A case for decision science research in energy

March 16, 2010

A sustainable low carbon future is seen by most to center around breakthroughs in technology and the associated economics.  Most of the attention has been on carbon sequestration, biofuels, renewable sources of electricity and the like.  A number of states and countries have instituted policies to make some of these happen.  Many also see electrification of transportation as an avenue to zero emission vehicles and energy security of net oil importing nations.  All of these cause people to make choices, in many cases requiring changes in behavior.  Introducers of technology know that the barrier to wide scale adoption is particularly high when it involves substitution of something familiar.   The science of why people make the decisions they do, especially those involving green alternatives, merits further investigation, if for no other reason than that it may guide product and process development into areas with higher success rates of adoption.  It will undoubtedly be effective in informing on policy.  An example is in the area of solar energy.  If the primary driver for adoption is “seen as being green”, then hiding photo voltaic devices inside shingles would be counterproductive, as also the policy of many neighborhoods to disallow visible displays of solar panels on homes.

The International Energy Agency (IEA) has posited that for any reasonable 2050 targets for atmospheric carbon dioxide nearly 40% of the mitigation has to be from energy efficiency.  Their most recent forecast calls for 57% of carbon mitigation by 2030 as being from energy efficiency (and interestingly only 10% from carbon sequestration).  Undoubtedly this will in large measure be accomplished with engineering designs that provide the same utility for less energy. This has been the case with up to 90% reduction in standby power of household appliances through the simple expedient of low energy power supplies and modified circuitry.  Since standby power constitutes 10% or so of all electricity usage in IEA countries, this is a huge gain.  The Energy Star and similar efforts have produced further results, although some of these fall in a different bucket, that of the same utility at a somewhat greater price.  In the case of compact fluorescent bulbs, the initial price is higher but the life cycle cost is lower.  Now this begins to get into the realm of decision science because the consumer is required to understand and appreciate life cycle costing.  We are firmly in it for cases where the costs are substantially higher, as in the case of hybrid vehicles. Electric cars will get squarely into the behavioral arena from the standpoint of range anxiety, which is roughly defined as the fear of running out of charge.

Electrification of transportation is an RTEC priority because we see it as the fastest route to energy security through making electricity fungible with oil.  Furthermore, well to wheel efficiency of electric cars is about 45% better than that of conventional cars and the tail pipe emissions are zero, although the burden is shifted to the power producer, where it is more tractable.  Consequently, enabling the public’s acceptance of electric cars is an RTEC priority.

Addressing range anxiety and other behaviors falls at least in part in the area of decision science.  Some of it can be addressed with technology.   For example, Nissan’s introduction of the Leaf later this year will be accompanied by features such as remote monitoring of the state of charge of the battery and driver notification, including identification of the nearest charging station.  But in most instances, technical advances only take us so far.  When smart electricity meters are installed in homes, there is high variability in the manner in which the data are used by the homeowner.  Behavioral studies are needed to guide the programs to achieve the best results.  Non price interventions that rely on behavioral proclivities, such as conformance to societal norms, can likely be used to advantage.

In their matrix of program thrusts, DOE’s newly formed unit ARPAe has a matrix element that intersects social science efforts with transportation.  RTEC believes that this could be a fruitful area of pursuit for RTI/Duke/UNC collaboration.  One possible project would combine conventional survey based approaches with behavioral economics ones in addressing the electric car range problem.  At this time this is based on guesswork premised upon beliefs regarding consumer preferences when driving conventional cars.  Statements such as “the consumer expects a range of 300 miles” are rife.  A definitive study of driving distances in metropolitan areas that are initial target of electric vehicle entry could then be used to devise behavioral studies, the results of which could be expected to drive out interventions, both price based and not.  To aid this, the original study would be broken out by age, income and other relevant demographics. Finally, the interventions themselves could be tested on a population.

The foregoing notwithstanding, RTEC believes that the greatest gains for society in the realm of sustainable energy are going to come from simply using less.  Consequently, a major focus will be to encourage and assist members in devising social science based research with this goal in mind.

Natural Gas as a transition fuel for Carbon Mitigation

February 11, 2010

Synopsis:

Natural gas is increasingly being proposed as a transitional fuel for carbon mitigation; even by NGO’s that in the past were firmly opposed to all fossil fuels.  RTEC has examined the underlying premise and concludes that it is well placed as an organization to play a significant role in informing on the policies that will drive the energy sector in this area.  This is in keeping with a key RTEC goal for this year: to be a more visible player in energy.

Why Natural Gas?

The most popular carbon mitigation strategies center on renewable energy sources.  The foremost among these are wind, solar and biofuels, with just the last addressing oil replacement.  This discussion will focus solely on power production.  The majority of power is produced from combustion of coal, especially so in China and India.  Despite strong support for coal in Washington, and the technical viability of clean coal, a confluence of events suggests a slow down in coal combustion is likely.  These are discussed below.

• California has already taken the lead to require coal plants to reduce emissions to the levels of natural gas plants, which is a fifty percent reduction, as opposed to ninety percent that previously was seen as a target.  Federal legislation is likely to emulate this in some manner.  This means that gas burning plants require no CO2 sequestration.
• The lower requirement reduces the cost for sequestration at coal plants.  For post combustion capture, depending on the technology, the cost is likely to be in the general vicinity of 3 to 3.5 cents per KWh.  The current cost is about 6 to 6.5 cents per KWh.  So the fully loaded cost will be close to 10 cents.
• The cost of electricity from natural gas can, as a rough rule of thumb, be estimated to be one cent per KWh for every $ per MMBTU.  So, at today’s natural gas price of about $4 per MMBTU, the cost is roughly 4.5 cents per KWh.  At $10 per MMBTU the cost would be about 9.5 cents per KWh.  In the last two decades, gas spot price has been above $12 for only four months, non contiguous.   If domestic supply holds up from the new shale gas reserves, few expect the price to go beyond $8, certainly not $10.  $10 is the effective breakeven with cleaned up coal, and with much lower capital investment.   Consequently, purely on economics and environmental compliance, gas plants make a lot of sense.
• Gas plants are an effective complement to renewable sources, which have diurnal and other variability.

Why Not Natural Gas?

• A shift away from coal to natural gas has to meet the critical hurdles of affordable gas and supply assurance.  The UK took this step in the belief that North Sea natural gas would be plentiful. This forecast did not hold up, and now the UK is forced to import, often at high cost.  For the US, reliance on foreign sources of Liquefied Natural Gas (LNG) would present issues, not the least being the high carbon footprint of LNG.  Alaskan gas, while plentiful, has deliverability issues.  So the future of such a shift relies upon the ability to exploit the massive shale gas reserves.  As noted above, if available, the price of gas is likely to be competitive with that of cleaned up coal.  Also, unlike oil, gas will not have any hidden military costs associated with assurance of foreign supply, since it would be entirely domestic.
• The bulk of the shale gas potential is in New York and Pennsylvania, states that are substantially unused to petroleum production (despite Pennsylvania being essentially the birthplace of oil in the US).  Public push back has been substantial, on the grounds of pollution believed to be caused by the fracturing operations essential to the production.  Drilling in parts of New York has ceased on account of this.  When ExxonMobil purchased XTO for over $30 billion, they considered the threat material enough to make closing of the deal conditional on freedom to operate.  Resolving the looming impasse could be critical to any strategy to replace coal with natural gas for electricity production.

Role for RTEC

• There does not appear to be any entity that has knowledge in the areas of the issues mentioned above and yet is non-aligned.  This is the opinion of executives at two petroleum related companies and two NGO’s with whom we have spoken.  A stated goal for RTEC is to identify compelling energy issues and play a key role in matters pertaining to a select few of these issues.    RTEC members have in depth understanding of the technology and economics associated with clean coal and natural gas production.
• In the critical area of economic viability of producing shale gas in an environmentally acceptable manner, RTEC will enter the debate with insights regarding the validity of public angst and the ability of industry to be responsive to the issues with merit.  In particular, we have been approached by the Sierra Club to work with them and others to craft legislation in Pennsylvania.  The Sierra Club, World Watch and EDF have all realized that their absolute objection to new coal derived electricity is not reasonable without support for an alternative.  Consequently, they are backing natural gas as a transitional fuel.  However, they want this to happen against the backdrop of environmentally secure production of shale gas.  Hence their need for a respected third party to weigh in on the issues.  RTEC expects to source one or two other non-aligned experts to augment its expertise, provided the costs are borne by the Sierra Club or another entity.  The Sierra Club is clear on the point that RTEC does not support their opposition to clean coal and is merely acting as a resource to resolve shale gas issues.
• If we feel we are making a real difference, we will consider measures to have a cadre of experts on call for consults from NGO’s and government bodies.  This may require seed funding, especially if a relational data base is part of the solution.  Ultimately, this could be a free standing unit whose span of influence could expand into other areas.

Potential Impact on US Energy

If natural gas fired plants are employed for new capacity, either for demand growth or replacement of ageing coal facilities (Progress Energy just closed thirteen coal fired plants in North Carolina), it provides breathing room for alternatives.  In particular, it gives time to resolve the issues surrounding clean coal, whether real or perceived.  RTEC continues to hold the view that clean coal is a viable part of the energy mix, especially when one considers the world at large.  Specifically, we expect post combustion capture and storage to be strongly in play for existing coal fired plants, especially those with many years depreciation remaining.

Eventually new base load capacity could go to Integrated Gasification Combined Cycle (IGCC), the long term clean coal solution.  We would expect also, that in the next ten years or so the nuclear option will be selected for new base load capacity and natural gas will begin to be phased out.  Price and availability of gas will determine the rapidity of this decline.  This is where the shale gas comes in.  If the known reserves can be accessed, there is reason to expect availability to be high.  Unlike offshore reservoirs, the time horizon between decision to drill and actual production is relatively short.  This is likely an effective antidote to rising demand driving up prices to double digits per million BTU.  Much of the new shale gas is profitable at $5 per MMBTU.  All of this leads to the hypothesis that natural gas prices will stay in single digits.  If they do, gas will remain competitive with clean coal and with lower up front investment, and so a shift away from it may not happen until nuclear power build up is significant.

In conclusion, if shale gas can be recovered in a fashion acceptable to the public, the reserves could be sufficient to support natural gas as a transitional fuel until cleaner alternatives become viable.  RTEC is positioned to play a key role, possibly a deterministic role, in the outcome.

Can North Carolina be a domestic source for lithium for electric vehicle batteries?

February 14, 2009

Making transport fuel fungible with electricity offers options to net importers of oil such as the US.  As a state, North Carolina is in the unenviable position of importing all of its fuel from other states.  While biofuel will undoubtedly play a role in reducing this import, electrifying the fleet offers another avenue.  The primary mission of electric vehicles(EV’s) would be the reduction or elimination of tail pipe emissions, the notoriously most difficult site for carbon dioxide capture, although a secondary one may be to act as a storage medium for the grid.  The FRDM program, led by NC State University, targets creating all elements of a Smart Grid, which would be a key vehicle in grid optimization.  So, North Carolina is already well placed to take a lead in electrifying the passenger vehicle fleet.

EV’s such as GM’s Plug-in Hybrid (PHEV), the Volt, scheduled to be marketed in 2010, are intended to be charged in conventional electrical outlets, with a gasoline engine for charging the batteries if needed to go beyond the nominal range, 40 miles in the case of the Volt.  Pure EV’s, running solely on electricity, such as one scheduled by Nissan for limited entry in 2010, are also likely to be part of the equation.  If such vehicles are to become a substantial portion of the passenger vehicle fleet, several economic hurdles will have to be crossed, some possibly needing subsidies.  The principal of these is the expected higher cost of the vehicle (pure EV’s, because of their simplicity of design, will be somewhat lower in cost than PHEV’s), driven largely by the cost of the battery.  Research to reduce cost and increase range is ongoing in this and other countries, and the current administration has announced the intent to significantly fund this endeavor as part of the Stimulus Package.

Batteries: The Lithium Ion battery is the clear leader in this field and many believe it will continue to be so for the foreseeable future.  Other manner of sophistication, such as augmentation with super capacitors for short  bursts of power, is expected to reduce the load on the batteries.  However, the current unit costs are high, although high volume throughput has not yet been in place.  One can expect the costs to come down over time.  A point of note is that while the technology is domestic in many cases, all battery manufacture is currently in other low labor cost countries.  However, as in the case of foreign designed cars, domestic manufacture may become feasible.  Location of such capability in North Carolina would go hand in hand with any decision to make North Carolina a primary launch state for electric vehicles.

Lithium: A more pernicious issue is the sourcing of the critical commodity, Lithium.  World reserves are considerable, but the majority of these are in Latin America, including some countries such as Bolivia who are not in close alignment with the US.  There is the risk of trading foreign dependency of one commodity for another.  Unlike the battery manufacturing situation, a mineral is uniquely situated, as in the case oil.  North America does have sizeable reserves of lithium ore, in the form of spodumene, an oxide, but with current technology the processing costs are high when compared to the cost of processing the brine based deposits in other countries.  The vast majority of spodumene reserves in this country are in North Carolina, in an area northwest of Charlotte.

Call for Action: The technology for spodumene processing deemed non economic is at least half a century old.  Hints exist in the literature for more innovative methods.  In the national interest a research program should be instituted to investigate the possibility of economic recovery of Lithium from oxide ore.  RTEC has commenced a scoping exercise in this area, currently involving a literature search, but a fully fledged investigation will require State or Federal funding.