Great Point's Coal Gasification Process

Cheaper Natural Gas from Coal

Peter Fairley, MIT Technology Review, Jan. 30, 2007

Great Point says that its catalytic process could put coal back in your basement.

In the second half of the 20th century, oil- and natural gas-burning furnaces drove coal out of the home-heating business across North America. But if Great Point Energy--a Boston-area startup with a low-cost process for converting coal into pipeline-grade natural gas--has its way, coal may start keeping us toasty again before long. ...

The process [takes place] in one single, efficient reactor by moving the catalysts into the gasifier itself. The key is a proprietary, recyclable catalyst developed in house with help from gasification and catalysis experts at Southern Illinois University, the University of Toronto, and the University of Tennessee, among others. The catalyst lowers the amount of heat required to gasify coal and simultaneously transforms the gasified coal into methane. In fact, the heat released in the syngas-to-methane step is sufficient to sustain the gasification, eliminating the need to fire up the reactions with purified oxygen. "It's perfectly heat balanced," says CEO Andrew Perlman. ...

This story is an update on Great Point and familiarizes some of my newer readers with the technology. This technology in many ways is similar to the technology described in about USSEC to turn soybeans into biofuel, but from a much more credible source.

As Green Technology Grows, So Does Silicon Valley

Silicon Valley Rebounds, Led by Green Technology

Laurie J. Flynn, The New York Times, January 29, 2007

After five years of job losses, Silicon Valley is hiring again. The turnaround coincides with a huge increase of investment in the emerging category of clean environment technology. ...

In Silicon Valley, investment in clean technology — from alternative energy products, like solar panels and hybrid cars, to the use of nanotechnology to solve environmental problems — went from $34 million in the first quarter of 2006 to $290 million in the third quarter, according to an annual report released Sunday by Joint Venture: Silicon Valley Network, a research organization in San Jose, Calif. ...

The region first started to show a reversal in late 2005, said Stephen Levy, an economist with the Center for the Continuing Study of the California Economy, a trend he attributed to an increase in worldwide demand for technology products. “Silicon Valley sells more to international markets than any other region, so we can grow as the international market grows, even if the U.S. market isn’t growing.”

It is natural for photovoltaic companies to grow in the home of silicon. The high electronic content of battery powered cars, like Phoenix Motors and Tesla Motors provides an incentive for these companies to locate there. But this isn't the only place for green technology which is distributed pretty evenly across the country.

Could USSEC Proccess Revolutionize Biofuel Industry?

U.S. Sustainable Energy Corp. (USSEC) (OTC:USSE.PK) announced that they have completed the assembly of their new reactor system located at the USSEC Bioenergy plant and fuel production facility in Natchez, Mississippi. The new reactor includes a number of component upgrades, and process improvements made since introducing the prototype last year. The patent pending process is claimed to be a major advancement for green energy that creates a quality 7-3-7 organic-based fertilizer, while also producing unique biofuel and biogas byproducts at very low cost.

The Rivera Process, named after the inventor, John H. Rivera, CEO of USSEC, is a modified pyrolytic process with hydrolysis. The new reactor is capable of producing 6000 gallons of biofuel daily, producing five gallons of fuel from each bushel of soybean stock -- a conversion ratio three times higher than the ratio for traditional biodiesel. The biofuel has a thermal value similar to petroleum diesel, displays no corrosive behavior, and is resistant to temperatures as low as -70 degrees Fahrenheit. The technology is also claimed to be also to run on cow manure and wood chips. Further announcements of additional site locations for operation in 2008 are expected by March.

The reactor is the first of more than 200 planned reactor tubes scheduled for installation over the next 12 months at the Natchez facility, which will have a capacity of 1.5 mgd when completed.

In the Rivera Process natural feed stocks and a proprietary catalyst are heated in a reactor to a relatively high temperature. This heating is typically performed below atmospheric pressure for a time sufficient to vaporize all oils and water from the feedstock and to allow the resultant chemical/mass transfer reactions to occur. The remaining solid is a substantially dry ash, wherein the vapor is extracted to form two biofuels via condensation while recovering lighter gases that are non-condensable at atmospheric pressure. The process is a “volume gain” process similar to catalytic cracking.

USSEC claims that it is able produce biofuel at a cost of less than $1 per gallon, compared with about $2.50 for most biodiesels on the market (prices assume soybeans cost $6 per bushel). And the USSEC cost includes production of biogas and carbon ash.

The heating value of the USSEC biofuel is 128,000 BTU/gal, while the heating value of biodiesel is typically about 117,000 BTU/gal and petroleum diesel is about 130,000 BTU/gal. For comparison, the heating value of typical regular unleaded gasoline is 114,200 BTU/gal, premium gasoline is 116,200 BTU/gal and jet fuel is 122,200 BTU/gal.

The pour point, an indication of the lowest temperature at which the fuel can be pumped, is typically less than or equal to -90°F. For comparison, the pour point for petroleum based diesel is around -16°F; the typical pour point for soy bean based biodiesel is 30°F.

Like pour point, the cloud point is lower than that of a typical biodiesel. At low temperatures, paraffin constituents in a fuel oil may precipitate as a wax forming a cloud. As a practical matter, cloud point is important since the wax formation can clog many fuel filters and render the engine useless. The cloud point is determined as the temperature at which a cloud of wax crystals first appears in the oil when it is cooled. The biofuel has a cloud point less than or equal to -70°F. For comparison, cloud point for petroleum based diesel is about 15°F (without winter fuel conditioners), the typical cloud point for animal fat based biodiesel is 68°F while the cloud point for soy bean based biodiesel is around 35°F.

Thus in addition to being a valuable fuel in its own right, the biofuel can be used as a supplement or blended with other biofuels and diesels to improve their cold weather performance.

The biofuel has a flash point between that of regular gasoline and petroleum diesel, ranging from 90°F to 95°F.

The biofuel also has a viscosity (cSt at 50°C) ranging from 0.8 to 1.1. This range is lower than that of traditional bio-diesels, which range from 1.9 to 6.0 cSt. The higher viscosity of traditional biodiesel has been known to result in gum formation on injectors, cylinder liners, etc. For this reason, it has been required to blend biodiesel with petro-diesels in blends of up to 20% of petro-diesel. The lower viscosity associated with the U.S. Sustainable Energy biofuel is a significant difference and advantage over biodiesels that suffer from gum-formation problems.

Because of the combination of the above properties USSEC biofuel can be used at 100 percent in diesel engines and with a 50/50 blend for gasoline engines without retrofits or modifications. Initially USSEC is using the biofuel for power generation, however it shows great promise for use in cars and trucks. They have run a variety of engines and vehicles, 2 cycle and 4 cycle, diesel and gasoline on the biofuel, for short term testing, which demonstrated the capability of using the biofuel in vehicles. They are considering a variety of transportation markets and will pursue them when it makes sense to do so.

The gas product has a heating value of 1,811 BTU's per cubic foot, while the heating value of natural gas is approximately 1,000 BTU's per cubic foot.

The "Rivera Process" was featured on Channel 13, WHO TV, in Iowa, in a special news cast that presented how low cost energy production is being applied to the creation of ethanol. The video piece, located at www.ussec.us/vde1.html highlighted the impact and importance of USSEC's technology, along with an overview of how it will be applied to partnering company Diversified Ethanol.

OTHER ACTIVITIES

Vidalia, LA
USSEC and Turnkey Electric, the joint venture partner of Pratt & Whitney Power Systems, have a strategic alliance leading to a joint venture to build the world's largest 1,000 Megawatt green power utility in Vidalia, Louisiana, the first United States 100% green power public utility.

John Rivera, CEO of U.S. Sustainable Energy Corp. "USSEC," stated, "With the opening of USSEC's new 500,000 square-foot biofuel facility in Natchez, MS., we will be supplying 100% of the power and electricity consumed by the city of Vidalia, Louisiana through the Vidalia Power and Light Public Utility. Since the electricity will be produced from 100% bio-waste product derived from the production of USSEC's organic 737 fertilizer created from soybeans, the power generated is renewable, recycled and green."

Diversified Ethanol
USSEC and Diversified Ethanol, a division of Originally New York, Inc. (OTC BB:ONYI.OB), have a Memorandum of Understanding (MOU) designed and intended to capture and dominate the multi billion dollar ethanol marketplace.

Diversified has built a 70,000 GPY pilot plant, in Eagle Grove, Iowa at the company headquarters, that is fitted to run on the biofuel from the Rivera reactor. Once the ethanol plant is running, a Rivera reactor will be installed so that it will be able to run on biomass. Their ethanol process uses inexpensive by utilizing a "cold microwave" to break down corn , which can result in ethanol plants using up to 30% less corn to get the same amount of sugars. The process "creates no waste water, and no waste solids, and their is no venting of bad waste gasses." As of Jan. 14, 2006 Diversified had powered up its pilot plant, one piece at a time, successfully completing sectional testing.

At he signing of the MOU Rivera stated, "Our immediate goal, is to construct a million gallon per day ethanol plant to be supported by the excess energy generated by USSEC and our subsidiary Sustainable Power Corp (SPC). Using Diversified Ethanol's technology we will obtain up to 30% more sugars from the corn we will process, according to independent university research. In addition, according to industry experts we will also save between 30-35% on our energy costs in producing ethanol, making our product the most cost competitive ethanol anywhere in the world."

Diversified intends to begin utilizing the low-cost fuel to power its own ethanol plants with nearly free steam. By combining Diversified Ethanol and USSEC's technology, the company believes it can produce 200 proof ASTM certified ethanol 60% cheaper than any other technology in the world.

Massachusetts Consortium
In a separate announcement a Memorandum Of Understanding was signed detailing the creation in Western Massachusetts of what could be the largest green electrical energy consortium in the Northeast.

The MOU calls for the formation of a green consortium to be owned jointly by USSEC, Vegetable Energy Group, LLC d/b/a Vee-Go Energy; and E2M.org (www.e2m.org). This consortium will work with USSEC subsidiary Sustainable Power Corporation to provide wholesale green electrical energy and generation plants to public and municipal electricity buyers throughout the state. The green electricity will be generated by SPC using their biofuel.

USSEC and SPC have offered to provide the fuels and equipment that could enable the Mt. Tom Power Station to significantly reduce their current CO2 and other emissions and provide 150 megawatts of new green generation capacity. The consortium has also offered to install smaller turbine generators in municipal utilities located in Western Mass. and throughout the state. They have offered to provide buyers with green electricity at a guaranteed 10% discount below the lowest fossil fuel electricity prices for a term of ten to twenty years.

This "biofuel" and the process for making it seems to be one of those things that is to good to be true. Companies with a lot of press releases, low stock prices and a lot of MOUs and "strategic alliances" always make me wary of what is going on. However USSEC seems to be backing it up with a considerable investment in the facility and a logical development plan - it seems to me to be a big risk to have such a large facility with only one reactor ready to test, although they have tested a previous version. If they can produce a fuel with those properties, for the cost that they claim, they certainly will revolutionize the biofuel industry. Biodiesel never made that much sense to me for temperate climates with its problems with cold weather, but this fuel seems to have those problems fixed. And it even can use wood chips a feedstock! I will certainly be waiting and watching to see how this one turns out. Best of luck to them, we certainly could benefit from having a process like theirs.

Process Improvements Reduce Ethanol Costs

Engineers Devise New Process To Improve Energy Efficiency of Ethanol Production

Carnegie Mellon University press release, Jan. 26, 2006

Carnegie Mellon University chemical engineers have devised a new process that can improve the efficiency of ethanol production, a major component in making biofuels a significant part of the U.S. energy supply.

Carnegie Mellon researchers have used advanced process-design methods combined with mathematical-optimization techniques to reduce the operating costs of corn-based bio-ethanol plants by more than 60 percent.

The key to the Carnegie Mellon strategy involves redesigning the distillation process by using a multicolumn system together with a network for energy recovery that ultimately reduces the consumption of steam, a major energy component in the production of corn-based ethanol.

"This new design reduces the manufacturing cost for producing ethanol by 11 percent, from $1.61 a gallon to $1.43 a gallon," said Chemical Engineering Professor Ignacio E. Grossmann. ... "This research is also an important step in making the production of ethanol more energy efficient and economical."

More Hype on the Volt

GM's 30-Person Battery Team; BizWeek Sees Japanese Win on PHEVs

By Felix Kramer, CalCars

A few key clips from the stories, followed by full text:

* The Volt is going some way to persuade cynics that U.S. automakers are finally getting serious about environmental technologies.
* Many industry watchers, especially those in Japan, remain skeptical that the Volt will do much to narrow the gap between GM and hybrid leaders Toyota and Honda.
* While details are scant, Toyota is also working on plug-in hybrids of its own.
* Honda is working on ... plug-in hybrids of its own.
* A breakthrough in Li-ion battery technology...is expected to happen in Japan [from] Sanyo Electric, which supplies hybrid batteries to Honda and Ford, and Panasonic EV Energy, in which Toyota has a 60% stake. ...

This post, references several articles, full text included, about the GM Volt and the hype it has created, including the speculation that Sanyo will have a battery breakthrough.

Xebra Sparks Interest in Electric Cars

New electric cars spark interest all over Bay Area

Inside Bay Area, January 27, 2007

Xebras, which are made in China, come in lipstick red, ... black-and-white stripes, kiwi green and ocean blue. There's also a pickup truck version, the ZAP Truck Xebra PK, available in blue and white. ...

The cars have only three wheels and technically are classified as motorcycles, although you don't need a helmet or a special license to drive one. ... The Xebra sells for around $10,000 and the trucks sell for around $11,000. ...

While the cars are cheap to operate, require little maintenance and are easy on the environment, they have significant limitations. You can't take a Xebra on the freeway because it only reaches 40 mph. And they can only travel about 25 miles per charge, or up to 40 miles a day with additional charging, which is accomplished by plugging the cars into an ordinary household 110-volt outlet.

I have avoided writing a post on this car, but this article saved me the work for those of your that are interested.

Financing Plan for Renewables Transmission Lines

California ISO Asks Federal Government to Back New Plan for ''Greening the Grid''

California ISO, press release, January 25, 2007

In a precedent-setting move that could have national implications, the California Independent System Operator Corporation (California ISO) filed today with its regulator, the Federal Energy Regulatory Commission (FERC), to approve in concept a financing plan for transmission trunklines to remote locations in order to get green power from multiple users onto the grid. ...

If the new payment mechanism is approved and implemented, it would be a first-of-its-kind means of removing financial barriers that can hinder development of wind, solar, geothermal ... renewable energy resources. ...

“We don’t have a choice as to where these natural resources are located,” said Rich Ferguson research director for the Center for Energy Efficiency and Renewable Technologies. “If we’re going to use these assets to offset less environmentally friendly types of power generation, we need to be able to build the transmission lines that reach those remote locations.” ...

This press release points out very well one of the big problems that renewable energy power plants have in becoming a larger factor in competing with conventional power sources. Even larger problems are expanding the grid so that power can be transmitted to widely separated geographical areas. How these costs should be passed on to the consume, must be determined before financing these projects can go foreword.

Unfortunately affordable high temperature superconducting (HTS) transmission cables are still years away from widespread use, even though significant progress is being made. See Amercan Superconductor Reports Out sanding Progress, ACCC (Aluminum Conductor Composite Core) cable and Second Generation Superconducting Cable Energized, for some of the developments being made in newer technologies for our transmission lines.

The greening of America

Jan 25th 2007
From The Economist print edition

How America is likely to take over leadership of the fight against climate change; and how it can get it right

A COUNTRY with a presidential system tends to get identified with its leader. So, for the rest of the world, America is George Bush's America right now. It is the country that has mismanaged the Iraq war; holds prisoners without trial at Guantánamo Bay; restricts funding for stem-cell research because of fundamentalist religious beliefs; and destroyed the chance of a global climate-change deal based on the Kyoto protocol.

But to simplify thus is to misunderstand—especially in the case of huge, federal America. One of its great strengths is the diversity of its political, economic and cultural life. While the White House dug its heels in on global warming, much of the rest of the country was moving (see article). That's what forced the president's concession to greens in the state-of-the-union address on January 23rd. His poll ratings sinking under the weight of Iraq, Mr Bush is grasping for popular issues to keep him afloat; and global warming has evidently become such an issue. Albeit in the context of energy security, a now familiar concern of his, Mr Bush spoke for the first time to Congress of “the serious challenge of global climate change” and proposed measures designed, in part, to combat it.

Hot for the time of year

It's the weather, appropriately, that has turned public opinion—starting with Hurricane Katrina. Scientists had been warning Americans for years that the risk of “extreme weather events” would probably increase as a result of climate change. But scientific papers do not drive messages home as convincingly as the destruction of a city. And the heatwave that torched America's west coast last year, accompanied by a constant drip of new research on melting glaciers and dying polar bears, has only strengthened the belief that something must be done.

Business is changing its mind too. Five years ago corporate America was solidly against carbon controls. But the threat of a patchwork of state regulations, combined with the opportunity to profit from new technologies, began to shift business attitudes. And that movement has gained momentum, because companies that saw their competitors espouse carbon controls began to fear that, once the government got down to designing regulations, they would be left out of the discussion if they did not jump on the bandwagon. So now the loudest voices are not resisting change but arguing for it.

Support for carbon controls has also grown among some unlikely groups: security hawks (who want to reduce America's dependence on Middle Eastern oil); farmers (who like subsidies for growing the raw material for ethanol); and evangelicals (who worry that man should be looking after the Earth God gave him a little better). This alliance has helped persuade politicians to move. Arnold Schwarzenegger, California's Republican governor, has led the advance, with muscular measures legislating Kyoto-style curbs in his state. His popularity has rebounded as a result. And now there is movement too at the federal level, which is where it really matters. Since the Democrats took control of Congress after the November mid-term elections, bills to tackle climate change have proliferated. And three of the serious candidates for the presidency in 2008—John McCain, Hillary Clinton and Barack Obama—are all pushing for federal measures.

Europe's good, and bad, example

Unfortunately, Mr Bush's new-found interest in climate change is coupled with, and distorted by, his focus on energy security. Reducing America's petrol consumption by 20% by 2017, a target he announced in the state-of-the-union address, would certainly diminish the country's dependence on Middle Eastern oil, but the way he plans to go about it may not be either efficient or clean. Increasing fuel-economy standards for cars and trucks will go part of the way, but for most of the switch America will have to rely on a greater use of alternative fuels. That means ethanol (inefficient because of heavy subsidies and high tariffs on imports of foreign ethanol) or liquefied coal (filthy because of high carbon emissions).

The measure of Mr Bush's failure to tackle this issue seriously is his continued rejection of the only two clean and efficient solutions to climate change. One is a carbon tax, which this paper has long advocated. The second is a cap-and-trade system of the sort Europe introduced to meet the Kyoto targets. It would limit companies' emissions while allowing them to buy and sell permits to pollute. Either system should, by setting a price on carbon, discourage its emission; and, in doing so, encourage the development and use of cleaner-energy technologies. Just as America's adoption of catalytic converters led eventually to the world's conversion to lead-free petrol, so its drive to clean-energy technologies will ensure that these too spread.

A tax is unlikely because of America's aversion to that three-letter word. Given that, it should go for a tough cap-and-trade system. In doing so, it can usefully learn from Europe's experience. First, get good data. Europe failed to do so: companies were given too many permits, and emissions have therefore not fallen. Second, auction permits (which are, in effect, money) rather than giving them away free. Europe gave them away, which allowed polluters to make windfall profits. This will be a huge fight; for, if the federal government did what the Europeans did, it would hand out $40 billion-50 billion in permits. Third, set a long time-horizon. Europeans do not know whether carbon emissions will still be constrained after 2012, when Kyoto runs out. Since most clean-energy projects have a payback period of more than five years, the system thus fails to encourage green investment.

One of America's most admirable characteristics is its belief that it has a duty of moral leadership. At present, however, it's not doing too well on that score. Global warming could change that. By tackling the issue now it could regain the high moral ground (at the same time as forging ahead in the clean-energy business, which Europe might otherwise dominate). And it looks as though it will; for even if the Toxic Texan continues to evade the issue, his successor will grasp it.

Bodmans Comments on the State of Union Address Regarding Energy

Various news agencies reported on Energy Secretary Samuel Bodman's statements at the World Economic Forum's annual meeting, that the U.S. "will need to have more imports of ethanol," if it is to meet the new mandate to cut gasoline use.

Bodman also said that he did not see a 51-cent-a-gallon subsidy to U.S. farmers remaining in place beyond 2010 or import tariff on ethanol of 54 cents a gallon beyond 2008. These remarks were made in regard to Bush's proposal outlined in Tuesday's State of the Union address in which the president said that he aims to cut gasoline use by 20 percent by 2017, mostly by replacing the fuel with ethanol, and by expected improvements in automobile fuel economy.

"The idea is that at some point in the future all these technologies need to stand the test of the free market," Bodman said.

Another report quoted Bodman as saying that the U.S. "must go beyond corn" to increase ethanol supplies. Corn could produce only 12 billion to 15 billion gallons of fuel a year, so the nation must develop ways to derive ethanol from plant waste.

Bodman admitted that technology currently doesn't exist to produce the needed ethanol quantities in a cost-effective manner. There is “an element of trust that U.S. companies can develop the technology to meet the target," Bodman said. He said he’s "cautiously optimistic this will happen," but that the U.S. "will need to have more imports of ethanol."

Bodman also defended Bush's drive to reduce oil consumption without higher gasoline taxes.

"The idea of taxing gasoline at an increased level, which is something that gets discussed from time to time, I view as a highly divisive matter," he said.

Bodman said nuclear power would have to play an important role in future U.S. energy planning. "I see no alternative other than nuclear power as an emissions-friendly source of electrical power," he said.

So the discussion goes on. Any way, my that we could not meet Bush's goals from domestic supplies is confirmed by another source. I think his implication of how much corn ethanol we will produce is high. Or at least his use of the word could should not be interpreted as will. Of course we could, but it would be at the expense of food supplies and high prices. Where the actual number will come in is pretty much up in the air now. I have always thought that the importation of ethanol from the Caribbean, Central America and South America would be a good idea, benefiting US needs and their economies. The use of butanol and coal to liquids to supplement ethanol was not brought up however.

The need for producing these quantities of renewable and alternative fuels should not be dismissed. For reasons of national security, energy independence, the risk of inflation and a severe economic downturn and for the economic benefit of our farmers we need to develop these supplies.

I support the reduction of subsidies and tariffs on ethanol so that a free trade on ethanol can be had and our domestic producers do not indulge in price gouging as would be possible with them. The market for ethanol must be maintained however and I support ever increasing requirements for alternative and renewable fuels as required to meet the production required to assure the goals outlined in the previous paragraph.

Their certainly are other alternatives to nuclear, but are they better? I happen to think clean coal with carbon capture is better.

New Report Finds Huge Power Potential in Geothermal Resources

The thermal energy stored in the Earth's crust could be converted into electricity to provide a substantial portion of future U.S. power needs, probably at competitive prices and with minimal environmental impact, according to a new study, MIT press release, full report (14 MB pdf), sponsored by DOE and led by the Massachusetts Institute of Technology (MIT). A 21-member expert panel released a report that examines the potential to tap into the heat in Earth's crust and convert it into electricity. The report found the potential to generate 100,000 megawatts of power from geothermal resources within 50 years. That's roughly one-tenth of the total generating capacity that exists in the United States today.

While today's geothermal power plants draw from underground reservoirs of hot, permeable rock containing significant amounts of water or steam, the MIT-led panel specifically examined enhanced geothermal system (EGS) technology, which involves creating such geothermal reservoirs in areas that lack either the water or the permeability, or both. Such technologies were previously tested by DOE in New Mexico and are currently being explored in Europe and Australia. See my previous post and the EGS technology description on the DOE Geothermal Program Web site.

Thanks in part to advances in drilling technologies for the oil and gas industries, the process of drilling deep into the crust to access hot, hard layers of rock and pumping water in to "stimulate" the reservoir—opening up cracks in the rock to allow water to permeate through—has already been proven. The report recommends more detailed and site-specific assessments of the U.S. geothermal resource, followed by several field trials at prime locations that would run for three to five years as a demonstration of the EGS technology.

EGS technology offers a huge expansion to the possible locations that can use geothermal energy and is a promising technology for the relatively long term. While conventional geothermal can continue to be a growing part of our renewabole energy potfolio now, EGS will take at least 15 years to fully develop and require a modest $1 billion investment over that time period, an investment that should be made. It is important that we make this investment because it is a low cost way to increase our energy indepence in a renewable way that can reduce the need for new fossil fuel and nuclear plants.

I am late on reporting on this potentially breakthrough technology, but is so important that it deserves a great deal of attention. Clean Break has a good blog on the subject and Atlantic Geothermal has a list of all the blogs that have been made on the subject.

Bush's Energy Reduction Executive Order Includes Provisions Requiring Purchase of Plug-in Vehicles

On Wednesday President Bush issued an executive order stating that

"It is the policy of the United States that Federal agencies conduct their environmental, transportation, and energy-related activities under the law in support of their respective missions in an environmentally, economically and fiscally sound, integrated, continuously improving, efficient, and sustainable manner."

He instructed government agencies to take eight steps to reduce energy consumption, two of which I am focusing on.

1) If agencies operates a fleet of at least 20 motor vehicles

(i) reduce the fleet's total consumption of petroleum products by 2 percent annually through the end of fiscal year 2015,
(ii) increases the total fuel consumption that is non-petroleum-based by 10 percent annually, and
(iii) use plug-in hybrid (PIH) vehicles when PIH vehicles are commercially available at a cost reasonably comparable, on the basis of life-cycle cost, to non-PIH vehicles

The reduction in use of petroleum products sounds quite reasonable, but not very aggressive. As pointed out in Autopia the order does not require that total fuel consumption go down, only that petroleum consumption be reduced. I find the order remiss in that it does not require any increases in the fuel efficiency of vehicles. This requirement could be interpreted as being included in my point two, as being part of the overall energy efficiency of the agency. I do not find this interpretation specific enough.

I find the increased use of non-petroleum-based fuel is extremely aggressive, as it could require the purchase of flex-fueled vehicles before the current vehicles would normally be replaced.

I am especially encouraged that the order included plug-in vehicles. The term "use of plug-in hybrid vehicles" does not define how much they must be used and thus leaves a potential loop hole. The life-cycle cost of PHEVs should allow well engineered PHEVs to be purchased at an early date. I wish the clause requiring PHEVs to be available commercially had been worded differently. I interpret it as meaning that they could be purchased from any company, large or small, offering the vehicles in any quantity, domestic or foreign made. This would be a fine policy, but I would like it spelled out as I have done, avoiding other interpretations of the policy.

2) Reduce energy intensity of each agency by:

(i) 3 percent annually through the end of fiscal year 2015, or
(ii) 30 percent by the end of fiscal year 2015, relative to the baseline of the agency's energy use in fiscal year 2003.

It is hard to judge whether these are reasonable goals, but they sound OK to me and I am supportive of such goals.

Thanks to the tip from Wired News Autopia

The State of the Union on Energy

In his State of the Union Address, President Bush called for an energy agenda having these main points:

1) Greater use of coal, solar, wind and nuclear
2) Battery research for plug-in and hybrid vehicles
3) Expand the use of clean diesel vehicles
4) Greater emphasis on cellulosic ethanol
5) Reduce gasoline usage by 20 percent in the next ten years by
5a) Setting a mandatory Fuels Standard of 35 billion
gallons of renewable and alternative fuels in 2017
5b) Adopting fuel economy standards for cars to conserve
eight and a half billion gallons of gasoline by 2017

I don't really have any objection to these points, except to say that I think we could reduce gasoline consumption by more than 20% by having even higher economy standards for cars and a really good push on batteries and plug-ins, electric cars ought to be included, we ought to include butanol and geothermal in our stable of renewable fuels, we need an a greater effort on more efficient power transmission technologies if we are going to take full advantage of renewable energy sources and we should place a high priority on energy storage technologies.

The best way to encourage better batteries would be to require the post office to replace its fleet with electric vans and require the other government agencies to use efficient hybrids. By the time laws were enacted and RFP's written a couple of years would pass by and the technology would be even better.

The only money we need to spend on coal technology is to encourage IGCC plants and carbon capture technologies, this program is pretty well in place, if more money would speed it up all the better. Getting the money that has been authorized into the budget and released is probable all that is needed.

I know that increased use of coal and nuclear will be controversial among many of my readers, but I don't see any way other technologies can take their place in the next 25 to 50 years. I am sure there are those of you that think that government spending for energy technologies is not necessary, that market forces would provide all the incentives that are needed. This is too much of a risk. The cost of our liquid fuels are increasing at too high a rate, despite the recent lull, and if we are not to have drastic economic effects we must push on with alternative energy sources before this happens. All the money we need for these programs could come from reducing the subsidies on hydrogen, fuel cells and the oil industry.

The complete text of his six paragraphs on energy policy are found in the continuation:

"Extending hope and opportunity depends on a stable supply of energy that keeps America's economy running and America's environment clean. For too long our Nation has been dependent on foreign oil. And this dependence leaves us more vulnerable to hostile regimes, and to terrorists - who could cause huge disruptions of oil shipments ... raise the price of oil ... and do great harm to our economy.

It is in our vital interest to diversify America's energy supply - and the way forward is through technology. We must continue changing the way America generates electric power - by even greater use of clean coal technology ... solar and wind energy ... and clean, safe nuclear power. We need to press on with battery research for plug-in and hybrid vehicles, and expand the use of clean diesel vehicles and biodiesel fuel. We must continue investing in new methods of producing ethanol - using everything from wood chips, to grasses, to agricultural wastes.

We have made a lot of progress, thanks to good policies in Washington and the strong response of the market. Now even more dramatic advances are within reach. Tonight, I ask Congress to join me in pursuing a great goal. Let us build on the work we have done and reduce gasoline usage in the United States by 20 percent in the next ten years - thereby cutting our total imports by the equivalent of three-quarters of all the oil we now import from the Middle East.

To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory Fuels Standard to require 35 billion gallons of renewable and alternative fuels in 2017 - this is nearly five times the current target. At the same time, we need to reform and modernize fuel economy standards for cars the way we did for light trucks - and conserve up to eight and a half billion more gallons of gasoline by 2017.

Achieving these ambitious goals will dramatically reduce our dependence on foreign oil, but will not eliminate it. So as we continue to diversify our fuel supply, we must also step up domestic oil production in environmentally sensitive ways. And to further protect America against severe disruptions to our oil supply, I ask Congress to double the current capacity of the Strategic Petroleum Reserve.

America is on the verge of technological breakthroughs that will enable us to live our lives less dependent on oil. These technologies will help us become better stewards of the environment - and they will help us to confront the serious challenge of global climate change."

The complete text of the speech can be found here.

Free Solar Power for Staples

The Connecticut Clean Energy Fund (CCEF), Staples and SunEdison hosted a dedication ceremony on Jan. 16 to unveil the largest solar power installation in New England at Staples’ 300,000-square-foot retail distribution center in Killingly, Connecticut. The solar power installation, built at no capital cost to Staples, was made possible through the collaborative effort of CCEF, which provided a $1.7 million grant for the project, and SunEdison, which financed the remaining costs of the project and designed and installed the system.

Is this the way we want to see our solar projects financed? Or is this type of financing necessary to enable expansion of the industry so it is more competitive with conventional power? I certainly think that the end user should pay a share of the costs. I don't especially blame Staples for taking advantage of a business opportunity.

Ford Airstream Fuel Cell PHEV

The Chevrolet Volt was not the only PHEV concept at the Detroit Auto Show. Ford Motor Company debuted a hydrogen-fueled, battery-powered plug-in in the new Airstream concept vehicle. Hardly a credible showing in my opinion.

In their press release they describe the car as follows:

The system, called HySeries Drive™, is powered by a 336-volt lithium-ion battery pack at all times and has a range of 25 miles on a full electric power. Once the battery pack is depleted by about 40 percent, the hydrogen-powered fuel cell begins generating electricity to recharge the batteries, increasing range another 280 miles, for a total driving range of more than 300 miles.

At home, the battery pack can be refreshed by plugging into a standard outlet. The HySeries Drive powertrain delivers a combined city/highway gasoline equivalent fuel economy rating of 41 miles per gallon and can travel up to 85 miles an hour. ...

The innovative powertrain reduces the size, weight, cost and complexity of a conventional fuel cell system by more than 50 percent. It also promises to more than double the lifetime of the fuel-cell stack.

The HySeries Drive system already is on the road in a Ford Edge prototype, which will be shown publicly for the first time at the Washington, D.C., Auto Show in January.

Phoenix Places Large Order to Altair, Altair Receives 16.6% Ownership in Phoenix

Altair Nanotechnologies Inc. (Nasdaq: ALTI) entered into an exclusive three year supply agreement with Phoenix Motorcars and in return has received a 16.6% ownership of Phoenix.

Altair has received a purchase order for its NanoSafe™ 35 KWh battery pack systems from California-based Phoenix Motorcars for $1,040,000 for battery pack systems scheduled for delivery in February and March 2007.

In addition, the company announced it has entered into a multi-year purchase and supply agreement with Phoenix under which Phoenix has projected orders for 2007 between $16 and $42 Million for up to five hundred battery pack systems.

$42,000,000/500 = $84,000 -- This doesn't make sense. What's wrong?

In consideration for a three-year exclusivity agreement within the U.S., Altairnano received a 16.6% ownership in the company. The three-year exclusivity agreement provides Phoenix with limited, exclusive use of Altairnano’s NanoSafe battery packs in four-wheel, all-electric vehicles having a gross weight up to 6,000 pounds. Phoenix must meet minimum battery pack purchases, annually, to maintain the limited exclusivity agreement. The minimum commitment to maintain exclusivity for 2007 would provide $16 Million in battery pack sales to Altairnano. Altairnano’s NanoSafe battery packs manufactured for hybrid electric vehicles (HEVs) and plug-in electric vehicles (PHEVs) are excluded from the exclusivity agreement.

"The market opportunity for freeway-ready, all-electric, zero-emission vehicles is growing daily," said Phoenix Motorcars CEO Daniel J. Elliott. "Having a best-in-class company such as Altair Nanotechnologies as an equity owner and as a provider of safe, powerful, fast-charging battery packs, will be a major driver for our growth," added Elliott.

Altairnano’s NanoSafe 35 KWh battery pack systems enable Phoenix SUTs to meet California’s Air Resources Board Type III Zero Emission Vehicle (ZEV) standards while providing power for a driving range of 135 miles and driving speeds of up to 100 miles per hour. The NanoSafe battery pack can be recharged in less than 10 minutes at fast-charge stations.

The initial order of battery pack systems, valued at $1,040,000, is scheduled for delivery to Phoenix in February and March 2007, and additional shipments of increasing value are planned throughout the 2007 calendar year. Depending on Phoenix’s level of demand, the entire projected order for NanoSafe battery pack systems may be shipped to Phoenix in calendar year 2007. Under the terms of the multi-year purchase and supply agreement, Phoenix will purchase all battery packs for its electric vehicles from Altairnano.

Phoenix Motorcars’ market strategy targets operators of fleet vehicles, such as public utilities, public transportation providers, and delivery services. This market presents a significant opportunity as there are more than 200,000 fleet vehicles in the State of California alone, with an increasing number of fleet operators now seeking freeway-capable, zero emission, all electric vehicles. The Phoenix SUT and SUV vehicles are the only all-electric vehicles currently on the market capable of meeting California’s Type III ZEV requirements.

Browne out

Jan 18th 2007
From The Economist print edition

An oilman's career encapsulates both the industry's past successes and its new worries

AFP

IT IS hard to summon much sympathy for the bosses of big oil firms. Their companies are among the most profitable on earth, and many of them have egos to match. They are at their richest and most powerful when oil prices rise, emptying the pockets of humbler folk and slowing whole economies. Despite all this, however, there is something poignant in the imminent retirement of John Browne, BP's boss since 1995.

Lord Browne has set the tone for the oil industry for much of the past decade. He was the first oil boss to champion, or at least not try to squash, greenery. There was a degree of public relations in this—BP is certainly not “Beyond Petroleum”, as its slogan claims, although it does have investments in alternative energy. But merely by breaking ranks on the subject, he helped bully his peers into a debate about global warming.

Lord Browne also created the industry's first “super-major” by merging BP with Amoco in 1998. The deal vaulted BP into the top ranks, and forced rival oil firms, including Exxon, Total and Chevron, into mergers of their own to keep pace. In 2003 he persuaded Vladimir Putin, Russia's president, that BP should buy half of a Russian oil firm—a feat no other foreigner has matched. Throughout this expansion, he kept costs down and profits up, to shareholders' delight. Since he took charge, BP's share price has more than doubled, its market capitalisation has risen fourfold and its earnings per share fivefold.

But over the past two years BP's star has dimmed. In March 2005 a fire at an American refinery killed 15 people and injured 170 more. Since then, BP has suffered corrosion and spills on its pipelines in Alaska, delays in developing new oilfields and two investigations of its trading arm for price-rigging. American officials and politicians have pilloried the firm for these failings. Last week, just days before the publication of the latest critical report, when Lord Browne said that he was bringing his retirement forward by 17 months to July, observers assumed that the announcement was intended to draw a line under BP's recent woes, and give his successor a fresh start.

With the benefit of hindsight, critics now claim to see a connection between BP's setbacks and Lord Browne's management style. Several reports prompted by the refinery fire—including one released this week by a panel headed by James Baker, a grand old oilman of American politics—have found that budgets and staff were stretched thin (see article). Tony Hayward, Lord Browne's successor, recently conceded that BP's “more-for-less” mantra could be taken only so far.

Whether BP's managers were negligent or simply unlucky will be difficult to judge—although lawyers will doubtless devote lots of time and money to the question. But BP is hardly the only firm that has ruthlessly cut costs. If there is a clear lesson to be learned from BP's troubles, it is that the strategies that have propelled the oil industry for the past decade, and that Lord Browne epitomised, are reaching their natural limits.

Big-oil nostalgia

BP will clearly have trouble cutting costs much further. In fact, a shortage of skilled workers and equipment is already pushing its bills up. Its biggest fields are maturing, as are those of other Western oil firms, yet access to new reserves is getting harder. Most of the world's most promising acreage lies in the Middle East, where nationalistic regimes restrict foreigners' access. Even countries like Russia, until recently the industry's great hope, are rolling up the welcome mat.

Nowadays, “Big Oil” reigns supreme in only a relatively small niche: the most technologically challenging and expensive projects, such as drilling in deep water, or turning tarry sand into something more useful. Unfortunately, these investments bring higher risks and lower rewards. Such trends should be worrying all oil bosses.

UCS Asserts That ExxonMobil is Clouding Understanding of Climate Change to Delay Action on the Issue

A new report, Smoke, Mirrors & Hot Air, from the Union of Concerned Scientists asserts that ExxonMobil has adopted the tobacco industry's disinformation tactics, as well as some of the same organizations and personnel, to cloud the scientific understanding of climate change and delay action on the issue. According to the report, ExxonMobil has funneled nearly $16 million between 1998 and 2005 to a network of 43 advocacy organizations that seek to confuse the public on global warming science.

"When one looks closely, ExxonMobil's underhanded strategy is as clear and indisputable as the scientific research it's meant to discredit," said Seth Shulman, an investigative journalist who wrote the UCS report. "The paper trail shows that, to serve its corporate interests, ExxonMobil has built a vast echo chamber of seemingly independent groups with the express purpose of spreading disinformation about global warming."

The report details how the oil company, like the tobacco industry in previous decades, has

• raised doubts about even the most indisputable scientific evidence
• funded an array of front organizations to create the appearance of a broad platform for a tight-knit group of vocal climate change contrarians who misrepresent peer-reviewed scientific findings
• attempted to portray its opposition to action as a positive quest for "sound science" rather than business self-interest
• used its access to the Bush administration to block federal policies and shape government communications on global warming

The report documents that, despite the scientific consensus about the fundamental understanding that global warming is caused by carbon dioxide and other heat-trapping emissions, Exxon- Mobil has funneled about $16 million between 1998 and 2005 to a network of ideological and advocacy organizations that manufacture uncertainty on the issue. Many of these organizations have an overlapping—sometimes identical— collection of spokespeople serving as staff, board members, and scientific advisors. By publishing and republishing the non-peer-reviewed works of a small group of scientific spokespeople, Exxon- Mobil-funded organizations have propped up and amplified work that has been discredited by reputable climate scientists.

"ExxonMobil needs to be held accountable for its cynical disinformation campaign on global warming," said Alden Meyer, the Union of Concerned Scientists' Director of Strategy and Policy. "Consumers, shareholders and Congress should let the company know loud and clear that its behavior on this issue is unacceptable and must change."

Honda to Launch Fuel-Cell Cars in General Market by 2018

A post on the Auto Channel reports: The AP reported that Honda Motor Co. expects to have begun selling fuel-cell vehicles in the general market by 2018, a news report said Friday.

"In 2018, I believe the development (of a fuel-cell car) will have been very advanced," Honda President Takeo Fukui was quoted as saying, by Kyodo News agency, in an interview in Tokyo on Dec. 25.

Kyodo said Fukui was confident that many customers will want to buy a fuel-cell car if it costs no more than about 10 million yen ($84,000).

The only reason that I post this news is that it reaffirms my belief that fuel cell vehicles are a long way off and that they will be expensive even then.

Paying the price

Jan 18th 2007
From The Economist print edition

Getty Images

The British oil firm is in trouble. But its rivals face many of the same problems

NO ONE calls upon James Baker, an American elder statesman, to solve a trivial problem. George Bush recruited him to defend his interests in Florida during the disputed election of 2000, and more recently to examine ways out of America's morass in Iraq. The United Nations once asked him to settle a 30-year-old conflict in Africa. So it says a lot about the state of BP, a big British oil firm, that it asked Mr Baker to head a panel to assess flaws in its safety regime.

John Browne, BP's boss, turned to Mr Baker in 2005 after an explosion at one of the firm's American refineries killed 15 people and injured 170 more. Since then BP has suffered a series of further disasters. Last year several of its pipelines in Alaska sprang leaks, briefly forcing the closure of America's biggest oil field and prompting oil prices to jump. BP's trading arm is under investigation for price-fixing. A showcase project at the Thunder Horse oilfield in the Gulf of Mexico has been delayed by a mix of hurricanes and engineering. Last year BP's output declined, and its share price has lagged behind that of rivals such as America's Exxon Mobil (see chart).

Now Mr Baker's panel, which published its findings on January 16th, has determined that BP's management did not devote enough money or effort to ensuring safety at its American refineries. Shortly beforehand, Lord Browne had said that he would bring forward his retirement by 17 months, to the end of July, reinforcing the notion that something had gone badly wrong at BP and that a fresh start was needed to set the firm to rights.

There certainly seems to have been something wrong with BP's safety practices. Mr Baker's report deliberately refrained from assigning blame for the explosion at the refinery, in the small American town of Texas City. But it did argue that the firm placed too much emphasis on preventing personal accidents, such as falls and car crashes, and not enough on preventing operational and engineering failures. Although the panel did not find any evidence that the firm had knowingly skimped on safety, it concluded that budgets had been inadequate and that staff had been overstretched. Moreover, it placed much of the blame for all this on the board and senior managers.

Lord Browne immediately vowed to fulfil all of the panel's ten recommendations. At the same time, he pointed out that BP had already increased spending on maintenance and safety at its five American refineries, from $1.2 billion a year to $1.7 billion. It has also hired more staff, established a new unit to set and enforce safety standards throughout the firm and beefed up the role of its American operations head to include overseeing safety.

Similarly, BP is doing public penance for its failings in Alaska. It has hired three experts on corrosion to assess whether it is monitoring and maintaining its pipelines properly. In response to allegations that it gave whistleblowers short shrift when they pointed to penny-pinching, it has appointed a former judge as an ombudsman, to record and investigate complaints.

Lord Browne insists that there is no pattern to BP's various problems and no over-arching failure of management. Not everyone agrees: Tony Hayward, his successor, said last year that BP's top brass were too imperious and failed to heed the concerns of the lower ranks. Other observers think the management is not assertive enough. Neil McMahon of Sanford Bernstein, a financial-services firm, believes that BP needs to be reorganised to reduce the autonomy of its many units and so ensure more consistent standards and policies.

But for all the fuss, BP's conduct is probably not too different from that of its rivals. Mr Baker's report suggested that most American oil firms probably tolerated similar safety lapses. Fadel Gheit of Oppenheimer, another financial-services firm, points out that before the disaster at Texas City, many refineries used to keep staff and maintenance crews on site, dangerously close to volatile chemicals. By the same token, he says, none of BP's partners in the Alaskan pipeline complained that it was spending too little on maintenance.

If anything, Mr Gheit argues, BP has handled disaster better than its rivals might have done: it has offered to settle all lawsuits arising from the explosion at Texas City and has set aside $1.6 billion to compensate the victims, whereas Exxon Mobil is still fighting a court case related to the massive spill from the Valdez, one of its tankers, off the coast of Alaska in 1989.

The rest of BP's difficulties are hardly unique. BP's rivals are also struggling to increase production, since nationalistic governments are increasingly inclined to exclude Western firms from the most promising exploration prospects. Indeed, BP is in a better position than most, in that it is still clinging to its prolific Russian joint venture, TNK-BP, despite the Kremlin's growing hostility to foreign investment in oil and gas projects.

Likewise, the whole industry is experiencing embarrassing delays and cost over-runs with complex projects like Thunder Horse. That is thanks to the high oil price, which has prompted a boom in exploration and thus created a shortage of labour and equipment. Both Royal Dutch Shell and Exxon Mobil, for example, have increased budgets and stretched timetables for their respective developments on Russia's Sakhalin Island.

Mr Hayward's elevation will not change any of this. As head of BP's exploration and production, he presumably would already be finding and pumping more oil and gas if he could. Furthermore, he has spent his entire career at BP, much of it as Lord Browne's protégé, so he is steeped in its culture. The change of guard may prompt investors to reassess the firm and give its share price a corresponding boost, say analysts. But in the long run Mr Hayward will probably find the job even more gruelling than Lord Browne did.

Ethanol Production Update

The headlines on the latest Renewable Fuels Association (REA) press release are: October production ties all time high, yearly production, demand for ethanol up more than 25%.

This somewhat contrary to what I have been reading in the popular press, that frequently says demand is down. We are still importing expensive ethanol to meet demand. However, the capacity of new plants probably will double over current capacity in the next two years, making me wonder whether we can absorb that much production, forcing ethanol prices down (that will be good for consumers, but bad for producers). Further, that production rate will put a strain on corn production forcing prices of corn up and possibly jeopardize our supply of food corn. No significant cellulosic ethanol production will come on stream in the next two years, so that alternative is no relief for corn supplies during that period. We need to put a moratorium on building more corn ethanol plants which only have a small net energy gain, and wait for cellulosic ethanol to become viable. We should stop subsidizing the construction of new corn ethanol plants.

Solar Engines

Red Herring reports that Carmanah Technologies(OTC: CMHXF) is planning to introduce a line of "solar engines", a bundle that will integrate solar panels, batteries and electronics to power off grid applications like telecom towers and monitoring equipment for pipelines.

This is a new market for Carmanah, whose core business is making solar LED lights, like street signs, airfield lights and lighted marine bouys for off grid applications. Shown is a solar powered light on a telecom tower.

This is the type of installation that traditionally has been served by lead-acid batteries and recently the fuel cell industry has made some inroads. Carmanah's product is a step further than the fuel cells, requiring less maintenance. The Red Herring article also delves into why they are going into this market and the potential market size.

Thanks to Tyler at Clean Break for the tip.

Loveless brothers

Jan 11th 2007 | MOSCOW
From The Economist print edition

AFP

Another Russian gas conflict was averted, but a short oil war broke out instead. Europe should take heed

Get article background

RUSSIA and Belarus, its ex-Soviet neighbour, are supposedly brotherly Slavic nations that are in the process of forming a union state. There are indeed some striking family resemblances. Both have irascible authoritarian presidents—Russia's Vladimir Putin and Belarus's brutal Alyaksandr Lukashenka—and both are inclined to risky diplomatic brinkmanship. This week that similarity propelled them over the brink and into an unfraternal trade dispute. Brief though it may have been, it had important implications for Russia's energy dealings with Europe, and perhaps also for the future of benighted Belarus.

A year ago, wrangling over the price of gas sold by Russia to Ukraine briefly diminished the flow of gas through Ukraine to Europe. At the end of 2006, Belarusian resistance to Russia's demand that it too pay more for gas threatened to unleash another so-called “gas war”. The modest economic growth that Mr Lukashenka terms the “Belarus economic miracle”—which along with his total control of the media and harassment of opponents has shored up his regime—has in fact been largely based on massively discounted Russian gas imports.

In the event, the two countries cantankerously reached a deal on an increased gas price just before their New Year's Eve deadline. But a few days later, an oil war broke out instead: Russia imposed new duties on the crude oil it exports to Belarus (refining and re-exporting it have been a crucial money-spinner for Mr Lukashenka, in effect another big Russian subsidy to the Belarusian economy). In revenge, Belarus demanded a transit fee on the oil that crosses Belarus to other European customers. The Russians refused—and Belarus began siphoning off oil in lieu of payment. On the night of January 7th Russia stopped pumping oil into a pipeline network that crosses Belarus and delivers 12.5% of the European Union's oil needs. Supplies to Poland, Germany and others stopped flowing.

The two countries' tactics may be similar, but their muscle is not. Mr Putin talked of cutting oil production and rerouting supplies. The Russians also threatened duties on all Belarusian goods, many of which would struggle to find markets elsewhere. On January 10th, after the presidents talked on the telephone, Mr Lukashenka blinked; the transit fee was lifted; and oil began to flow again before Europe was seriously affected. Nevertheless, the short but nasty spat has telling lessons.

One is that, with the Russians in this mood, Mr Lukashenka's grip on Belarus may be in jeopardy. While others reviled him, Mr Putin stood by Mr Lukashenka during his rigged re-election last year. But Mr Putin's motive was more aversion to European meddling in Russia's “near abroad”, and to the so-called “colour revolutions” of the kind that overtook Ukraine in 2004, than affection for Mr Lukashenka. Personal relations between the two men are said to be rancid; a proper union between their two countries, a plan Mr Putin inherited from his predecessor, Boris Yeltsin, now looks fanciful. (Mr Lukashenka is said to have cooled on the idea after it became clear that he was unlikely to remain president after the merger.) In the absence of a reliable alternative, defenestrating Mr Lukashenka may not be part of Mr Putin's plan. But the new gas price alone could seriously damage Belarus's mostly state-owned factories and collective farms, and alienate ordinary Belarusians.

The affair also confirms the increasingly poisonous nature of Russia's dealings with many of its former vassals. Energy feuds are both a cause and a symptom of this trend. Georgia, Mr Putin's least favourite ex-Soviet neighbour, has been forced to accept a price for Russian gas that is more than twice the new one for Belarus. But supplies from neighbouring Azerbaijan are helping Georgia through the winter, and they may soon, says Nika Gilauri, Georgia's energy minister, replace Russian imports altogether. With its own oil and gas deposits in the Caspian Sea, Azerbaijan itself recently rejected what Hafiz Pashayev, the deputy foreign minister, describes as the “unreasonable” gas terms offered by Russia, and stopped importing Russian gas. It has also ceased sending its oil through Russian pipelines.

The most important lesson for Europe, however, is once again that over-reliance on Russian energy is dangerous. In principle, the Kremlin's drive to charge its neighbours more for gas is reasonable. Overall demand for Russian gas is outstripping supply; suppressing demand in the ex-Soviet states should make more gas available for export to the more lucrative European market. In the particular case of Belarus, the Russians deserve some sympathy. Until last year they were criticised for coddling Mr Lukashenka with preferential gas terms—and Belarus's re-export of duty-free Russian oil was, as one foreign observer in Minsk puts it, an obvious “scam”.

But however reasonable its aims, Russia's bullying and capricious methods, plus its volatile relationship with energy transit countries and carelessness over the impact on European consumers, have rightly alarmed European leaders. Though Mr Putin pledged to “do everything to secure the interests of Western consumers,” Germany's Angela Merkel spoke of damaged confidence. The Europeans should also note that Russia has emerged from its tussle with Belarus with a 50% stake in Belarus's gas pipeline (payment for which will partly offset the gas-price hike), strengthening the Kremlin's grip on Europe's energy infrastructure. An EU energy strategy released this week talked about the need for diversifying suppliers and dealing with them collectively: the quicker, the better.

Plug-in Hybrids Stabalize Electric Grid

Technology Review has a nice roundup on the advantages of plug-in hybrids (PHEVs), pointing out how the vehicles could help stabilize the grid if they were charged during low demand periods. Some key excerpts from Technology Review:

Such a system could be further optimized by using smart chargers and other electronics. This system would include a charger that runs on a timer, charging cars only during off-peak hours. Researchers at Pacific Northwestern National Laboratory (PNNL) are taking this a step further with smart chargers that use the Internet to gather information about electricity demand. Utilities could then temporarily turn off chargers in thousands of homes or businesses to keep the grid from crashing after a spike in demand.

The next step would be to add smart meters that would track electricity use in real time and allow utilities to charge more for power used during times of peak demand, and less at off-peak hours. Coupled with such a system, the PNNL smart charger could ensure that the plug-in batteries are charged only when the electricity is at its cheapest, saving consumers money.

But what many experts are excited about now is a concept called "vehicle-to-grid," often abbreviated V2G. ... In this kind of system, each vehicle would have its own IP address so that wherever it is plugged in, the cost of the energy it uses to recharge would be billed to the owner. With the right equipment, the car could also return energy to the grid, giving the owner credit. Mock-ups of such systems have already been tested ...

I know some of this information is repetitive to some of my regular readers, but the importance of plug-in vehicles (and electric vehicles) to relieving our dependence on increasingly expensive liquid fuels is so crucial and the word must be spread to as many as possible. While I have said many times that conservation and use of renewables are very important this technology remains the cornerstone of The Energy Revolution.

Thanks to tip from Tyler at Clean Break.

Toyota to Reign in 2007

According to Autopia, for the first time ever, the top selling car company in the world won't be headquartered in the U.S. While GM and Ford are cutting production, Toyota will zoom past GM and produce 9.42 million vehicles across the globe in 2007. GM plans to build 9.181 million vehicles this year. (According to the BBC analysts do not expect GM to increase production significantly in 2007). .... more from Autopia

Toyota becoming number one in the auto industry is not only a blow to GM but to America who has been the leader in car sales for 81 years according to one source. The two rival car giants are now going in opposite directions, with Toyota expecting to add a half million in vehicle sales in 2007, while GM and other American car companies are closing plants and laying off workers. Toyota's rise would also be a victory for its unique corporate culture, the so-called Toyota Way, which is based on an obsession with craftsmanship and constant improvement. It is also a victory for keeping in touch with consumer demands, especially more energy efficient cars, which until this year, perhaps too late, American car companies have chose to ignore, instead offering its gas guzzling models.

Oil's not well

Jan 11th 2007
From The Economist print edition

A fall in commodity prices raises concerns about the appetite for risky assets

WHAT a difference a year makes. When Russia cut off gas supplies to Ukraine in January 2006, crude prices jumped 19% within a few weeks. This year, a similar halt to supplies, because of an oil dispute with Belarus, was a one-hour wonder in the market. The crude price slipped close to an 18-month low on January 9th.

Oil has not been rescued by planned production cuts by the Organisation of the Petroleum Exporting Countries nor by speculation about an American or Israeli attack on Iran, both stories that would normally add several dollars to a barrel.

Some attribute oil's fall to the mild winter in the northern hemisphere, which saw New Yorkers sunbathe in early January. But copper has also been plunging in price, which cannot be blamed on the weather. Other metals have been dragged down in copper's wake. The Economist All-items commodities index, which excludes oil, fell 10.2% in the week to January 9th (see chart).

t is possible that falling commodity prices are signalling a rough patch ahead for the world economy. Perhaps they are catching up with the mood in the bond markets, where the inverted yield curve (in which short rates are higher than long rates) has, many believe, for months been pointing to a slowdown.

But the gloom thesis is not really borne out by recent economic data, which have shown, for example, strong American employment gains and buoyant German manufacturing. Nor are there other signs that investors are becoming depressed about the outlook for global growth. The Baltic freight index, a measure of trade flows, has more than doubled within the past year (also see chart).

It seems more likely that commodity prices are being driven down by two other factors. The first is supply, as higher prices have steadily led to increased production. Dresdner Kleinwort, a German bank, reckons that 2007 could be the first year in the current “super-cycle” in which the supply problems in a range of metals will start to subside. Meanwhile, users of oil have piled up inventories (although the most recent data showed a dip), leaving them less vulnerable to supply disruptions.

The second force is the flow of investment. It is surely no coincidence that the two commodities to suffer most in the recent sell-off are oil, the most-traded commodity, and copper, where speculative excess seemed greatest.

The enthusiasm for commodities in recent years has been part of a general move into “alternative assets”, a term that covers everything apart from shares, bonds and cash. The idea was to find assets that were uncorrelated with traditional holdings, a move that should improve the risk-reward trade-off of portfolios.

When such a fashion takes hold, it can rapidly gain momentum. This is because alternative-asset classes are often small and new investment flows drive prices up very quickly. To those participating in the trend, that confirms the wisdom of their original decision and encourages others to jump aboard.

With commodities, institutional investors often bought index portfolios, which meant putting money into raw materials, regardless of the fundamentals of each market. (One problem for copper is that its index weighting, along with that of other base metals, is being reduced.)

Oil is the biggest single component in most commodity indices. Citigroup estimates that, from 2003 onwards, financial flows had pushed up the price of oil by some $35 per barrel.

Such was the scale of investment flows that the structure of the commodity markets changed. Traditionally, futures prices were lower than spot, or current, prices; a state known as “backwardation”. This allowed investors to buy the future and wait for its price to rise to the spot level. This gain, known as the “roll yield”, was an important part of commodity returns.

But financial speculation forced the futures price of some commodities well above the spot level, an unusual phenomenon known as “contango”. This meant investors in futures were losing money; in other words, the roll yield was negative. So whereas The Economist's commodities index rose 28% in 2006, the Goldman Sachs Total Return Index (which incorporates both oil and the roll return) fell 15%.

That seems likely to have disillusioned many converts to the commodity cause. Speculative investors have been getting out of their positions. They may be worried about Vladimir Putin, but they are more worried about cutting their losses.

The commodity sell-off has been accompanied by a retreat from another risky asset class, emerging-market shares. Suddenly, investors are rediscovering political risk. The botched currency controls imposed by Thailand last month have been followed by Hugo Chávez's plans to nationalise Venezuelan businesses.

Suddenly, the sang froid of investors has been disturbed. God, as the 1960s film “Georgy Girl” explained, always has a custard pie up his sleeve.