My Reaction to the State of the Union

I think it’s great to set ambitious goals. It’s true that if you set stretch goals, but fall a bit short, you still probably did OK. But it is also important to set goals that have a reasonable chance of success, especially when the consequences of falling short are high.

In President Bush’s State of the Union address tonight, he called for a 20% reduction in our gasoline consumption in the next 10 years. That’s a noble goal, and one that I fully support. For this goal, President Bush deservedly received a standing ovation. In fact, a 20% reduction would still have the U.S. using significantly more energy than the average European (we currently use about double the energy of the average European). So, one might think that we might look to Europe – given their current energy usage – as a model for helping us to lower our consumption here in the U.S.

But, as you might have noticed we like to do things our own way in the U.S. Sure, the Europeans (as well as most other countries) have had success, but we live in the land of the non-negotiable lifestyle. Therefore, we can’t emulate the Europeans. We have to find a way to keep running those gas-guzzlers so we can shun public transportation and drive anywhere, anytime we wish.

Bush’s proposal would be to increase our level of biofuels production by 35 billion gallons in the next 10 years (although some have informed me that this is actually for all alternative fuels, which would include coal to liquids). Not surprisingly, this was well-received by Iowa Senator Charles Grassley. I think “giddy” would accurately describe his demeanor as the camera panned on him. The president then got back on track and recommended improving the economy standards on cars to save another 8.5 billion gallons of gasoline in the next 10 years. He in fact said a lot of things that, if followed through, would greatly benefit the U.S. He discussed solar power and plug in hybrids, two of my passions. But I fear that we are too heavily counting on biofuels to deliver.

Look, I have no problem with the goal of increasing biofuels production. I think it’s a good goal, but as we know it can have unwanted consequences. Clearly we do not produce enough corn and soybeans to achieve this goal, so the technology that is being counted on is almost certainly cellulosic ethanol. And while cellulosic ethanol has great potential, we need to realistically understand that there is a reason that cellulosic ethanol plants are not up and running today.

Certain Silicon Valley entrepreneurs would have you believe that we just have to fund enough start ups and the technology breakthroughs will come. But it isn’t always as simple as calling your shot and then delivering it. Some people point to Moore’s Law and think it’s that simple. It is not that simple. Moore’s Law has only recently started bumping up against basic chemistry and physics. Production of cellulosic ethanol has been bumping up against these limits for years. I have previously weighed in on the current status of cellulosic ethanol technology, as well as the amount of biomass required for implementation. Clearly the technology is not yet ready for prime time.

And that brings me to my major concern: Is there a contingency plan? Cellulosic ethanol will see technology improvements. No doubt. What if they aren’t enough? What if, as is the case with a number of medical issues like cancer, we are still struggling with this issue in 10 years? Based on where we are right now, I think there is a pretty decent probability of that. Others, like Vinod Khosla, think the can do attitude of Silicon Valley will ensure success. But just in case, what is the backup plan? Are we going to operate without one? If world oil production peaks in the next few years, as I think is likely, where will we be if cellulosic ethanol doesn’t deliver? Will we merely count on sky-high prices to destroy demand (while also destroying lives)? Will we send troops to Venezuela to keep the oil flowing?

When we are serious about attacking our energy dependence, we will go after the demand side. I believe that a revenue neutral gas tax would seriously cut into our demand over time. This is, of course, the main reason for Europe’s success in maintaining a much lower level of energy usage. Such an approach works, and Europeans enjoy a nice standard of living. Perhaps we will decide to take this proven approach for reducing consumption before declining oil production forces higher prices on us before we have time to prepare.

17 thoughts on “My Reaction to the State of the Union”

  1. I missed the SOTU, but caught some of the highlights, and your analysis. A lot of what I heard sounded like stuff Amory Lovins proposed in Winning the Oil Endgame. Lovins seems to think drastic efficiency gains are do-able, even though I think some of his analysis is a little dubious. At any rate, we have historical precedence of big efficiency gains like this in the past, which would make bio-fuels a much more viable option, and then, many see bio-fuels as a part of the solution, or a bridge fuel.

    I do fear, as you mentioned though, that corn ethanol will override and become a political pork tool rather than a serious part of the solution. Both sides of the aisle love to throw that bone out to placate their constituents.

  2. as usual, I think your analysis is right on except for a couple points.

    I think a carbon tax is a great idea. While admittedly it’s regressive on two levels for low income people (it takes a bigger chunk their income, and low income people typically have cheap vehicles which have poor gas mileage), the regressive nature can be overcome by some form of income-based tax credit or cash allotment.

    Again the main issue most people have with public transportation is that it typically doubles transportation time. When I worked in Cambridge, Massachusetts, it took me 40 minutes to drive in (off-peak) and an hour and a half to use public transportation.

    And I don’t want to hear the argument of one can work on the train. I rarely see people do that. Mostly its iPods, newspapers, and staring out the window.

    We need independent vehicle development. Detroit isn’t going to build good commuter vehicles like the Smart car. two passenger cars with plug-in hybrids will do more to cut down gasoline costs than all of the PR for public transportation.

    rather than pouring money down all of these ethanol boondoggles, put our tax dollars into development of a reference implementation of a small plug-in hybrid would do far more good for our country and the world.

  3. It’s all about the small things that add up. I totally agree that setting lofty goals can be dangerous. I think if we focus on the fact that we have to do little things, that eventually those little things will add up to produce a large-scale effect.

  4. At 2.65 gallons of ethanol per bushel of corn, 25 billion gal will need 9.4 billion bushels of corn and will yield 2.9 billion bushels of dried distillers grains as a by-product.

    2004 US corn production = 10.1 billion bushels.
    2005 US corn production = 11.8 billion bushels.

    I guess there is enough corn, but we will be eating a lot less meat in future. Perhaps the President plans to promote vegetarianism?

    25 billion gallons = 1.6 million bbl/day of ethanol.

    1 gallon of ethanol produces 62% as much heat as one gallon of gasoline.

    So 1.6 million bbl/day ethanol = 0.99 million bbl/day of gasoline. This would reduce gasoline demand by 11% and oil demand by 5%.

  5. You’re right, a tax on transport fuels is the simplest and most effective way to get things moving the right direction. Add to that a carbon emissions tax on electric power generation, then let the market sort out the winners and losers from among technology alternatives and efficiency improvements. Unfortunately this seems politically impossible.

  6. Schrodinger,
    Here is a stat that might interest you: in 2005 14% of the US corn harvest was used to produce 4 billion gallons of ethanol. So to produce 25 billion gallons would need a mere 87.5% of the corn harvest. Of course, farmers may plant and produce more corn. Big WHOOPEE: if the corn harvest increases by a hefty 25%, we are still going to have to convert 70% of it into ethanol.

    That would of course have numerous unintended consequences, that no politician is going to worry about:
    1. Food will become very expensive.
    2. As you mentioned, most of us middle class people will be vegetarians, and not by choice.
    3. The cost of ethanol will sky rocket, due to the high demand (and price) for corn. In 2006 corn prices already rose ~50%.
    4. It will be most interesting to see the bipartisan fight in Congress: Farm state congressman (from both parties) arguing that we should just pay up for the expensive ethanol (and be glad it is made in America) and coastal congressman arguing that the 35 billion gal mandate makes no sense.
    5. OPEC will be laughing their butts off…

  7. What I don’t understand, is why everybody in the US is so hung up on ethanol? Is it the lingering after-effect of Prohibition? Ethanol is for DRINKING. Period.

    One of the many limitations of ethanol is the huge amount of energy required to distill it out of your fermentation broth: according to Scientific American (Is Ethanol for the Long Haul?) it takes 36,000 BTU (usually as natural gas) to produce a gallon (76,000 BTU) of ethanol. That’s almost 50% of the output energy! And note that cellulosic ethanol is at an even lower concentration at the end of fermentation, so it would require even more energy for distillation.

    Unfortunately in Washington today, it is apparently more profitable to hand out pork, than to actually look for a REAL solution…

  8. In which case just distilling all that ethanol will take 5% of our natural gas suppy, which will have to be imported as LNG. It might be possible to use coal or biomass or power plant waste heat, but most of the current ethanol plants run on NG.

    Then there is the fertilizer, but maybe we will import that.

  9. Robert, I follow and enjoy your postings on TOD.

    The expansion of the “renewable fuels standard” to the “alternative fuels standard” looks to be a nod to CTL. We shall find out when the initiative is rolled out.

    The text of the proposal at the White House site seems to be laying the groundwork for many of the ideas and policy recommendations advanced by “The American Energy Security Study” Done by the American Energy Sucurity Initiative(with funding from peabody, rentech, DOD, railroad and mining groups, among others)
    A cursory reading of the executive summary shows many similarities, including, quite coincidentally, a 20% reduction in gasoline usage by 2017.

  10. I think it is reasonable to assume that, if we produce all this new ethanol (no matter what the feedstock) it is simply going to add to the amount of energy we consume rather than displace the amount we import. Its growth is too incremental to do otherwise. Hopefully, it will reduce the volatility of the price of imports but it will likely cost us more in domestic food prices.

    I doubt we have the discipline to export any potential surplus. However, we may have a hand in disseminating emerging conversion technologies to the rest of the world, thereby decentralizing biofuel production as a buffer against crippling worldwide demand.

    One of the reasons that I push for converting waste into biofuels is that by doing so we will at least be accomplishing something clean and constructive with the unrecyclable waste we generate. At the very least we will reduce the need for landfills.

  11. Schrodinger said… Then there is the fertilizer, but maybe we will import that.


    We already import a great deal of the nitrogen fertilizer our corn farmers are dependent on.

    Over 90% of the synthetic nitrogen our corn farmers use is made from natural gas (NG) feedstock using even more NG as the energy source for the reforming process.

    Of that 90%, almost 60% is imported after being made outside this country with foreign NG.

    It is difficult to escape the conclusion that corn-based ethanol does little more than shift our dependency on foreign oil to a dependency on foreign natural gas.

    If we want to be dependent on NG, it would be simpler and more straight-forward to reform the NG directly into a liquid fuel than to go through the inefficient process of using the NG to first grow corn, and then reform the corn into ethanol.

    That would make sense. It would also upset a lot of corn farmers. It would also be unsettling for a lot of Corn Belt politicians.

  12. Robert said, It’s true that if you set stretch goals, but fall a bit short, you still probably did OK.

    Ay Laddie,

    It’s great to set goals, but one of the jobs of the President is also to set an example. I don’t know if you noticed, but the day after the SOTU, our CinC flew to Wilmington, DE on Air Force One to attend a meeting about energy conservation. (An as-the-crow-flies distance of about 93 nautical miles.)

    I find it more than a little ironic that the President would burn thousands of gallons of Jet A in a four-engine B-747 to fly 93 miles to attend a conference on energy conservation.

    Gary Dikkers

  13. Robert,

    Being an Ag. Producer in Montana, have been looking for a viable use of wind energy. We have the wind, problem is we don’t have the ability to transfer the electricity out of state, which is where the market is of course.

    We are also being absolutely KILLED by high fertilizer prices, especially Nitrogen.

    It costs approx $1,000,000/MW to install a wind turbine I am told. Am in the process of trying to do a feasability study on “farm size” NH3 production. Forgive me but my major in Bozeman was Ag.Business not engineering but I THINK you need electricity, water and storage to make NH3, right?? Would look forward to any input you would have……..

    Wouldnt it be really cool if we could use the wind to help produce nitrogen fert, without releasing all the carbon?

    Pat in Montana

  14. That’s not going to work. To make ammonia you need hydrogen and nitrogen. The hydrogen is made from natural gas. Ammonia is then produced by the Haber process. It’s a high temperature high pressure process and it will never be economic on a small scale. In theory you can make hydrogen from water and electricity but that costs much more than making it from natural gas.

    One way you might be able to use windpower would be to pump irrigation water. Wind power is intermittent but maybe that wouldn’t matter for irrigation.

  15. Being an Ag. Producer in Montana, have been looking for a viable use of wind energy. We have the wind, problem is we don’t have the ability to transfer the electricity out of state, which is where the market is of course.

    When I testified against the ethanol mandate, I argued that the money earmarked for that should go into making Montana a world class wind energy producer. If you look at the wind maps of the U.S., the potential is very high. Surprisingly enough, the solar potential is high there as well, but I only ever saw 1 set of solar panels in the entire state while I was there.

    Forgive me but my major in Bozeman was Ag.Business not engineering but I THINK you need electricity, water and storage to make NH3, right??

    I have seen some proposals floated for making ammonia from wind power. I actually posted a guest essay on this a while back:

    Ammonia and Biofuels

    Cheers, Robert

  16. Robert, you are spot on, as usual, about most things. There is one area, however, where I respectfully disagree. The effect on the world economy over the next 10 years will come more from less work (in the physics definition) via less energy availability, than anything to do with price (all things being equal. In the short term energy prices could swing us into a world wide recession – bringing us back to the “what came first, the chicken or the egg?”.

    Still, keep your posts and contributions coming.

  17. I’d like to point out that Bush didn’t say he wanted to reduce gasoline usage by 20 percent, but rather that he wanted to reduce, by 20 percent, the amount of oil we import, to make gasoline, from the Middle East.

    That, when the numbers are crunched, is a lot less than 20 percent of our usage.


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