermal power because it can be stored easily as heat and is half the cost of solar photovoltaic and is dispatchable by the utility when it is needed, unlike wind power which must be used when the wind blows. Heat is much cheaper to store than electricity and that gives solar thermal technologies (often called CSP for concentrated solar power) a big leg up over wind and photovoltaic.
Contrary to popular belief, I suspect we will find that clean coal plants (often called IGCC plants with carbon capture and sequestration) will prove to be too unreliable and the cost of gasification of coal (the G in IGCC), the separation of carbon dioxide from the waste gases, and compression too high. Liquefaction, handling, and eventually underground storage in large reservoirs will be so expensive that it is likely that solar thermal technologies will win the cost race. The financial risk of building a fifty year lifetime coal plant will become much more visible in 2007, and utilities that are doing it will see their stock suffer as investors recognize this risk fully! You have got to be crazy to build a fifty year asset with the escalating risk of environmental regulations and the certainty of carbon pricing at some point which will triple the effective price of coal. It will be much like all the gas plants built in the last decade that are already uneconomic. Besides, all the renewable portfolio standards (RPS) will make it where you can't produce coal-based electricity and sell it. Already California has a law requiring 33% of the power be renewable by 2020! The eastern states have their own renewable goals. The RPS standards are spreading like wildfire.
On materials and efficiency, I suspect in 2007 we will see new startups with great ambitions. I suspect that story will take a bit longer to become part of the mainstream discussions. I wish this would happen faster. We might see talk of "stored wind," which is key to increasing its use. We will see higher efficiency, new style photovoltaics that don't depend on silicon. They will need to get to mass produced technologies and 30% efficiency to really explode in the marketplace. That is entirely possible with thin film multi-junction approaches.
What will Congressional/presidential candidates will do before '08 election?
The biggest leverage for biofuels will come from the relatively similar positions of all the presidential candidates for 2008. Most of the rumored candidates already support an aggressive biofuels policy, as does the Democratic majorities in the house and the Senate, and the Bush administration. The winds are in favor of major progress in the biofuels arena nationally and globally.
What kind of alternative-fuel vehicles will we see this year? What will be the biggest money makers, or areas of heaviest investment in venture capital this year, including in clean tech?
I suspect we will see rapid adoption of the flex-fuel model and initial plans for flex-fuel hybrid cars. That is the right strategy for automakers, consumers, and the country, as it gives consumers a fuel choice and leverages hybrid technology to improve efficiency. If we have a battery breakthrough in the next few years we will see this model get adopted quickly. If we don't see a breakthrough -- and we need a five fold improvement in price performance of batteries -- hybrids will grow more slowly because of the increased cost of hybrids. They will in the near term cost $3000-$5000 more than their conventional cousins.
Green Home. Will it be brought to us by the Home Depot/Lowe's of the world? What will it look like and who will profit -- other than mother nature?
We have invested in Living Homes, which has built the first LEED Platinum high-end designer home, factory manufactured, and installed on site at mid-end cost. I suspect we will see many more similar efforts. Eventually these might come from Home Depot, but I suspect in the short run we will see new manufacturers and home builders dominate this exciting prefab space. Prefab will no longer be associated with low-end homes. Now most Americans can own a prefab Maya Lin home!
Comments View as Flat
Julia Olmstead Posted 1:07 am
23 Jan 2007
Wow
I wish I could be as optimistic as you are, Mr. Khosla. Here in Iowa we like to talk a lot about cellulosic ethanol but we'd rather grow as much corn as possible (thanks, government subsidies). I think most farmers probably laugh at the idea of switching to "grass cocktails" -- they would go broke if they were producing the yields Tilman is talking about. The income would hardly take them to the distillery. And, oh yes, we continue to build new ethanol plants that aren't compatible with cellulosic feedstocks.
But you're right, I do plan to increase, or at least maintain, my critiques of biofuels (although I've yet to get any oil money offered to me), including cellulosic ethanol, primarily because they distract from energy conservation. There are so many more efficient alternatives being pushed to the wayside (including walking and bike riding, but I guess those don't produce profits), or grossly underfunded, by the biofuel hype.
Here at the Midwestern land-grants, we're suffering from what I might call a "greasy-green hole" --the combination of decreased federal research dollars and vast quantities of funny money dangled by agribusiness for biomass research. I would be hard pressed to name a single agronomist who is not involved in something related to biomass/biofuels (myself included). This at the expense of research that might, you know, help us develop something like more sustainable food cropping systems? Doesn't seem like we're really acting in the public good, but I guess we are improving the profit prospects of venture capitalists bold enough to invest in these technologies. Nice of our state governments to provide the infrastructure for that.
Permalink
Ron Steenblik Posted 4:01 am
23 Jan 2007
Provide us with the evidence
(Well said, Julia!)
Mr. Khosla, you write:
The tariff on ethanol has been extended again and again ever since it was first imposed in 1980. Last year there was talk of ending it early; we saw where that went: nowhere. The tariff was due to expire, in any case, at 00:01 on 1 October 2007. But, surprise, surprise, it was extended once again, this time to the moment the ball drops on Times Square, ushering in 2009.
Meanwhile, Congressmen Earl Pomeroy (D-ND) and Kenny Hulshof (R-MO) have introduced the "Renewable Fuels and Energy Independence Promotion Act", which proposes making permanent the biodiesel and the ethanol tax credits, as well as the small agri-biodiesel producer and small ethanol producer credits, AND the $0.54/gallon MFN import tariff on ethanol.
So, what special intelligence do you have to give us any assurance that this bill will be defeated and some bill that seeks to do the complete opposite will win the day?
And as for oil getting more subsidies than ethanol, that has been true in aggregate terms, but certainly not per-gallon, much less per unit of useful energy. Doug Koplow (no sympathizer for the oil industry, he), in a study he undertook several years ago, found that, per unit of energy, ethanol was one of the most heavily subsidized energy forms, coming in at over $17 per MMBtu, compared with oil's $1.40 (both figures are updated to 2006 dollars), even counting expenditures in defense of the Persian Gulf. (See Table 3.4 in "Biofuels: At What Cost?".) The subsidy rate for ethanol has since dropped to around $15/MMbtu, plus or minus $2, and the rate for oil may have increased. But it is hard to imagine that, even allocating all subsidies to oil to just two products, gasoline and diesel, would bring the value per MMBtu anywhere near where the per-MMBtu subsidies are for ethanol.
You then add,
Is that good news? According to the latest figures from the U.S. Energy Information Administration, three-quarters of the FFVs produced in 2005 were pick-up trucks or SUVs. And the 2007 crop of vehicles does not look much better. But I guess we should be joyful: GM recently announced that it will be offering FFV versions of its Hummers, starting with the 2008 model year.
Permalink
Daniel Gibbs Posted 3:56 am
27 Jan 2007
Cellulosic ethanol
There is no question that large-scale production of cellulosic ethanol will be difficult to achieve, but it's worth it. Here's why: we need liquid hydrocarbon fuels to replace gasoline, jet fuel, and diesel. These need to come from carbon-neutral or carbon-negative sources, and that means sugar and lignin from biomass.
The problems: (1) the carbon balance does indeed depend on the process used, and deteriorates as the distance between feedstock collection (e.g. harvest) and fuel production sites increases. Biomass is much less dense than coal or oil, and we need to develop ways to produce biofuels and chemicals in a much more dispersed fashion. It takes 27 truckloads of switchgrass to produce one truckload of ethanol. The ratio for corn is about 3.6 to 1. This means we need to solve the problems of building many smaller plants vs. fewer large plants, which have the current technology benefit of economies of scale. This is a tough problem.
(2) The molecular problem is that cellulose is inherently a crystalline stuctural material, built to last thousands of years in some environments. Starch is an ephemeral storage material, designed to be readily broken down by tiny plant embryos. Both cellulose and starch are made from the same monomer: glucose. This is the reason the U.S. ethanol industry started with corn starch - now it must evolve, and do so rapidly. We need to get very large quantities of glucose (and xylose) from a two-by-four, figuratively speaking.
The benefits: global warming has come upon us rather suddenly, and will almost certainly reach unacceptable levels no matter what we do. It is very much in our interest to begin replacing fossil fuels with realistic biofuels now. Green plants absorb solar energy and carbon dioxide for a living. They are the only practical means of removing CO2 at the atmospheric concentration of 0.04% (400ppm soon). They also store that carbon in glucose, and the solar energy in chemical bonds, something which current solar technologies cannot do.
A second benefit is that we may begin to reduce the massive transfer of wealth from the U.S. and other oil consumers to oil producers. When oil prices reach $70/bbl, our oil trade deficit reaches $300 billion per year, not quite a billion dollars a day. Not counting Iraq at $9 billion per month.
Both global warming and oil prices are likely to get worse. In 1998, I wrote a paper titled "Global Warming and the Need for Liquid Fuels from Biomass" - linked at our website www.generalbiomass.com. The data at that time (ca. 1993) indicated that China had 9.5 million vehicles with a 6-year doubling time. India had 6.2 million with a 7-year doubling time. I read today in Fortune that China has 33 million automobiles, and is projected to increase to 130 million by 2015. You do the math, but that suggests a doubling time of about 4 years for China's autos. For reference, the doubling time for all world vehicles was 26 years in 1993.
Against that backdrop, I hope there will be more public and private support for cellulosic fuels than has so far been evident. Clearly they should be sustainably produced and used to power hybrids, not SUVs. Congress can do this if it has the will. Cellulosic ethanol comes out very well in greenhouse reductions in LCA (Life Cycle Analysis) studies by Kammen at Berkeley and Wang at Argonne.
Finally, we should think beyond agriculture. In North America, dozens of paper mills have shut down due to foreign competition. Some of these could be refitted as forest biorefineries, making ethanol and other feedstocks to displace oil. More than half the world's people will live in cities in 2008, generating lots of waste paper which could be made into ethanol.
Daniel Gibbs, Ph.D.
Permalink
tblakeslee Posted 8:43 am
02 Feb 2007
Geothermal is already cheaper than clean coal!
I completely agree that coal is a disaster and will probably never be economical with sequestration. Geothermal is already competitive and reliable and unlike wind, it works 24/7. The latest MIT study says that geothermal can be used economically even without hot springs by copying the water injection technique used on oilwells. Ormat (ORA on the NYSE) is already doing this profitably and with excellent reliability. They currently have 900 MW in operation and have orders for 200 MW in New Zealand and 380 MW in Indonesia. Here are some links to the report:
http://www.renewableenergyaccess.com/rea/news/story?id=47 ...
http://geothermal.inel.gov/publications/future_of_geother ...
http://messages.finance.yahoo.com/Business_%26_Finance/In ...
Permalink