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Peak Oil Planning

Ethanol Demand in U.S. Adds to Food, Fertilizer Costs (Update3)
Bloomberg
By Alan Bjerga

Feb. 21 (Bloomberg) -- U.S. plans to replace 15 percent of gasoline consumption with crop-based fuels including ethanol are already leading to some unintended consequences as food prices and fertilizer costs increase.

About 33 percent of U.S. corn will be used for fuel during the next decade, up from 11 percent in 2002, the Agriculture Department estimates. Corn rose 20 percent to a record on the Chicago Board of Trade since Dec. 19, the day President George W. Bush signed a law requiring a fivefold jump in renewable fuels by 2022.

Increased demand for the grain helped boost food prices by 4.9 percent last year, the most since 1990, and will reduce global inventories of corn to the lowest in 24 years, government data show. While advocates say ethanol is cleaner than gasoline, a Princeton University study this month said it causes more environmental harm than fossil fuels.

``We are mandating and subsidizing something that is distorting the marketplace,'' said Cal Dooley, a former U.S. congressman from California, who represents companies including Kraft Foods Inc. and General Mills Inc. as president of the Grocery Manufacturers Association in Washington. ``There are no excess commodities, and prices are rising.''

The energy bill requires the U.S. to use 36 billion gallons of renewable fuels by 2022, of which about 15 billion gallons may come from corn-based ethanol. The nation's current production capacity is about 8.06 billion gallons.

Alternative Energy

Oil prices tripled since the end of 2003, causing the government to consider alternative fuels. Now, the competition for corn is leading to higher costs for food companies, raising prices for everything from cattle to dairy products.

Corn doubled in the past two years, touching a record $5.29 a bushel today in Chicago. The price of young cattle sold to feedlots gained 8.7 percent in the past year, reaching a record $1.1965 a pound on Sept. 6 on the Chicago Mercantile Exchange. Average whole milk rose 26 percent to $3.871 a gallon in January from a year earlier, the Department of Labor said yesterday.

``For thousands of years, humans grew food and ate it,'' said Andrew Redleaf, 50, chief executive officer of Whitebox Advisors LLC, a Minneapolis hedge fund that manages $3 billion. ``Now we are burning crops to make fuel.''

Whitebox bought three U.S. grain depots in the past year to profit from the growth in demand.

Updated Forecast

Farmers will have to increase planting of corn for ethanol by 43 percent to 30 million acres by 2015 to meet the government's requirements, said Bill Nelson, a vice president at A.G. Edwards Inc. in St. Louis. This year, growers outside the Midwest are focused on more profitable crops such as soybeans and wheat, the USDA said today in a crop forecast.

Corn planting will fall 3.8 percent this year to 90 million acres as farmers sow 12 percent more land with soybeans and 6 percent more with wheat, Joe Glauber, USDA acting chief economist, said today at the department's annual conference in Arlington, Virginia. The USDA said Feb. 8 that world corn reserves would drop for the seventh year in the past eight.

Increased planting has caused some fertilizer costs to double. Diammonium phosphate, a nutrient used on corn fields, reached $792.50 a ton on Feb. 15 from $297 a year earlier, USDA data show.

Greenhouse Gases

Researchers led by Timothy Searchinger at Princeton University said their study showed greenhouse-gas emissions will rise with ethanol demand. U.S. farmers will use more land for fuel, forcing poorer countries to cut down rainforests and use other undeveloped land for farms, the study said.

Searchinger's team determined that corn-based ethanol almost doubles greenhouse-gas output over 30 years when considering land-use changes. Bob Dinneen, president of the Renewable Fuels Association in Washington, said the study used a flawed model and overestimated how much land will be needed.

Ethanol is important in reducing emissions, ending energy dependence on the Middle East and creating jobs in rural areas, Dinneen said today at the USDA conference.

``There are still some who want us to choose between food and fuel,'' said Dinneen, whose organization represents ethanol producers including Archer Daniels Midland Co. ``I don't think we have to choose.'' Research shows cellulosic ethanol made from grasses and crop waste may contribute 21 billion gallons by 2022, and farmers will be able to boost yields, he said.

Food Costs Rise

U.S. food costs, which account for about a fifth of the consumer-price index, rose 0.7 percent in January, the Labor Department said Feb. 20. They will increase as much as 4 percent this year, Glauber said in remarks at the forum.

``Food prices through 2010 will rise greater than the overall inflation rate,'' because of rising energy and commodity costs, he said.

Ethanol's contribution to inflation is limited, USDA economist Ephraim Leibtag said in an interview. A 50 percent jump in corn prices in 2007 from the 20-year average only added 1.6 cents to the cost of an 18-ounce box of Kellogg Co. Corn Flakes cereal, Leibtag said. The cost is less than 2 percent per box, JPMorgan Chase & Co. estimates.

Ethanol's boom helps restrain government spending on farm subsidies, said House Agriculture Committee Chairman Collin Peterson, a Minnesota Democrat. The USDA expects taxpayers to spend $941 million on the two main subsidy programs tied to price this year, down from $9.1 billion in 2006.

Smithfield, Tyson

For food companies, demand for ethanol translates into lower profits and job cuts.

Smithfield Foods Inc., the largest U.S. hog producer, said Feb. 19 it will cut output by as much as 1 million animals a year, or 5 percent, because feed costs are too high. The company is based in Smithfield, Virginia.

Tyson Foods Inc., the largest U.S. meat company, forecast an increase in grain costs this year of more than $500 million. Springdale, Arkansas-based Tyson also reported a 40 percent drop in first-quarter profit and said it will close a beef plant in Kansas, firing 1,800 workers.

Ethanol ``has caused a domino effect,'' CEO Richard L. Bond said in a statement Jan. 28. ``For the foreseeable future, consumers will pay more and more for food.''

http://www.bloomberg.com/apps/news?pid=20601109&sid=aBbT_F7fsibM&refer=home#
 
Something interesting that I read in Scientific American: http://www.sciam.com/article.cfm?id=a-solar-grand-plan

Essentially a scheme to rapidly develop a solar power industry in the US through price supports, building massive scale solar generation in the US southwest, transmitted to the rest of the US using high voltage DC transmission, with supply levelling done through compressed air storage. Estimated subsidy required is about $400 billion over the first decade or so before the industry is competitive without price supports. It sounds a bit crazy at first, but most of the assumptions are pretty conservative--they suggest using existing technology without technical improvements, but only a lowering of cost through economies of scale. It could displace the vast majority of US fossil fuel consumption by 2050.

A similar project is proposed in Northern Africa/Middle East to provide power (and fresh water via desalination) to those areas and Europe (with some help from wind and tidal). http://www.solarserver.de/solarmagazin/solar-report_0207_e.html

China also has extensive deserts that would be suitable.

I guess this is to say that even if it costs a couple trillion dollars over a decade or two, it'd probably be worth it for the world to become far less reliant on fossil fuels.
 
While solar certainly represents a kind of holy grail for electricity generation, there are still a number of crucial obstacles. Nevertheless, the source and the technology certainly hold a great deal of possibility - particularly so in areas receiving large amounts of sunlight. The following article suggests that there is much still to do before the potential of solar photovoltaic technology can be fully realized.
________________________


Cloudy Outlook For Solar Panels: Costs Substantially Eclipse Benefits, Study Shows

ScienceDaily (Feb. 22, 2008) — Despite increasing popular support for solar photovoltaic panels in the United States, their costs far outweigh the benefits, according to a new analysis by Severin Borenstein, a professor at the University of California, Berkeley's Haas School of Business and director of the UC Energy Institute.

"Solar photovoltaic (PV) is a very exciting technology, but the current technology is not economic," said Borenstein. "We are throwing money away by installing the current solar PV technology, which is a loser."

In his January working paper, "The Market Value and Cost of Solar Photovoltaic Electricity Product," Borenstein also found that, even after considering that the panels reduce greenhouse gases, their costs still far outweigh their social benefits.

The bottom line, Borenstein argues in his paper, is that solar PV panels are not ready for widespread installation. Rather than subsidizing residential solar PV installations, as many states do, he favors more state and federal funding for research and development.

"We need a major scientific breakthrough, and we won't get it by putting panels up on houses," he said in a recent interview on campus. "It is going to come in the labs."

Solar photovoltaic panels generate more power on summer afternoons when the sun is shining most intensely, which is also when the value of electricity is higher for most U.S. electricity systems, Borenstein noted. Proponents of the devices have pointed out that most previous analyses fail to address that fact. Borenstein uses actual wholesale electricity prices and simulated data to calculate how much that timing enhances the value of solar photovoltaic panels.

He found that the favorable timing of solar PV production increases its value by up to 20 percent. However, the premium value of solar PV could be from 30 percent to 50 percent higher if U.S. systems were run with less capacity and prices were allowed to rise as demand increases at different times of the day, said Borenstein, who has long advocated for such variable time pricing. He noted that U.S. systems typically operate with excess capacity and that consumers pay the same price for electricity at all times of the day.

“Basically, the benefits of solar PV are undermined by the way most grids are run today,†Borenstein said.

He noted that utilities are slowly moving toward operating with less excess capacity and time-varying pricing for residential customers, and that these changes are expected to be in place for customers to opt for on a voluntary basis in California by 2012. "When that happens, the value of solar will go up," Borenstein said.

His analysis deconstructs the argument that solar panels produce power at the location of the end-user and therefore can reduce the costs of transmission and distribution infrastructure investments. Examining 26,522 solar PV systems in California, Borenstein found they are not concentrated in locations where they would reduce transmission congestion and reduce the need for investment in transmission infrastructure.

"Solar PV is not clustered in the most valuable locations," his paper concludes.

Borenstein took his analysis a step further by calculating the discounted net present value (a financial tool to calculate the value of a dollar in the future compared to its value now) of power produced by a 10 kilowatt solar photovoltaic system and then compared that to the cost of installing and operating such a system over its lifetime. He found the cost for an installation ranges from nearly $86,000 to $91,000, while the value of the power produced ranges from $19,000 to $51,000.

Under the most extreme assumptions (a 5 percent annual increase in electricity costs and 1 percent interest rate), the cost of solar PV is about 80 percent greater than the value of the electricity it will produce, Borenstein found. Under more likely scenarios about interest rates and electricity cost increases, the cost of a solar PV installation today is three to four times greater than the benefits of the electricity it will produce, he said.

Given that a coal-fired electricity generation plant produces about 1 ton of carbon dioxide per megawatt hour, Borenstein estimated that the price of greenhouse gas reductions would have to range from about $150 to $500 per ton of greenhouse gases to make the current solar PV technology a worthwhile investment when greenhouse gas reductions are considered.

But Borenstein noted that policymakers are considering a far lower price – $20 per ton of greenhouse gases – as the maximum that industry could be charged in proposed tradable emissions permit programs.

Adapted from materials provided by University of California, Berkeley.

http://www.sciencedaily.com/releases/2008/02/080220224901.htm
 
Solar plants as in industry, or as in plants that grow? The latter are excellent at using solar energy. We could (and hopefully will) learn something from them.
 
That article is accurate in that the reason for solar's slow uptake has been a matter of economics rather than technical limitations. Providing support for a large scale solar industry would allow costs to fall significantly. This process is already occuring, but could (and probably should) be accelerated.
 
Economics are a considerable obstacle towards adopting solar. Improved technology can bring the price down to where it will be competitive with other energy sources, and drive the further adoption of the technology.
 
Famed geneticist creating life form that turns CO2 to fuel

A scientist who mapped his genome and the genetic diversity of the oceans said Thursday he is creating a life form that feeds on climate-ruining carbon dioxide to produce fuel.
Geneticist Craig Venter disclosed his potentially world-changing "fourth-generation fuel" project at an elite Technology, Entertainment and Design conference in Monterey, California.

"We have modest goals of replacing the whole petrochemical industry and becoming a major source of energy," Venter told an audience that included global warming fighter Al Gore and Google co-founder Larry Page.

"We think we will have fourth-generation fuels in about 18 months, with CO2 as the fuel stock."

Simple organisms can be genetically re-engineered to produce vaccines or octane-based fuels as waste, according to Venter.

Biofuel alternatives to oil are third-generation. The next step is life forms that feed on CO2 and give off fuel such as methane gas as waste, according to Venter.

"We have 20 million genes which I call the design components of the future," Venter said. "We are limited here only by our imagination."

His team is using synthetic chromosomes to modify organisms that already exist, not making new life, he said. Organisms already exist that produce octane, but not in amounts needed to be a fuel supply.

"If they could produce things on the scale we need, this would be a methane planet," Venter said. "The scale is what is critical; which is why we need to genetically design them."

The genetics of octane-producing organisms can be tinkered with to increase the amount of CO2 they eat and octane they excrete, according to Venter.

The limiting part of the equation isn't designing an organism, it's the difficulty of extracting high concentrations of CO2 from the air to feed the organisms, the scientist said in answer to a question from Page.

Scientists put "suicide genes" into their living creations so that if they escape the lab, they can be triggered to kill themselves.

Venter said he is also working on organisms that make vaccines for the flu and other illnesses.

"We will see an exponential change in the pace of the sophistication of organisms and what they can do," Venter said.

"We are a ways away from designing people. Our goal is just to make sure they survive long enough to do that."

© 2008 AFP
 
That sounds like hype to me. CO2 is not an energy source. This process will require some energy, likely solar. If it is more efficient and sustainable than agricultural fuels, I'll support it. Ultimately though, 80%/20% plug-in hybrids are the likeliest path to sustainable transportation. Trying to replace all of our present liquid fuel consumption is not terribly feasible.
 
Why is it hype? CO2 is used by plants for photosynthesis, who's to say that an organism that converts CO2 to fuel cannot be created?
 
That's not it. They call CO2 a feedstock, as if it were the scarce part of the process. It's not a source of energy. These organisms will need to be nourished somehow, likely involving solar energy.

Thus, not a magic bullet. Not to say its impossible or undesirable, just not as nice as they're spinning it to be.
 
The gas that would be produced in the process is methane (which is a potent greenhouse gas). Once compressed, it would essentially be natural gas.

"We have modest goals of replacing the whole petrochemical industry and becoming a major source of energy," Venter told an audience that included global warming fighter Al Gore and Google co-founder Larry Page.
Click to expand...

Sounds so good in print, but there is little mention of what a truly massive scale this would have to be ramped up to when compared to the entire present supply and future needs for oil and natural gas - which this is posited to eventually replace.
 
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