What to Expect in 2008

This is the crystal ball time of year in 'mainstream' media, so I don't see why this blog should be any different. Here's some things to consider / look out for in 2008, a year that could be a watershed for development of new fuels and efficiency technologies for the automobile.

People Will Continue to Throw Money at Corn Ethanol
And no one will be able to give good reason why. I've made no secret of my almost complete and utter disdain for corn-based ethanol (comparatively low energy output, water absorption, infrastructure challenges, diversion of food supply, etc.) In addition to these much discussed shortcomings, now we learn that farmers seeking to benefit from the Corn Boom of the Mid-Aughts have dumped so much nitrogen-based fertilizer into the Mississippi River, it's killed off virtually all species in a 7,900 square mile area in the Gulf of Mexico, a place fetchingly called the "Dead Zone".

So with all that going against corn ethanol, of course we can expect huge increases in spending in this area. Why? Three things: politics, politics, and politics. It's an election year, so pandering to Midwest farm states is essential. The recently passed Energy Bill (excuse me, the ‘‘Energy
Independence and Security Act of 2007’’) dramatically increases funding on ethanol production and research, leading elation on the part of upstart suppliers like VeraSun.

Order of the Day (er, Year): Mergers and Acquisitions
Maybe you saw the news about VeraSun acquiring USBioenergy for stock. The resulting company will have enough (planned) capacity to put sector titan Archer Daniels-Midland in the number 2 spot.

Oh, we're just getting started. There's a glut of small, cooperatively owned ethanol producers throughout the Midwest (Iowa alone has 29 plants up and running with another 18 under development.) Next, the ethanol craze has produced a high demand for corn , thereby dramatically increasing costs for these small producers. Lastly, the federal government has legislated a huge jump in biofuel capacity, making the big suppliers eager to jockey for position.

The result? A whole bunch of small suppliers are going to turn the keys over to the big boys. The shakeout that follows will benefit the usual suspects like ADM and Monsanto. Smaller winners maybe VerSun, Range Fuels, Pacific Ethanol, and some others.

While ethanol company activity will get the lion's share of attention, M&A activity will extend to other alternative sectors as well. A precursor could be Ballard's sale of their automotive fuel cell business to Daimler and Ford.

OK, this is getting too long. I'll break it into separate posts. More later (I've still got 9 days before the New Year...)

EVS 23 Brain Droppings

Had an opportunity to spend the day down at the Electric Vehicle Symposium last Monday in Anaheim, CA. What follows are some top line observations and some really awful pictures I took with my exceedingly lame camera phone.

Two "Oh Crap" Moments: A number of presentations included some telling projections. For example:

• Current vehicle ownership: 12% of the global population (820 million vehicles). By 2020, it'll be 15% (1 billion vehicles). Highest growth, not surprisingly, will be in the developing world (India, China, Brazil, etc.) That’s 150 million more vehicles on the road in 12 years. Good chance that a large percentage of these will have to be alt fuel.
• California GhG Emissions goals. 80% reduction by 2050. To get there, one scenario
  estimates that 11% of the cars on the road will be gasoline powered ICE. The vast majority will be alt fuel mixed with battery driven electric drive. (BTW, hydrogen was estimated to be ~12%. I doubt it'll even be that much.)

Batteries Will be Ubiquitous: No matter what technology or fuel was being discussed, batteries are invariably the central theme. Now, granted it’s a conference about electric vehicles, so batteries are going to be part of the conversation. That said, the constant attention paid to batteries (chemistry, capabilities, etc.) speaks to the critical role advances in these technologies will play. Not surprisingly, the companies seeking the fill this rapidly growing need were present and accounted for: A123, EnerDel, etc.

First Sign of the Apocalypse Confirmed: In a presentation on the Chevy Volt, GM admitted that they’ve “made some mistakes in the past” related to efficiency technologies. Come to think of it, that probably qualifies as Understatement of the Decade as well...

Legislation Will Impact the Alt Fuel Market From All Directions: Whether it be emissions reduction (e.g. UK Low Emissions Zone around London), spurring innovation (e.g. Austrian Agency for Alternative Propulsion Systems), or other areas, governments will continue to be play a critical role. A combination of legislative carrots and sticks will provide huge opportunities for those companies that are to successfully anticipate and react.

I Get the Feeling China Is Big: No conference today is complete without a discussion about China and the implications of its market. No exception here. An official from the Chinese Ministry of Science and Technology gave a brief talk on the state of EV research and emissions there. Essentially, the combination of a rapidly growing energy gap (resulting from a deficit of oil imports compared to growth in vehicle ownership) and air quality (or lack thereof) mean the government will be playing a very active role in developing and promoting alt fuel and efficiency technology adoption. One way will be through legislation: in 2000, the floor of Chinese vehicle efficiency was 9.5 liters per 100 KM. In 2010, that will drop to 6.7L / 100KM. The expectation is that the Chinese government will be investing heavily in R&D to facilitate necessary breakthroughs. One estimate was the MOST will receive 2.5% of GDP by 2020 (compared to 1.4% todat and under 1% in 1996.)

Tesla Update: The upstart EV car maker had a only a small booth, but had the foresight to put one of their roadsters in it. As a result, their set up regularly out drew the larger manufacturers, including Chevy Volt and the largely ignored Honda FCX Clarity. To be sure, the company still draws considerable buzz, but you get the feeling that there’s a certain antsiness to see these cars on the road after so much hype. At a presentation on the battery system, the Tesla rep pointedly wouldn't address questions regarding the transmission challenges they've been having. Still, he indicated that first deliveries will take place Q1 2008. Also, no warranty info about the battery pack as of yet, but the speculation is that it will be about 5 years / 100K miles driven.

Battery Buzz: Argonne National Labs partnered with EnerDel to research battery technology focusing on lithium Manganese spinel /lithium-titanate chemistry. Findings seem to indicate excellent power capability and life potential for a lower cost than comparatives.... A representative from Japan's Yuasa Corporation gave a technical discussion of their EH6 battery product. Given the reaction from the (very large) audience, there was a high degree of interest in the product. Lots of questions regarding cost, availablity for testing, distribution, etc. No other presenter in the forum had a similar level of interest.

Bob Lutz and I Are on the Same Page About Hydrogen

Timing is everything, I suppose.

Just posted last week about my lack of enthusiasm for hydrogen. Well, it turns out that GM's Bob Lutz isn't exactly setting his watch by the anticipated arrival of the hydrogen economy. Here's what Lutz had to say to US News and World Report's Rick Newman on November 16:

Newman: "So of all the different technologies GM is working on, how would you prioritize them?"

Lutz: "Electric. Advanced hybrid. Plug-in hybrid. Advanced clean diesels. And far out, there's hydrogen."

Not quite a ringing endorsement for the near term (or even long term) application of hydrogen. Click here for the full text of the interview.

Easy Hydrogen a Nice Idea, But No Quick Fix.

I admit it. I'm biased against hydrogen. I rarely write anything about it here because, frankly, I remain overly dubious about hydrogen ever making a meaningful impact on personal transportation. The number of hurdles that hydrogen has to surmount to become viable (processing, infrastructure, vehicle development, etc) are well chronicled. And after decades of work and billions of dollars spent, we don't seem any closer to the proverbial "hydrogen economy."

That all said, there's some interesting research going on at Penn State. In work funded by Air Products and Chemicals and the National Science Foundation, scientists have filled out patent applications for a process that converts organic waste to hydrogen "cheaply and efficiently."

Now let's be clear. If I tried to track all the research that's going on this area, I'd have to quit my day job (and you people aren't clicking on my adwords enough to let me do so...) And frankly, much of the research falls into the, shall we say, overly academic space (like using spent eggshells as a fuel source.)

There's something about Professor Bruce Logan's research, though, that's interesting. Maybe it's because he seems to solve problems associated with cellulostic ethanol (to difficult to break down the sources) and hydrogen (too expensive/wasteful to produce the hydrogen) in one fell swoop.

Using microbial fuel cells and a variety of fairly generic ingredients (e.g. off the shelf exchange membranes, acetic acid, etc.), the researchers were able to generate hydrogen at a rate about 4x - 5x more efficient than standard water hydrolysis. The results, it would seem, are remarkable:

"This process produces 288 percent more energy in hydrogen than the electrical energy that is added to the process. Water hydrolysis, a standard method for producing hydrogen, is only 50 to 70 percent efficient."

Too good to be true? Time will tell. And we'll have lots of it, because even if Logan's research continues to bear fruit, there's still a long way to go before hydrogen is the future fuel many want it to be.

Will It Really Be A Better Place?

Shai Agassi's been in the news a lot recently. The former SAP wunderkind recently launched Project Better Place, a company focused on developing recharging systems to support a presumed mass adoption of electric vehicles. With $200 million in first round startup capital (from sources like Venture Partners and the Israel Corporation), the resources are in place to get Agassi's unique concept rolling.

His plan is to attack two sides of the EV equation. The first, and this is the part that's gotten most of the attention, is to develop "extension cords", or places where EVs can either power up. This would involve developing infrastructure at fixed locations such as parking lots, homes, office parks, etc. For long range travelers, Agassi envisions battery "hot swap" locations: drive in, pull out a drained battery, push in a charged battery, drive off.

The second, less visible part of the company strategy involves, for all intents and purposes, the infrastructure for the infrastructure. Agassi is leveraging his SAP experience to develop the software that will "run" these new charging systems: integrating disparate grid systems, managing demand, setting priority, etc. From the man himself:

"This is where my expertise comes from. I had a great school at SAP, [I've developed] an understanding of business models and the complexity of multiple different systems in multiple different industries."

With enormous start up capital, management pedigree and experience, PBP would seem to be one of the new alternative transportation darlings of Silicon Valley. And why not? PBP has requisite trappings: a game changing, disruptive idea that (if successful) will fundamentally change the way people approach driving.

But is it a viable idea?

Personally, I love the concept, as it wholly re-envisions the auto industry. The idea of battery "hot swapping" is particularly interesting, as it helps remove one of the major obstacles to mass adoption of EVs: concerns about the cost, capability and longevity of batteries.

But it seems that a project of this magnitude is going to have a very long burn. There are enormous hurdles to clear, mostly around getting government, grid operators, auto manufacturers, etc. to place nicely in the sandbox together. And then there was this tidbit from the Q&A at the company launch (video here):

"You'll see us scale to a pretty wide test to test hundreds of thousands of vehicles in 2009."

Now unless he's going to be using some of that money to greatly expand the current fleet of EVs currently on the road, I'm not sure where these test subjects are going to come from. Maybe that line is for the investors, but its one of a number of comments that seems slightly disconnected from the current state of EVs.

In the end, I suppose that the real goal of Project Better Place is the software development component. If they plan on rolling out regionally (with local investment playing a significant roll in doing so), the software becomes to the money maker, while putting the onus of hardware implementation on others.

Range Fuels Featured in NYT

Nice article on the front page of the NYT business section about Range Fuels today. While Range isn't the only biomass-focused company to be mentioned (Bluefire, Virent Energy Systems, and Dynamotive Energy Systems all receive nods), Range gets the lion's share of the attention due to the ground breaking on their Georgia facility.

Not much new information explored or revealed that we didn't already know (see earlier Range posts here and here.) That said, the groundbreaking and ensuing media attention point to a company that, while still in its infancy, appears to have its act together.

Telsa Starts Getting Its Act Together

The regime of new Tesla Motors CEO Michael Marks (earlier post) has already started to pay dividends .

Back at the beginning of the year, Tesla announced that, in addition to launching a new car company, it was going to into the battery systems market. What, taking on the established old guard automotive industry isn't enough? You also need to pick a fight with the rapidly growing a hyper-competitive new battery technology crowd? Sounded like a two front war... one that would have stretched company resources to the breaking point.

Enter Marks (replacing former CEO Martin Eberhardt) and exit the battery business. In the company blog, Marks makes clear that the focus is on the company's nascent vehicle business.

While tearing up the $43 million contract the company had with Norwegian EV maker Think (careful following the link: annoying audio after the jump) couldn't have been easy, it allows Tesla to concentrate resources on nailing down outstanding issues related to the launch of their roadster and, ultimately, the four doors sedan.