Cellulosic Electricity: Stock Analysts v. Venture Capitalists

Romm v. Kholsa

In a persuasive series of articles, entitled "Pragmatists vs. Environmentalists" (Parts I, II, and III) on Gristmill, Vinod Khosla provides the reasoning behind his "dissing" of plug-in hybrids, which drew the ire of Joeseph Romm.  Neither seems to think the argument is settled, and Joeseph Romm returns fire here.

As someone who knows as much about investing as Joe Romm and has written as much about Climate Change and Energy Policy as Vinod Khosla, I feel the need to jump into the debate and settle the matter.  (Will either of them will notice?)

To summarize, Khosla argues that cellulosic ethanol shows more promise for reducing carbon emissions than plug-in hybrids because he sees the barriers to plug-ins (the need to improve batteries and clean up the grid) as harder to surmount than the barriers to cellulosic ethanol (the improvement of conversion technology.)  In his words, 

I consider replacing coal-based electricity plants (50-year typical life) a much longer, tougher slog than replacing oil with biofuels (15-year car life).

Romm blasts back reiterating the multiple problems of corn ethanol in response to the first of Khosla’s series, but has not yet responded to his point about cellulosic.  I thought I’d tackle the point about cellulosic myself.

There Isn’t Enough Biomass

According to the National Renewable Energy Laboratory’s From Biomass to Biofuels [.pdf] study, given all the available biomass in the United States, we will only be able to displace a little less than 2 billion barrels of oil equivalent a year.  But we currently use about 7 billion barrels of oil a year, so to displace all our oil usage, we would need nearly a 4x increase in fuel efficiency (not the 1.5x increase in internal combustion engines Khosla talks about.) 

Image source: NREL (From Biomass to Biofuels)

If the problem we’re trying to solve is the need to displace petroleum as the transport fuel of choice (because of both climate change and peak oil), Khosla’s "solution" can at best only tackle about 40% of the problem.

A Third Way: Cellulosic Electricity

Now let’s return to Khosla’s belief that it is simpler to replace the fuel (petroleum) in vehicles than the fuel (coal) in the grid, because of the longer lifetimes of coal plants than cars.  If you take a moment to review my article Ten Insights into Carbon Policy, you will note (insight #2), co-firing biomass in existing coal plants is more effective for reducing carbon emissions than turning it into liquid fuels.  You will also note (insight #9) that electric drivetrains are inherently more (5x) efficient than gasoline drivetrains.

Khosla may be right that we are not going to shut down old coal plants quickly (although my own utility, Xcel Energy, is planning to do just that.)  But even given an existing fleet of coal plant some biomass can be cofired with coal in existing plants with relatively easy retrofits.  Cofiring biomass is part of the Arizona Renewable Energy Assessment, which Black and Veatch predict would cost about 6-7 cents per kWh, and the limited amount included in the assessment is mostly due to Arizona’s limited biomass resource.

According to the NREL report referenced above, converting biomass into cellulosic ethanol can be done at about a 45% efficiency (i.e. 45% of the energy of the biomass makes it into the fuel.)  In contrast, biomass can be converted at 33-37% efficiency [pdf] when cofired.  Combining this with the 5x improvement of drivetrain efficiency that comes with electric propulsion, and the same amount of biomass converted to what I’ll call "cellulosic electricity" will take a vehicle 3.8x as far as it would in the form of cellulosic ethanol.  In a more recent article on Biomass, Vinod Khosla states "we consider [Energy Return on Investment] a less important variable than carbon emissions per mile driven."  If carbon emissions per mile driven are the most important variable, a 3.8x increase in miles driven on the same energy source will lead to a less than 27% of the carbon emissions per mile driven.

While cellulosic electricity is still not sufficient to displace all of our current petroleum use, it comes much closer than cellulosic ethanol.   Biomass cofiring with coal also tends to reduce SO_x and NO_x emissions.

Direct Combustion of Biomass

Biomass is a distributed resource, seldom available in large quantities in any one place.  This will be a problem for the cellulosic ethanol and cellulosic electricity industries.  Only a fraction of the available biomass will be close enough to existing coal plants that it will be practical to transport for cofiring.  Cellulosic visionaries see a system of distributed ethanol plants, yet that still leaves the problem of getting the fuel to market, since the current pipeline system for petroleum products has difficulty accommodating ethanol.  

On the other hand, while distributed direct- fired biomass generation of electricity is probably twice as expensive as cofiring with coal, distributed generation leads to opportunities for Combined Heat and Power (CHP), or cogeneration.   CHP can displace heating fuels such as natural gas, propane, or electricity, and often have combined efficiency from 50% to 80%.  In addition to the potential of displacing additional fossil heating fuel, cellulosic electricity is identical to the fossil fuel derived kind.  Therefore, unlike cellulosic ethanol, cellulosic electricity is completely compatible with the existing electric grid, leading to far fewer difficulties in transport.

A Cellulosic Sideshow

While I’m sure that economic techniques to convert various forms of biomass into ethanol and other liquid fuels will be developed, including by some of the companies in Khosla’s portfolio, I think it is unlikely th
at a large fraction of what is likely to become an increasingly valuable and scarce resource, biomass, will be used for ethanol.  As a scarce resource with relatively inelastic supply, the price will rise to the point where only the most efficient uses will be profitable.  In most cases, cellulosic ethanol is unlikely to be one of the most efficient uses of biomass.

Khosla’s dichotomy of replacing cars versus replacing coal plants is a false dichotomy.  While it is easy to retrofit gas cars to burn ethanol, it is also easy to retrofit coal plants to burn some biomass.  Given the dispersed and varied nature of the feedstock, both solutions are likely to coexist for a long time, but biomass cofiring has a little-heralded head start (unlike cellulosic ethanol, it is already progressing beyond the experimental stage), and cofiring’s superior efficiency should allow it to keep, and widen its lead.

But Vinod Khosla will have little reason to weep.  His Concentrating Solar Power investments will also be fueling our cars, and his "clean coal" technology has the potential to produce carbon-negative cellulosic electricity.