…mostly convenient truths

from a technology optimist

Vinod Khosla
Khosla Ventures
September 2007
1
 Agenda
• Why

• Coal/CSP

• Biofuels

2
Why “Green”?

3
 Safe or Not?

450ppm

550ppm

650ppm

Extinctions Hurricanes Flooding 600 M Catastrophe4

 Arctic Meltdown
24 Years

Later

5
www.usgcrp.gov
 Greenland
Meltdown

6
Roger Braithwaite, University of Manchester
 Increasing Melt Area on
Greenland Meltdown
Greenland

7
All melt records were exceeded in 2005.
Waleed Abdalati, Goddard Space Flight Center
 Greenland Takes Out FL, NJ, NYC

Greenland is 22 Feet of Ocean Height

8
http://www.solar2006.org/presentations/plenaries/p02-hansen.pdf
East Coast Underwater

9
Louisiana: 20’ Water Rise

10
Florida: 20’ Water Rise

11
Which Florida do we want?
Modern Florida Greenland Ice
Sheet Melts

West Antarctic Ice East Antarctic Ice

Sheet Melts Sheet Melts

12
 Florida: 2007 vs. 2107

With a 5 meter rise in sea levels…

13
Source: New Scientist, Jeremy Price and Jonathon Overpeck, University of Arizona
 2004

14
p://science.nasa.gov/headlines/y2004/images/bluemoon/elkbath.jpg
2005

15
 It’s Happening Now

• Within Our Lifetimes

• RUNAWAY Within Our Kids’

Lifetimes

• Models appear too conservative

16
 17
IPCC www.conservationcenter.org/assets/docs/Global%20Warming.PDF
 Public Opinion
• Fox News, 2/2007 poll suggests that 82% of
r s (74% of
Americans believe global warming is real
Republicans and 91% of Democrats)vo a v
f
• CNN, 1/2007 : 75% responded i o n in favor of
increased regulation andinrestrictions on
o p “to n
cars/power plants/factories
i c t i o reduce the effect
l ac
of global warming”
b
p u
• …
WSJ 1/2007 poll offered 5 choices – immediate
action, some action, more research, concern
unwarranted, and unsure – 64% were in favor of
some action (up from 51% in 1999), and only 8%
responded that concern was unwarranted
18
Climate Change
Changing Insurance Models

e s
• A GAO report notes that “Using computer-based catastrophe
!
l v
m se
models, many major private insurers are incorporating some
near-term elements of climate change into their risk
t h e
management practices. One consequence is that, as these

i n g
insurers seek to limit their own catastrophic risk exposure,
?
r u
they are transferring some of it to policyholders and to the
u o
public sector.”
i s
n n’t y
a r e l d Losses by Altering the
s
• “Climate Change
r o u
May Increase
re
Frequency or
S h
Severity of Weather-Related Events”
s u
n
• I“Insured Weather- Related Losses Have Been Sizeable, and
Federal Insurers’ Exposure Has Grown Significantly”

• “Claims Paid on Weather- Related Losses Totaled More Than

$320 Billion between 1980 and 2005” 19
 “The New Math Of Alternative
Energy” WSJ, Feb 12, 2007 ?
n g
• A 2006 DOE report notes that wind can generate g i
electricity at
5.58 cents per KW/hr, as opposed to 5.25, 5.31,
n
a and 5.93
c h
r e
(for natural gas, coal, and nuclear respectively) – without
taking environmental impact into account
” a
• en cents per
CSP can generate electricity ate9-12
n i y
tKW/hr right
now without subsidies! “gr tu
d
f an Biomass r
o Collaborative
• A recent study by the o California p
ics group)=noted
(government/industry Op that there are 80M tons
o m(in CA) that
of plant material e could be diverted to biomass
n
oare “practicallyg
n available”, and could be converted
use – 30M
e c a
…
to 2,500 MW of C h
electricity (equivalent to 5 natural gas plants,
and 1.3 billion galls of transportation fuels)
• The chief economist of the US DOA estimates ethanol can be
produces for $1.60 per gallon today
20
 Our Current Course
Business-as-Usual
(2% annual growth to peak, then 2% annual decline)
600

560
Biosphere
(ppmv)

520

480 450 ppm CO2 Coal

2
Atmospheric CO

440

400

360 Gas

320 Oil
Biosphere
280
1900 1950 2000 2050 2100 2150

21
http://www.solar2006.org/presentations/plenaries/p02-hansen.pdf
 Defeatism or Action?

We insure our homes

Why not our planet?

22
Good News Assertions
• Technical solutions exist
• Oil Replacement
• Coal Power replacement

• Laser Focus: Scaling & Economics

• Feedstock scale
• Proof for capital markets

• Policy not Technology Problem

23
“First they ignore you, then they laugh at you,
then they fight you, then you win.”

Mahatma Gandhi

We are here

24
Often what the Majority Believes is Wrong!

• PR campaigns from “interested parties”

• Hybrids vs. corn ethanol (Toyota vs. API)
• IGCC+CCS vs. Solar Thermal
• Ethanol Myths

• Environmentalists vs. Pragmentalists

• Scheer Nonsense: too much of a good thing is bad
• Biodiesel: land efficiency & economic sustainability
• PUG Power: Wind & Solar Photovoltaics

25
Conventional Wisdom is Wrong

• Oil Dependence
• Food vs Fuel
• CAFÉ is costly

• Electric Power : Coal is the only option

• Green means Lower Economic Growth

• Higher cost than fossil
• Lower economic growth, fewer jobs

26
Un-Conventional Wisdom

• Oil: Replaceable with cheaper alternatives

• Coal: Uneconomic risk adjusted bet

• Efficiency: Need business models

• Lower Cost, More Jobs, More Googles

27
Scale of Resistance
• Saudi Arabia: $1 trillion for each $4bbl

• Exxon, Chevron, Shell, BP…

• Coal: Peabody
28
 Cardinal Rules

• Land efficiency!

• Cost (plug-ins, hydrogen)

• Pragmatics: PUG power vs Greenies

• Regulation permanent & Subsidies transient

• Economics & Capital Formation: Business

29
 Renewable Energy USA!

West, SouthWest
have solar…

Texas has wind &

solar …

Southeast has
biomass!

Rockies have
geothermal!

Midwest has
corn/wheat belt!

30
Source: NREL, USDA, NRCS, EIA
 Regional Co-operation!

Solar

Wind

Biomass

Geothermal

We need a power grid from California to

Florida 31
Source: NREL, USDA, NRCS, EIA
 Which Gamble?
…. higher startup costs, lower eventual costs?

…. more jobs, more Googles or more of the same?

…. competition for energy or safe oil monopoly?

…. lower power costs or lower healthcare costs?

…. planet insurance or catastropic relocations?

…. terrorism avoidance or military expenses?

…. energy insurance or Mideast dependence?

32
What Can We Do?

• “Top Down” Policy

• State cap & trade (CA AB32)
• Low Carbon Fuel & Power Standards

• Promote Biofuels & E85

• Pumps “volume” mandate & FFV car mandate
• Cellulosic RFS: “all you can supply at reasonable cost”
• Feedstock: “million ton biomass centers”

• Renewable Power
• Regional Transmission : renewables first transmission
• RPS or Feed-in tariffs
• Health, Carbon & other costs

• Regional Collaboration
33
 Societal Cost of
Hydrocarbons
US Related Data:

• Air, water, and soil pollution

from electric generation cost
$14.8-90.3 billion – each year!

• 1 gallon of spilled oil can

contaminate 1 million gallons
of water!

• Oil pollution from automobiles

causes $4.6 billion in damages
to crops, rivers, forests, lakes
etc

34
Source: Coghill Capital Management
 Societal Cost of
Hydrocarbons (Continued)
Military Costs:

• Strategic Military Bases

($49bn)

• Oil and Gas supply route

security ($20bn)

• Strategic Petroleum
Reserves ($30bn)

• Iraq ($1 trillion! – or

$275mn per day!)
35
Source: Coghill Capital Management
 Societal Cost of
Hydrocarbons (Continued)
Health Costs:

• 760,000 Chinese die each year

due to air and water pollution
($99bn)!

• Lung disease and asthma

caused by pollution ($16.1bn)!

• Lead, Mercury, and Arsenic

poisoning from coal plants is
linked to mental retardation,
learning disabilities, premature
mortality, and to some autism
cases ($88-640bn)

36
Source: Coghill Capital Management
 What Are Fossil Fuels’
Externalities?
Fossil Fuel Costs (Billions $USD)
Low Medium High

Military Base and Supply Route

$49.00 $75.00 $100.00
Security

Environmental Monitoring and

$14.80 $53.00 $93.30
Clean Up

Healthcare Treatment and

$24.03 $237.00 $450.00
Mortality from Pollution

Total Fossil Fuel Costs $88.10 $365.00 $640.30

37
Source: Coghill Capital Management
 What Are Fossil Fuels’
Externalities? (continued)
The Effect on Consumers
2006 Ave. Mid-Societal Consumer
Total Cost/ Unit
Cost Cost Increase
Coal (Short $0.0454
$20.49 $93.83 $114.32
ton) c/kWh
Crude Oil $1.54 per
$60 $26.68 $86.68
(Barrel) gallon

Natural Gas $0.0235

$6.80 $2.74 $9.54
(mmcf) c/kWh

Mid-Range societal cost increases (generation costs only – no distribution or retail

included)

• Coal fired electric generation goes from $0.026/kWh to $0.0714/kWh

• Natural gas electric generation goes from $0.0615/kWh to $0.0851kWh
• Regular gallon of unleaded gasoline goes from $3.46 to $5.01 per gallon 38
Source: Coghill Capital Management
…or get to work

39
a renewable universe…

40
Khosla’s “solutions” Rules
• Attack manageable but material problems

• Technologies that can achieve unsubsidized market

competitiveness in 5-7 years

• Technologies that scale - If it isn’t cheaper it

doesn’t scale

• Technologies that have manageable startup costs

and short innovation cycles

• Technologies that have declining cost with scale –

trajectory matters
41
Khosla Ventures Stion
Renewable Nanostellar Ausra
Portfolio Codon Altarock
Praj Infinia
Great Point
Quos Energy
NanoH2o
Solar
Tools Wind
Geothermal
Water
Natural
Coal Gas
Segetis Plastics
Materials Electrical
eChromics Building Efficiency Efficiency GIV
Calera Materials
Oil Mechanical Seeo
Corn/ Efficiency
Sugar Fuels Newco1
Future
Cellulosic Fuels

Altra Transonic
Cilion Streamline
Hawaii Bio Living Homes
Ethos
Mascoma LS9
Verenium Gevo
Range Amyris
LanzaTech 42
Coskata
 Corn/Sugar Fuels:
• Altra: Altra intends to become an integrated biofuels company in
the U.S., producing ethanol and biodiesel from a variety of
feedstocks

• Cilion: Cilion is building destination ethanol plants, promising to

be the cheapest and greenest ethanol from initially corn and
incorporating cellulosic technologies as they come online.

• Hawaii Bio: Hawai‘i Bioenergy’s mission is to determine the

feasibility and viability of locating and operating integrated
ethanol bio-refinery plants in the Hawaiian Islands.

• Ethos: Ethos is developing sugar cane and cellulosic biofuels in

Latin America (excluding Brazil).

43
 Cellulosic Fuels:
• Range Fuels: Range is building the first commercial cellulosic
ethanol plant in the US using a proprietary anaerobic conversion
and heterogeneous catalyst technology.

• Mascoma: Mascoma Corporation is leading the development of

proprietary bioprocess technologies for cost-effective conversion
of cellulosic biomass to ethanol, drastically reducing the need for
external enzymes.

• Coskata: Coskata is commercializing a fermentation technology

for the production of fuel-grade ethanol from syngas.

• Verenium: Verenium is a developer of biofuels derived from low-

cost, abundant biomass and the developer of specialty enzyme
products.
44
 Future Fuels:
• LS9: LS9, Inc., the Renewable Petroleum CompanyTM, is
combining synthetic biology and cellulosic feedstocks to make
petroleum replacements from bacteria using fermentation.

• Gevo: Gevo is developing technologies for the bacterial

production of biobutanol from sugars and cellulose.

• Amyris: Amyris Biotechnologies is translating the promise of

synthetic biology into industrial production of fermentation diesel
and higher alcohols from sugars and cellulose.

• Lanzatech: LanzaTech is developing a proprietary fermentation

technology to convert industrial flue gas from steel mills as a
resource for biofuels production.

45
 Efficiency:
• Transonic: Transonic is using proprietary fuel injection
technology to increase the efficiency of gasoline engines.

• Streamline: Streamline is an engineering research and

development firm using fluid dynamics modeled on natural
systems to improve efficiency.

• Living Homes: Living Homes builds greener, cheaper, LEEDS

qualified homes using a modular system.

• Group IV Semiconductor: Group IV Semiconductor is an

experiment in solid state lighting.

• Seeo: Seeo, an early stage company is developing polymers that

allow them to develop batteries with high energy density and high
cyclability. 46
 Solar/Wind/Geothermal/Natural
Gas:
• Ausra: Ausra is developing Concentrating Solar Power (CSP) power
stations, which uses the heat of the sun to drive steam turbine power
stations, and produce renewable power at low cost.

• Altarock: Altarock develops and commercializes enhanced

geothermal technology (EGS) for producing 100% clean, renewable
baseload power.

• Stion: Stion is a 4th generation photovoltaic company developing

high-efficiency, low cost thin-film modules.

• Great Point Energy: GreatPoint Energy is commercializing a

process for converting coal and biomass into high value clean,
pipeline quality natural gas.

• Infinia: Infinia is developing proprietary stirling-engine technology

for concentrated solar power and other applications. 47
 Tools:
• Nanostellar: Nanostellar's Rational Catalyst Design methodology
unites two disciplines – computational nano-science and advanced
synthetic chemistry – to speed the pace of development for
nanoscaled catalytic materials for diesel emissions control.

• Codon Devices: Codon Devices is focused on enabling commercial

applications of synthetic biology.

• Praj: PRAJ, a public company based in India, has built over 300
plants in 30 countries and has global scale execution capability. It is
working to provide technology and design engineering for ethanol
plants across the world.

48
 Water:
• Quos: Quos is developing a proprietary process for water
desalinization which shows many advantages over reverse osmosis.

• NanoH20: NanoH20 is developing proprietary membranes for

existing reverse osmosis desalination plants which will increase flow
and reduce energy usage while reducing the cost of water.

49
 Materials:
• eChromics: eChromics is developing a new, switchable
electrochromic glass technology that will be utilized for highly energy
efficient windows.

• Calera: Calera is developing new, environmentally-friendlier cement

for use in construction.

• Segetis: Segetis is developing a variety of bio-based plastics using

renewable agricultural and forestry feedstocks.

50
Solar Flare?

Coal
Clampdown? 51
 Electricity = biggest and
fastest growing carbon problem

1971 2002 2030 52

IEA WEO 2004 Courtesy Steve Koonin, BP
Energy use grows with development
energy demand and GDP per capita (1980-2002)
400
US
350
Primary Energy per capita (GJ )

300
Australia
250

200 France
Russia S. Korea UK Japan
150 Ireland

Greece
100
Malaysia
50 Mexico Smallest per capita use, Fastest
0
China Brazil growing, Largest Population
India
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
GDP per capita (PPP, $1995)
53
Source: UN and DOE EIA
 Demographic Transformations

Population
2003 2003 Population
2050 2050
N-America N-America
Africa Africa
S-America S-America

Europe
Europe

Oceani Oceani
a a

Asia
Largest SegmentAsia
6.3
8.9
billion
billion

54
source: United Nations
Annual primary energy demand
1971-2003

Fastest
Growing

55
Source IEA, 2004 (Exclude biomass)
 Our Current Course
Business-as-Usual
(2% annual growth to peak, then 2% annual decline)
600

560
Biosphere
(ppmv)

520

480 450 ppm CO2 Coal

2
Atmospheric CO

440

400

360 Gas

320 Oil
Biosphere
280
1900 1950 2000 2050 2100 2150

56
p://www.solar2006.org/presentations/plenaries/p02-hansen.pdf
 Solution : Phase Out Coal
Alternative Case: Coal Phaseout
(+2%/yr to 2012; +1%/yr to 2022; phaseout by 2050)

600

560
Atmospheric CO 2 (ppmv)

520

480 450 ppm CO2

Biosphere
440
Coal
400

360 Gas

320 Oil
Biosphere
280
1900 1950 2000 2050 2100 2150

57
http://www.solar2006.org/presentations/plenaries/p02-hansen.pdf
 Capital Markets &
Governments Changing
• Duke Energy head Paul Anderson has noted that if capital markets believed that limits
on carbon emissions were inexorable, and that those who continued to emit would pay
for the carbon emissions they put out, that financial priorities would shift even in the
absence of any concrete Congressional action.

How much coal and

• The first announcement by the private-equity group taking over TXU was a cancellation
of 8 of the 11 planned coal power plants

• Then the State of North Carolina forced Duke power to cancel 50% of its proposed coal

carbon risk will the

expansion at Cliffside. In New Mexico, $85 million in proposed tax breaks for the Desert
Rock coal plant were killed.

market bear?
• An appeals court in Missouri ruled that the State Public service Commission had run
roughshod over the public review process to approve a giant coal plant proposed by
Kansas City Power and Light, reopening the Sierra Club's legal challenge to the plant

• Fortune reports: “These are troubling times for any company trying to build a coal-fired
power plants - and more than 150 of them are being planned across America.
Opposition is mounting to coal plants because they contribute to global warming. The
plants are getting harder to build because activist groups try to stop them, causing
delays that raise operating costs. And investors are paying attention. Federal regulation
of carbon emissions, which is being actively considered by Congress, could also make
burning coal more expensive.”

58
 The TXU Story
• “TXU, the largest energy provider in Texas, agreed last night to a $45 billion buyout …..
The buyers have promised environmental groups they would cancel a slew of coal-fired
power plants on the firm's drawing boards.”

• “The environmental agreement was the idea of the private-equity firms Texas Pacific
Group and Kohlberg Kravis Roberts, which made it a condition of the acquisition”

• “TXU would back federal legislation that would require reductions in carbon dioxide

Today’s unthinkable
emissions through a cap-and-trade system. It would shelve plans for eight of 11 coal-fired
plants that current TXU executives had proposed for Texas and would drop plans to build
new coal plants in Pennsylvania and Virginia. The company would also double its spending
to promote energy efficiency, to $80 million a year, for five years.”

•
or tomorrow’s
“The buyout firms also promised to cut TXU's emissions of carbon dioxide, the
most prevalent of greenhouse gases scientists blame for global warming, to 1990
levels by 2020. This matches the targets contained in legislation passed last year

conventional wisdom?
in California but exceeds anything TXU is obligated to achieve. When the three new
coal plants are on line, the company's emissions are projected to be nearly 20 percent
higher than they were in 1990.”

• ‘"Anyone doing an energy investment in today's situation has got to be sensitive of the
change in the attitudes of the culture and the change in the attitudes of the country, and
particularly the attitudes of Congress," said a person involved in the negotiations who
spoke on condition of anonymity because the deal had not yet been announced.’

• “But there are financial advantages to the environmental agreement, as well. When they
acquire companies, private-equity firms typically try to cut costs rather than expand
operations. TXU had estimated that the ambitious coal plant expansion would cost at 59 least
$10 billion; others suggested that with soaring construction costs, the ultimate price tag
could be much higher.” Washington Post – Feb 26, 2007
Coal: Ready for Updating…

Coal Plant Age

0-10 1
1

10-20 9
99
Age (years)

20-30 32
90

30-40 34
58

40-50 16
24

50-100 8
8
Cummulative %
%
Percentage
60
PUG Power (utility grade power)

• Cost Effective in $/kwhr

• Reliable power:
high uptime & predictable…not just when wind is blowing

• Dispatchable power:
available when customers demand power

• Peak & Base load power:

base power at base price; peak load power at peak price (12pm-8pm);
no power at low load (12am-6am?)

• Capacity factor: (ideally 60%); predictable operation time daily

61
 …alternatives?

…photovoltaic: expensive & not

r g y
dispatchable
n e
e E ?
…wind: not utility gradeu k - 0 8
d D 0 7
u l 2 0
…geothermal: h onot enough
i n hydrothermal
e s b
(EGS?)
er 1 0
W h i $
t will bear risk?
…nuclear: mwho
m
co
…clean coal: far away & too uncertain

62
 Standard and Poor’s Assessment
Pulverized Gas Eastern Wind Nuclear
Coal (CCCT) IGCC

Capital Cost ($/kW) 2438 700 2795 1700 4000

Direct Generation 5.8 6.8 6.8 7.1 8.9

Cost (cents/kWh)

CCS vs. Carbon Credits

Cost W/CCS (cents/kWh) 12.0 9.6 10.2 7.1 8.9-9.8

Cost w/CO2 Credits 6.2-7.9 7-7.7 7.1-8.7 7.1 8.9-9.8

($10-$30 per ton)

Capital Costs: Costs of constructing the plant

Direct Generation Cost: Costs of generating electricity

Cost W/CCS: Direct Generation Cost + cost of Carbon Capture and Storage – total cost of
electricity generation with CCS

Cost w/ CO2 Credits ($10-$30 per ton): Direct Generation Cost + cost of CO2 credits -
– total cost of electricity generation with Carbon Credits 63
Source: Jim Harding
 Photovoltaic Solar

• Expensive but declining

• Available when sun shines

(not “dispatchable” for utility needs)

• Cost $.20-40kwh
(2-4x more expensive than coal)

• Economical as Distributed Power Today

64
 Nuclear Plants Are Expensive!
14,000
Shoreham

Comanche Peak 1
12,000
Installed capital costs in 2004 $/kW

Nine Mile Point 2 Watts Bar 1

10,000

8,000
Comanche Peak 2

6,000

4,000

2,000

Copyright Jonathan G. Koomey 2007

0
1970 1975 1980 1985 1990 1995 2000
Date of first operation

Koomey, Jonathan, and Nate Hultman. 2007. “A Reactor-Level Analysis of

Busbar Costs for US nuclear plants,” 1970-2005, forthcoming in Energy
Policy
65
Source: Jim Harding
 Wind Doesn’t Match Utility Demand
7000 Demand (MW )
W ind MW
6000

5000

Utilities want to buy power when customers need it

MW

4000

Not when the wind blows or the sun shines!

3000

2000
Stored power is key to increasing value of wind kwh
1000

0
1 169 337 505 673
Hour (januar y 2000)

Wind Random vs. Load 66

Lots of power at 2am
Untrustworthy Predictions: Natural Gas

AEO projected natural gas prices versus actual wellhead prices

Source: Lawrence Berkeley National Laboratory 2006 67

 US Electric Power: Coal Is Back
80000 Capacity, total by source
70000
Other
Renewables
60000
megawatt

Water
50000 Nuclear

“As natural-gas supplies and prices have become a

40000
Gas
Oil
Coal
30000

problem, the power industry is shifting to coal in a big

20000

10000

way,
1950 with plans to build more1980
than 1001990
coal-fired
0
1960 1970 2000
year of initial operation

power plants in coming years at a potential cost of

more than $100 billion”

As Utilities Seek More Coal, Railroads Struggle to Deliver “ Wall Street Journal - March 15, 2006

Natural Gas Price

68
www.eia.doe.gov
Coal Prices
Coal Prices from 1949 to 2005 - Dollars per Short Ton

60
Peak
50 1975: $50.92
Price - in 2000 Dollars

40
2005:
$21.51
30

20

10

0
1949

1952

1958

1961

1964
1967
1970

1976

1979
1982
1985

1991
1994
1997

2000
2003
1955

1973

1988
Year
69
Coal Issues

• Availability
• Cost
• Transportation
• Emissions Costs

70
PRB Coal Supply Bottlenecks Exist
(Star Tribune 1/16/2006)

• “Compliance Coal” price 2004 - $5/ton; $7/ton

2005; $22/ton “spot price” in 2006 plus
“emission adder”

• Emission credit price $1600/t

• Utilities signing $25/t contracts for PRB Coal

• US EPA CAIR rules (Aug 2005) restricts SO2 in

28 states

• Plant modifications costs are rising 71

 Coal Transport
• 70% of railroad traffic
is coal

• Coal Rail Problems

cost $3B in 2005

• Spot price doubled

72
Testimony of David Wilks, President Energy Supply Xcel Energy, Senate Committee on Energy and Natural Resources, 5/25/2006
Wall Street Journal 3/15/2006 As Utilities Seek More Coal, Railroads Struggle to Deliver
 Coal Transportation Erratic
(WSJ, Mar 15, 2006)

r ?
e
w
o forced to
• “as contracts expire …. utilities pare
o r
pay 20-100% more” a l
c o l?
r t oa
• “railroads have put p the
o electric
c industry… in a
s o r
a n ol
potential crisis tsituation”
r n
e a
• w Ethcosts up 21% because of
ArkansasldElectric
o u
coalSdelivery
h
• Congress to hold hearings on coal delivery
73
 Coal - transport
• Nearly ½ of railroad
use to transport coal

• 150 new coal plants

(proposed) would
equal line of 10-ton
coal trucks circling
the Earth 3 times
each year

74
Carbon Pricing Hurts Coal

One ton of coal produces 3 tons of

Carbon Dioxide

Effective cost of coal = 3-6 X greater

75
Coal Risks: Coal plant costs have
continued to rise!
(NPR, Jan 17, 2007)

• Westar Energy VP: When we started the process, an

800 megawatt coal plant cost approximately $1
billion… today, the cost is closer to $1.4 billion

• Westar VP “That’s a very rapid run-up in the cost of

building a new coal plant” (40% in 18 months)

• Black and Veatch is advising clients to assume there

will be an additional cost associated with Carbon
emissions – to build now without considering the
future would be a “risky proposition”

76
Plant Costs Continue to Rise!
• “the price of a
coal-fired power
plant has risen 25
percent to 30
percent.”

77
Source: NY Times
Coal Capital Costs

78
 Projections Are More Conservative
Than Reality
Type Install Date Capital Cost ($/kW) – 2006$

B&V Projected - New Coal (SC) 2005 2,120

B&V Projected - New Coal (SC) 2010 2,180

B&V Projected - New Coal (SC) 2020 2,240

B&V Projected - Coal - IGCC 2005 2,750

B&V Projected - Coal - IGCC 2010 2,840

B&V Projected - Coal - IGCC 2020 2,840

Big Stone II, South Dakota (Otter) - PC Construction starts mid-2008 $2,168

Kansas (Westar) - PC Cancelled $2,333

Springfield, IL - PC $2,500

Cliffside (Duke Energy) – PC Approval granted in 2007 $3,000

West Virginia (AEP)– IGCC Commence ops in 2012 $3,500+

Mesaba (Excelsior) – IGCC Review on hold $3,593

FutureGen – near zero emission Commence ops in 2012 at $6,000+

demonstration plant earliest
79
Source: Projections – Black and Veatch, Cost estimates from UCS, NyTimes, Other news sources
Is Carbon (CO2) risk being ignored?

80
 Implications of Carbon Costs

$100/tC (≈ $30/t of Carbon Dioxide)

Carbon emission charges in the neighborhood of $100t/C can enable
commercialization of most of the wedges to combat global warming
Form of Energy Equivalent to $100/tC
Gasoline 25c/gallon
Crude Oil $12/barrel
Coal $65/U.S. ton
Natural Gas $1.50/1000 scf
Electricity from coal 2.2 cents / kWh
Electricity from natural gas 1.0 cents /kWh
Today's global energy system $700 billion per year (2% of GWP)
81
Source: http://www.stabilisation2005.com/day3/Socolow.pdf
What is the cost of
future CO2 limits in the US?

82
Source: Synapse Energy Economics, Climate Change and Power: Carbon Dioxide Emissions Costs and Electricity Resource Planning, May 2006.
Carbon Dioxide prices
Pulverized Coal Uneconomic
100
$/mwh

80
High
$30/t, $77/mwh
60 Mid
Levelized Cost

Low $19/t, $66/mwh

40 $8/t, $55/mwh

20

10 20 30 40 50

Cost of CO2 ($/ton)

83
Source: EIA, “NEMS EMM Factors for AEO06,” spreadsheet, 2006, and Synapse, 2006. The costs are representative
of a new coal plant built in the Midwest in 2015.
 Is coal an effective way
to avoid carbon?
a sample projection

Cost per Ton of CO2 Avoided

350

300

250

200
$/tC

150

100

50

0
SC UCS IGCC NGCC
Assume 85% capacity factor for all technologies. Source: : “IGCC: Next Step on the Path to Gasification-Based Energy
84
from Coal,” Robert H. Williams, 2004. Cost estimates similar to estimates in “The Cost of Carbon Capture,” by Jeremy
David and Howard Herzog (2000) and “Evaluation of Fossil Fuel Power Plants with CO_2 Recovery,” NETL (2002).
Compilation: Sylvia Smullin
 The Cost of CCS

• “When CO2 capture is considered, the cost of electricity produced

by IGCC would be increased by 30 to 50% over that of supercritical
PC without capture, or 25 to 40% over that of IGCC without
capture (Table 3.7). However, for supercritical PC with CO2
capture, the cost of electricity is expected to increase by 60 to 85%
over the cost for supercritical PC without capture.”

• “Coal plants will not be cheap to retrofit for CO2 capture. Our
analysis confirms that the cost to retrofit an air-driven SCPC plant
for significant CO2 capture, say 90%, will be greater than the cost
to retrofit an IGCC plant.”
85
Source: MIT Study - http://web.mit.edu/coal/
 The Problems with CCS

o
• The “Wedge Theory” from Princeton professors Stephen Pacala and n
r b
Robert Socolow suggests that burrying 1b tons of Carbon by 2050
a r do
c
could provide approximately 1/7th of the total emissions we need in
e
the period
r a t f o
e s t o w
• 1B Tons of Carbon = 3.6B Tons of
emissions from coal plantsq u 2
, h
CO (greater than 2X the total CO 2

s e
today)
c e d ? !
n t
’ engineer d u o r t m e
•
c aat Stanford
“Lynn Orr, a petroleum
p r o s pestimates that
who directs
ustore a billion
the Global Climate
o l
and
Energy Project
e i s r a n
University,
l v
to

f wto the total

tons of carbon
i
underground,
t t
the
o i
total inflow of CO2 would be roughly
I
equal
r e w e
outflow of oil and gas today.”
=
h e m e deploying carbon capture and
•
w
“A new study from MIT estimates
o l u
storage will raise the wholesale
that
price of electricity from new coal
v
plants by 50 percent (this may be a conservative estimate--other
nprice nearly twice as high).”
r b o
studies have put the

• C
“It would a $4 billion to eliminate the carbon dioxide generated by
cost
power plants in the Carolinas” (The News Observer, March 27, 2007)
86
The Problems with CCS …
• The Australian program “Catalyst” had an apt description of what
liquefaction and subsequent sequestration means:

“Well this drum holds 200 liters. Imagine a pile of these drums
that runs for 10 kilometers that way, 5 kilometers that way,
and stacks up 10 drums high. More than 1300 million of them.
That’s how much CO2 pours out of our 24 coal power stations.
Not every year, that’s just in one day. Now the gas has to be
compressed into a liquid to inject it underground. But even that
leaves a huge volume to process. It squashes down into a lake
of drums 1 kilometre square. And remember, that’s’ every day.”

87
 No Sequestration in the Carolinas
t e
s tra
q u e
• A US DOE report found that certain areas of the US where
coal is produced (such as the Carolinas) “lack the proper
geology to trap the gas”
t s e t i s
n ’ e i c h
c a
require the h
e r
construction of am
u ?
•
w e
Instead, they
w w e e d
pipeline network
to f
Iand other offshore a l
o sites. d the way too
h n
y
transport the gas all Kentucky, West Virginia,
c e The, a l l
cost of this network (for just the

u c
Carolina plants) is roughly
d e
r The problem this poses
$4 billion, on top of all the other

r o
costs associated
– even if wew
e
with sequestration.
p
is significant
o
d emissions associated with many coal
could overcome the higher costs

c e
and still-large carbon
a
sp regions makes sequestration an unlikely possibility.
plants, the geographies of some of the nation’s largest coal-
producing

88
 The Problems with CCS (Safety)

y !
b i lit
• Carbon leakage remains a potential problem

ia
l
t h e
• “Even tiny leaks undermine the value of burying

a r s
carbon; some experts estimate that an annual
e
leakage rate of 1 percent could add $850 billion
b
o
per year to overall costs by 2095.”
h
W
• Who bears the liability for CO leakage into the
2
atmosphere?

89
 IGCC+CCS= Risk, risk & more risk!

• Cost of IGCC & PC plant construction

• Technology risk
• PC & IGCC: Cost of coal & pollution regulations
• Coast of coal
• Cost of transportation
• Cost of carbon dioxide
• IGCC+CCS
• Cost of transporting liquid/high pressure carbon dioxide
• Cost of sequestration
• Who will provide insurance against release?
• Coal Externalities
• health care liability
• Sludge & mercury liability
• Carbon dioxide liability (per Supreme court decision)

90
Who wants to be a millionaire?
(Starting with $150 billion)

?
on
lli
bi
50
$1
se
ho
W
Knowing each plant =600,000 cars of liability
91
COAL = FAST FOOD

CHEAP, PLENTIFUL, ACCESSIBLE

 It provides about 50% of the electricity in the US
 The vast majority of reserves are mined within the US
 Has the potential to supply our electrical needs for at
least 100 years (though the number may vary)

HAZARDOUS TO HEALTH
 Significant environmental problems
 Damage to land from mining, water from various
sources (acid runoff, heavy metals), and air (single
largest contributor to greenhouse gas emissions)

92
We’re using the
atmosphere as our sewer

93
The Face (Externalities?) of Coal

China GDP growth =

China environmental damage?
& health care costs?

94
Source: “Concentrated Solar Power Potential in China”, Deepak Boggavarapu PhD
 Environmental impacts of
coal power: pollution
• Typical Coal Plant:
– 3,700,000 tons of Carbon
Dioxide
– 10,200 tons of nitrogen oxide
(NOx),
– 10,000 tons of sulfur dioxide
– 720 tons of carbon monoxide
– 220 tons of hydrocarbons,
volatile organic compounds
(VOC)
– 225 pounds of arsenic
– 170 pounds of mercury
– 114 pounds of lead
– Up to 2.6 tons of uranium and
6.4 tons of thorium 95
 The Effects of Coal: Raw Numbers

• Typical 500-MW coal

l
plant: more than
125,000 tons of ash
and 193,000 tons of
nt a
sludge
m e
r o n
• Toxic waste --
including arsenic,
n v i
mercury, chromium,
and cadmium
n e c e !
i s a n a
•
plant : 5.2l tons of
A 1,000 MW coal-fired
aof Uranium m e
C o
per year
and 12.8 tons per
year of Thorium

• 3X as much sludge as
all municipal waste in
US 96
Source: ORNL, UCS
 Air pollution from power plants
causes health problems:

• Coal pollution can cause and exacerbate s ?

heart disease, lung cancer, and other s to
b e t
as r
respiratory ailments
t o u a
e x e C e
• Average n m i d
t h e of 14 years-lost
r e
for
i o xthose who die

…
prematurely
u p
from exposure
d to particulates

e S o n t
• Powert a b
hplant pollution
r istthe a n cause of 38,200
… d heart c attacks
ll u and over 24,000
non-fatal
l e p o
r u
premature deaths in the US each year

97
Source: Clean Air Task Force, June 2004.
Air pollution from power
plants causes deaths
…guess where all the coal power plants are?

Deaths per
100,000 adults
range from <1
(blue) to >30
(pink)

98
Source: Clean Air Task Force, June 2004.
“Pulverized coal” plant incurs high health costs

Health Costs of Pollution from Power Plants

35
30
Cost (cents/kWh)

25
20
15
10
5
0
1997 Average US 2004 BACT Coal IGCC NGCC
Coal Plant

Mean cost for 2004 BACT coal = 2.3 cent/kWh.

This means that coal-generated electricity in the US
annually incurs $46 bill in health costs 99

Source: Robert H. Williams, 2004.

 Coal’s World is Changing

• 7 of 12 utilities considered carbon risk

• 10 of 12 plans will consider in next round

• Calif. PUC requires utilities to include “adder

• Initially $8 /ton
• +5% per year ($27/ton by 2030)

100
Source: Union of Concerned Scientists
Growing support for Regulation

• Six of nation’s top 10 power companies support

federal CO2 cap-and-trade legislation
s a n
o n i
l a t i
r e g u
• 2004 Survey: 50% of power executives
!
expected
s
CO laws within 5 years
n i l i t y
i o b
2

i s s v it a
E m e
in Wal-Mart, GE, Ford, Google,
• CO limit support:
2
PG&E

• US Climate Action Partnership: “as quickly as

possible”
101
– seeks 10-30% emission cuts within 15 years and
 “Nobody in their right mind should
be building a coal plant”

o t
• "It's the definition of financial insanity to invest in a new
n
e n
coal plant," agrees Marc Brammer, head of research for
consulting firm Innovest Strategic Value Advisors.
i v e
a r l g
•
t s
"It's very likely the investment
i c a
decisions many are making,
a n g
to build long-lived high-carbon-dioxide-emitting
l we'll alllo
power

l P
plants, are decisions
l y
live to regret," warns Vice-
s !
o
several coalaplants.al isk
President Gary Serio of Entergy Corp. (ETR ), which owns

C i c r
• o m "could
Those companies
t h e be really jeopardizing their
o n
stockholders' investment," warns one utility executive.
e c
• “Sue us so I can do my job,” pleaded a high-ranking EPA
official. “My boss doesn’t believe that enforcing the Clean
Air Act is a priority,”

102
Source: Business Week
 Coal An Expensive Mistake!
Florida Capitol News, April 18, 2007

• “The power company could face between $120

a r e
million and $400 million in annual penalties for
emitting carbon dioxide under a raft of proposals
n t s
floating through Congress that are aimed at
m e t s !
combating global warming, said David Schlissel, a
es t be
senior consultant for Synapse Energy and
i n v us
Economics.”
a l e r o
C o n g
• a
d to expect that a policy to regulate
‘''It's prudent
climate change will be put into effect in a way
that should concern utilities that are building coal
power plants,'' Schlissel said.’

103
 Pressure from Investors
• Investor Network on Climate Risk
• manages $3 trillion in assets
• 5 times bigger than in 2003

• Carbon Disclosure Project

(international)
• manages $31 trillion in assets

• Major banks firms analyzing CO2

risk, trying to reduce exposure

• Banks under pressure to avoid

financing new coal plants 104
Shareholders versus ratepayers

• Two lines of case law suggest shareholders

should bear risk for investment mistakes

– Prudent investment: was the decision to invest --

and to keep investing when circumstances changed
-- prudent when made? If not, no rate recovery
– Shared costs: even if the decision was prudent,
shareholders should bear some of the costs of the
unsuccessful investment

• Focus on creating ongoing incentive to reevaluate

investment decision
105
Western US Coal Plants

Current
Planned

106
http://www.westernresourceadvocates.org/media/pdf/CA%20Coal%20Shadow.pdf
 Conventional Wisdom:“250 Years of Coal”

• 50% US 2005 Coal from

Powder River Basin

• 136 Gtons (109 Gt remaining)

• Using 1 Gt/ yr

USGS, Evaluation of Economically Extractable Coal Resources in the Gillette Coal Field, Powder River Basin, Wyoming 02-180 2002
107
 Peak Coal?
– “the data quality is very unreliable,”

d o
– China’s last update = 1992; 20% consumed since,
l
though no update in its figures!
c o a
u c h f t ?
w m and Australia) that l
– since 1986: all nations
e
with significant coal
e
resources
(excepting India
H o
estimates
h a v
have reported substantial
updated reserves
downward resource
revisions.
a l l y
r e
e “the present and past experience does not
w
– Conclusion:
support the common argument that reserves are
increasing over time as new areas are explored and prices
rise.”

– World’s in-situ resources of coal: 60 percent downward

revision in 25 years.
108
From The Energy Watch Group report, “Coal: Resources and Future Production,”
 Renewable Energy from State Standards*
BIG MARKET: BIG CARROT
HI
55,000 New renewable energy supported:
CA
50,000 - 46,270 MW by 2020**
NV
45,000 AZ & NM
Equivalent to: WA
40,000 - 17.7 million less cars CO & MT
35,000 TX
Megawatts

30,000 MN
25,000 IA & WI
MD
20,000 PA
DC & DE
15,000 NJ
10,000
NY
5,000 CT & RI
MA
ME
0
2000 2005 2010 2015 2020

*Projected development assuming states achieve annual renewable energy targets. 109
**If achieved, IA, IL, and ME goals would support an additional 4,400 MW by 2020.
 Renewable Electricity Standards
Washington: Twenty One States
15% by 2020 MN: 27.4% by 2025* NY: 24% ME: 30%
by 2013 by 2000
IA: 2% by 1999* WI: 10% by 2015
MT: 15% IL: 8% MA: 4%

“No Choice” on renewable

by 2015 by 2013** by 2009
RI: 16%
by 2019
power
NV: 20%
CT: 10% by 2010
NJ: 22.5% by 2020
by 2015
BIG STICK CO: 16.1%
by 2020
DE: 10% by 2019
MD: 7.5% by 2019
AZ: 15% D.C: 11% by 2022
CA: 20% by 2025 NM: 16.2% PA: 8% by 2020
by 2010 by 2020
Standard
TX: 5,880 MW
(~5.5%) by 2015 Standard and
Goal
HI: 20% by 2020
 21 States Goal
+ D.C.
*MN has a 30% by 2020 standard for Xcel Energy, and a 25% by 2025 standard for all other utilities. CO and NM 
have a 20% by 2020 standard for investor­owned utilities, and a 10% by 2020 standard for other utilities.  110
** In addition to their requirements, IA has a 1,000 MW (~10%) by 2010 goal, and ME has a 10% new resources by 
2017 goal.  IL has a renewable energy goal, with no specific enforcement measures.
Good news on Alternatives

Solar Thermal

111
…solar thermal (CSP)

112
 We have
113
NO SHORTAGE
8 inch deep layer of oil annually

Humans will use

15 in 2050

100,000 114
Terawatts
 A Technology Crisis
…not a Resource Crisis!
• Scalability

• Cycle Time to Use

• Cost Competitiveness

115
 Scalability : Land For All Electricity

All Worldwide Electricity

116
Carlo Rubbia, SolarPACES2006 earthobservatory.nasa.gov
 USA…
Looking Good
Germany: 57% world PV US: 7% world PV

117
Creating a U.S. Market for Solar Energy, by Rhone Resch, President of the Solar Energy Industries Association.
Area requirements to power the USA

(150 km)2 of
Nevada covered
with 15%
efficient
solar cells could
provide the USA
with electricity

½ as much land
with 30%
efficient turbines

118
J.A. Turner, Science 285 1999, p. 687.
How Much California Land?

2005 Load: 52 GW
2020 Load: 69 GW

All New Load

Through 2020:
17 GW (15x15mi)
Shut All The Coal Plants

Close All Non-Hydro

119
 Technologies
1st 2nd 3rd 4th
Generation Generation Generation Generation

Si a-Si, CdTe, CIGS MOS

[15- 18%] [7-9%] [10-12%] [25- 30%]
Sharp, Q-Cells, Schott Solar, EPV, Shell, Honda, Stion
Kyocera, Sanyo, Fuji Electric, Daystar, First
Mitsubishi, Unisolar Solar, Nanosolar,
SunPower Miasole, Heliovolt
•Crystalline ingots, •PECVD deposited •Sputtered or •Thin films with
wafers •Silicon multi- evaporated straightforward
•Diffused and junction thin films reactive processing
screen printed unit on flexible or rigid compounds •Readily available,
cells substrates •Complex, esoteric low cost and
•Assembled and hazardous environmentally
modules benign
•Fully integrated 120
 121
Source: Sunpower
 122
Source: Applied Materials
Photovoltaic Cost Trajectory
• Module Prices Falling

• System Share Of Cost

Is Growing

• With zero cost modules

Systems at $2/Wp

• Annual capacity equals

China’s weekly needs

123
IEA http://www.iea-pvps.org/products/download/rep1_15.pdf
 Costs Including Storage
• PV @ $3-5/Wp
ey
Total ≈$30/Wp for a 60% capacity factork
•
t h e
• Thermal CSP $3-7/W for 60%isCF a l
a l c o
r m o f
t h e n g
r n i
• PV @ 22.4
l a cents
u r
kW/h
S o ot
• t
Current Thermal CSP at 16 cents kW/h

– A 700MW plant means 7.1 cents kW/h!

124
PV cost reduced from http://www.iea-pvps.org/products/download/rep1_15.pdf , other reports PV storage: ½ reported
battery cost CSP: Black & Veatch, CA study 4/06
 We Need To Work On
• Higher Efficiency Cells!
• Leverage Systems/BOP Cost

• Manufacturing Scaleup!!

• Batteries and Storage

• Beyond Vanadium Flow Cells,
Li-Polymer, Beyond Lead-Acid,
$/kWh – need 5x

• Not Concentrators?
• Adding BOP cost,
reducing cell cost
125
 Cycle Time to Use

• Oil & Coal – millions of years

• Gas & Clathrates –100,000’s?

• Biomass – 1 -10 years

• Thermal Solar – ?

• Photovoltaic Solar - instantaneous

126
How Soon Is Solar Competitive?

» Residential:
• $.20+/kWh average
• Maximum scale limited to 10%
• Subsidy dependent

How
» Centralized: Long
• Gas Peaking $.16/kWh
Is Coal
Competitive?
• Gas CC $.10/kWh
• Coal $.06 /kWh
• Cost sensitive to carbon price

127
 California CSP : better than “next best”
•CSP: lower cost
power than combined
cycle gas plants

•CSP creates 2-7X

more jobs than gas
plants

•Per GW CSP reduces

CO2 by ~2mt/yr worth
$38m/yr

•CSP provides hedge

against fluctuating
commodity prices
128
Source: NREL subcontract report by Black & Veatch, April 2006
 Three Gorges Dam

CSP would generate 1.7 times the power

in same land area at significantly lower
capital cost and faster construction time.
~18 GW generating capacity
>25 years planning and construction
~1.3 million people displaced
~630 sq km reservoir
>$50B estimated actual construction cost

129

Source: “Concentrated Solar Power Potential in China”, Deepak Boggavarapu PhD

 Hoover

CLFR plant with same annual power

Output as Hoover Dam
130
 Ausra CSP vs Hydro

• Glen Canyon • Ausra CSP in US

SW
• Built 1956, $300M • 500MW with
storage
• $2.222B in 2006 $ • $1.802B in 2006 $
• 3,208,591 MWh ’05 • 3,209,038 MWh/yr
• $693/MWha • $562/MWha

131
Operating Status of SEGS
Parabolic Trough Plants

14000
13 TWhe Solar Thermal Power since 1986
Annual GWh
12000
Cumulative GWh
Net Electric Production [GWh]

10000

8000

6000

4000

2000

0
88

90

92

94

96

98
85
86
87

89

91

93

95

97

99
01
02
03
19

19

19

19

19

19

19

20

20
19

19

19

19

19

19

19

19

20
132
The CSP Technologies

Troughs Towers Dishes

133
 Dish-Engine

134
www.stirlingenergy.com
 Power Towers

135
Solar Two, 10MW, Barstow, CA
 Parabolic Troughs

136
olar Electric Generating Stations, 354MW, Boron and Harper Lake, CA
CLFR

137
A 5MWt CLFR collector
100’ x 1000’

138 138
Ausra CLFR
Benefits of CLFR:

• Sturdy, low cost construction

• Primary components steel, glass, water
• Efficient use of land
• Air cooled; minimal water use
• No toxic materials
• Easily protected from hail and dust storms
• Can by hybridized with fossil fuel plants

139
Liddell Project

140
Solar Thermal Power Plant
Up to 20 hours energy storage

280C
50bar

Increase capacity factor by building larger

solar field. Basic 180MW plant is 640 acres

Copyright © Ausra, Inc.141

2007
 Solar Correlates with the Load

Daily Power vs Solar Availability Daily Power vs 2x Solar Field Availability

120.0 120.0

100.0 100.0

80.0 80.0
Demand

% Power
% Power

Series1 Series1
60.0 60.0
Series2 Series2
40.0 40.0

20.0 20.0
Generation
0.0 0.0
1 3 5 7 9 11 13 15 17 19 21 23 1 3 5 7 9 11 13 15 17 19 21 23
Hour Hour

Solar Highly Correlated with CA loads Larger Solar Array

Timeshifted a few hours “Clipped” At Max Output Power

Very predictable and steady (10%) More Hours of Peak Load Served

142
 Time-Of-Day Pricing

• PG&E (Northern CA) Summer

• Noon – 8pm : 1.95x “nameplate” $/kWh

• Coal, Wind get “nameplate” average price

• Solar gets 1.2x “nameplate” price

• Solar With Storage can get 1.5x

143
 Storage is Essential

• 24 hour power vs. 5 hour peak sunlight

• Batteries, Flow Cells, Compressed Air,

Pumped Hydro, SMES: $300-1000/kWh

• Thermal Storage: $15/kWh demonstrated

144
 Storage For Time-shifting

To Storage

8 hour peak load vs. 5 hour peak

sunlight
Plant Output

From
Direct Solar Storage From
6 hours of storage increases revenue
Direct Solar Storage
50%
Direct Solar

Shift Output To Peak Hours

6 AM 9 AM 12 PM 3 PM 6 PM 9 PM
145
Time of Day
 CA Electric Power

Storage, Capacity Nom LEC, Nom LEC,

Capacity, MW hours Factor 30%ITC 10%ITC

Simple Cycle Gas,

PEAKING 85 n/a 10.0% 168.0 168.0

Combined Cycle Gas,

INTERMEDIATE 500 n/a 40.0% 104.0 104.0

Pulverized Coal, BASE 1500 n/a 65% 45.0 45.0

PV, 2006 1 0 25% 200. 250.

Parabolic Trough 100 0 28.4% 154.0 173.0

Parabolic Trough 2011 150 6 40.4% 120.0 134.0

Luz2 DPT 150MW 150 0 25.0% 107 120

146
Black and Veatch, Economic, Environmental, and Energy Benefits of Concentrating Solar Power in California, April 2006; PV www.solarbuzz.com DPT Luz2
 Cost of Power by Type

200
180
160 Gas CC
140 Nuclear
120
$/MWh

Solar Peaking Pricing Coal IGCC

100
Coal PC
80
60 Coal IGCC + CCS
40 Gas CT
Solar Baseload Pricing
20
0
0 10 20 30 40 50
$/t CO2
147
 Cost of Power by Type

200
180
160 Gas CC
Gas CC2007
Trough
140 Nuclear
120 Trough 2011
$/MWh

Solar Peaking Pricing Coal IGCC

100 DPT 2007
Coal
DPTPC2011
80
60 VK IGCC
Coal 2011 + CCS
40 Gas CT
Solar Baseload Pricing
20
0
0 10 20 30 40 50
$/t CO2
148
 Net Impact of Time-Of-Day
(Including Thermal
Cost of Power Storage)
by Type

200
180
160 Gas CC
140 Nuclear
120
$/MWh

Solar Peaking Pricing Coal IGCC

Trough 2007
100
Coal PC 2011
Trough
80 DPT 2007
60 Coal
DPTIGCC + CCS
2011
40 GasVK
CT2011
Solar Baseload Pricing
20
0
0 10 20 30 40 50
$/t CO2
149
Key Issues for Thermal CSP

• Back End Power Block

• Turbine/Engine Efficiency

• Concentrator and Receiver

• Mirror $ / m2 dominates total system cost

150
Poised for Breakaway Growth?

• Crossing Gas Prices

• Meeting IGCC Prices (2008-09)

• Meeting Pulverized Coal Prices (2008-09)

• Large Capital Flows Will Follow Costs

151
 Policy Needs?
• Stable ITC

• Level tax playing field

• Transmission Priority and Grid Upgrades

• Startup loan guaranteed for initial plants

152
Power to the Nation: HVDC

153
153
A New Federal Subsidy Program
• Farm Subsidies 2006: $26 B
» Stabilization, Preservation of Farms, Non-Production

• Total Coal Revenues: $12 B

» Profits $1.2B

• Let’s Subsidize COAL: $1.2 B

» Replace profits for NOT DIGGING COAL
» Lowest Cost, Highest Reliability Sequestration

154
http://www.freetrade.org/pubs/pas/tpa-032es.html http://www.mrm.mms.gov/Stats/pdfdocs/cr99.pdf
Renewable Energy Economics
Benefits of a 20% by 2020 RES

• $72 billion in new capital investment

• Benefits to rural America, including 30,000 jobs

• $49 billion in lower electricity/natural gas bills

• Estimated $10.2 billion increase in GDP

155
 … with positive local impact

• Each 100mw of CSP: 94 permanent jobs,

• versus 56 for combined cycle gas plants

• Each 100mw of CSP: $628 million gross

state output
• compared to $64m for the combined cycle plant

156
Source: Black & Veatch, 3/06
 …and our greatest opportunity
• “CSP power plants, constructed primarily of
concrete, glass, and steel, can be quickly
constructed and brought on line.”

• “With access to adequate transmission,

CSP could provide inexpensive carbon-
free electricity to the entire country.”

– US DOE Solar Technologies Program CSP 2009 Initiative

157
Geothermal Potential
Geothermal Potential in the United States

10¢ kW/hr 1,251,351 MWe

12¢ kW/hr 7,188,200 MWe

158
Source: Matthew Clyne, Black Mountain Technology, MIT
EGS Technology
How it works

159
…or get to work

160
Biofuels
Think Outside the Barrel

161
Implausible Assertions?
We don’t need oil for cars & light trucks

We definitely don’t need hydrogen!

We don’t need new car/engine

designs/distribution

Rapid changeover of automobiles is possible!

Little cost to consumers, automakers, government

162
 RISK: Oil vs. Hydrogen vs. Ethanol
Oil Hydrogen Biofuels
Energy Security Risk High
High Low
Low Low
Low

Cost per Mile Med

Med Med­High
Med-High Low
Low

Infrastructure Cost Very Low

Very Low Very High
Very High Low
Low

Technology Risk Very Low

Very Low Very High
Very High Med
Med

Environmental Cost Very High

Very High Med­Low
Med-Low Low
Low

Implementation Risk Very Low

Very Low Very High
Very High Low
Low

Interest Group Opposition Very High

Very High High
High Low
Low

Political Difficulty ?? High

High Low
Low

Time to Impact ­- Very high

Very High Low
Low

163
Source: Khosla
 OPEC’s Economic Effects

164
Source: Coghill Capital Management
 Ethanol Supply Projections
200

E85 is ten times

Capacity (Billions Gallons)

150
larger than blending
market
Total Ethanol
Capacity
Corn Ethanol
Production
Corn Ethanol
100 Production

We must kick start

50 E85 Market
the E85 market!!
0
Additive Market

23
13

19

29
05

07

09

11

15

17

21

25

27
20

20

20

20
20

20

20

20

20

20

20

20

20
Year

165
What’s Possible
Year Biomass Acres Cellulosic Corn Total
Yield Planted Ethanol Ethanol Ethanol
Tons/acre (millions) (billion (billion (billion
gals) gals) gals)

2012 8.9 5 4.4 12.0 16.5

2017 12.5 19 24.8 14.6 39.4
2027 23.1 49 124.4 14.6 139.0

Replace most of our imported oil in twenty years!

166
 Area to replace GASOLINE in USA

50m Acres
replaces all our
gasoline!

167
 Why Now?
Projected World Oil Prices (EIA)

Alternative Technology Viability Zone

168
Source: EIA Reports
 Energy Balance
Not Your Father’s Ethanol
CO2 emissions from alternative fuels
Different corn ethanol
FT (Coal)
60

production methods have FT (Coal)

Gasoline (Tar Sands)

Gasoline (Tar S ands)
FT (Coal CCD)

different emissions
Gasoline

Ethanol (Corn Coal)

50
Ethanol (Corn Coal)

Ethanol (Corn Wet Grains)

Ethanol (Today)

FT (Coal CCD)
Ethanol (Corn NG)

Typical corn ethanol

Ethanol (Corn Wet Grains)

Ethanol (Today)
Ethanol (Corn No- Till)

Ethanol (Corn NG)

40
Ethanol (Corn Biomass)

Ethanol (Corn No Till)

Gasoline
Ethanol (Cellulose)

Ethanol (Corn Biomass)

production reduces carbon
Ethanol (Corn Biomass CCD)
Ethanol (Cellulose CCD)

30

emissions 20%

Ethanol (Cellulose)

Ethanol (Corn Biomass CCD)

20

Ethanol (Cellulose CCD)

10
Cellulosic ethanol can achieve
dramatic greenhouse gas
0

reductions 1

- 10
…even negative emissions 169
Source: NRDC
NRDC Report - “Ethanol: Energy Well Spent”
“Don’t let the perfect be the enemy of the good”

• “corn ethanol is providing important fossil fuel savings and

greenhouse gas reductions”

• “very little petroleum is used in the production of ethanol …..

shift from gasoline to ethanol will reduce our oil dependence”

• “cellulosic ethanol simply delivers profoundly more renewable

energy than corn ethanol”

170
 Brazil sugar-cane/ethanol learning curve
Liters of ethanol produced per hectacre since between 1975
to 2004

Rendimento Agroindustrial – Brasil

(em litros de álcool hidratado equivalente por hectare) 30,000??
6500
6000
5931
5500
5000
4500
4000
3500
3000
2500
+3,77% aa em 29 anos
2000 2024

1500
75
77
79
81
83
85
87
89
91
93
95
97
99
01
03
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20

Fonte: Datagro
08 Nov 2005 Nastari / Datagro @ Proálcool 30 anos 11
171
 Technology Progression
Synthetic Biorefinery
i cal Bio
h em eng
o c Gasification ine
r m eri
The ng

Many companies, multiple

Fue ?
solutions
l Che
mis …all t a
improving
t ion a l M o d eling
try C o m p u
Corn trajectory Ene
rgy
Algae cro
ps
Pla
nt o g y
Br io l
ee B
din Cellulosic Bioethanol
he tic Sy s t
ems
g n t
Sy Biol
ogy172
Energy Crops:
Miscanthus
1 years growth without replanting!

Little water, little

fertilizer, no
tillage, lots of
biomass,

….energy crops
make it possible
20 tons/acre? (www.bical.net) 173
10-30 tons/acre (www.aces.uiuc.edu/DSI/MASGC.pdf)
Energy Crops:
Sorghum

25 tons/acre (Prof. Holtzapple- Texas A&M) 174

 The perennial advantage
• Annual crops rely more heavily on human inputs. Humans can
only respond to environmental changes on the scale of months or
seasons and hectares or square kilometers.

Sept annua
Dec March June
l

175
12 mos 21
 Biomass Will
Make a Difference
Turning South Dakota into… …a member of OPEC?!
Today Tomorrow Thousand barrels/day
Farm acres 44 Million 44 Million Saudi Arabia 9,400
Tons/acre 5 15 Iran 3,900
South Dakota 3,429
Gallons/ton 60 80
Kuwait 2,600
Thousand 857 3,429
Venezuela 2,500
barrels/day
UAE 2,500
Nigeria 2,200
Iraq 1,700
Libya 1,650
Algeria 1,380
Indonesia 925
Qatar 800

176
Source: Ceres Company Presentation
Large Improvements Are Visible
Ethanol Yields Up & Up & Up
Conservative Cellulosic
3,500 (24tpy/108gpt)

3,000

2,500
Sugar Cane + Baggasse Brazil Energy Cane
Gallons per acre

(11 tpy/102gpt)
2,000
Cellulosic (10tpy/100gpt)
1,500
Corn, Cellulose,
1,000 Cane Today 

500
Biodiesel
0
2000 2005 2010 2015 2020 2025 2030 2035
Time

177
 Myths Galore!
• Energy Balance – not your father’s ethanol
• Not enough cropland – only if you try to make pigs fly!
• Food prices or the best thing for poverty?
• Lower energy content, lower mileage – in which engine?
• More expensive or poorly managed? US oil or Saudi oil?
• Existing infrastructure – for E85 or additive? Some or all pumps?
• Dubious environmental benefits – as additive E20 or E85?
• Cellulosic ethanol – real or not?
• Free marketeers hell or level playing field?

178
My Favorite FFV . . .

Optimized for ethanol

and gasoline both &
mileage differences can
be small!

SAAB 9-5 with E85

179
 A Darwinian IQ Test?
• Feed mid-east terrorism or mid-west farmers?

• Import expensive gasoline or use cheaper ethanol?

• Create farm jobs or mid-east oil tycoons?

• Fossil fuels or green fuels?

• ANWR oil rigs or “prairie grass” fields?

• Gasoline cars or cars with fuel choices?

180
DOE went looking for 3 projects…

181
 Lots of variability…
Company Tech CapX/ Capacity Yield/ton
G ($) (MGPY)
Abengoa Bio 15.8 11 49
Alico Hybrid 5.6 14 55
Bluefire Bio 5.0 19 82
Broin Bio 6.1 31 112
Iogen Bio 10.5 18 78
Range Thermo 4.5 40 101
182
“The War on Oil”
…weapons from the “innovation ecosystem”

183
 Biofuels Feedstocks & Pathways …
Glycerin
Natural Transesterification
BioDiesel (FAME or FAEE)
Oils
Methanol/Ethanol Ethanol, Butanol,
Renewable Petroleum
Fermentation FermDiesel

ETG via catalysis Biogasoline

Sugars/
Catalytic Conversion Dimethylfuran
Starch
Gasoline, Diesel,
Catalysis and Aqueous phase Reforming
Hydrocarbons

Algae + Sunlight – Cell Hydrocracking BioDiesel (FAME or FAEE)

CO2 Mass

Ethanol
Fermentation Butanol
Diesel
Cellulose/ Acid or Enzyme
Hemicellulose Hydrolysis Saccharification C6, C5
Mixalco Sugars
Mixed Higher
Process Alcohol
Biomass
Microbial
Methane
cultures
Syngas
Fermentation Ethanol
Gasification Syngas

Fischer-Tropspch BTL Diesel

catalysis 184
Waste
 Biofuels Feedstocks & Pathways …
Glycerin
Natural Transesterification
BioDiesel (FAME or FAEE)
Oils
Methanol/Ethanol Ethanol, Butanol,
Renewable Petroleum
Fermentation FermDiesel

ETG via catalysis Biogasoline

Sugars/ Feed Catalytic Conversion Dimethylfuran
Starch
Cost
Gasoline, Diesel,
Catalysis and Aqueous phase Reforming
Hydrocarbons

Algae + Sunlight – Cell Hydrocracking BioDiesel (FAME or FAEE)

CO2 Mass

Ethanol
Fermentation Butanol
Diesel
Cellulose/ Acid or Enzyme
Hemicellulose Hydrolysis Saccharification C6, C5
Mixalco Sugars
Mixed Higher
Process Alcohol
Biomass
Microbial
Methane
cultures
Feedstock Syngas
Ethanol
Fermentation
Gasification
Supply
Syngas

Volume Fischer-Tropspch
catalysis
BTL Diesel
185
Increasing
Waste Technological Difficulty
 Imperium Renewables, FutureFuel, etc. transesterification Fatty acid esters
(biodiesel)
Vegetable oil Choren hydrocracking
Diesel
Cilion, Altra
Sugar/starch Verasun, Aventine, etc.
dry mill yeast fermentation
Ethanol
Poet
Companies involved in
feedstock improvement ethlyacetate production/hydrocracking
ZeaChem Ethanol
Monsanto
DuPont BP-DuPont Biofuels
Syngenta bacterial fermentation
Gevo
Allelyx Butanol
Advanced Biofuels
CanaVialis Green Biologics
Mendel Biotechnology Cobalt
Ceres Synthetic biology/fermentation Diesel/gasoline
Bical Energy Amyris Biotechnologies “Biocrude”
Agrivida LS9
Edenspace Aqueous phase reforming
Teri
Virent Energy Systems Diesel/gasoline
Praj
GreenFuel growth with CO2 and light/ “Biocrude”
Aurora Biofuels transesterification of hydrocracking
Lipids
Algae LiveFuels
PetroSun Fatty acid esters

Mascoma enzyme hydrolysis/fermentation

Verenium Ethanol
Iogen, Abengoa Bioenergy,
Poet, SunEthanol, TMO
Biomass gasification/catalysis or
•Agricultural RangeFuels syngas fermentation
Ethanol
Coskata
•Forestry BRI Energy
biopile fermentation/catalysis
Terrabon Mixed alcohols
Catalysis/pyrolysis
Wastes BIOeCON, FES Fuel oil/diesel
•Flue gases
CO fermentation
•Municipal waste LanzaTech Ethanol
•Municipal sewage acid hydrolysis/fermentation
Ethanol
BlueFire Ethanol
•Recyclable plastics 186
thermal depolymerization
Changing World Technologies Fuel oil
 Biodiesel
The Near Future…
Glycerin
Natural Oils Transesterification
Ethanol – Sugar
BioDiesel (FAME or
Fermentation FAEE)
Methanol/Ethanol Ethanol, Butanol,
Renewable Petroleum
Fermentation FermDiesel
Dimethylfuran – via catalysis
ETG Biogasoline
Sugars/ Feed Catalytic Conversion
Catalysis
Dimethylfuran
Starch
Cost Gasoline/Diesel –
Gasoline, Diesel,
Aqueous
Catalysis and Aqueous Reforming
phase Reforming
Hydrocarbons

Biodiesel - Algae
Algae + Sunlight – Cell Hydrocracking BioDiesel (FAME or FAEE)
CO2 Mass
Ethanol – Cellulose Ethanol
Hydrolysis Fermentation Fermentation

Cellulose/
Hemicellulose Acid or Enzyme
Fermdiesel, Saccharification
Butanol C6, C5
Hydrolysis Sugars
Mixalco Gevo
Mixed Higher
Process Alcohol
Biomass Methane – Microbial Syngas
Microbial Cultures Ethanol
Methane Fermentation
Ethanol – Syngas
cultures
Feedstock Fermentation
Gasification Syngas
SupplyBiodiesel, Ethanol –
Fischer-Tropspch
Volume FT and Catalysis
catalysis
BTL Diesel
187
Higher Alcohols –
Waste Increasing
Mixalco Process
Technological Difficulty
 Story Time
… or news from the frontlines

188
189
190
 Trash… Or Treasure?
Range is working to transform this into ethanol!

191
Southeastern U.S. Potential
• ≈ 13 Billion gpy
Product Potential
– From
unmerchantable
timber & timber
harvesting
residues only

192
193
194
Potential of Synthetic Biology
Synthetic Biology
Synthetic Biology Fermentation
Anti-Malarial
Diesel
= Fermentation DieselX

Gene 1
3
Gene
Gene
Gene
1 42

Source of genes Custom-Built Microbe

Artimisinin
Recombinant Small Molecule Bio-Synthetic Pathway 195
 Designer Hydrocarbons
Hydrocarbon Biosynthesis: Nature’s Energy Storage
Renewable Feedstock

X X
Metabolic modeling
+
Synthetic biology X X
Hydrocarbons

X X

X X

>90% Energetic Yield From Feedstock

LS9 Designer Biofuels & Chemicals

196
Butanol, the old fashioned way…

197
 Metabolic Engineering

Biomass
Hydrolysate

BUTANOL

CO2
ethanol
lactate
acetone
A recombinant strains
formate
containing a butanol
pathway produces .
hydrogen
..
butanol in addition to
other products.

198
 Metabolic Engineering

Biomass
Hydrolysate

XX
XX

X
X
BUTANOL
X
X
Classical and genetic
techniques are used to
improve butanol tolerance.

199
 Cellulosic Biofuels Status
• DOE: Six “meritorious” biorefinery grants

l
• Multiple demo plants under constructionl o n
g a
3 5 b
et s
• Various technologies,
n t s feedstocks under test
!
i d e o a l
r e s g
• P
A diversity of geographies – not just mid-west

• Question is “not if” but “at what price”

200
 at
t h
”
em
st e!
s y nc
…and this is just the c obeginning
e dis t a
o n g
t i n
v a l o
n o ee
i n f r
“ u
h e yo
…imagine t tthe map in 2017!
i n g h
e
v ro u
l i e b
B e
201
A Potential Trajectory …
Market Phenomenon

New Chemistry liquid fuel +PHEV

Investment Target Cellulosic ethanol, Full FFV conversion

???
Butanol blends + PHEV

???
B85+PHEV
E85 plug-in hybrids
…driven by the “innovation” ???
E85 /electric hybrids

New Liquid Fuels

ecosystem
E85+ FFV penetration
Corn/Sugar ethanol E85

Energy Crop Agronomy

of Butanol
Corn ethanol Blend

E85 Engine Optimization

scientists, technologists, Scaling, Waste Sources

entrepreneurs
Energy Crops

Cellulosic, Infrastructure

Cost

Initial Distribution

Experimentation

Automotive Efficiency, CAFÉ, Lightweighting,

202
Battery Technology, Cleaner Electricity
Biohol Trajectory

203
 Farmers Are Driven By
Economics
Per acre economics of dedicated biomass crops vs. traditional row crops

Biomass Corn

Grain yield (bushel) N/A 162

Grain price ($/bushel) N/A $3.50

Biomass yield (tons) 15 2

Biomass price ($/ton) $35 $35

Total revenue $525 $637

Variable costs $84 $168
Amortized fixed costs $36 $66

Net return $405 $403

204
Source: Ceres Company Presentation/ Khosla Ventures
 Biomass Yields?
• Miscanthus averaged 16.5 dry tonnes per acre per year,
n e
over 3 years l i
where sawgrass averaged 4.6 at 3 Illinois sites, with data taken
o es
s
a cane r that will
• Sugarcane experts in Brazil are breedinggenergy a c
likely result in yields of 25 dry tones S
harvestable biomass t U 0 m
per acre per year of

ee ut 5
• High yield sorghum can be m growno in 35 US States and
d as a25bdry tones per acre per year
produce yields as high l
u n
c o o
•
change inw
e
DOE estimates
n d
that collecting
agricultural
existing biomass with small
practices could generate 1.3 billion
tones… of biomassa in the US and still be able to meet all food,
feed, and e m demands.
export
d
• Approximately 75 million acres of crop and pasture land in the
US can easily be converted to cultivating energy crop without
205
impacting domestic food production (CERES)
 Miscanthus Farming vs.
Corn/Soybean
Corn/Soybean Rotation
e y10 Years
Miscanthus Energy Crop
10 Years 1st Year 2nd Yearr3rd - 10th
242o
1
Corn Soy
s o 1,770
Total Variable Costs 464 321 2,657 521
r m /
195

a 420r n
Total Other Costs 630 571 4,029
f o
395 396 2,856

6,686 is 916 c662

Total Costs 1,094 892
s a 591 4,626

u
h h a on n !
t
Yield (tons ha) 11 4

n t t i 17
Yield (dry tons ha)
c a l e t a 0 35

s
i a681b 5,783 r o 0 663 1,330 7,527
M fit
Gross Revenue ($ ha) 1,020

Net Profit ($ ha)

r o
-74 -210 -903 -916 1 739 2,900

Notes: p
1 - Discounted at 3% annually
Corn and soybean costs and average yields for Central Illinois after (Hoeft et all, 2000),
206
and prices based of CBOT 2002 futures
Biomass, Geopolitics &
Poverty

Biomass & Poverty

Belt

207
 Monoculture or Polyculture (Grass Cocktail)
A study from the University of Minnesota suggests…

l d r e
i e l t u
y cu
• that “mixtures of native prairie plants i h
g grown l y on marginal land
h o
p and that “ethanol
are a good source of biomass for d
n can t
biofuel”
cprovide more useable
made from mixed prarier plans
e a a
pethanol s or soybeanre
energy per acre than either b l m xi
corn
i s t
a o
biodiesel” in low s e , m
ta r s d
s oalso have a n
aof being perennial
• Mixed prairie suplans
s f
i o m the s y
benefitl
… e b
i replanted), s
as wellleas preventing
t
(don’t have g
e
be
, s i soil erosion
and removing
a t carbon dioxideilfrom s the e r air. Additionally, they
s
don’t r
trequire s o div irrigation, while adding
pesticides, herbicides,
fertility to degraded lands.e r i o
c h b
ri
• … until cellulosic… ethanol is viable, coal/natural gas plants
could burn the prairie biomass – this would actually reduce
net carbon dioxide emissions through reduce fossil fuel use208
and by storing carbon in prairie soils
 Ethanol Subsidies
• “With the rise in today’s price of corn,es
d i
i prices”, rm
exceeding the government’s “target s f a

these agricultural subsidies willu bdwindle n in

g
to the
” s d e c li
t asrecur
range of $2 billion, andewill on
:
unless and
“
until the energy demandn r e
gfor crops disappears”
n g wr sidi
on ies
n i the sub
c l i or
e
• The market
d t th i n g f
price for corn rising is effectively
…righ subsidies – one set of subsidies off-
lowering
…
sets another
209
 Simple Action Items
Require 70% new cars to be Flex Fuel Vehicles
•    … require yellow gas caps on all FFV’s & provide incentives to automakers

• Require E85 distribution for all high volume gas stations
     …. for stations that pump more than 2 million gallons per year of fuels;

• Make VEETC credit variable with oil price ($0.25-0.75)

     …. with cellulosic multiplier and minimum carbon reduction standards

• Make the cellulosic biofuels RFS = “all production till 2015”

     …. With price caps on maximum cellulosic premium over the price of gasoline

• Increase RFS to 35 billion gallons by 2022

210
...ensuring investors long term demand and oil price stability
 e l f!
f u al
u t h
c i n
an on
c t i
e p
W um
n s
c o

211
 The Possible at “NORMAL”
Margins!
June 2006, Aberdeen , South Dakota

Imagine $1.99 ethanol at every Walmart in

America

212
Generic Approach
take a big problem (challenge)

… add the best minds

… the power of ideas
… the fuel of entrepreneurial energy
… and a dash of greed

213
…the chindia test
only scalable if competitive unsubsidized

214
…the scaling model
brute force or exponential, distributed…

215
…investments or climate
solutions?

wind
photovoltaics
biodesel
hybrids

216
…”relevant scale” solutions for

…oil

…coal

…materials

…efficiency
217
…pragmentalists vs idealists

218
Which Risk for oil & coal?

or…

the lesser evil

219
Denial to Despair?

or…

Solutions (they exist)

220
 …biases

…hybrids good

…corn ethanol bad

…biodiesel good

…nuclear bad

221
 Subsidies: Oil or Ethanol?
• Ethanol receives:
f as
• a $0.54 per gallon producers credit, as well
o
additional state-specific subsidies se
h o
• Oil receives: t
f
• Excess of Percentagew
r
a cost depletion”
over
d
worth $82 billion dollar
s l !
subsidy
o
• Expensing of d i e an
exploration and development cost
- $42 billionsisubsidy.
e t h
u b
• Add onsalternative fuel production credit (read
oilO il
shales, tar sands etc).
• Oil and gas exception from passive loss
limitation
• Credit for enhanced oil recovery costs
• Expensing of tertiary injectants 222
• $7 billion in Katrina relief!
 Hybrids or Ethanol?

Hybrid Corn Ethanol

n d
Carbon 20-30%
r a
20-30%
reduction p e !
e a io n
Cost $5000 h
c ol u t $50
r
a es
f
ScalabilityaBattery l Cellulosic
is a l a b
l
o sc breakthrough Breakthrough
n
a re to High
t h
Impact
o
Low
Eautomakers
m
Oil reduction 20-30% 90%

223
Hybrid or FFV?
Hybrid FFV
v e
ti
c
Cost $3000 f e
f$30
- e
r e
o !
a m n
r t i o
f fe olu
Gasoline s o s
157 477
V ’
F
Savings
F
(11000 m/yr; 14mpg)

224
Biodiesel vs. Ethanol vs. Cellulosic Diesel
“Classic” Ethanol Cellulosic Diesel
Biodiesel
Carbon reduction - 80% 20-30% Not Available
2006
Carbon reduction – 80% 80% 80%
2010
s !
e r
Scalability (2030 600-900
t
2500t (cellulosic) 2500 (cellulosic)
Gallons/acre)
y Ma
r
Sustainability (2030) Poor High High

cto
j e
Product Quality Poor Good Good
r a
T
Unsubsidized 10 yr High Excellent Excellent
market (@ $45 oil (@ $45 oil (@ $45 oil price)
competitiveness price) price)

2010 Production Cost High Med-Low Med-Low

225
Technology Poor Improving Nascent
 Is There a Food vs. Fuel Issue?
P R
• The Mexican Tortilla Story ….
t ry
u smaize, rather than the yellow variety that is
Nearly all Mexican tortillas are made of home-grown white
n d of subsidised ethanol across the border has
more common in the United States. The growing
prompted the price of yellow corn, quoted in
i l i popularity
Chicago, to rise by over 50% since October. So industrial
users of imported yellow corn in Mexico o
r The tariff on imported g r to disappear under the
(for animal feed and syrup) started buying white maize instead.
The government was slow to react.
o i n f o
maize is not due

u e
North American Free Trade Agreement until next year. But
o p g
the government
n
could have blunted the

s s
price rise by waiving the tariff or moving quickly
e l i
to expand the tariff-free quota, says Luis de la Calle,
h
i
a former trade official. Mr Calderón
?
price-cap withlthe biggest tortilla
did
e v
raise import
s
quotas on January 18th, and agreed a voluntary

e a not coverg n d
makers.
u
But the political
tortillap ? by many poorer Mexicans. A
damage had already been done, and the
s
r government
price cap does
a i withdrew e
the small-scale
v the subsidyn e
makers patronised
d
out that thep
previous
… higher pricea
h e e i poor, who grow maize. Mexico's Federal
on tortillas because
s
it was indiscriminate. Officials point

m b b
is good news for the rural

c a
Competition
h y e s
Commission is investigating
sayss u
the import and distribution of maize. But Eduardo Pérez
Motta, the commission's
blame forw
t r ipresident,
m
he thinks that import quotas rather than monopolies are to

r
the price spike. In other words, contrary to Mr López Obrador's claims, Mexicans would
…from free
benefit
u n fa
trade in maize.

co er
l o w Economist, 2007

226
227
BioPlastics – the next cycle?

228
Applications of
BioPlastics

229
 Competitive Landscape

230
ource: Sustainable chemicals Report – Chevreux
 Plenty of Markets!

231
ource: Sustainable chemicals Report – Chevreux
 Plenty of Upside!

232
ource: Sustainable chemicals Report – Chevreux
...replaced all 300 Billion lbs of
plastics ?
…how much land would it take?

233
Oil Refinery Concept

234
Bio-Refinery Concept

235
 Twelve Platform Chemicals

Succinic Acid FDCA 3-HP Aspartic Acid

Glucanic Acid Glutamic Acid Itaconic Acid Levulinic Acid

3-HDL Glycerol Sorbitol Xylitol

236
 Hieroglyphic Writings…
A version of graphic representation of A specimen of an Egyptian
“Top 12 DOE platform chemicals from glucose” language writing

O O O O
OH HO OH
HO HO OH
O NH2

O
HO HO O HO OH
OH
O NH2 O OH

OH OH O OH OH OH
OH
HO
OH OH OH O OH OH OH

O O OH OH
OH O O
OH
O HO
O HO OH OH OH O

ca. 2000 A.D. ca. 530 B.C.

letters  syllables  words  poems 237
 Enabling Renewable Value Chains for
Sustainable Chemical Industry

Renewable Industrial New Industrial

Feedstocks Bioproducts Bioproducts
(crops & forestry)

Triglycerides Biodiesel Bioplastics

(vegetable oils)
Compound set A Specialty polymers
Soybean, Linseed,
Corn, Canola
Compound set B Polymer additives
Technologies:
Performance
Synergy of Surfactants
Carbohydrates Fuel ethanol
Renewable Adhesives
Starch
Sucrose
Compound C
Coalescent Solvents
Cellulose/Wood Feedstocks
Other Products Other

238
…bottled water
renewable???

239
 HO OH O O
O OH
H
O
O
n

1,3-propanediol

hydrogenation EEP

poly(hydroxypropionate)
HO OH

O
NH2
oxidation CH2
3-hydroxypropionic acid
O

dehydration
HO OH

OH acrylamide
O O CH2
O
malonic acid
acrylic
240
acid
3-HP Derivatives

241
 Succinic Acid as a
Platform
Polyurethanes Polycarbonate/PBT Blends
Nylon

Polycarbonates
TPE’s Adipic Acid Hexanediamine
PBT
Aliphatic
Polyesters N-Methyl Pyrolidone
1,4-Butanediol THF
Solvents

New Crop
Growth
Succinic Acid
Promoters

Salt
Replacements

Sources: MBI, Zeikus, et.al 1999; Sado, et.al, 1980; Dake, et.al. 1987 242
Succinic Acid Derivatives

243
 Lactic Acid As a Platform
Polyurethanes Epoxides TPE’s
Polyacrylic Acid

Polycarbonates
Propylene Oxide Resins

Acrylic Acid
Polyesters
Propylene Glycol
PLA Lactate Esters
Solvents

New
Lactic Acid Chiral Synthons

High Amino Acids
Performance
Food  Pharmaceutical
Materials
Additives Precursors

244
PLA Derivatives

OH

OH

245
Levulinic Acid Derivatives

246
 DuPont Sorona polymer; part of polymer is 1,3-propanediol from ferment
HO OH

DuPont Sorona
http://www.dupont.com/corp/new
DuPont Sorona
s/daily/images/dn_photo_sorona2
http://www.azom.com/images/
70x270.jpg
dn_photo_swim229x275.jpg

DuPont Sonona
http://www.jobwerx.com/images/DuPont_sorona_a
pparel.jpg
247
A Change of Paradigm
Old New
Catalyst Heavy Metals ● Enzymes
● Organisms
● Selective catalysts
Solvent System Organic Water

Raw Material Source Petroleum Renewable

Harmful Impacts ● Environment Low to no negative

● People impacts

Production Risk Higher inherent risk Lower inherent risk

● Pressure
● Temperature

Energy Petroleum based Renewable energy

_ Rigid discipline silos Cross discipline team

Sustainability Who cares? A new attribute 248

 Societal Cost of
Hydrocarbons
US Related Data:

• Air, water, and soil pollution

from electric generation cost
$14.8-90.3 billion – each year!

• 1 gallon of spilled oil can

contaminate 1 million gallons
of water!

• Oil pollution from automobiles

causes $4.6 billion in damages
to crops, rivers, forests, lakes
etc

249
Source: Coghill Capital Management
 Societal Cost of
Hydrocarbons (Continued)
Military Costs:

• Strategic Military Bases

($49bn)

• Oil and Gas supply route

security ($20bn)

• Strategic Petroleum
Reserves ($30bn)

• Iraq ($1 trillion! – or

$275mn per day!)
250
Source: Coghill Capital Management
 Societal Cost of
Hydrocarbons (Continued)
Health Costs:

• 760,000 Chinese die each year

due to air and water pollution
($99bn)!

• Lung disease and asthma

caused by pollution ($16.1bn)!

• Lead, Mercury, and Arsenic

poisoning from coal plants is
linked to mental retardation,
learning disabilities, premature
mortality, and to some autism
cases ($88-640bn)

251
Source: Coghill Capital Management
 What Are Fossil Fuels’
Externalities?
Fossil Fuel Costs (Billions $USD)
Low Medium High

Military Base and Supply Route

$49.00 $75.00 $100.00
Security

Environmental Monitoring and

$14.80 $53.00 $93.30
Clean Up

Healthcare Treatment and

$24.03 $237.00 $450.00
Mortality from Pollution

Total Fossil Fuel Costs $88.10 $365.00 $640.30

252
Source: Coghill Capital Management
 What Are Fossil Fuels’
Externalities? (continued)
The Effect on Consumers
2006 Ave. Mid-Societal Consumer
Total Cost/ Unit
Cost Cost Increase
Coal (Short $0.0454
$20.49 $93.83 $114.32
ton) c/kWh
Crude Oil $1.54 per
$60 $26.68 $86.68
(Barrel) gallon

Natural Gas $0.0235

$6.80 $2.74 $9.54
(mmcf) c/kWh

Mid-Range societal cost increases (generation costs only – no distribution or retail

included)

• Coal fired electric generation goes from $0.026/kWh to $0.0714/kWh

• Natural gas electric generation goes from $0.0615/kWh to $0.0851kWh
• Regular gallon of unleaded gasoline goes from $3.46 to $5.01 per gallon 253
Source: Coghill Capital Management