Energy 101 - transportation

Truman National Security Project

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Biofuels 101

What Every American Should

Know about Biofuels


Definitions and Benefits Biofuels are a type of transportation fuel whose energy is derived

from biomass conversion, as well as solid biomass, liquid fuels and various biogases.

Biofuels are gaining traction as a transportation fuel because of: oil price hikes the need for increased energy security concern over greenhouse gas emissions from fossil fuels support from government subsidies

Biofuels emit fewer greenhouse gases than gasoline refined from oil.

They are made from renewable sources.

Key Takeaway: Biofuels can play a key role in reducing our dependence on oil and reducing greenhouse gas emissions.


Biofuels: 1st and 2nd Generation

1st Generation

The most commercially viable biofuel today is grain ethanol (corn or sorghum).

90% of gasoline today contains 10 percent ethanol (E10). EPA recently approved the use of 15% ethanol in our vehicles (E15).

In 2011, the U.S. produced more than 13 billion gallons of ethanol (the vast majority corn based).

2nd Generation

Advanced or Next Generation Algae fuel Cellulosic ethanol (made from

wood chips, corn cobs, corn husks, citrus waste)

Biodiesel (Used mainly in Europe and in busses)

Reduces greenhouse gas emissions by 86%.

Cellulosic ethanol production is predominantly in pilot phase.

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Truman National Security Project 4

Food Vs. Fuel In 2008, the Grocery

Manufacturers Association (GMA) launched a smear campaign to blame the rising cost of food on American ethanol producers.

Studies have found that the causes of food spikes in 2008 were due to: speculation in the commodity

market high oil prices the cost of shipping and

manufacturing

Ethanol is made from Yellow 2 corn which is used primarily for animal feed.

A by-product of ethanol production is Distillers Grains, a nutritious feed for animals. Approximately a third of every

bushel of grain that goes into ethanol is returned as Distillers Grains.

Key Takeaway: Grain ethanol production has a small impact on food prices but the main driver is non-commercial speculation and high oil prices. Cellulosic and advanced ethanol will not compete with any food or feed sources.


Subsidies and the RFS The Volumetric Ethanol Excise Tax Credit (VEETC)

Subsidized the production of ethanol in the United States. Originally set at $0.54/gallon to offset the $0.54 ethanol

tariff on imported ethanol, then reduced to $0.45/gallon. The VEETC and import tariff were completely eliminated on

December 31, 2011.

The Renewable Fuel Standard (RFS) 2005 Standard required 7.5 billion gallons of transportation

fuel to come from renewable sources by 2012. The Energy Independence and Security act of 2007 set a

goal of 36 billion gallons of renewable fuel by 2022 (21 billion gallons must be from advanced or cellulosic ethanol, 15 billion from grain).

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Future of the RFS

The RFS has been attacked by Big Oil as an “ethanol mandate”.

RFS is only energy policy in

place to reduce dependence on oil.

Billions of dollars have been invested in advanced biofuels with the expectation that Congress will stay committed.

Dismantling the RFS would choke funding for advanced

ethanol production.6

Key Takeaway: The RFS has been critical driver of innovation and investment in next generation ethanol. Eliminating RFS will send wrong signal to investors.

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Challenges and Opportunities

The Blend Wall: Majority of cars on the road can only run on gasoline with E10. Vast majority of our gas stations only dispense gasoline with E10. Ethanol industry is producing more ethanol than it can legally dispense.

Solutions: Short Term Fix: E15 Long Term Fix: Flex Fuel Vehicles and Flex Fuel Pumps

A full move to E15 temporarily alleviates blend wall problem by opening up market to more ethanol (1st and 2nd generation).

Flex Fuel Vehicles run on higher level blends of ethanol (E0 to E85). Flex Fuel Pumps dispense these levels. U.S. Auto Makers have committed to building more Flex Fuel vehicles at the same time that U.S. ethanol trade groups are working to put more Flex Fuel pumps in the ground.

Choice at the pump will create competition in the fuels market, reduce prices and break Big Oil’s monopoly on the fuels market.


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Energy 101:

Energy

Efficiency


Energy efficiency is about using electricity, natural gas, and liquid fuels

more wisely to

improve the nation’s energy security, economic

competitiveness, and environment


An upfront investment of $520 billion

by 2020 would unlock $1.2 trillion in energy

savings.

Energy efficiency in the buildings sector represents a largely uptapped economic opportunity

“

”…but only if the nation can craft a

comprehensive and innovative approach to unlock it.

- McKinsey analysis from “Unlocking Energy Efficiency in the U.S. Economy”


President Obama has focused heavily on energy efficiency

Make non-residential buildings 20% more efficient by 2020

Reduce greenhouse gas emissions by 17% by 2020 and 83% by 2050 (compared to 2005 levels)

Reduce oil imports by one-third by 2025


Buildings consume 40% of the nation’s energy


The Administration works to improve efficiency in the residential, commercial, vehicles market through: • industrial and funding research

and development of new technologies,

• Setting energy performance standards for appliances, and

• supporting states in policy development


The states are the leaders in setting policies to improve energy efficiency

More than 30 states have legislated or voluntary targets for efficiency improvements that the utilities are directed to achieve state-wide.

Source: C2ES


Increasing vehicle efficiency is the most effective near- and mid-term policy solution to reducing oil consumption

INSERT Graphic to demonstrate that 3 out of every 4 barrels of oil goes into the transportation sector

INSERT Graphic to demonstrate that 80% of oil use within transport goes into ground transportation (as opposed to air or sea)


Over the last 30 years, vehicle technology advances have gone into making heavier & faster vehicles at the expense of improving fuel economy


Along with replacing fossil fuels with non-food-based biofuels, the most effective strategies to reduce fuel consumption are to:• Improve efficiency through developing

advanced, lightweight materials• Improve the efficiency of internal

combustion engines, and• Electrify the vehicle fleet


The Administration’s new fuel economy standards will improve our energy security and result in large savings at the pump


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Energy 101:

Electric and

Hybrid

Vehicles


Electric and Hybrid Electric VehiclesUS Government subsidies of up to $7500 to per purchase (based on fuel economy efficiencies) have improved electric and hybrid vehicle sales. In addition, some states, such as California offer up to $5,000 in tax credits per purchase to further enhance the value proposition.

Different technologies yield different fuel economy / emission results:

Definitions: Electric Vehicle: A vehicle which contains no petroleum

powered internal combustion engine. Battery technology is utilized to store the power used to propel the drive train.

Hybrid Vehicle: A vehicle that combines petroleum and electric power to propel the drive train. There is a spectrum of technologies that alter the ratio of battery to petroleum utilized, and thus, the emissions and fuel economy savings.

Electric / Hybrid Vehicle Spectrum

Petroleum Internal Combustion Engine

Parallel / Mild Parallel Hybrid Engine

Series Parallel Hybrid Engine

Series Hybrid Engine

Plug-in Hybrid Electric Engine

Fuel Cell Engine

Electric Engine


There are multiple types of viable hybrid electric vehicle configurations available, each with their own markets, benefits and challenges

Vehicle Type Description Example

Parallel / Mild Parallel Hybrid

Single electric motor is coupled with ICE (internal combustion engine). Electric motor assists with acceleration. Regenerates during braking

Honda Insight Honda CRZ Mercedes S400

BlueHYBRID

Series Parallel Hybrid

One electric motor coupled with one ICE motor. Each are capable of powering the vehicle, and each is used in different ratios as driving conditions require as controlled by on-board computer

Toyota Prius Ford Escape Ford Fusion

Series Hybrid or Extended Range Electric Vehicle (EREV)

Electric motor powers the drive train with a ICE to power generators that feed power back into the electric motor as conditions require

Chevy Volt

Plug-in Hybrid Electric Vehicle (PHEV)

Similar to a Mild Parallel Hybrid with extended range electric capacities due to Lithium-ion batteries

Ford Escape Plug-in Honda Civic Plug-in

Fuel Cell

Similar to Series Parallel however, instead of ICE, a fuel cell engine is coupled with an electric motor. Zero emission vehicle

Chevy Equinox FCEV Ford Edge Hyseries

Electric Vehicle

Vehicle powered solely by an electric motor. Currently range of vehicle per charge is limiting wide adoption. Zero emission vehicle.

Tesla Motors Nissan Leaf


There are currently two prevailing operating models for electric vehicles Currently, battery range per charge for vehicles remains below 50

miles for most affordable electric vehicles. Tesla Motors has a luxury sedan that boasts a 300 mile range per charge, however, it is priced well above the median auto purchase price of $28,000

After driving to destination, vehicle is plugged in to charge and is back on the road. Current recharge times are 4-8hrs depending on voltage and battery depletion.

Operating Model 1: Use and Recharge

Operating Model 2: Battery Swap Out / Subscription

Drivers pull into battery changing stations to have battery removed and replaced. Battery swap currently takes 5-10 minutes depending on model

Not sure this is accurate

anymore. Just saw a Ford

announcement for the Focus Electric with 76mpc, and

operational tests for over 100.


The greatest challenge to the viability of hybrid and electric vehicles lies in the establishing lost cost supply-chain to meet consumer price pointsThe established automotive supply chain requires time to reach economies of scale and experience to drive down the costs of hybrid / electric vehicles. However, as a mature industry, the supply chain’s ability to adapt to changing consumer demands should be realized by 2015.

A look at a typical automaker’s supply chain representing hundreds of thousands of jobs:

Auto Company Manufacturer

Tier 1 Supplier Tier 1 Supplier Tier 1 SupplierTier 1 Supplier

Tier 2 Supplier

Tier 2 Supplier

Tier 2 Supplier

Tier 2 Supplier

Tier 2 Supplier

Tier 2 Supplier

Tier 2 Supplier

Tier 2 Supplier

Hundreds of Tier 3 Suppliers feeding into Tier 2 Suppliers


Electric vehicles are the key to reducing oil consumption and vehicle-borne carbon emissions in the transportation sector

Electric and hybrid-electric vehicle technology have become viable technologies for the personal transportation market and sales are expected to reach 65% of all auto sales in 2030

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

2012

2020

Global Small Vehicle Sales

Global Electric Hybrid Sales

2025

2015

2030

By 2030, oil consumption is reduced by 18% of 2010 consumption levels. U.S. fleet turnover rate is currently 12-15 years. At this projected rate, adoption is expected to accelerate beginning 2018.

Note: Based on 2009 McKinsey study of electric vehicle adoption rates and auto industry growth. Electric vehicle adoption numbers verified by Becker/Sidhu UC Berkeley 2009 study: “Electric Vehicles in the United States”


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Energy 101:

Oil


The U.S. imported 45% of its petroleum from foreign countries in 2011

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Rank Country Million bbl/d1 Canada 2.22 Saudi Arabia 1.23 Mexico 1.14 Venezuela 0.95 Nigeria 0.8

Source: EIA, U.S. Imports by Country of Origin, 1/2007-12/2011

Nearly 69% of U.S. imports originated from five countries


Crude oil is produced in 31 U.S. states and U.S. coastal waters.

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Source: Energy Information Administration


Oil is traded on a world market, and oil price is impacted by global supply and demand

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Source: Energy Information Administration

Demand for oil is expected to grow, especially in Asia and developing economies

Geopolitical events, such as the Arab Spring and U.S. sanctions on Iran, can lead to supply disruptions

Supply in the future is expected to come from the MENA region

Companies are increasingly turning to difficult and more costly sources to unlock supply, such as the ArcticSource: Energy Information Administration, International Energy Agency


National Oil Companies hold about 90% of the world’s oil reserves

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•International Oil Companies, including U.S. companies like ExxonMobil, account for less than half of global production

•National Oil Companies are owned partly or in whole by a national government, such as Saudi Aramco (Saudi Arabia) and Petrobras (Brazil)

•States use revenues from NOCs for government programs and/or objectives


Energy Security: Spare Capacity, Strategic Petroleum Reserves

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Spare capacity can act as a cushion to insulate the world oil market from supply shocks. EIA defines spare capacity as the volume of production that can be brought on within 30 days and sustained for at least 90 days. Global spare capacity is currently tight.

Saudi Arabia, the largest oil producer within OPEC, and the world's largest oil exporter, historically has had the largest spare capacity (usually keeping more than 1.5 - 2 million barrels per day of spare capacity on hand)

The U.S. President can tap into the Strategic Petroleum Reserve (capacity of 727 million barrels) for a “severe energy supply interruption,” not necessarily high gasoline prices•The Department of Energy oversees the SPR, located at four Gulf Coast sites•A presidentially-directed release has occurred three times: 1) 1991 during the first Iraq War, 2) 2005 after Hurricane Katrina and 3) 2011 to offset global supply disruption from political events in Libya and other countries.

Source: Energy Information Administration, U.S. Department of Energy

Energy 101 - transportation

Technology

ethanol tariff

percent ethanol

production of ethanol

place ethanol

ethanol industry

ethanol tradegroups

ethanol mandate

imported ethanol