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By Robert Rapier on Oct 26, 2010 with 32 responses

The U.S. Navy and Biofuels – Part I

On Tuesday, October 19, 2010 I conducted an interview with Tom Hicks, who is the Deputy Assistant Secretary to the Navy (Energy). The idea for the interview originated from my recent essays on Solazyme (here and here) in which the Navy’s investments in biofuels were discussed. After the Solazyme essays were published, Consumer Energy Report editor Sam Avro contacted the Navy for comment, and they offered to set up an interview with Mr. Hicks.

Sailors assigned to Riverine Group 1 conduct maneuvers aboard Riverine Command Boat (Experimental) (RCB-X) at Naval Station Norfolk. The RCB-X is powered by an alternative fuel blend of 50 percent algae-based and 50 percent NATO F-76 fuels to support the secretary of the Navy's efforts to reduce total energy consumption on naval ships. (U.S. Navy photo by Mass Communication Specialist 2nd Class Gregory N. Juday)

I was joined by Sam, and our questions below will be denoted as “RR” or “SA”. Mr. Hicks’ responses are “TH”. The goal of the interview was simply to distill down for a general audience what the Navy is trying to accomplish. The interview went on for over 40 minutes, so it will be broken down into multiple parts. (Links to: Part I, Part II, Part III)

RR: Can you tell me a little bit about yourself? What brought you to this job?

TH: Shortly after college I began working for the Navy as a civilian. I started the energy program for what was then Navy Public Works Center – Washington. That was really doing energy efficiency efforts in the tens of millions of dollars throughout the region. That was kind of early 90’s. From there I went to the EPA, where I created Energy Star for Buildings. Instead of Energy Star for Computers and many other things that you are probably familiar with – I created the application for buildings while there. I implemented that and ran it for a number of years and then went on to the U.S. Green Building Council, where among other things I headed up the Leadership in Energy and Environmental Design (LEED) rating system for a couple of years, and I also started and ran the international program there as well. From there, this opportunity came back, and it was a way for me to in many ways come home, back to Navy, and kind of apply both my energy and green building roots to what the Navy’s aspirations were.

RR: In talking to people, I think a lot of people don’t really understand the relationship between the Navy and the companies you work with. For example, are you doing your own research, or only funding outside research? So what exactly is your scope, particularly as it relates to biofuels?

TH: As you probably know, the Navy, as with the Army and Air Force – we purchase our fuel through what used to be called DESC (Defense Energy Support Center) and is now DLA – Energy (Defense Logistics Agency). So we all purchase our fuel from them to power the fleet. For us it’s mostly JP-5 and F-76 and a little bit of JP-8 through DLA Energy. In terms of research, what we are doing – and this stems from the Secretary’s vision and goals that he laid out in October 2009. What he laid out was what the Navy is going to do going forward in the future. There are goals about energy efficient acquisitions, but the two that are the most relevant here are sailing the “Great Green Fleet” which is an idea that hearkens back to the “Great White Fleet” around the turn of the last century that Teddy Roosevelt sailed; this idea that in 2012 we will put a carrier strike group in local operations entirely on alternative fuels and then in 2016 we are going to deploy that strike group on all alternative fuels. So that’s one marker. The other is that by 2020, 50% of all of the Navy’s energy consumption will come from alternative sources. Those are the kinds of guideposts, the vision that we are working toward. In terms of the research, what we are doing today is doing the research, testing, and certification on all the engines in our inventory. That includes all of our surface vessels, as well as all of our aircraft, and testing them to use a 50:50 blend of biofuels, and whatever the case may be; JP-5, JP-8, or F-76.

RR: So you are testing fuels, but not actually trying to produce any yourselves?

TH: No, that’s really not our role to play in this market. There are many other entities that are in that space, and we are looking to utilize those fuels in the blends I mentioned before.

RR: Thanks, that helps clarify one point. So, what are the primary drivers for this, and what is driving the timelines? Is this coming from policy, where they are saying “We really need this”, or from scientists saying “We can do this?”

Deputy Assistant Secretary of the Navy for Energy, Thomas W. Hicks.

TH: I think what’s driving it for us is that we see it as enhancing our war-fighting capabilities. It is about becoming more energy independent, more energy secure, and playing what we consider a leading role, not only in the Department of Defense, but in the Federal Government in seeing the realization of an energy efficient economy. That’s what’s really driving us, and that’s consistent with the President’s objectives for the Federal Government, and we see ourselves playing a leading role in that. Having more homegrown, secure, independent sources of fuel is going to be critical to us to be able to complete our mission going forward.

RR: The U.S. Joint Forces released a report earlier in the year (see this story) that warned of the potential for a 10 million barrel a day shortfall by 2015. I am wondering about your opinion on that. Oil supplies, short and long-term; do you think that’s going to be an issue?

TH: I am not an expert in those areas. I can probably point you to some people who are. I was at a conference yesterday, and I understand we currently have about a 500,000 barrel per day surplus, which is pretty tight, but I can’t really comment on that. But of course as we pursue this effort, what we are looking to do is to decrease our dependence on fossil fuels. By going for these alternative fuels and biofuels, we can find more independent, secure sources.

SA: Sam here. If I could go back to the original question posed by Robert, where he asked what is driving the changeover towards alternative fuels and greener energy; is it more of a policy thing, which you explained to us and obviously we understand the importance from a security aspect, and about that no one is going to argue about, but I think Robert’s question was more about whether it was wishful thinking. More like “We would love to be in a position to be less reliant on crude oil and the sources we are getting the crude oil from” – or is it the scientists telling you “This is something we can do?” So the question is really, “Is this something we can do, or something we hope we can do?”

TH: Certainly from a technical perspective, as we are proving out through our testing and certification program, the fuel works just as well as other fuels. The blend, the fuel; is transparent to the operator. These are drop-in, so from that perspective it works. So I am not sure if that answers your question from a scientific perspective.

RR: I think the question is, “Can they deliver?” I agree with you that these are drop-in fuels (we are specifically talking about synthetic fuel replacements, not biodiesel or ethanol), as I have seen lots of testing on them. But are the companies realistic about the timelines in which they can deliver?

TH: Well, I think that’s one of the key things we are sending out is a demand signal to the market. So what we are saying is that by 2012, to test the fleet and do the local ops that I mentioned with the Great Green Fleet, we need 8,000 barrels of biofuel. To deploy that in 2016, we need 80,000 barrels. Those are certainly quantities that – we have talked to industry – and they will have no problem with delivering. By 2020, we go from 8,000 to 80,000 to 8 million barrels, is what our need is to meet that goal of 50% alternative fuel. So if we were to sit passively back and not send out the demand signal, perhaps we would have a different outcome. We choose a leadership position, and part of that position is sending out a strong demand signal to the market, that if you can deliver this; if you establish this; if you can meet it at a competitive cost long-term, then this is something we are going to commit to. So again, we are going through the entire certification and testing of every engine in our fleet, including the diesel back-up generators on our carriers.

SA: I just want to clarify one point. So you are telling me, obviously I understand your strategy for getting there, but you are confident that this strategy will take you to a point, where I have seen the Secretary of the Navy say that they want to be sure that 50% of total energy consumption will come from alternative energy sources by 2020, and reducing the use of petroleum by 50% in the commercial fleet by 2015; so you think those are viable goals?

TH: Those are viable goals, and those are goals that are driving our strategies, and driving our budget to make those goals a reality. And again, it’s not just the Navy; we send I think an important demand signal, but if you look at us relative to commercial aviation we are very small, but at the same time I think we represent a very powerful part; and we are also doing this through partnerships with others; whether it’s USDA in trying to create a vibrant biofuel market in Hawaii, or it’s working with DLA Energy to make sure they understand what our needs are, and when we will have those; it’s also working with DOE, through their loan guarantee program and other investment programs into biofuels; we are working all those groups to really make sure that a market takes off on biofuels. We are doing everything within our control to do that.

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The next installment begins by discussing the reasons that the Navy can’t use fuel produced from coal. (Links to: Part I, Part II, Part III)

  1. By Russ Finley on October 26, 2010 at 3:20 pm

    Eisenhower would roll over in his grave if he saw the debt the military industrial complex is saddling our children with.

    As the old saying goes, “Ride that government gravy train until it runs out of gas!” And yes, I just made that up.

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  2. By perry on October 26, 2010 at 3:35 pm

    I wonder what he meant by 500,000 bpd surplus? Surplus hitting the market or surplus capacity? If it’s the latter, we’re going to be scrambling sooner than most predicted.

    Go Navy!!

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  3. By OD on October 26, 2010 at 4:19 pm

    Good question Perry. I’m pretty sure that he did not mean spare production compacity, since OPEC is said to have 1.2 mbd all the way to 5 mbd depending on the source. I think he was referring to stock levels. Maybe Robert can clarify.

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  4. By savro on October 26, 2010 at 4:23 pm

    Perry said:

    I wonder what he meant by 500,000 bpd surplus? Surplus hitting the market or surplus capacity? If it’s the latter, we’re going to be scrambling sooner than most predicted.

    Go Navy!!


     

    In the context he made the statement, I understood it to mean surplus capacity. I will ask for clarification though.

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  5. By Wendell Mercantile on October 26, 2010 at 5:32 pm

    Did Deputy Assistant Secretary Hicks ever say by what process; using what feedstock; and from which suppliers, the Navy expects to get the biofuels they need? Or are they just going to throw their requirement at the private sector and expect someone to supply it?

    My personal view is that the Navy, Air Force, and Army should all build and own their own biofuel production facilities. They might contract with industry to run it as the War Department did with Monsanto, Dow, Westinghouse, DuPont, Babcock and Wilcox, etc. during the Manhattan Project, but the facilities at Oak Ridge, Hanford, Los Alamos, Niagara Falls, etc. belonged to the Army Corps of Engineers until Congress formed the Atomic Energy Commission after WW II and the AEC took them over.

    I’m looking forward to hearing why the Navy can’t use liquid fuels made from coal. It seemed to work fairly well for the Germans in WW II. (Although it would have been better for us and the war would have been shorter had it not worked.)

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  6. By Kit P on October 26, 2010 at 10:16 pm

    “So again, we are
    going through the entire certification and testing of every engine in
    our fleet, including the diesel back-up generators on our carriers.”

     

    Which are powered by
    nuclear reactors, so the diesels provide for decay heat removal after
    a reactor scram. Also it is important to maintain weapons and fire
    fighting systems on a war ship. Therefore, fuel systems must be very
    reliable. I also understand that pilots think fuel quality is
    important too.

     

    When it comes to
    things like that, the navy has deep pockets. Biomass fuels will need
    to be developed to high stands for the public to accept.

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  7. By perry on October 26, 2010 at 10:39 pm

    The Air Force is already testing CTL fuels Wendell. South Africa produces 300,000 bpd with CTL. That would just about take care of the military’s needs. Logistics have a lot to do with this. The military spends a fortune on fuel transport. 8 of the 10 biggest fuel guzzlers in the military are fuel/supply vehicles. Imagine the cost of transporting diesel from Montana to Afghanistan. Or anywhere to Afghanistan, for that matter.

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  8. By Rufus on October 27, 2010 at 1:30 am

    This is, simply, National Defense. The “Joint Operating Environment” Report, and the German Military have both come out, and stated quite simply that the fecal matter will be bombarding the rotating, whirlathingies with Great Force by 2015.

    You look all around the world at planned projects, and there just isn’t anywhere near enough oil coming online to keep the world supplied reasonably well into 2015 (and, quite possibly, past 2013 – with 2012 looking very tight.)

    The Military is in a “double-bind,” because They need replacements for Diesel, and Kerosine, two products that are much more difficult, due to lack of suitable homegrown oils, than gasoline, which can be substituted for with alcohol.

    Wouldn’t it be great if our ‘Rulers and Masters’ would give us, the little people, a “heads up” about the impending energy trainwreck instead of telling us bedtime stories about “clean” windmills, battery-cars with 100 mile ranges?

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  9. By paul-n on October 27, 2010 at 2:09 am

    Rufus, that’s just crazy talk.  If there is a storm coming, we should rest assured that our leadership is doing it’s best to not to avoid the storm, but to avoid us knowing about it. 

    Seriously though, the last eight presidents have all said that America needs to reduce its oil use, so it’s not as if they haven’t been warning the people.  But somehow, those people still buy more and more PU’s and SUV’s than small cars, every year, and drive them more miles.  So whose fault is it, really, that a crunch is coming?

    I think that, one way or another, the military will get all the fuel they need.  It is the rest of us that will have to make do with less (and pay more for it).  And if that is the only sacrifice we collectively have to make, we are getting off lightly.

     

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  10. By Rufus on October 27, 2010 at 3:20 am

    Paul, I’m becoming more, and more convinced that OUR drop-dead price is somewhere around $3.50/gal., maybe a little less. I think we’ll hit that next year, and I expect we’ll fall back into recession shortly thereafter.

    This time, though, we’ll probably only drop demand by a million, or a million and a half barrels/day – about what the Non-OECD countries (Chindia, et al) are increasing it. So, I don’t expect oil to fall back into the thirties this time. Maybe the Fifties, or, briefly, the Forties, before it takes off again.

    Then you have the question of, “what will another recession, on the heels of the past/current one do to an already weakened economy?” It’s not a pleasant thing to contemplate. Will the “collective” even recognize what’s doing it to them? I’m thinking, “probably not.” It’s a worrisome proposition, I think.

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  11. By OD on October 27, 2010 at 12:29 pm

    The bible mentions nuclear war?

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  12. By perry on October 27, 2010 at 12:55 pm

    The atom hadn’t been split back then OD, so the word nuclear wasn’t in the vocabulary. Trying to describe nuclear warfare 2000 years ago wouldn’t have been an easy task. But, it may have gone a little like this.

     

     ”By these three was the third part of men killed, by the fire, and by the smoke, and by the brimstone, which issued out of their mouths.”

     

    Sounds a lot like a rocket launcher being described by someone who had never seen modern machinery. Keep in mind that this prophecy was written at a time when the world’s total population was less than 200 million. An army of that size would have had to have been imagined well into the future. At a time when the capability existed to kill 1/3 of mankind. Neither was really possible before the last few decades. And there certainly wasn’t anything west of the Euphrates an army of that size would want. At least not before peak oil.

     

    A lot of people have strange fears. Some warranted, some not. That’s mine, for what it’s worth.

     

     

     

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  13. By George on October 27, 2010 at 1:03 pm

    NAVFAC SW held an Energy Industry Forum on June 3
    On Alternative Energy and what the Navy is doing and what they looking for.
    NAVFAC SW held an Energy Industry Forum

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  14. By Optimist on October 27, 2010 at 1:58 pm

    Paul, I’m becoming more, and more convinced that OUR drop-dead price is somewhere around $3.50/gal., maybe a little less.

    I’d love to know how you determined that, Rufus.

     

    I doubt there is a “drop-dead” price. At $3.50/gal we would all sure conserve like hell, and that would provide much needed relief.

     

    Whether $3.50 precipitates a recession will depend on how the prostitutians react. On that score I’d have to admit: It doesn’t look good. The bad news is that America was once a country that left the market (mostly) to itself, didn’t try to protect dying industries or iconic companies – no matter how painful the consequences. The good news is that America can be that country again.

     

    Wow! Now I feel much better about those coming tea-party victories!Laugh

    There are billions of people in the world that are not threaten US military because they are threaten by their own military or secret police. The lucky ones escape and come live in the US.

    Here I am going to have to agree with Kit: for all its foreign policy mistakes, there is no other country I’d rather see as the world’s only superpower than America.

     

    Let’s hope the cowards in Washington DC doesn’t sink the ship with their foolish and selfish little games.

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  15. By Nick de Cusa on October 27, 2010 at 8:12 am

    Looks like the US military is hard at work making itself less of a threat to the rest of the world by giving fashionable hypes precedent over operational effectiveness. Good thing for the rest of the world.

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  16. By Kit P on October 27, 2010 at 10:10 am

    “If there is a
    storm coming ..”

     

    That is correct, if.
    There is no storm coming but if a storm comes some of us are
    prepared. If you commute in a $40k SUV 100 miles a day you may be in
    trouble. If you owe $50k on the SUV, $500k on your $150k house, and
    your credit cards are maxed out, then you may have a personal storm
    coming.

     

    “Looks like the US
    military is hard at work making itself less of a threat to the rest
    of the world ..”

     

    Do you mean that
    peace loving group of Americans that are willing to die for you Nick?
    Nick of short memory most likely lives someplace where there is a
    cemetery full of dead Americans, Brits, Aussies, and Canadians who
    brought freedom.

     

    If a real storm
    comes or other natural disaster comes to where Nick lives he will
    mostly likely complain that we did not bring enough free food,
    bottled, water, and tents.

     

    Nick if you think it
    is okay to plant a bomb in my kids school I hope you have a cave to
    hide in because the US military is going to more that threaten you.
    If you live country that allows people to train to plant a bomb in
    my kids school, I am sorry but the US military might come and do
    something about it.

     

    There are billions
    of people in the world that are not threaten US military because they
    are threaten by their own military or secret police. The lucky ones
    escape and come live in the US.

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  17. By perry on October 27, 2010 at 11:46 am

    Paul N said:

    Rufus, that’s just crazy talk.  If there is a storm coming, we should rest assured that our leadership is doing it’s best to not to avoid the storm, but to avoid us knowing about it. 

     


     

    They don’t know any more than we do. Nobody on the planet can say with certainty how peak oil plays out. Some countries will handle it better than others. My own fear is that China won’t like the idea of less oil for its economy. China takes whatever steps it feels necessary to keep its economy growing 8-10% a year. Whether it’s manipulating their currency, subsidizing exports, or buying up whatever raw materials it can get its hands on, China does what’s best for China. Their “economic miracle” will be stopped dead in its tracks by peak oil. So, will China sit on its hands and accept their fate, or will they make that little Bible prophecy come true? I always wondered why an army of 200 million men would WANT to cross the Euphrates anyway. After all, there’s nothing west of the Euphrates but sand. That, and a whole lot of oil.

     

    The US squats over the Middle East like a mother hen. It’s totally plausible that an oil grab by China would turn nuclear, and that 1/3 of mankind would die as a result. It’s just a 2000 year old prophecy. Might be nonsense. But, the odds of it coming true are growing by the day.

     

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  18. By OD on October 27, 2010 at 2:43 pm

    I don’t know Perry, that all sounds a little too woo woo for me. I just don’t see China starting a nuclear war to gain access to more oil, because in all likelihood that would result in far far less oil being available and any prospect of growth would go right out the window. They’d be better off trying to get oil shale flowing.

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  19. By OD on October 27, 2010 at 2:56 pm

    Whether $3.50 precipitates a recession will depend on how the prostitutians react. On that score I’d have to admit: It doesn’t look good.

    Looks like the country’s biggest employer is trying to prepare for the coming storm. This was posted in the comments section over at greencarcongress under the article about Walmart’s new hybrid trucks, in case anyone didn’t see it.

    Some really good questions here. I’m Kory Lundberg, senior manager for sustainability communications at Walmart. On this new hybrid truck, we expect a 5 to 7% gain in fuel economy with this technology.
    At Walmart, we think electrification will be a big part of our fleet in the future – in fact, we are now testing three different hybrid technologies in our fleet.

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  20. By perry on October 27, 2010 at 2:56 pm

    OD said:

    I don’t know Perry, that all sounds a little too woo woo for me. I just don’t see China starting a nuclear war to gain access to more oil,


     

    It sounds whacky, but fire and brimstone describes nuclear bombs just as well as mushroom clouds. Even if we ignore the prophecy, there’s a very real chance China will want those oil reserves. The only thing standing in their way is the US military. God help us if Gulf countries start reneging on Chinese oil deals when it hits $200 a barrel.

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  21. By Optimist on October 27, 2010 at 3:50 pm

    Even if we ignore the prophecy, there’s a very real chance China will want those oil reserves. The only thing standing in their way is the US military. God help us if Gulf countries start reneging on Chinese oil deals when it hits $200 a barrel.

    Wowa! Getting ahead of ourselves? Let’s take these in logical order:

    1. Oil may or may not hit $200/bbl. I see oil price (among other things) as a lagging indicator of economic activity. At the moment, and I would say for the next 5 – 10 years, I just don’t see the economic activity that will generate sufficient demand for oil to reach $200/bbl. No doubt the day is coming when the world’s economy could afford oil at $200/bbl. I just don’t think it will be soon. The good news: I might be wrong.

    2. Let’s assume oil does hit the $200/bbl mark: If the past is any guide, you’d have to wonder how long oil will stay there. As I mentioned above, at those levels you’d see pretty impressive conservation world wide. True, as Rufus mentioned, it may not drop back to $30/bbl. Boo-hoo. $30/bbl did NOT exactly light a fire under the economy’s @ss, did it?

    3. But let’s take it a step further, and assume oil hits $200/bbl and stays there (even though I can’t imagine who could currently afford oil at those levels). Why would the Chinese invade anybody? They sure didn’t look like they planned invading anybody when oil hit $150/bbl. What is SO different about $200/bbl? At $200/bbl, the Chinese (and the Indians) have huge internal problems: they’ll bankrupt their governments with their state controlled gas prices. These guys will NOT be looking to pick a fight with anybody.

    4. But let’s assume China DOES invade the ME, and now controls OPEC. What do you think the US leadership will do? Hint: let’s review current policy: OPEC is currently controlled by a country the US likes to call an ally for reasons that mostly defy logic. A country where radical Islam receives the bulk of its funding. A country that supplied 15 of the 19 hijackers. A country that supplied by far the bulk of the foreigners US forces had to deal with in Iraq. US leadership has no qualms about pleading these guys to give us more oil, and pay whatever they want. You want to tell me that if it is the Chinese who control OPEC, US leadership will suddenly grow a set of sphericals, stand up and make demands? Go to war?!?Your faith in US leadership is very touching, if that is what you believe…

    None of this makes any sense, IMHO…

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  22. By Wendell Mercantile on October 27, 2010 at 4:43 pm

    The Air Force is already testing CTL fuels Wendell.

    Perry~

    I’m well aware of that. (Although the operative word is no longer “testing,” it’s “tested,” and the results were positive. To no one’s surprise, jet engines run just fine on fuel made from coal.) Those tests started a number of years ago at Malmstrom AFB, Montana using that state’s coal reserves.

    Also as of right now, the Air Force CTL program has been abandoned (not permanently I should hope). U.S. Air Force Cancels Malmstrom Project

    The reason for stopping work at Malmstrom was that it wasn’t economically feasible and couldn’t provide jet fuel at a competitive price. But there will come a day when its no longer a questions of economics, it will be a question of, “Do you want jet fuel, or not?”

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  23. By Kit P on October 27, 2010 at 5:47 pm

    I always find a goofy disconnect between government public relations about energy and real life.  Let start with Tom Hicks slides from George’s link:

     

    Progress through Innovation

     

    I do recall a naval officer called Rickover who found a way to fit the first high temperature, pressurized water reactor into the 28 foot submarine hull.  That is what I call innovation and in less time than it takes the NRC to perform a design certification these days. 

     

    Tom Hicks was careful not to use the word nuclear anyplace but it slipped in  on the graph of the overall energy source graph for the navy – 16% nuclear.  So how is Rickover’s program doing about 225 ships later?  Zero reactor accidents!  The drawback to more nuclear ships and shore power stations is the high initial costs and the two year training program required for nuke plant operators.  

     

    The only thing I found remotely innovation was:

     

    Ocean Thermal Energy Conversion (OTEC) is ideal for island locations. Can get power and water.

     

    Not the least bit practical but it sounds good on power point presentations;

     

    The presentation on solar had a long list of PV solar failure mechanisms that require a qualified maintenance department which the navy should already have.  The more expensive being:

     

    Premature PV module failure or infant mortality

    Inverter failure

    Feeder cable failure

    Transformer failure

     

    Then there is this bit of advice:

     

    In addition to system maintenance and trouble shooting procedures, operations and maintenance personnel must acquire thorough knowledge about significant life safety hazards associated with solar power systems components that operate at 300-1000 volts DC.  

     

    The only thing that I thought was significant was some geothermal for bases in the desert in California and Nevada.  

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  24. By Kit P on October 27, 2010 at 6:07 pm

    “there’s a very real chance China will want those oil reserves”

     

    China has about the same ability to project military power as the Boy Scouts.  The Boy Scouts having the advantage of not having to hold a gun to the head of their populations.  China does not have a blue water navy.  China depends on the US Navy and our allies to keep the sea lanes open.  The ocean is a big place and we have all seen that pirates still can operate with impunity.  

     

    When you look at what it takes to put super nuke air craft carriers out to sea, it is a big challenge and the US has 10.  Overwhelming military superiority discourages competition in that area.

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  25. By paul-n on October 28, 2010 at 3:35 am

    Who knew it would be all about China?

     

    I think there is an important point, about China, that is being missed here.  It is a *very* export oriented economy.  Their biggest problem with $200 oil will not be that they can’t get enough – they can likely outbid most, and have more electric rail than anyone esle, and more electric bikes than the rest of the world combined.  Bejing has as many buses (that could run on CNg or coal gasifiers if necessary) as half of the US total.  And they have agovernment that will not hesitate to institute fuel rationing if needed.

    No, China’s real problem in a $200 oil world is that the rest of the world will bein recession, and their export markets will dry up.  So what then is the point of any military adventures to get oil?  Even if they could do that, then they can drive their cars around while their factories go broke becasue they can;t sell anything?

    China has the worlds largest hydro electric construction program, the largest wind power construction program, the largest ( I presume, correct me if I’m wrong) nuke construction program, the largest (only?) coal to methanol program, the largest electric rail construction program, and they are already doing oil shale, and have been for some time.  They also have the world largest coal mine worker forced early retirement program, but that’s a different story.  

    In short, they are doing lots of energy stuff other than oil.  Yes, they still need lots of it, but if the rest of the world is in severe recession, they will slow down too, and won’t hesitate to take cars off the road if need be.

     

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  26. By paul-n on October 28, 2010 at 4:15 am

    Paul, I’m becoming more, and more convinced that OUR drop-dead price is somewhere around $3.50/gal., maybe a little less. I think we’ll hit that next year, and I expect we’ll fall back into recession shortly thereafter.

    Well Rufus, I hope for the sake of the American economy and people (and ethanol industry!), that you are wrong!

    If you are right then the American economy is about as robust as a house of cards – and I don;t believe that to be the case.

    Retail price here in Canada is $4.10(US) and we haven’t dropped dead, Australia is at $4.45 – both these countries have “similar” economies, and transport structures (i.e. car based) to the US, and both are doing better, economically, than the US, and have been for the last year.  

    What I am getting at here is I don;t think the price of gasoline, is the real problem.  Truck and SUV sales are creeping up again – it is the usage of gasoline that is the problem.  Actually, only part of the problem – the US does have one or two other economic issues to deal with at present.

    I think oil has done its damage – even if it gets cheaper, that won;t get people their jobs back, or put their houses above water, or reverse foreclosures, etc etc.

    If it gets more expensive, will it make things that much worse? As Kit points out, if you are way in debt on your car, house and credit card, then the pump price of gasoline is far from your biggest problem.  

    That said, I maintain that high oil prices exacerbate America’s trade deficit, and that doesn’t help the economy at all, but to blame it now for causing another recession is a bit like blaming the pitcher of a losing team, when the fielders dropped flyballs, threw wide returns, the catcher was off the plate, and the batters couldn’t hit the side of barn.  

    But, assuming you are right, will the ethanol industry ride to the rescue an only sell ethanol based on the price of corn, regardless of how expensive gasoline gets?  

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  27. By Rufus on October 28, 2010 at 4:44 am

    Of course not; they’ll get every last penny for their fuel that they can get. It won’t matter much, because we don’t have enough ethanol to make a difference, and won’t have for several (and, I mean, Several) years.

    Corn is all but “maxed out,” and it’ll be five years, at least, before we start seeing any meaningful cellulosic product. We could be well, and truly, drowned by then.

    Canada, and Australia are in very good shape. They are energy exporting nations, with strong agricultural bases, and conservative fiscal/monetary policies. They might, likely, get by with a not overly serious downturn while we’re plunging off a cliff.

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  28. By paul-n on October 28, 2010 at 5:50 am

    Of course not; they’ll get every last penny for their fuel that they can get.

    And fair enough, too – but how about voluntarily giving up/phasing out the VEETC if gasoline is over $4?

     

    i think there would be enough ethanol to make a difference in an embargo situation – if oil available to the US is halved, Ethanol would instantly be double it’s current % of gasoline, and production would probably be ramped up pretty quickly – even if it means the old school acid hydrolysis of the stover and anything else- at that point it would be cheaper than oil.

    Australia is an energy exporter , but not for oil – like the US, it imports more than it produces.  It does export LNG, and LNG is priced almost as high as oil, per btu.  Australia’s coal exports account for more than Australia’s total domestic energy consumption and GHG – wonder why we didn’t support Kyoto?

    All three countries have good agricultural bases (relative to their populations).  

    But out of the three, only the US has Wall St, and only the US is in trouble!

     

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  29. By Kit P on October 28, 2010 at 9:11 am

    “China has the
    worlds largest ..”

     

    We are not in a
    contest with China. It is not about size, it is about quality and
    safety. Rickover was relentless about safety and quality. In the
    US, we enjoy the most reliable electricity in the world. We do it
    safely and with insignificant environmental impact.

     

    China is playing
    catch up. Thirty years ago the US had the civilian largest nuclear
    construction program, now we have the largest program to make
    reactors last 60 years and gearing up to have the largest program to
    make reactors last 80 years. The civilian nuclear industry is now
    relentless about safety and quality but unfortunately not before a
    reactor accident.

     

    “world largest
    coal mine worker forced early retirement program, but that’s a
    different story.”

     

    China lead the world
    in killing coal miners. Although I have seen no statistics, the US
    leads the world in coal miners that drive big pick up truck home
    every night. I do not see a problem for the US. China has a long
    way to go.

     

    About 60 years ago,
    my dad flew daily patrols along the cost of China. We are still
    doing the same today. American servicemen stand the line every day
    and it takes energy to do that. We have learned that standing the
    line is best for Americans when that line is drawn as close to those
    who would use force to achieve their goals. Russia, China, and
    North Korea may not be happy to see the American military on their
    boarders but our presence excludes historic enemies and occupations.

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  30. By paul-n on October 28, 2010 at 2:49 pm

    Agreed we are not in a contest with China, but they think they are in a contest with us.  My point there is that China is building a lot of infrastructure that is not oil dependent.

     

    Number I have read is 5000 Chinese coal miners each year that do not come home,  which is quite tragic.  I have not seen historical numbers for 19th century coal mining in Europe, but I would doubt that it was ever close to that (for accidents anyway, later deaths from black lung might be different).

     

    The only real “threat” that I can see China posing is an economic one, and even then I think that is overstating the case.  If something happens and we lose our imports of cheap junk from china that is far from the end of the world – and would hurt them more than us.

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  31. By Wendell Mercantile on October 28, 2010 at 4:29 pm

    Number I have read is 5000 Chinese coal miners each year that do not come home, which is quite tragic.

    Not in a command-directed, Communist society with 1.3 billion people. The one thing they have a super abundance of is manpower. This is the same country that sent their soldiers to war in Korean in the dead of winter wearing canvas boots not much different than high-top tennis shoes. Heaven only knows how many of their troops died in the Korean War because of exposure to the cold instead of by enemy fire.

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  32. By Duracomm on October 31, 2010 at 10:19 am

    Russ Finley said,

    Eisenhower would roll over in his grave if he saw the debt the military industrial complex is saddling our children with.

    You can’t fix a problem if you do not know what is causing it.

    If entitlements had followed the same pattern of spending that the scary bogeyman the “military industrial complex” had there would likely be no debt problem in the US.

    A chart at the link below sums up the problem. In 1956 defense spending was about 60% of budget and in 2006 defense spending was about 20% of the budget.

    Defense spending is not causing the debt / deficit problem entitlements are.

    The Stubborn Welfare State

    In 1956, defense dominated the budget; the Cold War buildup was in full swing. The welfare state, which is what “payments to individuals” signifies, was modest.

    Now everything is reversed. Despite the war in Iraq, defense spending is only a fifth of the budget;

    so-called entitlement payments to individuals are almost 60 percent — and rising.

    In fiscal 2006, the federal government spent almost $2.7 trillion. Social Security ($544 billion), Medicare ($374 billion) and Medicaid ($181 billion) dominated. There was $199 billion more for payments to the poor, including the earned-income tax credit and food stamps, among others.

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