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February 02, 2011

What’s the Transportation Fuel of the Future ?

Gasoline, diesel, and kerosene (jet fuel) pack a lot of energy into small weight and volume. That's why almost all the world's transportation runs on these oil products. Trouble is oil's getting expensive again and could, at least temporarily, suffer from very erratic supply if the freedom virus spreads to places like Saudi Arabia and Libya and despots come tumbling down. We in the US can increase our production but not enough to eliminate our imports from dangerous and sometimes hostile places. There's also a fair amount of carbon in oil and lots of noxious stuff that comes out of tailpipes as well.

The opportunity is to take advantage of ample (and growing) natural gas supply to convert much of our fleet to either natural gas or electric. The question is which? And is either conversion really justified?

Natural gas has 23.5% more useful energy per pound than the gasohol (gasoline plus ethanol) most of us use; but natural gas needs a much bigger tank because the energy per gallon of compressed natural gas (CNG) is only 40% that of gasohol. The tank also has to have heavy walls because compressed natural gas is, obviously, pressurized. Natural gas refueling is similar to gasoline refueling and takes about the same amount of time. Natural gas vehicles cost about 10% more than gasoline or diesel vehicles, probably because they're made in much lower volume. Nevertheless CNG vehicles are already in use for many applications. According to The Natural gas Vehicle Knowledgebase, there were over 11 million of them in use worldwide at the end of 2009.

CNG for transportation is priced in GGEs or gas gallon equivalents; that makes for easy comparison shopping. According to the Tulsa World, CNG is selling at less than $1.00/GGE in that state while gasoline is over $3.00. Two notes, though: there is a $.50/gallon federal subsidy and prices are closer to $2.00/GGE in many other places I checked. Nevertheless, because of vast new supplies of natural gas coming online in the US, these prices are liable to remain stable while gasoline climbs. Natural gas emits much less carbon dioxide than gasoline and it has almost none of the other noxious tailgate gasses that oil products have. The rub, however, is infrastructure. There are not enough CNG filling station to make CNG practical for anything except fleet use. Building more CNG filling stations means building more natural gas pipelines – which may be a very good idea for a number of reasons.

Even though electric cars convert energy from batteries into miles more efficiently than internal combustion engines convert gasoline into miles, batteries still don't store nearly as much useful energy per pound as liquid oil – and they take longer to refill than a gas tank. If your gas tank holds 20 gallons of the gasohol most of us are burning today, that's 160 pounds. You would need almost 800 pounds of lithium batteries to take you as far (energy efficiency numbers from Tesla's website).

Electricity is a cheap fuel; at $.15/kwh it is equivalent to $1.00/gallon gasoline for a car getting 30mpg. Offpeak electricity can be much cheaper than this. There is no pollution of any kind at the point of consumption although there obviously can be emissions during generation of electricity. Economic problem today is that electric cars cost too much to buy – but that could change. Cars can be charged (slowly) at home; if we're going to make a major switch to electric cars, we need not only a Smart Grid to manage the load but a network of rapid recharging or battery-swap stations.

So do we build the infrastructure for electric cars or CNG cars? Or are we going to continue with gas and diesel? Interestingly, the low price of natural gas favors both electricity and CNG as fuels since the cost of electricity is very dependent on the price of natural gas. It's not economically crazy to burn natural gas to generate electricity and then use that electricity to power cars, even when transmission losses are taken into effect.

From an investor's PoV, this is a big gamble. From a car maker's PoV, it's a bet your company decision. This is NOT a decision that government should make except when governments buy their own fleets and establish fueling infrastructure for them. This is a decision the market place should be allowed to make – free of mandates or subsidies.

Related posts:

We Can End Energy Subsidies

Natural Gas Disrupts the Energy Industry

Look Ma, No Gas



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