By: Joel Makower
The seemingly sudden elevation of ethanol in the national consciousness -- capped last month by the "addicted to oil" admission in George Bush's State of the Union address -- shows the value of persistence and patience for those promoting alternative energy resources, and underscores the notion that every underdog has its day. But it also points out that no matter what petroleum alternatives you choose, there will likely be plenty of critics out there. It took barely a single 24-hour news cycle following Bush's speech before enthusiastic headlines gave way to pessimistic reports detailing why the president will likely have a tough time pushing his vision past everyone from environmental activists to Big Oil. Perhaps. But I'm far from ready to run this idea into a ditch. Not long ago, I wrote of General Motors' growing efforts to fuel a national ethanol infrastructure -- what I've dubbed the "Flex-Fuel Freeway," in contrast to the much ballyhooed (and much longer-term) Hydrogen Highway that California and other states have been pursuing with varying degrees of hope and hype. And, indeed, GM continues its aggressive push. During the recent Super Bowl weekend, for example, it launched a Web site and advertising campaign promoting E85. The tagline: "Live Green, Go Yellow." The color yellow refers, in this case, to corn, the principal feedstock of ethanol, as well as to the color of gas caps GM will be putting on the more than 400,000 flex-fuel vehicles capable of running on 85% ethanol (known as E85) that it will produce in 2006. (Full disclosure: I have played a small consulting role to GM on its E85 initiative.) But it's not just GM that's paving the way for the Flex-Fuel Freeway. Ford, too, is touting flex-fuel vehicles, and attempted to one-up GM recently by unveiling plans for a flex-fuel Escape Hybrid. The prospect of such a vehicle is tantalizing -- the Escape Hybrid's EPA-estimated 36 miles per gallon pencils out to about 240 miles per gallon of oil when run on a mixture of 85% ethanol -- but don't bother placing your order quite yet. Ford's flex-fuel Escape Hybrid is still a concept car, and it doesn't even meet current emissions standards. Nonetheless, Ford plans to make a quarter-million or so non-hybrid flex-fuel vehicles this year. All of this is promising, but questions remain: From what will we manufacture ethanol? Who will build the infrastructure to ensure that E85 fuel is easily available to American drivers? And how can all this be done with maximum benefits -- not just in kicking our oil addiction, but also in mitigating climate change? Indeed, the on-ramp to the Flex-Fuel Freeway is pocked with several such challenges. Bush himself addressed the what-shall-we-make-it-from question in his speech. Corn is the current default ingredient for ethanol, at least in the U.S., and studies suggest that the fossil-fuel inputs needed to grow corn negate much of E85's oil-saving benefits. In his speech, Bush announced plans (or at least ambitions -- it's unclear whether there's actual money authorized) to:
fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years.
This is laudatory, albeit hardly a stretch goal. (Quick aside: In his remarks at this year's Clean-Tech Investors Summit, former Bush-the-senior EPA administrator Bill Reilly cracked that in his recent State of the Union address, George W. managed to pronounce "cellulosic biomass ethanol" more accurately than he does "nuclear.") Many experts suggest that cellulosic ethanol -- derived from plant waste and other fibrous materials -- can be ramped up rather quickly. And, since it can be sold through gas pumps at any of the 19,000 or so existing U.S. fueling stations, infrastructure problems are minimal (or at least far less than for hydrogen distribution). And cellulosic ethanol makes the most climate sense, since using waste products requires few, if any, fossil fuels to grow, and even growing special "bioenergy crops" can be done with far fewer petroleum and petrochemical inputs. According to a recent study by Dan Kammen of U.C. Berkeley's Renewable and Appropriate Energy Lab (Download - PDF), the greenhouse gas (GHG) improvements of cellulosic over corn-based ethanol are dramatic. Kammen's review and analysis of various studies concluded that:
The impact of a switch from gasoline to [corn-based] ethanol has an ambiguous effect on GHG emissions, with the reported values ranging from a 20% increase to a decrease of 32%. . . . However, current data suggest that only cellulosic ethanol offers large reductions in GHG emissions.
The other big question is how to grow the infrastructure -- the classic chicken-and-egg question of which comes first: the demand for E85 fuels, or the widespread availability of E85? At present, E85 is available at only about 600 fueling stations around the U.S. And there are just over 2 million E85-compatible vehicles on U.S. roads -- a tiny fraction of the roughly 200 million vehicles registered. Creating a robust network of E85 fueling stations in a given region would require a concentration of flex-fuel vehicles near those pumps. But there are many unanswered questions: How many vehicles and how many fueling stations would it take to create a tipping point in a given region? What can state and local governments do to facilitate this? What industry players would need to be engaged, and in what ways? What kind of driver education would be required? What are the policy barriers that would need to be overcome? So many questions, so little time. But help may be on the way -- at least in California. The Los Angeles Times reported recently that Hollywood mogul Steven Bing and Silicon Valley venture capitalist Vinod Khosla are bankrolling a campaign for a ballot initiative that, if approved, could raise as much as $380 million a year to develop alternative fuels. Dubbed the Clean Alternative Energy Act, the initiative would place a small tax on all oil produced in California -- the U.S. third-biggest crude oil-producing state -- much like taxes already levied in Alaska, Louisiana, Texas, and other oil-rich states. The initiative would bar oil companies from passing the tax on to consumers in the form of higher pump prices. The money would go to a new independent agency that would earmark 60% of the money for programs aimed at developing alternative vehicles and fuels to reduce gasoline and diesel use, 27% to pay for related research at California universities, and most of the rest to help companies put new products on the market. Such an initiative could go a long way toward powering the Flex-Fuel Freeway. But don't get your hopes up. The Times noted that:
A coalition of oil companies and anti-tax activists is already organizing a counter-campaign, arguing that the alternative energy initiative is "nothing more than a hidden tax which could cost consumers and businesses hundreds of millions of dollars every year in higher gasoline, diesel, and jet fuel prices."
All of this controversy and debate is enthusiastically welcome, as far as I'm concerned. Compared with more recent skirmishes around energy independence -- whether to drill for oil in the Alaskan tundra, for example -- this debate holds much more promise to significantly address our energy needs in relatively short order. If we can ramp up E85 -- using corn at first, then biomass, aggressively increasing the fuel's availability and reducing its price -- it could be the first genuine opportunity we have to break our now- acknowledged addiction. Joel Makower is Co-founder and Principal of Clean Edge, Inc.