Where to go from here?

Foreword:  This piece is late for its purpose.  I began writing it in late August and had a first draft in the space of a few days, then I set it down for a 3-week hiatus.  When I came back to it I had great difficulty getting to the next stage of refinement, and it barely changed through the end of September and the whole month of October.
Ideally this piece should have been done no later than mid-October.  Energy issues are crucially important to the USA, and anything which might have injected some reality-based ¹ discussion into the pre-election politics could not have done anything but good.  That opportunity is now gone, but I'm hoping it can still be of benefit.

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We've ² got a problem.  A BIG problem.  It's a problem as big as the biggest monster SUV, and as old as the Model T.  It's our dependence on oil.  Not only are the costs of oil depressing our economy ³ , the money we're paying is feeding a movement which is inimical to the United States and western civilization in general.  Even without that, we have still not fully dealt with the air pollution produced when the oil is consumed.
It's obvious to a great many people that we are already involved in a war.  Why not take the war beyond the spheres of military action and financial interdiction and attack the problem at its source, and (since You Cannot Do Just One Thing) a few others besides?

Specifying the problems and goals

Suppose that the US decided to take the following as national security issues:

• Dependence on foreign (particularly middle-east) oil and vulnerability to price shocks.
• Decreasing availability of N. American natural gas and price spikes.
• Air pollution and its consequent health effects.
• Increasing atmospheric CO2 concentrations.

The goals:  Reduce the need for oil and gas to moderate prices and cut the influence of their price on our economy, reduce pollution and cut atmospheric CO2 contributions.  (Whether or not the last is necessary or even desirable is the subject of much debate, but the scientists are the most reliable guides we have and they don't seem to have changed their recommendations yet.)
Further suppose that the US went on a war footing with regard to these issues, devoting about $100 billion per year initially.  What would it buy, and how fast could we see change?

What have we got to work with?

Any attempt to re-power a large part of the economy has to begin by identifying the source of energy that will do it.  An expansion in energy supply from a given source can be obtained either by taking more raw energy from that source or greatly increasing the efficiency with which it's used.  Any source which can neither be expanded by a large amount nor made much more efficient is of no further interest.  Hydropower falls into this category.
It would be helpful at this point to list the various energy sources we use, their quantities and efficiencies.  US energy consumption for the calendar year 2003 was bit over 98 quadrillion BTU (henceforth "quads").  It was divided roughly as follows ⁴ :

Fuel	Qty	Units	TBTU/day	Efficiency	Output, TBTU/day	Output, GW
Coal	22.31	Quads	62.2 tot / 54.7 elec	0.33 (elec)	18.2 (elec)	222.4
Gas	22.71	Quads	62.2	-	-	-
Nuclear electric	7.97	Quads	21.8	0.327	7.14	87.2
Renewable (total)	6.15	Quads	16.8	1.0	16.8	206
Petroleum	39.07	Quads	107.0	-	-	-

Within the categories of petroleum and natural gas, the usage breaks down roughly as follows:

Fuel	End use	Units	Qty	TBTU/day (est)
Petroleum	Total	mmbl/day	20.04	107.0
	Residential	mmbl/day	0.88	4.7
	Commercial	mmbl/day	0.38	2.03
	Industrial	mmbl/day	5.00	26.71
	Electric power	mmbl/day	0.54	2.88
	Transportation	mmbl/day	13.24	70.7
Natural gas	Total	1012 ft3/yr	22.89	62.22
	Transportation	1012 ft3/yr	0.65	1.85
	Electric power	1012 ft3/yr	4.92	13.98
	Commercial	1012 ft3/yr	3.13	8.90
	Residential	1012 ft3/yr	5.10	14.50
	Industrial	1012 ft3/yr	8.09	22.99

Some facts about oil and gas bear thinking about:

1. US oil production in the lower 48 states peaked in 1971 and has been in constant decline since; it is now about half of peak levels. ⁵
2. Alaskan oil production peaked in 1988 and is down more than 50%. ⁶
3. US natural gas production peaked in 1973 and has not declined as steeply ⁷ , but consumption has rebounded since. ⁸

It appears very unwise to rely on either oil or natural gas for any growth in our energy supply.  Even current levels of use mean increasing dependence on imports from unstable parts of the globe, higher prices and consequent drag on the US economy.  Addressing this will require less-conventional energy supplies combined with more efficient use of the oil and gas which remains.

Step 1:  Find the will and the money.

The first and by far the biggest battle would be fiscal and political.  It steps on established toes and requires sacrifices which would make some people scream, so it will have heavy opposition.  The first step toward overcoming it is to have the courage to call it a war.  It would be impossible to sell to the public otherwise; attempting to conduct business as usual would come across as hypocrisy and be self-defeating.
The infrastructure would have to be financed, and the monetary incentives would have to back up the program rather than undermine it.  (This contrasts it to corporate average fuel economy standards, which combined with relatively cheap fuel to spur a huge increase in vehicle miles travelled and defeat the express purpose of the program.)  The biggest use of oil (66%) is for transporation, and taxes on motor fuel are one of the few changes which would not give foreign manufacturers and suppliers an inherent advantage over domestic industry.  (The reluctance of Detroit to make economical vehicles is a different matter.)  Let's assume the $100 billion/year for infrastructure and incentive programs is financed from motor fuel taxes.
If the US consumes ~170 billion gallons of motor fuel (gasoline and diesel) per year, a tax of about $0.60/gallon would provide the revenue.  One purpose of the tax is to spur cuts in fuel consumption; so long as the the same level of investment was required, the tax would have to rise as fuel consumption fell.  If fuel consumption fell to 60 billion gallons annually, a tax of about $1.70 would continue to supply $100 billion in annual revenue.
Attacking dependence on imported oil and gas means decreasing the need for those fuels or substituting other sources of energy.  The second battle would be technical:

1. Increasing overall efficiency;
2. Replacing energy derived from oil (and gas) with other sources, and
3. Coming up with those sources.

Replacing the energy is not difficult.  The total energy consumption in the form of oil is large, but our use is inefficient; the power which actually makes it to the wheels of US vehicles averages less than 200 GW.  There are also ways to leverage the consumption of natural gas to take much better advantage of it.

Step 2:  Support other fuels, but only the right ones.

There is already some support in the US vehicle fleet for "alternative fuels".  There is not a car built these days which cannot handle some fraction of alcohol, and some cars can handle M-85 (85% methanol), E-85 (85% ethanol), straight gasoline or any mixture.  Alcohol (particularly methanol) can be made from a variety of resources (some under-used), including coal and scrub timber.  This isn't bad, because it will help fuel the existing vehicle fleet before it gets retired.
There are also things we should not do, such as ethanol from corn.  This fuel should be strongly discouraged; it requires 1 BTU of fossil inputs to produce only 1.2 BTU of alcohol.  10% ethanol mixes qualify for forgiveness of the $.19/gallon Federal gasoline tax, amounting to a subsidy of roughly $11.40 per gallon of non-fossil energy.  This ill-conceived farm subsidy program and others like it should be terminated immediately and the money rolled into programs which actually work.  If we need to pay subsidies to farmers, it should go for programs like leases for wind turbine sites.

Step 3:  Use non-chemical energy.

The real impact will come from technologies not yet on sale.  Honda, Toyota and Ford are already selling hybrid vehicles, but it would be a relatively small change (bigger batteries, a charger not much bigger than a computer power supply) to turn these vehicles into plug-in hybrids.  The plug-in hybrid can eliminate a large fraction of fuel consumption for many drivers (as much as 100% for people whose driving is exclusively short trips) while retaining hybrid efficiency for other driving.
If we assume that there are 200 million personal vehicles in the USA and they are replaced at the rate of 10% per year (which would probably be accelerated if fuel prices doubled), that is 20 million vehicles per year.  Current hybrids cost about $3500 more than conventional vehicles; if the plug-in option added $500 in batteries and other hardware, this is $4000 per new vehicle.  If half of this is paid by subsidies from the fuel tax, it would cost $40 billion per year.

Step 4:  Get the energy, cleanly.

Guesstimating the power output of gasoline-fuelled vehicles at 110 GW average and a grid-to-wheels efficiency of ~60%, the electricity required to feed a national fleet of plug-in hybrids would be approximately 180 GW; adding trucks to this would raise this figure to 290 GW. ⁹ .  If electric transport is phased in at 10% per year, average electrical demand would grow at a rate of 29 GW/year.  This demand would have to be met without adding to demand for other fuels in short supply, such as natural gas.  Nuclear takes far too long to site, approve and construct, so the remaining candidates for the energy are coal, wind and cogeneration.

No fuel like an old fuel:  king coal

The US has immense reserves of coal, but getting more energy from it requires finesse.  Coal combustion is a major source of air pollution in North America, and adding to the total would be unacceptable to much of the public.  Fortunately there are cleaner coal-burning technologies which are also more efficient, and they also have potential for improvement.  Integrated Gasfication Combined Cycle (IGCC) powerplants first convert coal to a combustible gas, clean the gas of pollutants such as sulfur, and then burn the gas in a gas turbine to generate electricity.  The gas turbine exhaust heat then feeds a steam generator, which generates yet more electricity.  The efficiency of an IGCC plant can reach 40%, roughly 20% greater than a standard steam-cycle plant.
Old coal-fired steam plants can be repowered with IGCC systems ahead of the existing steam turbine and condensers; the changeover raises the output of the plant by about 190% (the Wabash River IGCC repowering raised plant output from 90 MW to 262 MW).  Emissions of sulfur and particulates are nearly eliminated, NO_x is greatly reduced, and it appears likely that activated-carbon scrubbing of the fuel gas could achieve mercury emission cuts at least as good as are possible with conventional powerplants.  Last, the absorber step which removes hydrogen sulfide from the fuel gas also captures most of the carbon dioxide produced in the gasifier; this stream is ready for sequestration should that be desired.
Suppose that old steam plants can be repowered with IGCC for $1100/KW.  If output increases by 190% in the process, each GW of old capacity creates another 1.9 GW after repowering.  Powering America's cars means adding 18 GW of net capacity per year; this would require repowering about 10 GW of old plants at a cost of $32 billion/year.  This leaves $28 billion per year out of the $100 billion in fuel tax revenue.
The conversion of coal to medium-BTU syngas composed of H₂ and CO (approximately 300 BTU/ft³) creates many possibilities that do not exist today.  Hydrogen could be tapped from the syngas for synthesis of ammonia; a hydrogen-enriched gas stream could be fed to a reactor to make methanol for motor fuel; the gas could be piped to nearby customers as a cheaper substitute for natural gas, and burned in cogenerators to replace the electricity it would otherwise generate (the benefits could be substantial); the syngas could be used to run solid-oxide or molten-carbonate fuel cells to further increase the efficiency of the system.  However, such steps are beyond this simple analysis.

The future of gas

North American gas supplies are shrinking, leading to steeply rising prices.  The trend is not helped by policies which encourage electrical generation to use gas-fired turbines.  Prices have already forced much of the ammonia industry (precursor to nitrate fertilizers) to other continents, and home heating is much more expensive than it was a year ago.  To control costs, it is highly desirable to increase the efficiency with which we use gas.
Unlike coal, gas has the advantage that it can be used in a variety of ways without processing.  According to the EIA ¹⁰ , space heat accounted for 68% of all residential consumption of natural gas.  In the year 2001 ¹¹ , residential space and water heating accounted for 4.47 quads of gas consumption; commercial space and water heating used another 3.05 ¹² quads.  This consumption (low-grade heat) is ideally suited for conversion to cogeneration ^*.  If furnaces and water heaters were converted to use small gas-fired engines instead of open flames, this 7.5 quads of natural gas could produce 1.5 quads of electricity, or an average of 50 GW (the diverted energy could be made up using insulation, solar heat, or syngas from coal-fired IGCC plants).  Usage and generation would peak during the heating season, so the actual requirement might be closer to 3 times the average, or 150 GW.  If the cogenerators cost $500 per kilowatt, adding 15 GW per year would cost $7.5 billion.  This could easily be rolled into the normal installation and replacement cycle of furnaces and water heaters.
Industry uses a considerable amount of process heat, which is another place where cogeneration could skim off some electricity.  Roughly 5.6 quads of gas was used for industrial boiler fuel and "direct uses" in 2002 (see figure 22).  I do not have enough information on the actual end uses to be able to guess at the possible contribution of industrial cogeneration, so I will postulate no new generation from this sector.
So far the hypothetical program has added 29 GW of electrical demand per year, and has found ways to add 23 GW of average capacity each year with nothing more than improved efficiency.  Another 6 GW is needed every year, and $20.5 billion per year remains in the budget.  What can we get for it?

Step 5:  Use renewables where possible.

The last step is replacement of some fossil energy with renewables.  It is projected that mass-produced wind turbines could cut the cost from their current figure down to as low as $300 per peak watt.  If wind farms can be sited where such turbines achieve a capacity factor of 20% and the installed cost is $500/KW_peak, $20 billion per year will buy 40 GW_peak of capacity, or 8 GW average.  This is 133% of the remaining increase in generation capacity required to supply vehicular demand, which means that generation can be decreased elsewhere (such as gas-fired turbines).  This would take a huge load off N. American natural gas demand; combined with the displacement of other natural gas uses by coal syngas, it could eliminate the current short- and medium-term gas shortage situation.

Results

Where would this leave us after 10 years?

• 200 million vehicles on the road powered mostly by electricity.
• Petroleum usage down by perhaps 60%, approximately equal to US imports at current rates of production and consumption.
• Foreign-exchange savings of ~$150 billion/year at $35/bbl (enough to pay to continue the program with $50 billion/year left over).
• Roughly 1/3 of all sulfur, NO_x and mercury emissions from coal-fired plants eliminated, over and above other control measures.
• Roughly 700 billion KWH of wind energy generated per year, enough to replace more than 1/4 of 2003 fossil-fired electricity production or 18% of total production.
• Reduced natural gas demand and thus natural gas prices.
• Quieter, cleaner and healthier cities.
• Near-independence of the US from foreign oil, allowing us to deal with threats from oil-producing nations without worrying about our economy.

To sum it all up:

Energy source or use	Annual consumption change, quads/yr	Annual output  change (electric  or equiv.), GW	Tax revenue or (subsidy), $billions	Net revenue, $billions
Petroleum	-2.20	-29.0	100.0	100.0
Coal, electric	+1.27	+19.0	(32.0)	68.0
Coal, syngas	+0.20	n/a
Gas	0	+5.0	(7.5)	60.5
Wind	n/a	+8.0	(20.0)	40.5
Hybrid subsidy	n/a	n/a	(40.0)	~0

I'm not a proponent of violence for its own sake, but this is one war I could get behind without reservations.

Appendix A:  Cogeneration

It's a Zen truism that you cannot do just one thing.  Engines burn fuel to make power, but every bit of fuel burned leaves some residue of unusable heat.  This waste heat must be dumped to a heat sink, otherwise the engine cannot operate.  Common engines must reject 50% or more of the energy value of their fuel; today's automobiles average about 17% efficiency, rejecting 83% of the energy in their fuel as heat through the radiator, exhaust and transmission.
There are a great many things which just require heat.  Living space requires heat in the winter, boilers require heat to boil water, bakeries require heat for their ovens.  Often the heat required for these purposes is at a temperature lower than the heat which is rejected from heat engines.  This creates a possibility:  instead of burning fuel for heat at point A, and then burning more fuel to make power at point B and throwing the waste heat into the air, why not make power at point A and use the engine's rejected heat for the heat you needed anyway?  Since you can't do just one thing, why not make both of them count?  That's cogeneration. 

How does it work?  Suppose that you need .95 KWH of heat and 0.33 KWH of electricity.  You have the choice of 3 devices to turn fuel into the energy you need:

1. A furnace which burns fuel with 95% efficiency and loses 5%.
2. A generator which burns fuel with 33% efficiency and dumps the remaining 67% of the energy as waste heat.
3. A cogenerator which converts fuel to electricity with 25% efficiency and captures 70% of the total energy as heat, for an overall efficiency of 95%.

How does the combination of the furnace and generator stack up to the cogenerator?  Not very well:

Appliance	Fuel input	Efficiency	Heat output	Electric output
Furnace	1 KWH	95%	. 95 KWH	0
Generator	1 KWH	33%	(to waste)	0.33 KWH
Cogenerator	1.33 KWH	25% electric  70% thermal

0.93 KWH
0.33 KWH

As you can see, the cogenerator can produce about the same useful output as the furnace/generator combination with approximately 1/3 less fuel; further, the cogenerator does not have to be as efficient as the stand-alone generator to yield savings, because the heat is going to a useful purpose.  Cogeneration can save a great deal of energy by making use of heat which would otherwise be discarded; alternately, it can create much more useful energy from the same amount of fuel.  Back

Footnotes

¹  "Reality-based" as used here means it comes with verifiable facts and figures, rather than as an antonym to "faith-based" or in the sense of realpolitik.  Back
²  In this context, "We" refers to the USA.  No slight is intended to other nationalities, alliances, ethnic groups or chess clubs.  Back
³  At the time of this writing, world prices for light sweet crude have been flickering back and forth around the value of USD 50/bbl and have peaked over USD 55.  These prices, while not by themselves able to throw the economy back into recession, are projected to cost a substantial fraction of a percent of GNP growth per year.  Back
⁴  The efficiencies and net use entries for natural gas and petroleum are unspecified in this table.  This is because it is not possible to state meaningful numbers spanning the diverse end uses of these fuels.  Back
⁵  http://www.eia.doe.gov/emeu/aer/txt/ptb0501.html Back
⁶  Ibid.   Back
⁷  http://www.eia.doe.gov/emeu/aer/txt/ptb0602.html Back
⁸  http://www.eia.doe.gov/emeu/aer/txt/ptb0605.html Back
⁹ US motor gasoline consumption in 2003 was 16.6 quads, or 556 GW thermal; at an efficiency of 20% the average power delivered is 111 GW.  The corresponding figure for diesel (distillate fuel oil) is 5.42 quads or 181 GW thermal; if the average efficiency is 35% it delivers 63.4 GW average to the wheels.  Back
¹⁰  http://www.eia.doe.gov/emeu/recs/byfuels/2001/byfuel_ng.pdf   Back
¹¹  Ibid.  Back
¹²  1999 figures from http://www.eia.doe.gov/emeu/cbecs/pdf/set10.pdf  Back
Postscript:  On Saturday 11/20 the New York Times published an article on the resurgence of coal on the front page of the business section.  The question is not whether we will use more coal, but how it will be used and what else will happen as a consequence.  As long as we are re-thinking our energy sources for electricity, why stop with electricity?
UPDATE:  This piece is also posted at The Speculist.   ¶ 11/21/2004 11:10:00 PM