Today I am giving a talk at the Southern Energy and Environment Expo in Asheville, North Carolina. It is an amazing three day affair full of everything from solar systems to rain water catchments to biofuels. Here is what I plan to say:
Biofuels will be good for your wallet, and that is a new argument from me.
We used to make biodiesel in the back yard. Biodiesel is a fuel that is made from vegetable oil, or other fats, that can run in any unmodified diesel engine.
We used to make it in my back yard, put it in our cars and trucks and we drove down the road.
Now we make biodiesel at our coop. Coop members come to our biodiesel operation, make their own fuel, and drive down the road.
And now we are building a commercial biodiesel facility in Pittsboro. It will make around a million gallons a year, from fats that are collected from within a hundred mile radius. And it will ship a million gallons of fuel a year into a market that is about 100 miles around Pittsboro.
All of which is to say that I have spent the last few years completely immersed in biodiesel. I’ve also been completely immersed in used fryer oil on a number of occasions, but those memories are not as fond for me.
For many years I have explored all sorts of arguments regarding the use of biofuels. By biofuels I mean biodiesel, and straight vegetable oil, and ethanolówhich is a fuel that I know very little about.
And I have noticed that my arguments are changing.
There was a time when I was infatuated with the idea that we are running out of oil. I was a big fan of Hubbert’s Peak and Richard Heinberg and Paul Roberts and the whole end of oil crowd. We are consuming way faster than we are replacing, folks, and the new discoveries just aren’t piling in fast enough.
But one day when I was passing through a local sculpture studio, I encountered a guy on the couch who said, “Hell they got oil in Saudi Arabia that they ain’t even found yet.”
And it dawned on me that the “end of oil” argument had no traction. It’s too geologically involved, it’s too complicated, and forget it. Scaring people with the “end of oil” doesn’t work.
For a while there I was real excited about climate change as an argument for increasing the use of biofuels.
I referred to rising sea levels, increased storm activity and the spread of exotic diseases as an indication that we should change our behavior. I’m a huge Ross Gelbspan fan. I was all gung ho about climate change as a reason for people to switch to biofuels when I ran smack dab up against Michael Crichton’s book State of Fear. He doesn’t believe in climate change (and he loves spraying DDT), and there are a whole bunch of educated people that take his fiction seriously.
When I read State of Fear it dawned on me that climate change is like peak oil. Too hard to figure out. Complex. And without traction as an argument for switching to biofuels.
I’ve also tried to use pollution as an argument. Biofuels burn cleaner than fossil fuels, which is why we should all convert to them immediately. This will reduce asthma, stop the destruction of our view sheds, and save our society a ton of money. For instance, I remember seeing mountains when I used to come to Asheville.
But I have found that argument also falls on deaf ears. In America, air is free, and we don’t seem to notice or care about the loss of scenic vistas, and in America, if your child happens to be a weaker member of the species, you can buy your own health care policy to pay for his or her asthma.
And another thing about America, I’ve noticed, is that in America, fuel is supposed to be cheap. I’m not a constitutional scholar, but I have failed to find anything about an entitlement to cheap fuel in the Constitution. Congress just appointed a special committee to “investigate” the high price of fuel. What a good idea. They can all drive their Hummers up to Capital Hill to start the enquiry. Too bad the peak oil argument has no traction, or we could replace the “investigation” with a simple lesson on supply and demand.
It’s funny. This is a land that believes in the free market. It prides itself on being the last free market for health care in the world, and yet when it comes to the price of fuel, it suddenly believes that government intervention is required.
Before today, I’ve never tried to use economics as an argument for biofuels. After all, the economics have always been against me.
When we started selling biodiesel to the public we were at 3.50 a gallon. And petroleum diesel was at 1.60. No wonder I didn’t use economics to make the case for biofuels. I have always been the “high priced fuel guy.” Instead of wading into price parity with petroleum, I’ve been the one raging on about how petroleum has externalized its true costs.
And there is another side to this. At Piedmont Biofuels, we have been chronically out of fuel. Since making my first batch of biodiesel, I’ve spent more time not delivering than delivering fuel. One time in my blog I suggested that if we couldn’t deliver any fuel at 3.50 a gallon, why not fail to deliver fuel at 7.00? A forum of TDI owners picked up on that argument and I was savaged up one side and down the other.
Today petroleum diesel is at 2.60. It’s topped 3.00 in California. It appears petroleum is coming to us. It’s funny how 67.00 for a barrel of crude makes people think about alternative energy. In fact 67.00 for a barrel of crude makes even me throw around the economics argument.
To tackle the economics of biofuels we have to start with our mixed economy, and we have to know that it is government involvement that sets the price of energy. And the good news is that the government appears to be entering the renewable energy space.
While it is well known that Uncle Sam subsidizes petroleumóby providing things like free wars, fighter jet escorts to petroleum tankers, and fat tax credits to the purveyors of petroleum, it appears that he has decided to include biofuels in his largesse.
Subsidy number one: there is now a one-dollar per gallon tax credit for petroleum blenders who include biodiesel in their operations. If they blend 20% of every gallon with biodiesel, they can claim .20 back from the IRS.
Subsidy number two: The Energy Bill that President Bush recently signed. Everything related to energy can jump into the trough. It looks like the nuclear industry may have faired a little better than the biofuels crowd, but renewables of all types get a slice of the pie. In an economy that is hungry for energy, this administration has decided to give away tax revenues and slacken regulations for all things energy related. I suppose that when you are unable to notice that we are approaching the end of the fossil era, giving incentives to any and all energy sources is not a bad “strategery.”
Subsidy number three: Our own State Energy Office is currently flirting with three different potential biodiesel producers in North Carolina. Piedmont Biofuels is one of them. Here in Asheville, Blue Ridge Biofuels is another. It appears that North Carolina is so interested in having some local biodiesel production that they are prepared to put some public money into the pot.
I used to think that North Carolina imported 100% of its fuel to the tune of 7 billion dollars per year. But when I checked that figure in preparation for this talk, I learned that it left out imported natural gas, imported coal, and imported uranium, and that the actual number is closer to 15 billion dollars a year. 15 billion. That’s what I call a “leak” in our economy. That’s a pretty good-sized leak for a state that just passed a 17 billion dollar budget.
Imagine a state with a 15 billion dollar per year energy trade deficit. A state with no commercial wind production. No ethanol production. And no commercial biodiesel production. It doesn’t strike me as a big surprise that our state is thinking about investing in biofuels.
The government is noticing renewables. And as government notices renewables, renewables have a new fighting chance of competing with other energy sources. Which means we are on the cusp of an economic boon.
As our energy regime changes from fossils to renewables, a seemingly endless amount of opportunities arise. Think of energy regime changes in the past. Infrastructure that was once rigged for burning wood had to be replaced by stuff that could burn coal. That which was burning coal was replaced by infrastructure that could burn oil. We haven’t even finished our transition from polluting inefficient fossils like coal and oil–we were supposed to be on our way to cleaner burning natural gas–until it too turned out to be too scarce and too expensive to get at. And here we are.
Think of the investment opportunities. Think of the inventions. Let’s forget about biofuels for a moment and cut to electricity. This state has about 20,000 megawatts of production, and by all accounts we need more. We could meet the entire state’s needs with 10 square miles of photovoltaic. Because the sun shines on North Carolina.
And I have an idea, instead of a massive centralized array; let’s distribute that across our existing rooftops. It is now legal to do grid-tied solar production in North Carolinaóagain the government is starting to get itóand by using our grid as a battery, all we need each householder to do is install a little more capacity than they consume.
Too expensive? Watch the price fall and the technology climb when we start talking about megawatts of PV production. And remember our mixed economy. Tax the polluting carbon, invest in the clean renewables and the shift will begin in earnest.
Guys like Paul Roberts would have us believe that the switch to renewables is encumbered by “asset inertia.” That is to say that big energy companies have paid off their massive investments, whether they are inefficient, or polluting, or both, and they are busy making massive profits such that they have no incentive to change. In his fantastic book, The End of Oil, he cites the Tennessee Valley Authority next door for continuing to shovel coal into ancient power plants, and instead of installing scrubbers to clean up sulfur emissions, they merely increase the height of their stacks so that we won’t notice their pollution as much. Again, I remember when you could see the mountains in Asheville.
While he injects asset inertia into his gloom and doom, I love that. Asset inertia provides opportunities for newcomers. Asset inertia is what kept Detroit kicking out gas pigs, thereby ceding almost 40% of the U.S. auto market to the Japanese. Asset inertia is what kept the purveyors of typewriters stalwart in the face of word processing. And asset inertia is what kept the phone companies fast asleep with the rise of the Internet.
By the way, I’m a big Paul Roberts fan. He completely gets it. And he is an amazing writer. But I’m not sure he believes the shift will begin in earnest.
I would argue that it already has begun.
Last year at this venue the investments in biofuels in this state could be measured in the tens of thousands of dollars. This year it is in the millions. Think about the vendors, and the trade’s people that are suddenly finding work in the fabrication of a new industry.
As our industrial infrastructure sits idle and abandoned, forgone to far away places where stuff can be manufactured less expensively, biofuels projects are moving in and retrofitting. Here in Asheville, Blue Ridge Biofuels is building a plant down in the historic industrial river district in the Phil Mechanic Building. What was once the home of refrigeration, back in the day, and later the home of dying industries, is now on it’s way to becoming a biodiesel production plant.
By the way, Blue Ridge Biofuels put up the first “open to the public B100/B99 pump in North Carolina. You can visit it at Gas-Up on Haywood Rd. in West Asheville. I hate to mention that here, because I hate getting smoked by other biodiesel coops. My preference would be if Piedmont Biofuels could claim all of the “firsts,” for biodiesel in this state, but Asheville can be pesky that way.
We are retrofitting an abandoned industrial site as well, bringing a payroll, investment, and new life to a property on the edge of Pittsboro that was forsaken long ago.
In biodiesel we are attending the birth of an industry. And in general we are on the cusp of an energy regime change. Look at this exploding exposition. Imagine the sheer quantity of work involved in switching our economy from fossils to renewables. This is a very good time to be a solar installer. Or a fuel maker. Or anything associated with renewable energy. Anyone tried to hire a solar builder lately? Get in line.
I started this talk off by saying biofuels would be good for your wallet, and I added that such an argument was new for me.
I’m going to give up selling my other ideas. Forget peak oil, and climate change; forget green washing, and providing “PR quantities of fuel.” We now know that the war in Iraq was not about resources, after all, it requires 400,000 barrels of oil a day to sustain our efforts there, so I’m going to stop appealing to reason, or to conscience, and I’m going to start crafting arguments that will head straight for your wallet.
And while I do thatóyou just keep right on investing in renewablesóbecause over the next decade, they cannot lose.
Updates via RSS