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Friday, June 20, 2008

The Fruitlessnes of Alternative Energy Research and Development...or Why I Hate Big Oil

Mort Kondracke has this piece in the Hill today.

Sens. John McCain (R-Ariz.) and Barack Obama (D-Ill.) unveiled impressive plans this week on energy and competitiveness policy, but they need to act now to save federal energy research from collapsing.

Specifically, McCain should call the White House and Obama should call Democratic Congressional leaders to make sure that federal scientific research budgets aren't flat-lined for another year.

Funding cuts are especially dire for science programs at the Department of
Energy, resulting in layoffs at national laboratories and cuts in university
research in the physical sciences.

I must respectfully disagree with Mr. Kondracke on both points. I don't believe that either Mr. McCain or Mr. Obama has an altogether impressive energy policy. Beyond that extolling the virtues of increased alternative energy research is fool hearty in my opinion. That's because energy independence has never been about a lack of research in my opinion.

The last few years have brought a renewed focus on energy independence, and the automakers have responded. They have created a plethora of automobiles that one can term alternative fuels, or flex fuels. There are cars that run on hydrogen, natural gas, and even electric powered cars. Yet, the most popular alternative fuel car is the so called hybrid. Of course, this is not actually an alternative fueled car. This car is fueled by gasoline made out of oil. It just so happens that the car can switch seamlessly from gas to electricity and thus they generally get better gas mileage.

So, why is the hybrid all the rage and the hydrogen powered car obscure? After all, hydrogen is cleaner, more efficient, gets better gas mileage, and most importantly the Saudis get zero dollars when we buy one. To answer this question we must ask ourselves how we would go about filling up a hydrogen powered car. In fact, the last time I attended the Chicago Auto Show that's exactly the question I asked to the representative at Nissan when their hydrogen powered car was still a concept. They told me that there are government sponsored hydrogen fuel stations. In Illinois there were about fifty. That's about how many gas stations there are in my neighborhood in Chicago.

In fact, it would be so hard far the owner of a hydrogen powered car to fill up regularly that to mass market them, the automakers make them flex fueled as well. In other words, these autos run either on gas from oil or hydrogen. As such, the owner of the car would be able to fill up at a regular gas station as well as at these government sponsored hydrogen fuel stations.

Now, why in the world would the federal or state government need to get into the business of of offering hydrogen fuel stations? Wouldn't this be the sort of things the oil companies would be a better fit for? After all, wouldn't it make sense for oil companies to put at least one tank in the corner for all the automobiles that run on alternative fuels? So, why don't they do it? I know they can afford the research into creating such fuel tanks.

In my opinion, they don't do it because the oil companies have no intention of allowing anything besides autos run on gas generated from oil to be mass marketed. That's because they are making far too much money in that sort of gasoline.

That's why research into alternative energy is nothing more than fool's gold. We've been researching alternative energy for years. The technology has long been out there. What no one can figure out is how to mass market it to the consumer. In order to do that, a place to fill up has to be nearly as readily available as it is to fill up a traditional car. Only the oil companies can provide that outlet. All the research in the world is not going to create alternative energy fueling stations on every corner like they have with traditional gas stations.

Therein lies the rub, as Shakespeare would say. All the research in the world is not going to resolve the real problem. We have a cartel of about eight companies and they are all getting really wealthy selling one type of fuel. They have no motivation or reason to try and offer any other variation to the market. It is nearly impossible for anyone to challenge them. Until they decide to enter other markets, all the alternative energy research in the world will do nothing to solve the fundamental problem.


Anonymous said...

They are a few reasons. First, Just how is the hydogen going to be delivered? If in liquid form then it means in needs to be cryogenic, not eaxctly practical. So if it is just as a compressed gas then it means it requires a whole big (expensive ) infastructure to transport, store, and transfer the compressed hydogen. Add to that the danger of mistakes when connecting to the transfer mechanism and the chnage in skill sets needed before it can be widely used.

You arn't allowed to refill your own Propane tanks for a gas grill. Hyrogen is lot more volitile.

But the bggest issue with Hydorgen is that it is really just another method of tranferring energy. It is not actually a naturally occuring "Fuel". It's an artificial one (and an inefficient one). It takes energy to derive it from whatever source is used and with current technology alot more energy is put in than is recovered when it is altimately used to power a vehilce.

mike volpe said...

With all due respect, somehow all of these supposed problems that you list are resolved when it is delivered just fine to government sponsored hydrogen fuel stations. There are cars from major manufacturers like Honda, Nissan, and BMW that right now run on hydrogen and somehow they have figured out how to fill them up.

The simple fact is that the oil companies have plenty of cash for R and D on these matters and if they wanted to they could easily figure out how to deliver hydrogen fuel to their gas stations. The problem is NOT some sort of complicated scientific matter but a simple lack of will.

Anonymous said...

Your question was why only Goverment sponsored Hydogen Fuel Stations?

To put in simpler terms. Because no else is willing to front the large infastructure investment needed to sell a product where there is no market and that has a cost structure that is hoplessly "upsidedown".

At the begining of the automotive age, gasoline was not widely available either, but as demand grew, at least gasoline was easily transported and stored. Hydrogen - not so much.

Create the demand first and the product infastructure will quickly follow. You can't do it the other way around, execpt by force. and even that generally doesn't work well.

mike volpe said...

Spare me, the oil companies combine to make in excess of $100 billion dollars yearly in pure profit, after taxes, spare me with the large costs of infrastructure. This has nothing to do with large up front costs for infrastructure. If the oil companies wanted to right now this minute there would a hydrogen fuel tank in every gas station. This has nothing to do with capital but will.

Anonymous said...

Gotta disagree on this one, Mike (I know you love to argue:-) )
The fact is, it cost the State of CA millions (currently running at 6.5 million / year) to put in 25 Hydrogen (H) stations, three of which have already been closed! And that's just the cost for the station itself - the costs involved in creating and transporting the H are even more expensive. As has already been mentioned, H is an energy storage mechanism, not an energy source. Fuel cells are very efficient at getting out the vast majority of what was put in, but the energy input has to come from somewhere - either fossil fuels, nukes, or biological sources. Of course, nukes are not likely for political reasons, but are the most energy efficient. Fossil fuels have all the same problems they do in cars, and in the long run, you end up with about a net energy wash - it cost as much to create the H as the benefit gained by using it. Biological sources are the most environmentally friendly, but currently actually end up costing more energy to create than can then be extracted from the H by the fuel cell.
Then there is the volumetric problem - H can carry a limited amount of energy per (insert your favorite measure of volume here).
this means that for the same space required by the average 20 gallon gas tank giving about 400 miles traveled, you might get 100 miles on the same size tank of H.
This is why there is much more focus on hybrids, and particularly hybrids that can be plugged in and recharged, even further reducing their petrol usage.

Of course both privately and publicly funded research into these problems is ongoing (some of which shows promise), but so far nothing has been discovered that would make H a truly practical alternative for the average American.

PS - there is also the minor issue that fuel cells don't work below freezing, and must be warmed to above freezing to start - a bit of a problem in places like Minnesota...

mike volpe said...

First of all, science was never best subject. Thus, some of this is above my head, however it is also in my mind somewhat irrelavat, and I will explain why.

First, let me set this debate back to where I am comfortable, math and economics.

First of all, I certainly didn't expect or demand that big oil be able to flood the market with hydrogen fuel tanks all at once. I haven't even heard of any test marketing. I bet cities like San Francisco would eat up a hydrogen fuel tank. I don't know that big oil hasn't tried to test market it anywhere.

Second of all, there are a lot of alternative fuels out there. I didn't mean to single out hydrogen as the one and only.

Third all of the problems that you are talking about get resolved for R and D. You said it cost \

"it cost the State of CA millions (currently running at 6.5 million / year) to put in 25 Hydrogen (H) stations, three of which have already been closed!"

Big Oil made a combined over $100 billion last year in PURE PROFIT after taxes. Are you really saying that they should be worried about aborbing a cost of $6 million per year. They wipe their a$$es with 6million dollars. BP
Amoco says they will supposedly spend $700 million over the next ten years on alternative energy. (a rather paltry number compared to what they make if you ask me) You're telling me they can't find anything in the budget for test marketing a new fuel tank in select areas. Of course, they do.)

Frankly, if big oil were actually competing in a market they would, but they don't. That's why they are able to make moneyh consistently without innovating in the slightest.

Innovation is what is supposed to resolve problems that you talk about. I just refuse to believe that our country has to run all their cars on fuel derived from oil. I believe we can easily run most of our automobiles with other fuels.

Except the oil companies don't want our cars running on anything but fuel made out of oil. Of course, if they refuse to create fuel tanks for any other fuel, there is no way to do it. They are the collossal. No one can take them on. Without the oil companies being involved in bringing all fuels to the market we can never be energy independent because there would never be a mass market for these alternative fuels. Since gas made of oil would be available everywhere all other fuels would fail.

All you folks do is make excuses for companies that have corrupted the market place they supposedly compete in. We don't have a mass market for alternative fuels because the oil companies refuse to expore trying to figure out ways to create one. They seem to figure out how to make money without innovating at all. That's because they aren't a market but a cabal or the economic term an oligopoly.

They are all making obscene amounts of money at the same time and none of them has any motivation to do anything different. The market that they dominate and control together is just fine with them and they don't want to change it in the slightest.

That's what's going on here? They all control the market together. I can never understand why anyone would defend the oil companies. In my opinion they are anti capitalists. The fundamental heart of capitalism is competition. Big Oil doesn't believe in competition. Each just wants enough to get fabulously wealthy for infinity. There is plenty of market for that. That's NOT the way MARKETS are supposed to WORK.They have infact corrupted the market. There is no defending them.

Anonymous said...

Still can't totally agree, Mike - although I will agree that the major oil players do act in often anti-competetive ways, I also don't see (as someone who is fascinated by the science) any near-term, practical alternatives to petroleum-based fuels for individual ground transportation. We've about beat Hydrogen to death (Propane and Natural Gas have most of the same problems), Electrics show some promise, but as a rule are still either too short-ranged, too expensive, or both, and will not be a viable alternative on a large scale until a major battery breakthrough occurs. Biodeisel shows some promise, but has it's own issues, particularly in large numbers, thus it is not a good large-scale solution.
At this point, the best thimg on the market is the popularity of hybrids, and well designed hybrids, capable of plug-in recharging in addition to the gas engine recharging, in conjunction with large-scale additions of (primarily) nuclear and (on a smaller scale) wind to the electric grid would, for the mid-range future, be the most efficient way to meet our individual ground transportation needs.
In theory, at least, if we could get over our cultural fear of nuclear, both trains and larger aircraft could go nuke, but any current alternative fuel would require a plane the size of a 747 to carry 100 people, well below the point of diminishing returns. Trains could do a bit better, since they can refuel more frequently.

Again, as soon as there is a truly viable alternative, I'm all over it, but until then, Economics 101 says "...if you got it, drill it!"

BTW, Thanks for some great discussions!

mike volpe said...

You don't have to agree and of course a debate is not very much fun if we are just simply agreeing with each other.

That said, I didn't put timeframes on any of these things, though with the money they have, the revolution wouldn't have to be very long if they wanted to revolutionize the market.

That said, they aren't really trying and it appears you agree with me on that. Again, I don't what the answer is myself, however I do know that we don't necessarily need to run all our automobiles on gasoline derived from oil. We do because the oil companies are very unmotivated in revolutionizing the market. Until and unless they do, we will be addicted to oil.