From Left Field: Methanol In China

Recently Financial Times Asia has been running some pieces dealing with the future of liquid fuels in China. While the articles are suggestive rather than explicit, three very interesting points are made. The Chinese government is averse to extensive production of fuel ethanol because of the claims that the latter would make upon agricultural resources. Liquid fuels derived from coal will instead be emphasized. And, finally, methanol rather than petroleum-like synfuels would become the mainstay of the personal transportation industry.

The last supposition is the least certain and is based upon the fact that Beijing has recently set national standards for methanol fuel. But it makes sense in the light of certain facts regarding coal-based liquids considered in their totality.

OUR FIFTY THOUSAND FOOT VIEW

From the perspective of the Chinese, methanol rather than synfuel makes sense. Methanol has been pretty much written off in the U.S. as an alternative fuel for reasons we can only speculate upon, but the fact is that methanol can be produced for under a dollar per gallon from coal, and the technology for doing so is very mature. Furthermore, newer technologies have been devised that promise reductions in that already low price. Ethanol can also be produced from coal as well, but the process is more expensive and the technology less mature. So methanol it is.

What does this mean for the rest of the world? We shall see. The industrial nations of the world are not singing from the same hymn book, as they say, in respect to alternative fuels. The U.S. is hyping ethanol while the Europeans are big on biodiesel and bio-synfuel, but lots of dark horses are running about the landscape. Interestingly, methanol is not one of them, or, if it is, it is one of those breeds of pygmy horses of about the size of a Rottweiler.

We think China rather than the U.S. is ultimately the nation to watch in respect to alternative fuels. Within thirty years China may be the world’s pre-eminent industrial power, and possibly the leader in science and engineering as well. It will also take the lead in alternative fuels because the government will impose its will over private entities to ensure that the nation takes a course in regard to energy that is congruent with its long term economic welfare. That may not be the case in the U.S. where entrenched economic interests may prevail against the general welfare. In short, this is a very important development, though one that runs contrary to established trends.

SOME ONE THOUSAND FOOT VIEWS

Much of what follows is the gist of some conversations we have been having with an individual we will call Methanol Mark. Mark is an executive with an alt fuels startup. We will say no more about the company because the information was provided to us on deep background. We will say, however, that Methanol Mark’s scientific knowledge of the entire range of alternative liquid fuels exceeds that of any other individual we have encountered to date. His business knowledge is another matter. Mark definitely tends toward the paranoid style. Like many alt fuels folks he hates the oil industry, though he was once profitably employed within it.

In any case, here is the gist of what he communicated to us with a few of our own observations thrown in for good measure.

In the past methanol enjoyed strong advocacy as a replacement fuel for gasoline. Methanol is well proven as a racing fuel, and the methanol industry itself is large, rich, and well organized. During the nineties methanol manufacturers successfully pushed through a multitude of pilot programs involving government fleet vehicles, and also did their part to publicize the then extensive research concerning direct methanol fuel cells (DMFCs) for transportation.

Then, at the beginning of this decade, interest in methanol as a fuel seemed to wane. The fleets of methanol powered vehicles began to disappear, though not entirely, and all of the auto manufacturers quietly abandoned their research efforts involving direct methanol fuel cells, citing the relatively poor efficiency of DMFCs as compared to fuel cells running on gaseous hydrogen.

Frankly, we were puzzled. Sure DMFCs might be somewhat inefficient, but then methanol is a lot cheaper and a lot more energy dense by volume than hydrogen gas, so where’s the overall disadvantage? Moreover, DMFCs require less platinum than hydrogen PEM fuel cells, and the technology is arguably more mature. As a matter of interest, Smart Fuel Cells of Germany has had a direct methanol fuel cell on the market—not in pilots, but on the market—for two years now, and we advise readers to visit their Website and peruse their white paper on DMFC efficiency.

So why not methanol? “The oil guys squashed it,” claims Methanol Mark. “They quietly lobbied it out of existence. They see it as a threat because it’s the only cheap alternative, the only one that could compete with them today.”

He has a point there. Methanol is indeed cheap, even with the rising cost of natural gas. And when one considers that in direct methanol fuel cells that already cheap fuel is heavily diluted with water, then gasoline is no longer even competitive, although direct methanol fuel cells themselves remain extremely expensive. Of course methanol can also be used in internal combustion vehicles and the amount of greenhouse gases emitted per horsepower produced will be substantially less than in the case of petroleum products.

True, methanol is quite toxic, and even skin contact can have dire consequences. It’s also highly corrosive and cannot make use of existing oil pipelines or storage facilities. But to a nation desperate for a secure supply of abundant liquid fuel to power the ever expanding fleet of personal vehicles, methanol is attractive, even seductive.

Currently, we see no very obvious investment opportunities in Chinese methanol, except perhaps for companies promoting new, low cost production techniques. Clearly, methanol powered cars are not going to be appearing in huge numbers any time soon because no infrastructure exists to support them. But this is clearly an area to watch. In another five years it could be huge.