Week of May 25

Biogas powered cars, direct methanol fuel cells, more on oil prices

Last week I saw a rather interesting article in the International Herald Tribune alluding to the use of biogas for motor fuel in Scandinavia. Apparently, the practice has been going on for some time and was encouraged by Volvo which made special models of vehicles that could run on such effluvia. Volvo stopped production of such cars two years ago, but Mercedes and Volkswagen are planning on filling the breech with biogas cars of their own designated specifically for the Swedish market.

The author of the piece was apparently unaware of the fact that biogas is simply methane (the chief constituent of natural gas) that happens to have been derived from processing biomass rather than found in free form in subterranean deposits. Thus any car that can run on fossil fuel natural gas should be able to run on biogas, provided that the biogas has been properly scrubbed so that it is essentially pure methane.

We haven't given much consideration to biogas in this publication heretofore, but it probably merits some. That's because it's a fuel source whose economics are fairly plausible, and which is surprisingly well established though not at all well publicized.

Most biogas is manufactured in devices known as anaerobic digesters which are essentially large chambers filled with the biomass to be "digested". I used the term biomass loosely here; most commonly the material to be digested is manure or, occasionally, decaying plant matter, and the digestion itself is performed by anaerobic bacteria. The construction of the digester itself ensures an absence of air, permitting the bacterial decomposition of the feedstock to take place, generally over a span of weeks.

Anaerobic digesters produce mostly a combination of carbon dioxide and methane. The methane is separated from the CO2, and the methane must then be "scrubbed"—that is, contaminants must be filtered out, leaving more or less pure CH4. Effective scrubbing tends to be fairly expensive, and this fact has hindered the growth of the biogas industry in the past.

Biogas production occurs chiefly at landfills, garbage dumps, and farms. It's a bit more prevalent in Europe than here, but there is still a lot of activity in the U.S., though most waste plant operators in the U.S. have yet to purchase anaerobic digesters. I might add that there are also companies manufacturing special generator turbines capable of running on unscrubbed biogas.

Currently, scrubbed biogas is cost competitive with conventional natural gas in the U.S., and is actually cheaper in many instances. Most of it is sold to natural gas distributors and is not marketed specifically as a green biofuel. Some biogas is also used to run small electrical generation facilities for supplying grid power. In fact there is one in a landfill located a few hundred yards from where I sit.

If anaerobic digesters were to become pervasive and were the norm on farms and landfills, biogas could easily become bigger than ethanol is today, in other words could become the dominant alternative fuel. That hasn't happened, however, and I can identify at least a couple of reasons why it hasn't.

First, the price for fossil sourced natural gas has not been that high for all that long—just a few years actually. During the last decade there was almost no rationale for going to bio-based sources, and only recently have the economics appeared highly favorable.

Second, most designs of digesters are not suited to industrial scale production. They're slow and they're small and they're not very automated. They're not very efficient either. Innovative designs that reduce or eliminate the traditional shortcomings are available, but they haven't achieved much market penetration yet, probably because biogas generation is a small, ancillary business for most biogas producers rather than a major profit center.

The third factor is the ambiguous position of natural gas vehicles in the marketplace. Natural gas vehicles, mostly commercial fleet vehicles, experienced strong and growing sales in the nineties, but the category is stagnant or declining today, and natural gas consumer vehicles have largely disappeared from the market. Converting conventional internal combustion engines to run on natural gas is expensive, and they tend to be somewhat sluggish compared to their gasoline powered equivalents. And, worse yet, the high pressure storage tanks are costly, take up a lot of space, and provide a limited cruising range. It will be interesting to track the Swedish experiment in the light of these concerns.

One further comment in this regard. Sweden is perhaps the only country in the world that successfully adopted an alternative fuel en masse for civilian transportation, that fuel being so-called producer gas or syngas, essentially the same substance used in nineteenth century gaslights. This occurred in the years from 1940 through 1945. Sweden was officially neutral during World War II, but the Allied Naval blockade against the Nazi dominated Continent of Europe discouraged oil companies from attempting supply Scandinavia. You think we've got oil problems now, consider Sweden in the early forties.

Syngas can be produced from coal or natural gas, but in Sweden's case it came from burning sawdust or wood chips in an oxygen starved atmosphere in a process known as partial oxidation. Small gasifiers were mounted in or on the automobile, and modifications were made in the carburetor system to permit the car to run on syngas. Performance was hardly stellar, but it was better than walking.

Such "wood burners" were made elsewhere in the world during the same period, including the United States, in fact the U.S. War Department encouraged their production, even producing instruction manuals for the home builder. They were also to be found in Brazil, France, England, and of course in Germany. But in Sweden they were pervasive because the Swedish auto industry continued to build civilian cars, and many of the wartime models were specifically designed to run on syngas.

Someone should do a detailed historical study of the Swedish syngas experience. It's bound to be instructive for the kind of transition we're probably going to have undertake.

Back in Contention – the Direct Methanol Fuel Cell for Transportation

Back in the middle nineties when interest in fuel cells was really beginning to pick up, a lot of people thought that the direct methanol type would prevail in transportation applications. The technology appeared more mature than that of its close cousin the PEM (polymer electrolyte membrane) fuel cell which runs on hydrogen, and the ultimate manufacturing cost of the complete power plant seemed likely to be considerably less due to the fact that special fuel tanks were not required. And the fact that methanol was much cheaper and much more easily stored than hydrogen was also a big plus. Direct methanol fuel cells are also much better suited to powering portable devices like laptops and cell phones and they continue to be extensively researched for such applications. Moreover, there was already limited infrastructure in place for methanol powered internal combustion vehicles which produced lower emissions than gasoline burners.

So why didn't methanol make it in the transportation field? For one thing, direct methanol fuel cells, or DMFCs as they're known, are less efficient than other types. You're lucky to get 30% efficiency compared to nearly 50% for a PEM and even more for a solid oxide type. They also require more of the precious metal catalyst, platinum. The toxicity of methanol is also an issue.

Nevertheless, there has been a resurgence of activity with respect to large format DMFCs intended for transportation applications One company in Germany whose name escapes me claims to have a product available now, while a new Canadian company named SymPowerrco has a fuel cell under development using a novel sulfuric acid electrolyte.

I spoke with SymPowerco CEO John Davenport who indicated that the company was working on a 500 watt model which would be utilized to trickle charge a high output alkaline secondary battery which the firm was also developing. Initial transportation markets would include small, low powered vehicles like golf carts and motor scooters. The trickle charging scheme would permit the use of a much smaller, lighter storage battery than would ordinarily be the case.

I asked Davenport about the cost, always a troubling issue when it comes to fuel cells. "No question, fuel cells have been expensive," he answered, "but there's nothing in the design of the fuel cell stack that necessitates high manufacturing costs. The structure of a fuel cell is very similar to that of battery. The problem has been that fuel cells are hand made and subject to very expensive machining operations. You have to perfect the basic technology, identify the core markets for the product, and then commit to mass production. Nobody has done that yet."

At present only one DMFC manufacturer, Smart Fuel Cells in Germany, is actively in business, making a 25 watt unit selling for several thousand dollars. This too is used for trickle charging a bank of storage batteries, and is intended for high end recreational vehicles and boats where it serves to provide secondary electrical power not motive power. The product has been on the market for a number of years.

At this point the most one can say is that there has been a modest revival of interest in the category. A solid market success could prove elusive, and even best case would be several years off.

Yet More Musings on Oil Prices

I published two lengthy considerations on oil prices last, and I'll have to admit I'm having second thoughts regarding some of my conclusions.

Lately, I've been reading and thinking a lot about speculation in petroleum futures, particularly regarding the vastly increased number of such trades taking place and the broadening participation of various financial institutions including hedge funds and pension funds. Some financial analysts are reporting a twenty fold increase in activity within the last four years, that is, precisely within the period of sharply accelerating oil prices.

The question then becomes what weight should be assigned to the volume of trades beside other factors such as static production over most of the same period and greatly expanded auto sales within the developing markets of East Asia.

Attempting an answer would require a much larger study of commodity markets and a search for relevant historical examples.

No commodity of which I am aware other than food in famine afflicted regions has been subject to the kind of giddy price inflation one sees in hot stocks or in certain real estate markets. Stocks can increase a hundred fold in value in the span of days or weeks. Real estate does not appreciate so quickly, but in certain isolated markets it has risen very quickly, particularly, commercial real estate. But, in the case of petroleum or related categories such as metals, gold excepted, one does not generally see prices going up in multiples over the course of just a few years.

Now there have been attempts in the past to corner commodity markets, that is buy up much of the available supply and then withhold it from normal purchasers. Such a corner in the wheat market circa 1900 forms the basis of Frank Norris's famous novel, "The Octopus". The incident did not result in any lengthy elevation in wheat prices. An even bigger corner was attempted unsuccessfully in 1907 when a group of rogue American financiers attempted to monopolize the world market for copper. At the time telephone lines and electrical transmission lines were being built out at a frantic pace, and had the attempt succeeded, the price of copper would have at least briefly ascended to unprecedented heights, with dire consequences to the American economy.

Fortunately, J. P. Morgan, the unofficial leader of the American financial industry, got wind of the scheme and used all of his considerable power to thwart it. Even so a business recession ensued and lingered on for years, only ending with the commencement of the First World War when America proceeded to do very brisk business selling food and supplies to the Triple Entente.

I can think of other cases where commodities rose sharply for a short period of time. Coincidentally, coffee grew very dear during the period of the first oil embargo in 1973. At the time I figured the Arabs were cutting off the supply of Yemeni coffee beans, but apparently that wasn’t a factor. More likely global reduction of land under cultivation for that purpose explained the spike, in other words, simple supply and demand.

"Controlled substances" such as cocaine and opium, which are, after all, commodities, have also been subject to wild price fluctuations, but there it's clearly a case of supply and demand, and, ironically, the presence of so-called drug cartels actually served to reduce market prices.

Anyway, this is a subject I may revisit shortly. For now we have many unanswered questions. In closing I will note that George Soros, who knows a thing or two about manipulating markets, asserts that oil is bubble at present, and that price collapse is in the offing. Who am I to argue with a multi-billionaire. Except to say that static or even falling production is apt to characterize the foreseeable future, and, if that is the case, any price collapse will inevitably be followed by sustained high prices in the years to come.

Oil Bubble?

If oil is in a bubble, why are they doing it? I remember retail gasoline at 85 cents a gallon after 9-11. (2001) The Russians flooded the market with crude. Maybe as a punishment to the Saudi's for the attack? Now, everyone knows that oil in the ground is worth more than money in the bank. It's no secret. With the dollar going it's way, everyone is closing back the valve. There could be a deep current that is in alignment with fighting global warming, and raising the price of crude (with other fossil fuels to follow, thus undercutting the coal-powered electric car idea) is obviously the most expedient way of slowing CO2 buildup. Sustainable, domestic fuel production is the salvation of America. On the other hand, it could be in the cards that PNAC, or some other world bank secret society is pushing the USA into a USSR-style capitulation and breakup. ("Tejas will rise again!") Sunlight and hard work is the most democratic way of producing our energy. If we were to have a fusion breakthrough, and start mass producing methanol from CO2 and electricity, then the whole central distribution scheme begins again. The people currently in control would love it.