OT? Interesting presentation on Ethanol

Hi ya'll,

So a couple of weeks ago there was a discussion about ethanol in avgas. Some of the posts addressed the 'false economies' of Ethanol production. I thought those posts we're very compelling, however I've just watched a very interesting talk by Vinod Khosla. Vinod is one of the principals of Kleiner Perkins - one of the two powerhouse VCs behind Silicon Valley's most important ideas over the last twenty years. Vinod is now mostly retired as a VC, but he's got a number of good arguments in favor of Ethanol. He is really smart and honest fellow, so when he says something is compelling I listen.

Vinod recently gave his talk at google and they are now distributing it online: (click here to view)

If you are concerned about the future of fuels, oil dependance and some surprising consequences for greenhouse gasses, it is worth watching. At least watch the first five minutes to decide if you want to watch more.

Ethanol presentation at Google

That is a very interesting talk. I agree that getting real entrepreneurs into the energy business will allow us to come up with some great solutions. My major concern is the one he brought up - the oil companies dropping the price of oil to kill these types of initiatives.

Thanks for the link - I doubt I would have ever found this video without you pointing it out.

Excellent

Excellent stuff. Thank you. I passed the link to several friends. I don't buy all of it and I disliked some of the political slant, but it was VERY eye opening.

hevansrv7a said:

Excellent stuff. Thank you.

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You are welcome. I've talked with this fellow in a few other contexts and he's a real straight shooter.

Interesting. I disagree with the "big, bad oil companies" nonsense, though. "Oil companies" don't control the price of oil...or even refined fuel. They are commodities. WE control the prices, ultimately, though supply and demand. (Once we've paid OPEC for the oil, which is another matter entirely.)

Ethanol is very high octane fuel, though the energy content per gallon is a bit lacking. And you can legally make the stuff yourself, in your garage. Yes, folks, operating a "still" is legal! You need a permit from the BATF, but it's easy to obtain. You just have to pinkey-swear you won't drink the stuff. It's pretty much done on the honor system. (You're required to put poison in the fuel, but nobody actually checks up on it.)

Big bad oil companies

Bitsko said:

Interesting. I disagree with the "big, bad oil companies" nonsense, though. "Oil companies" don't control the price of oil...or even refined fuel. They are commodities. WE control the prices, ultimately, though supply and demand. (Once we've paid OPEC for the oil, which is another matter entirely.) ...

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Hi Bitsko, I'm just curious, what part of what he said about oil companies did you disagree with? If I recall correctly, he said that an oil company exec told him that they would drop the price of oil down to the point where ethanol production is not economically viable if they felt ethanol would become a threat to their business. Is this what you disgree with, or was there something else that I missed?

I've worked closely with many Venture Capitalists, and I've been involved in purchasing or investing in several companies with values up to 2 billion dollars.

Vinod seems to be a typical VC. In general terms, the VC formula is:

1. identify disruptive business or technology trends with potential large payoffs
2. identify key 'startup' players and technology, or put together startup companies with hand-picked individuals
3. place several investments
4. through their investment influence, try to drive industry standards or government regulation in a favorable direction.
5. publicize and hype the new business/technology and how it will payoff to investors
6. just when the world has bought into the arguments and momentum is building, sell the company or take it public to make money.

[example the 'Tech Bubble']

In the above, actually having the market develop or technology widely deployed is not an objective.... making money is. The VC's motivation is not to make the world a better place.

Having said all that... Vinod may be right, for all of the wrong reasons. To me , he blew his credibility badly when he quoted an oil company executive as saying all of the new oil is coming from (paraphrased) 'despots and terrorist countries'. The fact is, most new oil is coming from one of the world's largest reserves... the Alberta tar sands in Canada.

Last time I looked, Canada was a stable, democratic country... and literally just 'up the road' from the US.

Of course, VCs like to use emotional hyperbole, but it totally blew his credibility. How much of the other information that he provided was false or misleading? It pays to be a skeptic. This man want's your tax dollars spent to his benefit.

He makes a lot of excellent points, but underpinning everything is the big hand of government guaranteeing him a return on his investment.

This is my opinion of course (humble or otherwise). Be skeptical... look for other sources of information before making any judgements (or investments).

It will be a while before I convert my O-320 to run on corn whiskey.

Vern Little
RV-9A
-professional skeptic-

Some more critique of Vinod's stuff

He did not deal with the ramifications of converting our food exports to energy. What would happen to the price of grains in the poorer parts of the world and what political changes might that cause? What if Canada followed suit? Between US and Canada, there's a lot of food exports others need.

A friend contributed these points (some of which numbers differ):

Most of the people babbling about carbon have no real contribution to energy production and consumption as our society is organized and functions. Stanford University did a long, hard study of Ethanol in the economy and determined that, in whole, it consumes more energy than it provides ? a net loser. We have embraced it because of the politics of coalitions. The environmentalists are a little chastened because they foisted MTBE on us in 1990, and now we have more contaminated ground water than at any time in the continent?s history. They got together with the farm lobby to foist ethanol on us as a fuel.

1)[font=&quot] [/font]You can?t ship it around the country through pipelines ? it eats them quickly. So it must be trucked or trained ? a windfall for those transportation industries.



2)[font=&quot] [/font]It needs lots of biomass as input to the conversion process. The Stanford guys said that our transportation consumption is great enough that we would have to plant every acre of the continental US ? and still would be short of current consumption levels.



3)[font=&quot] [/font]Ethanol, at current cost and tax levels, is 30% less cost efficient than 87 octane gasoline.



4)[font=&quot] [/font]Ethanol is a massive taxation problem. Ethanol taxed for consumption provides $20-60 per gallon in tax. In order to protect that tax revenue, ATF requires that any ethanol produced be certifiably poisoned with 15% gasoline to prevent untaxed consumption. As ethanol production and distribution increases, this will be huge, because the blending doesn?t happen before shipping.

3)[font=&quot] [/font]Ethanol, at current cost and tax levels, is 30% less cost efficient than 87 octane gasoline.

Which is why Brazil consumers have switched 40% of their auto fuel consumption from petrol to domestically produced Ethanol? Please site sources for this statement, I don't see how that adds up.

I was totally against Ethanol until I first saw this talk, then I poked around a bit and found this article:

http://en.wikipedia.org/wiki/Ethanol_fuel_in_Brazil

As for the implication that Vinod is trying to pump up eventual stock sales, I don't think this is true. Vinod has at least a billion dollars and I note that the companies he cites that would primarily benefit are either farmers or large public corporations.

Most of the people babbling about carbon have no real contribution to energy production and consumption as our society is organized and functions. Stanford University did a long, hard study of Ethanol in the economy and determined that, in whole, it consumes more energy than it provides ? a net loser. We have embraced it because of the politics of coalitions. The environmentalists are a little chastened because they foisted MTBE on us in 1990, and now we have more contaminated ground water than at any time in the continent?s history. They got together with the farm lobby to foist ethanol on us as a fuel.

Would you mind a citation for this? I'm honestly curious and my googling hasn't found this Stanford study.

Ethanol

hevansrv7a said:

Most of the people babbling about carbon have no real contribution to energy production and consumption as our society is organized and functions. Stanford University did a long, hard study of Ethanol in the economy and determined that, in whole, it consumes more energy than it provides ? a net loser.

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This is true, and was addressed by Vinod in the presentation. Using corn would require about the entire continental US to be planted to provide our current needs. However, the technologies that they are developing would allow different types of grasses to be used that generate much more organic matter that can be converted to ethanol. Corn is not a very efficient producer of ethanol. Check out this grass, called miscanthus:

http://bioenergy.ornl.gov/papers/miscanthus/miscanthus.html

More dialogue

Guys, please note that the part of my post that you are responding to was from a friend. I provided it because it's interesting. I don't know if it's "right". He's very bright and very thorough, but had not yet seen the video when he wrote that. I'm trying to get him to provide the link to the Stanford study and I'll provide it if/when.

I make no evaluation of Vinod's motives and I generally think that "ad hominem" arguments are less useful than a direct examination of the data and logic. They can be useful in pointing the way when investigating an idea's merits, but they don't change the merits.

I was more concerned with the issues of:
1. issue of lowering food grain production as it would affect the world economy and the health of third world people in general.
2. Issue of transportation - does it really eat pipelines?
3. Issue of last-minute blending requirement.
4. Confusing statements about "big oil", some positive, some very negative. Of course, in the real world, all could be true at one time.
5. Making carbon dioxide an issue when it does not have a direct relationship to the primary issue only weakens, IMHO, the overall presentation.

For more experimental information/data, you may also want to look at: http://www.age85.org/ActiveProjects.htm

Brazil doesn't make ethanol from corn as we do. Brazil mkes ethanol from sugarcane, which is much more efficient. With their climate & soils, they can grow a lot of sugarcane.

Wow, that's cool, I didn't realize aircraft were flying off this stuff. Great link above, http://www.age85.org/ActiveProjects.htm,
Thanks he

RScott said:

Brazil doesn't make ethanol from corn as we do. Brazil mkes ethanol from sugarcane, which is much more efficient. With their climate & soils, they can grow a lot of sugarcane.

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If I understand the comments I've read about using ethanol in Brazil, they are petroleum poor and their ecomomy would suffer paying the price to import oil. One problem is ethanol is an alternative fuel that it is difficult to extract more energy from than you must put in to refine the product. Using a sugar starter, (like sugarcane) would certainly help. Corn and other starches need to ferment more to produce alcohol. When using ethanol as a motor fuel the biggest problem is range. To extract the most energy from ethanol the engine needs to be set up for the fuel. Typically higher compression, different injectors, timing and cams are needed. It is problematic to then run the engine on gasoline. Most of the dual-fuel cars are gas best and alcohol "OK". The range difference can be as much as 30%.
Bill Jepson

Sweet Potatoes

I have done much research on this topic, as I am going to produce my own Ethanol. I have studied in-depth modern still designs and can produce ethanol for 99 cents per gallon with parts from Home Depot, in fact, I have the plans somewhere. I will find them and if anyone is interested, please pm me.

Here is the deal. Corn is not a good source to produce pure ethanol. So, if one bases his or her opinion or research on corn productivity as the source to produce it, the study determines corn is the fault not the concept. Corn cannot and will not produce enough ethanol ever for Americas need!

Enter the world of the sweet potato; it?s the sugar content that determines the amount of ethanol that can be produced per bushel of any crop. Sweet potatoes have 20 times the amount of sugar and this is why I will be using them, which in return will reduce my cost to produce it to a level that is worth my time and effort. The only issue with the sweet potato is that the sugar starts breaking down into starch after three days, so one had better get it to the masher as quick as possible.

If Midwest farmers would change their crops to the sweet potato, perhaps we would have a chance to produce a plethora of ethanol, but that is a whole other story, and like many in the USA, change is hard unless there is a catastrophic event that forces one to change his or her beliefs.

Here is a link some of you may be interested in
http://running_on_alcohol.tripod.com/id2.html

Jim