Another Biomass Plant Announced

Back up the truck.  Annother biomass plant gets announced.

This time, it's a 28MW plant. We think that's within the sweetspot.  A couple of 100 MW plants have been announced, but that requires a lot of green chips to be harvested within the 25 Mile radius normally associated with economic delivery.  

Price of Oil -- What to do?

Unbelievable but true. You've heard there is no such thing as a guaranteed profit. Think again.

Contango is a term used to describe the situation when the future price of a commodity is greater than the current price plus the cost of storing that commodity. 

That means you can buy on the market today, sell a future and lock in a GUARANTEED profit. 

Shell Oil is doing just that right now.  They are storing  oil in unused tankers. By selling a future (vs. an option) they have pre-sold what they have just bought on the open market an locked in a profit.

This can only happen when the hedgies don't have access to capital, or are too risk adverse-- because otherwise they would close the gap via arbitrage trades.

Does this mean oil prices will go up.  Likely yes.  Should you hedge the price of gas or oil if you are an industrial consumer? That answer is less obvious because the COST of the hedge is high right now (because the future price of oil is high relative to the current price).

The smartest industrial fuel hedge we've seen is putting in a biomass boiler (or a gas/biomass dual boiler).  While oil and natural gas trade within a band, the price of wood chips is not very highly correlated to oil.  When prices of natural gas goes up, industrial customers can switch to green chips, wood pellets or better yet torrefied wood.

In aggregate, the cost of a biomass boiler is much less than the cost of a financial hedge right now.

Two Serious Bets on BioMass

Duke Energy announced plans to build 12 biomass power plants by 2014.  That's huge.  

The $ 4 Million per MW seems high to us, and the price tag doesn't help stimulate the market but this is a huge vote of confidence on the part of Duke.   Read more...

Earlier, the Southern Company announced plans to build 2 100 MW plants to also come online in 2014. Read more...

Looks like these two run the same math (and watch each others moves pretty carefully).

These are just announcements, so they can change them later but I suspect that this is a 'get ahead of the cap-and-trade' wave.  Caps will be determined between now and 2014 and if biomass, coupled with replanting, gets scored at somewhere near carbon neutral then the utilities can utilize these plants to meet demand growth and avoid having to pay market prices for carbon credits.

All in all, a very sensible solution.  

Bio Coal Shows More Promise

Bio Coal is the name some use for Torrefied Biomass.  The problem with biomass is the MASS.  The energy value is typcially low, and the cost to harvest, move, and process the mass is high.

Torrefaction addresses these issues.  It is a process which 'concentrates' the energy value of biomass through heating the material in a process similar to making charcoal.  It is a low emission, carbon neutral alternative. (Think of how much smaller and lighter the dehydrated food hikers carry is).

Energy Density is one of the principles that alternative energy providers sometimes avoid at their own economic peril.  

We've struggled to find a true, all in, no subsidy, no massive leaps of faith, equivalent cost of energy for this technology.  Round one of our work is completed and we think that the comparable cost of energy is...

$ 80 to $85 per ton of coal

On a comparitive basis of other renewable, carbon neutral or better energy sources that's pretty darn good.

Next we're going to look at feedstock pricing elasticity.  We want to truely measure the "ethanol effect" where industry development drives up feedstock prices to the point of choking off the crush spread.

We're also going to try and get an idea of emissions data. Since most of the volitiles are burned off proponents are suggesting that emissions should be favorable.  However I have not yet found any real bag test results. Particulate matter could be a problem, however particulate filters exist today which may solve the problem.  Stay tuned

We'll call the equivalent issue in Torrefaction the "Burn Spread", ie the difference in value between the input feedstock (think wood chips) and the economic value of the output (Bio Coal).

So at 11,000 BTU/lb coal on the east coast at $ 120 per ton the "Burn Spread" is $ 40 per ton.

Clearing the first hurdle.

Before we get too excited, we have some more work to do but 80% of the stuff we look at has hit a dead end at this point in the process.  At least we've cleared the first hurdle.

Track our work on Bio Torrefaction.

Huge positive impact through proper Tire Pressure

No Kidding folks, there is something simple that we can do that would have as LARGE a POSITIVE impact on CO2 emissions as all the Wind Energy currently sited in the US -- and at a fraction of the cost (not that we're against wind).

The numbers on the impact of improper tire pressure are STAGGERING, and verifiable.

Several firms offer valve caps that turn color or light up if tire pressure is low. An easy solution.

These should replace pizza's and candy bars as fundraisers, they should be provided for free, or made part of the auto registration or inspcection process.

Very low cost. Surprisingly high impact.

If 20% of the improperly inflated tires in the US were corrected, the impact would be a savings of 1.7 Trillion Gallons of Gasoline per year, and 6.5 Trillion dollars saved. Want to confirm/dispute our calculations -- please debate the numbers.

http://spreadsheets.google.com/pub?key=plY2Q4hDAUmg4C2f_r9ALIQ

Congress knows this because they have tried to mandate tire pressure monitoring in all new vehicles. But there 240 Million cars in service today that could benefit from this simple improvement.

Torrefacted Plant Material -- One Worth Watching

Through all the noise out there right now, we look for ideas that could truly make a difference. Our criteria is:

1) The technology must be at least 35% Carbon Positive

2) The potential scale of operation must be large enough to deliver 10% of the current US Demand for electricity

3) The cost, post inflection point, must be 20 cents per kWH or less Without subsidies and tax credits (because the government can't afford to subsidize a large part of our consumption).

+++++++++++++++++++++++++++++++++++++++++++++++++++

One that has real potential is Torrefied Plant Material. New work out of NC State is showing some interesting numbers for a unit which converts plant material into a powdery charcoal like material in the field.

The numbers look promising, because the cost of material handling is significantly reduced. In most waste-to-energy applications, the cost to move and handle low BTU material creates the barrier to economic viability.

Furthermore, the resulting fuel (think charcoal chips and powder) can theoritically co-burned with coal in existing power plants. This is what makes it exciting. A power producer could have a renewable fuel which could be added based on the relative cost of delivered Torrefied BioMass to Coal.

Two 'test burns' are scheduled for 2008. We'll be monitoring this space. Check back or contact us for updates.

If current Torrefied Pine Wood can be utilized in a coal fired plant, the next step to viability would be developing plant species for BTU value vs Food or Fiber Strenght value. The feedstocks are the kind that grow on marginal land, avoiding the current ethanol "Fuel at the expense of Food" debate.

The Plug In Car -- One That Doesn't Work

PLUG IN CAR -- What a bad idea.

Here's Why: The plug in car uses off-peak grid supplied electricity to charge batteries. 50% of all electricity comes from coal fired plants and roughly 65% of off-peak electricity is coal fired.

So the plug car is 65% coal fired!

The net environmental gain from switching from gasoline to coal fired electricity is NEGATIVE.

The efficiency losses associated with buring coal to produce electricity, plus the  line losses to push that electricity to the home, plus storage losses to charge the battery, plus additional losses  to convert that stored energy into motive power are huge. We calculate the total efficiency at somewhere around 15%!

And that's 15% net efficiency for a electricity that is 65% coal based. The percentage of off-peak electricity that is coal fired is not likely to meaningfully decline near term. The dollars and corporate leadership credibility spent on the Plug-In Car could be put to so many truly valuable initiatives.

And the shame is that the GM engineers already know this. Don't be fooled, it's about PR, not the environment.

So what could GM be doing that would make a difference? Stay tuned to my next posting.