The Handy-Dandy Khosla Refuter

The web site Seeking Alpha has just published a new article on ethanol:

Ethanol: A Few Myths Debunked

To be honest, there are so many misconceptions and myths in the article that a better name for it would have been Ethanol: A Few Myths Repeated. I think all of these “myths” have been covered at one time or another in this blog, but he does quote Vinod Khosla at length. So, this might be a good time to re-debunk Khosla, given that he has repeated this claims many times since the first debunking.

So, once again, here are Vinod Khosla’s claims, repeated from the above article, dissected and debunked.

VK: Energy balance is not even the right question to answer. It is not the energy balance of ethanol that matters but the energy balance of ethanol relative to the energy balance of gasoline.

I agree 100%. But this is exactly the comparison that I and others have consistently made. The problem is that VK is comparing apples to bananas, as I will show.

VK: Dr. Wang at Argonne National Labs has built one of the most rigorous and transparent public models for energy balance calculations. His results indicate that corn ethanol has almost twice the energy balance compared to gasoline, yet this crucial fact is seldom mentioned in the press.

That’s because it is just flat-out wrong. If this was true, we wouldn’t even use gasoline, and ethanol wouldn’t need federal subsidies. After all, why on earth would we invest our BTUs into gasoline when we could get twice the energy return with ethanol? The reason is that VK is grossly misinformed, but he has no excuse because I have explained this to him over the phone. Twice.

VK: According to the majority of studies, corn ethanol has an energy balance between 1.3-1.8 while gasoline is substantially worse, at about 0.8 (since it takes energy to extract, transport, refine and handle gasoline).

Doesn’t it take energy to plant and harvest corn, ferment the ethanol, refine it, and transport it? Of course it does. Except with gasoline, the planting and fermenting have already been done by nature. The harvesting involves drilling a hole in the ground and extracting an energy rich, water-insoluble mixture that takes a fraction of the energy to refine that ethanol takes.

Here is the true story. If I have 1 BTU to invest, and I want a return on that BTU, where am I going to invest it to get the most value? Well, if I invest in ethanol – according to studies that the afore-mentioned Dr. Wang has co-authored – I am going to end up with about 1.06 BTUs of fuel and 0.25 BTUs worth of animal feed. So, for an investment of 1 BTU, I netted 0.06 BTUs of liquid fuel. Again that is backed up by the USDA’s own studies that Dr. Wang has co-authored.

If I invest that BTU into gasoline production, here is what I get. The worst conventional fields in the world have a 10/1 energy return on getting crude oil out of the ground. According to Cutler Cleveland (and consistent with my own personal experience), the world wide average energy return for crude oil extraction is 17/1. So, for my 1 BTU investment, I average 17 BTUs of crude in the crude tank. But I have to refine it. A heavy, sour refinery has an energy return of about 10/1 (producing gasoline, diesel, heating oil, jet fuel, etc. from the crude). So, my 17 BTUs of crude are going to take 1.7 BTUs – in the worst case – to refine. I have then invested 2.7 BTUs (1 to extract and 1.7 to refine) to process 17 BTUs of crude into liquid fuels.

Typically, there are losses of around 5% in refining crude. These losses often have BTU value that is recovered, but let’s say they don’t. Then, my gross is 17 * 0.95 = 16.15 BTUs of usable liquid fuels for my BTU investment of 2.7 BTUs. My energy return is 16.15/2.7, or 5.98. This compares to an energy return of 1.3 for ethanol (when we count animal feed as BTUs). So, gasoline has about 4.6 times the energy balance of ethanol, as opposed to VK’s claim of twice the energy balance for ethanol. He is off by an order of magnitude. Now it should start to become clear why ethanol will always need subsidies to compete.

Moving on:

VK: Electricity has an energy balance four times worse than corn ethanol. Do we stop using electricity?

No, because we can’t plug our toasters into a pile of coal. We can, however, run vehicles on the fossil fuel inputs that we used to make ethanol. That is the key difference. Electricity is a much more user-friendly form of energy than is coal. There is no advantage to recycling fossil fuels into ethanol (well, there’s coal, but I won’t go there).

VK: Dr. Wang goes on to say that energy balance is “not a meaningful number for any fuel in evaluating its benefits. “Why then does the press continue mentioning it?

It is ironic that in the same essay VK argues that the energy balance of ethanol is twice that of gasoline, he also argues that it is not a meaningful question. I have pointed out the absurdity of this position before, because this isn’t the first time he has taken it.

VK: Why do they fail to mention that electricity has a substantially worse energy balance than ethanol?

See above. Think about plugging your DVD player into a pile of coal and the picture will start to become clear.

VK: What is often inferred by the press is that it takes more petroleum to make ethanol than is displaced. This is emphatically NOT true, even in the most vintage of plants.

He is correct here, but fails to mention that the majority of the fossil fuel input into an ethanol plant, natural gas, works just fine as a vehicle fuel. Compressed natural gas (CNG) buses are very popular mass transit options, for instance.

VK: In fact if we have to pick an alternative to gasoline, then ethanol is the best choice today.

Ethanol, also known as recycled natural gas. My question is: Why go to the trouble of recycling the natural gas into ethanol, when CNG buses have a proven track record?

VK: Energy balance is the wrong question. Greenhouse gas emissions per mile driven is the right question.

Those questions go hand in hand. In fact, they are inversely proportional. The lower the energy balance, the higher the overall greenhouse gas emissions for the process. For an energy balance of 1.06, you have a 6% reduction in greenhouse gas emissions. Along with that, we get more pesticide and herbicide runoff into our waterways, increased soil erosion from expanded corn production, and we all get to pay more for our food.

We can do better. If we put half the effort into supporting conservation measures that we do into supporting corn ethanol, we could make a significant reduction in our fossil fuel usage. But, there isn’t any money to be made in that, so this option tends to be ignored. Sooner or later we won’t have a choice, but I would like to see us make the choice while we do still options.

6 thoughts on “The Handy-Dandy Khosla Refuter”

  1. > No, because we can’t plug our toasters into a pile
    > of coal.

    Excellent comeback :).

    But it brings up the question of whether direct carbon fuel cells could scale down to the point where they could provide combined heat and power for a residence.

    In the city, natural gas is obviously a lot easier to distribute, but for remote locations it would be nice if you could just drop the occasional bag of Kingsford into a hopper in the basement and, well, plug your toaster into a pile of (char)coal.

  2. I wonder if Vinod has done his homework like he did on his other companies that he and Kleiner Perkins have made millions with.

    I understand he is personally investing in these companies to make this world a better place for our kids and grandchildren.

    Vinod is right once again and if I ever meet him, I will say thank you.

  3. I wonder if Vinod has done his homework like he did on his other companies that he and Kleiner Perkins have made millions with.

    Perhaps. Or, it could be like the companies he lost millions with:

    “While recognized for several venture “hits”, Khosla also played a key role with several of the tech industry’s most spectacular failures, including Asera, Zambeel, Dynabook, Excite, and others.”

    Vinod is right once again and if I ever meet him, I will say thank you.

    Right about what? He is right about some things, but many of his comments about ethanol are demonstrably and spectacularly wrong.


  4. It’s hard to compare ethanol and gasoline because while both require fossil fuel inputs, ethanol’s are mostly from natural gas while gasoline’s are from oil.

    We could do an apples to apples comparison by considering this question. Let us start with a certain amount of fossil fuel in the ground. Now, let us produce enough ethanol OR gasoline to let us drive a certain distance. Which process depleted our store of fossil fuels more? Measure the fossil fuels in BTUs to allow comparison of NG to oil.

    I think we have discussed this before, and the evidence is that ethanol depletes fossil fuels by fewer BTUs in order to drive a certain distance. Is that correct?

    Why do some claim that this is not a fair, apples to apples comparison?

  5. I am not the sharpest knife in the drawer but I think I see your point.

    Question: You said “ethanol” will never be viable without a government subsidy. Do you mean corn ethanol or any ethanol? If you mean ethanol in general doesn’t that dismiss current discoveries in conservation, efficiency, and production technology before they even have a chance to take effect. I am thinking you meant CORN ethanol.

    As well, BTUs are one measure of ethanol viability but is there not also a considerable return on production of our own energy rather than relying on the Middle East et al? If the $3 or $4 per gallon stay in the US?

    I also think we should start saying ethanol/butanol instead of just “ethanol”.

  6. Why wouldn’t we want to use the natural gas directly?

    Answer: Capital cost and inconvenience. You need to invest into on-board storage, into filling stations and range is lower than for petrol.

    Natural gas is currently (and has been for most of the last 100 years) significantly cheaper than crude oil. There are good reasons it hasn’t made much progress as a vehicle fuel in spite of that price advantage.

    “After all, why on earth would we invest our BTUs into gasoline when we could get twice the energy return with ethanol?”

    Because most of the input cost is for labour/land/access/royalties rather than input energy?

    Because some “energy” (eg petrol) is a lot dearer than other energy (eg coal at the mine mouth in the Powder River Basin, or stranded natural gas)?

    “Electricity is a much more user-friendly form of energy than is coal. There is no advantage to recycling fossil fuels into ethanol”

    Ethanol is considerably more user friendly than natural gas as a vehicle fuel.

    “For an energy balance of 1.06, you have a 6% reduction in greenhouse gas emissions.”

    As a very rough approximation, but natural gas has a lower carbon content than crude oil.

    And petrol is rather heavily refined in the US, because simple distillation doesn’t yield enough. Arguably the marginal petrol barrel comes from hydrocrackers and the like, and therefore has a much higher fossil fuel intensity than the average refinery output.

    I am working on a post on net energy, efficiency and ethanol on my blog. I’ll post the link when it’s ready as it might interest you.

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