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The Truth About Fossil Fuels and Renewable Energy (Part II)

Re: uranium enrichment, I neglected to mention - URENCO (owned by the British and Dutch governments and German utilities) is building a centrifuge enrichment plant in New Mexico, scheduled for initial operation in 2009. To its credit, the DOE turned down the USEC request for a loan guarantee because adequate capacity is planned at the URENCO and GE sites with commercial resources alone. If the GE laser isotope separation process works as planned, it will be less energy intensive and lower cost that the centrifuge process. The DOE Lawrence Livermore Lab, with B&W assistance, tried to develop a pilot laser separation facility in the 1999-2000 period, and abandoned the project as not feasible.

The Truth About Fossil Fuels and Renewable Energy (Part II)

A thoughtful and useful sequel to Part I of your essay, thanks Joe. We agree that federal subsidies and regulation are the main impediments to a rational and economic solution to energy supply.

A few points in support of your thesis and investing ideas:

1. I'm retired from the Babcock & Wilcox Company in Lynchburg, VA. B&W produces the fuel elements and other components for all the Navy's reactors that, as you say, have a fifty-year history of incident-free operation. B&W also designed and built the Three Mile Island reactor, and after that fiasco (due as much to operator error as to faulty design) sold their commercial nuclear business to the French. Areva North America continues to operate in Lynchburg and is a leading contender to build new reactors in the U.S. based on a European design. Areva has entered a joint venture with Northrop Grumman (NOC) to build a plant in Newport News capable of fabricating large reactor vessels (NOC also installs the reactors in the Navy's carriers and some of their submarines). B&W recently proposed and submitted a license application for a 100-MW modular commercial reactor that has features that make much environmental and economic sense. B&W is a subsidiary of McDermott International (MDR), which also has interests in the construction of off-shore drilling platforms and boilers and environmental controls for fossil-powered generation plants.

2. Expansion of nuclear power requires facilities to enrich natural uranium with the fissionable isotope U235. The leading source of enriched uranium in the U.S, is USEC (USU), which operates a Cold War-era gaseous diffusion plant in Ohio. USEC has invested $1.5 billion in development of a centrifuge enrichment plant, but was recently denied federal loan guarantees for funding completion of the plant, putting the project and the future of USEC in doubt. Meanwhile, GE has formed a joint venture with Hitachi and Cameco (CCJ) to build an enrichment plant in North Carolina using a laser isotope separation process that has not been demonstrated at commercial scale. These issues must be resolved before expansion of nuclear generation is realistic, and I'm hopeful that they can be resolved without government subsidy.

3. I've had holdings in Chesapeake (CHK) and Penn-Virginia (PVR) for some time, and have ridden the shares down and now up in recovery. PVR has the advantage of diversification between coal properties and a natural gas mid-stream business. PVR and Martin Midstream (MMLP) both throw off nice income streams.

4. Some of your commenters, particularly jerrydd, do not seem to understand the difference between energy and power (the rate at which energy is generated or used). As you point out in your post, wind and solar (and ocean waves) are intermittent sources of both power and energy. A wind farm or solar array can generate multi-MW of power when the wind blows and the sun shines, and can offset some of the energy generated from fossil or nuclear generators, but (apart from massive energy storage facilities) cannot be relied upon to supply power or energy when it's needed. Since wind and solar cannot replace fossil or nuclear plants, their economics are highly dubious.

The Truth About Fossil Fuels and Renewable Energy

Thanks Joe for a well-reasoned and non-ideological post. I look forward to Part II.

Several comments endorse a "comprehensive energy policy". I take the heretical position that, given the tragic history of past efforts to craft a useful policy, the best outcome would be NO energy policy. Our politicians and the technologists who populate the energy bureaucracies have proven that they are not competent to create a beneficial policy. Let the markets work!

This week the President let fly $2 billion in new subsidies for advanced battery production. Members of my family in recent weeks have benefited from $9000 in subsidies to trade clunkers for new cars that they would have bought anyway. I will benefit from a $1500 tax credit to replace a HVAC system this spring that had to be replaced anyway. I traded in a hybrid Ford Escape this year, purchased three years ago with a $2000 tax credit, because for our transportation requirements it didn't really offer a significant benefit in mileage compared to the 4-cylinder Escape we received in trade (with a $50 per month reduction in amortization cost). Before I retired, I worked on a project to build an enormous superconducting magnet for energy storage, funded with a $25 million grant from DOE, that was delivered to a scrap yard in Florida.

You get the point: subsidies granted by our politicians have been an unmitigated waste. Any policy that attempts to drive the market in a direction that is not economically justified will fail, and if an approach has economic justification, it doesn't need a policy push.

A Natural Gas Centric Strategic Long-Term Comprehensive Energy Policy

Good, factual post! We certainly need to wean the U.S. away from imported petroleum quickly, and with minimum expense. CNG may be the way, if not bio-fuels and EVs. Probably a mix of each of these as well as petroleum-based fuels during a transition period.

One flaw in the CNG argument is the 4:1 lower energy density of CNG vs. gasoline. Thus for equal range and energy efficiency, a car powered by CNG would require 4x the tank volume of a gasoline-powered car. I don't know how the Honda GX packages its tank into its body, but I suspect it simply has reduced range and/or trunk space compared to a gasoline-powered version.

The cost of conversion from gasoline to CNG runs $5000 to $7000 per vehicle, and it's hard to believe that this will be economic until the price of gasoline returns to well over $4 per gallon. I drive a Ford Escape hybrid, and I figured I'd break even on the $3000 cost premium after tax credit with gasoline over $2.75 a gallon; made money last summer, not this year. The cost to convert the entire U.S. light vehicle fleet of 240 million vehicles (R.L. Polk) to CNG would be an astronomical $1.5 trillion (doesn't sound so bad in comparison with the projected federal deficit).

Safety is also a concern: a house I used to live in blew up a few years ago because a technician made a wrong connection to a high pressure gas line. Two houses were destroyed here in central Virginia last year when an interstate gas line blew up. The thought of householders plugging their cars into gas lines for overnight refills scares me. But then gasoline is explosive, too, it's just not under pressure. CNG refueling at service stations with trained operators and reliable devices sounds better to me; that's how I get the propane bottle for our grill refilled.

For these reasons, the Pickens Plan dropped the idea of using CNG for light vehicles last year, and is now concentrated on adoption of CNG for heavy trucks. This is supported by the fact that major CNG lines tend to parallel the major interstate truck routes. I have every respect for Boone Pickens and his investment in the cause; he has the good sense to realize the limitations of CNG as a vehicle fuel in the near term.

You suggest a number of policy steps that should be taken, and I can agree with some, particularly slapping an import tax on petroleum. I do not believe that there is an effective government solution to the problem, however; far better to let the market sort out the best among alternative fuels for our future transportation needs.

Six Companies Poised to Gain from a Natural Gas Auto Mandate

You all may have missed the news back in November that the Pickens Plan is no longer focused on CNG passenger vehicles, but supports CNG for heavy trucks (see seekingalpha.com/artic... Reason being that CNG has about 1/4 the energy per gallon of gasoline, so to get equivalent range you need 4x as much tank volume as a gasoline-powered vehicle. This is less of a problem for trucks, and you may have seen transit busses with CNG tanks strapped to their roofs.

I for one would not want to sacrifice range, or trunk space, or a rear seat, or accept the risks of CNG in a collision let alone leakage in my garage.