Post 3: Chapter 4, Part II

Sustainability

The third pillar of alternative fuels promotion is sustainability. As described by the World Commission on Environment and Development report, Our Common Future, sustainability is, “…development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Thus, this topic is perhaps the least concrete of the three pillars and the most open to interpretation.
One way to look at the problem of sustainability is in terms of the renewability of resources. Petroleum and its derivatives along with natural gas are almost certainly finite resources. If this sounds equivocal it’s because some would argue that as prices increase, new technologies will take advantage of previously uneconomical sources of oil which would then be profitable and plentiful. Colin Campbell, a peak oil promoter calls these people “flat earth economists.” This view may be valid and peak oil theorists may be completely wrong, but from where the world stands today, petroleum appears to be a finite resource (for more information on peak oil see Chapter 2).
Beyond peak oil, which shows a definite lack of sustainability in the gasoline and diesel industries, there are alternative fuels. CNG and LPG are non-renewable sources of energy because of their close association with petroleum. They can be promoted as a short-term solution, however, because their emissions are low relative to petroleum and there is still an abundance of domestic natural gas reserves. Hydrogen as a fuel source is remarkably available, it’s the most abundant element in the universe, but large problems still exist with the cost and availability that make best as a long term solution. Electricity does a great job of providing the advantages of alternative fuels up to the point it gets put in the car. Once in the car, current battery technologies limit the vehicle’s value due to low driving ranges, long refueling times, and incremental costs of $10,000 to $20,000. This leaves ethanol and biodiesel to consider, which have advantages and disadvantages of their own
In a report published in the Journal of the Air and Waste Management Association, Heather MacLean, et. al., performed a sustainability study for the production of four alternative fuels from plant materials: corn ethanol, cellulosic ethanol, woody ethanol, and soy biodiesel. Their study used two scenarios: near term partial sustainability that had petroleum inputs in farming and energy production, and long term “full” sustainability that used biofuels for agricultural and electricity inputs. Usage amounts were equivalent to replacing all the fuel consumed in the country by light-duty spark ignition engines, which at the time was roughly 120 billion gallons per year. Table 4.3 shows the results of the study.
According to the US Census Bureau, there are currently 1.94 billion acres of surface land in the US. Nearly 1.4 billion acres is rural land, of which 377 million acres is cropland, 32 million is held out of use by the Federal government (in the CRP), 120 million acres is pastureland, and 406 million acres is rangeland. Given these amounts, depending on ethanol in the near term would use all of the in-use cropland that exists, cellulosic and woody ethanol would use 60 and 80 percent respectively and biodiesel from soybeans would use more land than is available. The amount of land needed increases for the long-term view (although significantly less for cellulosic and woody ethanol), needing all the land in the US and a large piece of Canada for soybean growth. The amounts are based on yields of fuel per bushel or dry ton, and the per-acre yield of corn and soybean is significantly lower than the other ethanol feedstocks.

Table 4.3
Land Required for Sustainable use of Biofuels (Billions of Acres)
Fuel Near-term
Land use Long-term
Land use
Corn Ethanol 0.37 1.1
Cellulosic Ethanol 0.26 0.33
Woody Ethanol 0.30 0.37
Soy Biodiesel 1.5 2.6
Source: Adapted from Heather MacLean, et. al., “A Life-Cycle Comparison of Alternative Automobile Fuels," Journal of the Air and Waste Management Association, Vol. 50, Iss. 10 (October, 2000), p. 1769-1779.

This is an extreme view of the situation, although for 100 percent sustainability it is mostly accurate. The US wouldn’t have to displace all of its oil consumption with these fuels to maintain a sustainable environment and economy, however. Replacing only 50 percent of its oil consumption from a variety of fuels and technologies would go a long way to maintaining our economy while decreasing dependence on foreign oil and increasing air quality and environmental benefits.
Another aspect of sustainability is energy yield or net energy balance. All fuels take energy to create and deliver a certain amount of energy in return. Net energy balance refers to the difference between the amounts of energy it takes to produce a fuel compared to the amount of energy it provides. Calculations include all energy cycles that go into production:
• Agricultural cycle: tilling, fertilizing, producing fertilizer, irrigation, fuel consumption by equipment, labor energy, harvesting, etc.,
• Production cycle: transportation to the plant, energy to run the plant, grinding, fermenting, storage, waste water disposal, in some cases energy used to produce equipment, etc., and
• Transport cycle: to the various retail and/or storage facilities, and pumping it into the tank, etc.
In order for an alternative fuel to be “acceptable,” it should show a positive energy balance, producing more energy per gallon than what goes into it, or at least providing a better balance than gasoline or diesel. The two petroleum fuels have an energy ratio of 0.81 and 0.84 respectively, meaning more energy is used to produce them than they produce when burned. Comparatively, both ethanol and biodiesel have positive energy ratios of 1.34 and 3.2 respectively, showing a much higher energy yield.
Finding similar information for other fuels is difficult, however. Net energy balance studies appear to be based mostly on biofuels and exclude the other gaseous fuels and electricity. Some intuitive thinking might be useful to give a general idea of energy balances for some of the fuels. Propane is a gaseous fuel that is a byproduct of the natural gas and oil refining industry. One can figure that energy inputs related to these industries that account for activity through refining could also be attributed to propane, which would have some additional inputs for transportation, distribution, and storage. This information plus knowing that a gallon of propane contains 74 percent of the energy content of a gallon of gasoline, one can figure that the energy balance for this fuel won’t exceed gasoline by much, if at all.
In a study by GM of well-to-wheel energy outputs of various fuels, compressed natural gas was found to offer no energetic advantages to the use of gasoline when used in a dedicated CNG vehicle. Hydrogen in fuel cells was found to be energetically advantageous to gasoline and diesel fuels when produced from non-North American natural gas but inferior if produced from electrolysis. Electricity is difficult to intuit due to considerations of line loss, battery efficiencies, and production fuel mix all add to the net energy equation and are difficult to compile and calculate. A wild guess would be that it doesn’t offer substantial energetic benefits.
In the case of sustainability, technology is the key and must be depended on for the best sources of alternative fuels to come into widespread use. When the technology will come about, however, is difficult to know. If near-term peak oil estimates are correct, then time may be the biggest factor in the sustainability debate. If oil prices soar because production decreases, it will take time to fully develop unconventional sources of oil and to increase production of alternatives, which will most likely see a corresponding spike in demand and prices. If time is of the essence then, what is it that is keeping alternative fuels from widespread use? The next section will address these issues.

Obstacles

In spite of the much claimed benefits of alternative fuels, which for the most part have proven true, there is still a very small amount of consumption of these fuels. The three most common causes for this are 1) a low price for oil and therefore gasoline, 2) a lack of fueling infrastructure, and 3) high incremental costs associated with alternative fuel usage, whether on the vehicle side or the fuel side. The low price of oil was touched on in the section on Hubbert’s Peak in Chapter 2 and speculations beyond those are not in the scope of this paper (if they were I’d be in Chicago trading futures). This section will take a look at the other two issues in more detail.

Fueling infrastructure

Perhaps the main obstacle in the widespread use of alternative fuels is availability. Consumers aren’t going to use any fuel if it is not convenient for them to do so. Having to drive to the other side of town to fill your car from the one E85 pump in the city isn’t within the parameters of most consumers’ dedication quotient. The Alternative Fuels Data Center of the Department of Energy has an alternative fuels station locator on their website, which allows one to search for different fuels within a variable mileage range. Having conducted a quick search of the database centered on Austin, Texas (a city known for renewable energy and “green” attitudes), for stations within a 30, 100, and 400 mile radius of downtown; liberal distances for someone to drive just to fill their tank. Results are shown in Table 4.4.

Table 4.4
Alternative Fuel Stations Within Three Different Radii of Austin, Texas
Fuel Type Number within Radius (miles)
30a 100a 400a Nationalb
Electricity 0 0 3 574
CNG 1 2 67 800
LPG 22 124 715 3,113
Biodiesel 0 0 7 187
E85 0 0 4 209
Hydrogen 0 0 0 14a
Source: a Alternative Fuel Data Center, Alternative Fuel Station Locator. Online. Available: http://afdcmap.nrel.gov/locator/LocatePane.asp. Accessed: October 27, 2005, and b Alliance to Save Energy, The Drive To Efficient Transportation (May 2005), p. 35-42, except hydrogen.

Within a 400 mile radius of Austin, Texas, an area that covers a good portion of the state as well as a large piece of Oklahoma and Louisiana, there are 796 alternative fueling stations. The vast majority are propane sites, mostly consist of non-automotive businesses like U-Haul rental stores, campgrounds, and residential propane distributors. Across the country, there are roughly 4,900 alternative fueling stations total, the great majority being propane, with the great majority of CNG and electric fueling sites in California. Compare that number to more than 10,900 gasoline and diesel fueling stations across the State of Texas and 180,000 across the nation, and the lack of infrastructure becomes apparent.
This is a simple exercise and none too accurate either as there are at least three biodiesel filling stations in the city limits of Austin that aren’t listed. It does however, match the general consensus that LPG and CNG have the widest spread fueling infrastructure and it goes to show the general dearth of available stations for the alternative fuels in general.
The availability of alternative fuels also depends on location. For instance, St. Paul, Minnesota has 31 E85 stations within a 30 mile radius, Los Angeles, California has 44 CNG stations in the same distance, and there are at least ten biodiesel stations within 30 miles of downtown Atlanta, Georgia. The different density of available alternative fuels is most likely explained by state incentive programs. In the case of Minnesota, the state offers a $0.13 per gallon incentive for the production of ethanol up to $1.95 million for each producer. The governor has also signed a law that requires, “within eight years that gasoline contain 20 percent ethanol (E20) unless ethanol already makes up one-fifth of gas sold in the state.” California is known to aggressively pursue both CNG and electricity.
Aside from what stations are located where, a major cause of the lack of infrastructure is the proverbial chicken-or-egg syndrome. Businesses aren’t willing to build costly infrastructure if there aren’t any vehicles to use it (a CNG refueling apparatus costs over $300,000). Consumers and businesses aren’t going to buy and use AFVs if there isn’t anywhere to fuel them. Alleviating this is the classic role of government in a socio-capitalist economy, and it’s the main purpose of the programs under the Clean Air Act of 1990 and the Energy Policy Act of 1992. The goal of those programs is to create a critical mass of AFVs in an area that creates infrastructure and familiarizes people with the products, causing a “spill-over” into the private economy.
Along with these programs, the Federal government offers direct tax incentives to purchasers of AFVs. The Electric Vehicle Tax credit gives EV buyers 10 percent the cost of the vehicle up to $2,000 in 2005. Under the Clean Fuel Vehicle Tax Deduction, purchasers of light-duty AFVs can receive a $1,000 tax credit, and purchasers of heavy-duty AFVs can receive up to $25,000 for vehicles over 26,000 pounds. Also, in an attempt to satisfy the chicken-and-egg dilemma, many states also have their own incentives for AFV purchases and for infrastructure installation. A few examples are listed below:
• Kansas offers tax credits of up to $40,000 for the conversion of a vehicle to an alternative fuel source based on gross vehicle weight and up to $160,000 for building a qualified alternative fuel filling station;
• Connecticut offer a Corporate Business Tax credit of up to 50 percent the costs of converting a vehicle to CNG, LNG, LPG, or electric and/or installing infrastructure equipment to provide fueling for the same;
• Virginia provides individuals and businesses 10 percent the allowable federal tax deduction for purchasing AFVs and infrastructure installments; and
• New York gives a tax credit for 50 percent the incremental costs of purchasing an electric vehicle, 60 percent for AFVs, and 50 percent the property value of refueling stations.
Even with the incentives, alternative fuels and alternative fuel vehicles aren’t a large part of the transportation sector, especially for light-duty vehicles. Part of this has to do with education. Prior to conducting this study, the author wasn’t aware of the incentives for purchasing AFVs other than for hybrid-electric vehicles and it is warranted that many others don’t know either until they talk to a salesman, if they ever do. A second problem that is discussed by Leiby and Rubin is the lack of a used AFV market. If people have to pay full price for AFVs, there will be fewer of these vehicles sold and thus less alternative fuels consumed. The final problem is cost, which is covered in the next section.
To interrupt with a positive note, biodiesel and similar products like Fischer-Tropsch diesel (made from natural gas or coal and not currently available) are excellent fuels for replacing conventional diesel that can be delivered using existing infrastructure and used by existing engines without modification. The recent availability of biodiesel has kept it low as a percentage of total alternative fuels purchased but starting in 2000, the first year it was measured by the EIA, it has seen a 536 percent increase in consumption through 2005, making it the fastest growing fuel measured. Given the amount of diesel engines used in transportation, biodiesel has perhaps the best chance of increasing alternative fuel usage in the US and is winning support from truck drivers and passenger car drivers alike.

Costs

Cost is the major driver of an economy. Careers have been built and Nobel Prizes won by economists who explained how prices affect consumer behavior. While there will always be early adopters for any technology, it isn’t until mass production brings down prices that the “mainstream” buyer will begin to consider new technologies, and alternative fuels and the vehicles that consume them are no exception.
The Clean Cities Alternative Fuel Price Report lists the average national price for conventional and alternative fuels for September, 2005. The prices are listed in Table 4.5.

Table 4.5
Average National Prices for Conventional and Alternative Fuels (Per Gallon or Gallon Equivalent)
Fuel Gasoline Diesel E85 CNG LPG B20 B99-100
Price $2.77 $2.81 $2.41 $2.12 $2.56 $2.91 $3.40
Source: DOE, EERE, Clean Cities Alternative Fuel Price Report (Washington DC: September 2005), p. 3.

The results show that apart from biodiesel, the alternative fuels are cheaper on average than regular gasoline or diesel. In pure economic terms, this means consumers should be switching from higher priced gasoline to lower priced alternatives but this is obviously not the case. Leiby and Rubin’s study compiled pricing information on how much lower alternative fuels need to be given their availability. What they found is that given a low availability of a fuel prices of alternative fuels would have to be significantly less than regular gasoline to induce consumers to use them, approximately $0.27 to $0.30. Given their results and that alternative fuels are available at less than five percent of stations nationwide (because many fueling stations are non-automotive or for private/government use only), it’s apparent prices would have to be less than the $0.41 average reduction that is seen now, or the price differential would have to last for a long period of time.
Both E85 and CNG fall within this price range but consumers still aren’t buying them in large quantities. Part of this has to do with availability another part has to do with costs. In the year 2004, there were 775,638 AFVs manufactured in the US of which 31 percent were light-duty automobiles and 68 percent were heavy-duty trucks, pickup trucks, and vans, the other 1 percent being buses and “other” vehicles. This number is actually down 100,000 to 150,000 from the last two years. Compare this to 11.6 million total vehicles manufactured in 2004, and it’s easy to see why few of these vehicles are purchased. Add to this that most of the AFVs manufactured are purchased for fleet use, and not by the average consumer, and the supply is even fewer.
Another aspect of this equation is that 93 percent of the vehicles offered are flexible fuel vehicles (FFV) that use either E85 or gasoline. The way to know if you own one of these vehicles is that there is a sticker under the gas flap that says it can be used with either fuel. Most consumers who have the vehicles don’t know that their vehicles can use E85. Even if they did, it is certain they would opt for using it. A study by the EPA, DOE and DOT showed that E85 use in FFVs accounted for only one percent of the fuel consumed, the other 99 percent was conventional gasoline.
Thus, there is a definite lack of availability of alternative fuel vehicles, which is certain to have a direct impact on the amount of alternative fuels purchased, and those AFVs that are most common rarely use the fuels available to them. But other than availability, there is also price to consider. Almost all AFVs are more expensive than their gasoline counterparts. The incremental price ranges from $230 for an ethanol vehicle with production over 100,000 units to about $6,000 extra for an all-electric vehicle with production of 25,000 units, with an average of about $2,500.
Most Americans, it is assumed, would be unwilling to pay an extra $2,500 for an AFV, especially when availability of the fuels is dubious. There also is a difficulty inherent in the fact that it is an automobile that people are purchasing. Large durable goods aren’t as easily tradable for new ones as soon as something better comes around. The high price and expected lifetime use of the purchase plays a large role in when and what is purchased. Gasoline prices have only been above the $2.00 mark since March of this year which gives only eight months to a year for people to feel the effects on their wallets. People who bought a car around this time aren’t likely to buy a new one for a couple more years.
The question is, “At what point does the price of gasoline make the incremental costs of an AFV and alternative fuel use more attractive than conventional automobiles?” Somewhere in the $2.00 range seems likely as there has been a steady decrease in demand for large SUVs in the last year coupled with an increase in demand for more fuel efficient vehicles like Toyota’s Prius, which has a three-month waiting list in some parts of the country. And that is ultimately what it comes down to, price and availability. Toyota may not be able to keep up with Prius production, but consumers know that they are being made as fast as possible. Do consumers know that CNG or LPG vehicles are available to the public? My guess would be no. As John Maples, et. al. state in their report, Alternative Fuels for U.S. Transportation, “Given the availability of large quantities of low-cost fossil fuels, powerful policies will be needed to induce massive transitions to low-carbon fuels such as hydrogen or renewables.”