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Oil & Security by Shultz/Woolsey--revised must-read (long)

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  • Felix Kramer
    Since some people prefer email to PDFs, so here s a text version of this document (with authors IDs moved up). It sa persuasive presentation of the case for
    Message 1 of 1 , Oct 2 8:32 PM
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      Since some people prefer email to PDFs, so here's a text version of this
      document (with authors' IDs moved up).
      It'sa persuasive presentation of the case for flex-fuel plug-in hybrids by
      eminent authors.

      You can get the 13-page PDF file at

      A Committee on the Present Danger Policy Paper:


      by George P. Shultz and R. James Woolsey
      George P.Shultz is a former Secretary of State and is currently
      Distinguished Fellow at the Hoover Institution, Stanford University.
      R. James Woolsey is a former Director of Central Intelligence and is
      currently Vice President of Booz/Allen Hamilton.
      The two are the co-Chairmen of the Committee on the Present Danger.
      The Committee on the Present Danger: P.O. Box 65196, Washington, D.C. 20035.
      Tel. 202/778-1032. Fax 202/659-7923. email: info@...

      (An earlier version of this paper was posted in June on the CPD Web-site
      just prior to the Senate debate of the Energy Bill to help inform that
      debate and for discussion and commentary by interested parties prior to
      CPD board and membership approval. That discussion and commentary has
      informed this draft, dated August 5, 2005. Board and membership approval
      is not yet final.)


      This paper could well be called, "It's the Batteries, Stupid." Four
      years ago, on the eve of 9/11, the need to reduce radically our reliance on
      oil was not clear to many and in any case the path of doing so seemed a
      long and difficult one. Today both assumptions are being undermined by the
      risks of the post-9/11 world and by technological progress in fuel
      efficiency and alternative fuels.

      We spell out below the risks of petroleum dependency, particularly
      the vulnerability of the petroleum infrastructure in the Middle East to
      terrorist attack - a single well-designed attack could send oil to well
      over $100/barrel and devastate the world's economy. That reality, among
      other risks, and the fact that our current transportation infrastructure is
      locked in to oil, should be sufficient to convince any objective observer
      that oil dependence today creates serious and pressing dangers for the US
      and other oil-importing nations.

      We propose in this paper that the government vigorously encourage and
      support at least six technologies: two types of alternative fuels that are
      beginning to come into the market (cellulosic ethanol and biodiesel derived
      from a wide range of waste streams), two types of fuel efficient vehicles
      that are now being sold to the public in some volume (hybrid
      gasoline-electric and modern clean diesels), and one vehicle construction
      technique, the use of manufactured carbon-carbon composites, that is now
      being used for aircraft and racing cars and is quite promising as a way of
      reducing vehicle weight and fuel requirements while improving safety.

      The sixth technology, battery improvement to permit "plug-in" hybrid
      vehicles, will require some development - although nothing like the years
      that will be required for hydrogen fuel cells. It holds, however,
      remarkable promise. Improving batteries to permit them to be given an
      added charge when a hybrid is garaged, ordinarily at night, can
      substantially improve mileage because it can permit hybrids to use battery
      power alone for the first 10-30 miles. Since a great many trips fall
      within this range this can improve the mileage of a hybrid vehicle from,
      say, 50 mpg to over 100 mpg (of oil products). Also, since the average
      residential electricity cost is 8.5 cents/kwh (and in many areas, off-peak
      nighttime cost is 2-4 cents/kwh) this means that, after taking account of
      the differential efficiencies of electric and gasoline power, much of a
      plug-in hybrid's travel would be on electricity that is the equivalent of
      $1/gallon gasoline (or, off-peak, 25-50 cents/gallon) as contrasted with
      the same vehicle's use of today's approximately $2.50/gallon gasoline.

      A plug-in hybrid averaging 125 mpg, if its fuel tank contains 85 per
      cent cellulosic ethanol, would be getting on the order of 500 mpg (of oil
      products). If it were constructed from carbon composites that mileage
      could double, and, if it were a diesel and powered by biodiesel or
      renewable diesel derived from waste, it would be using no oil products at

      What are we waiting for?


      There are at least seven major reasons why dependence on petroleum and its
      products for the lion's share of the world's transportation fuel creates
      special dangers in our time. These dangers are all driven by rigidities
      and potential vulnerabilities that have become serious problems because of
      the geopolitical realities of the early 21st century. Those who reason
      about these issues solely on the basis of abstract economic models that are
      designed to ignore such geopolitical realities will find much to disagree
      with in what follows. Although such models have utility in assessing the
      importance of more or less purely economic factors in the long run, as Lord
      Keynes famously remarked: "In the long run, we are all dead."

      These dangers in turn give rise to two proposed directions for government
      policy in order to reduce our vulnerability rapidly. In both cases we
      believe that existing technology should be used, i.e. technology that is
      already in the market or can be so in the very near future and that is
      compatible with the existing transportation infrastructure. To this end
      government policies in the United States and other oil-importing countries
      should: (1) encourage a shift to substantially more fuel-efficient
      vehicles, including fostering battery development for plug-in hybrid
      vehicles; and (2) encourage biofuels and other alternative and renewable
      fuels that wherever possible can be derived from waste products.


      1. The current transportation infrastructure is committed to oil and
      oil-compatible products.

      This fact substantially increases the difficulty of responding to oil price
      increases or disruptions in supply by substituting other fuels.

      There is a range of fuels that can be used to produce electricity and heat
      and that can be used for other industrial uses, but petroleum and its
      products dominate the fuel market for vehicular transportation. With the
      important exception, described below, of a plug-in version of the hybrid
      gasoline/electric vehicle, which will allow recharging hybrids from the
      electricity grid, substituting other fuels for petroleum in the vehicle
      fleet as a whole has generally required major, time-consuming, and
      expensive infrastructure changes. One exception has been some use of
      liquid natural gas (LNG) and other fuels for fleets of buses or delivery
      vehicles, although not substantially for privately-owned ones, and the use
      of corn-derived ethanol mixed with gasoline in proportions up to 10 per
      cent ethanol ("gasohol") in some states. Neither has appreciably affected
      petroleum's dominance of the transportation fuel market.

      Moreover, in the 1970's about 20 per cent of our electricity was made from
      oil - so shifting electricity generation toward, say, renewables or nuclear
      power could save oil. But since today only about two per cent of our
      electricity is oil-generated, a shift in the way we produce electricity
      would have almost no effect on the transportation or oil market. This
      could change, however, with the advent of plug-in hybrid vehicles,
      discussed below.

      There are imaginative proposals for transitioning to other fuels for
      transportation, such as hydrogen to power automotive fuel cells, but this
      would require major infrastructure investment and restructuring. If
      privately-owned fuel cell vehicles were to be capable of being readily
      refueled, this would require reformers (equipment capable of reforming,
      say, natural gas into hydrogen) to be located at filling stations, and
      would also require natural gas to be available there as a hydrogen
      feed-stock. So not only would fuel cell development and technology for
      storing hydrogen on vehicles need to be further developed, but the
      automobile industry's development and production of fuel cells also would
      need to be coordinated with the energy industry's deployment of reformers
      and the fuel for them.

      Moving toward automotive fuel cells thus requires us to face a huge
      question of pace and coordination of large-scale changes by both the
      automotive and energy industries. This poses a sort of industrial Alphonse
      and Gaston dilemma: who goes through the door first? (If, instead, it
      were decided that existing fuels such as gasoline were to be reformed into
      hydrogen on board vehicles instead of at filling stations, this would
      require on-board reformers to be developed and added to the fuel cell
      vehicles themselves - a very substantial undertaking.)

      It is because of such complications that the National Commission on Energy
      Policy concluded in its December, 2004, report "Ending The Energy
      Stalemate" ("ETES") that "hydrogen offers little to no potential to
      improve oil security and reduce climate change risks in the next twenty
      years." (p. 72)

      To have an impact on our vulnerabilities within the next decade or two, any
      competitor of oil-derived fuels will need to be compatible with the
      existing energy infrastructure and require only modest additions or
      amendments to it.

      2. The Greater Middle East will continue to be the low-cost and dominant
      petroleum producer for the foreseeable future.

      Home of around two-thirds of the world's proven reserves of conventional
      oil -- 45% of it in just Saudi Arabia, Iraq, and Iran -- the Greater Middle
      East will inevitably have to meet a growing percentage of world oil demand.
      This demand is expected to increase by more than 50 per cent in the next
      two decades, from 78 million barrels per day ("MBD") in 2002 to 118 MBD in
      2025, according to the federal Energy Information Administration. Much of
      this will come from expected demand growth in China and India. One need
      not argue that world oil production has peaked to see that this puts
      substantial strain on the global oil system. It will mean higher prices
      and potential supply disruptions and will put considerable leverage in the
      hands of governments in the Greater Middle East as well as in those of
      other oil-exporting states which have not been marked recently by stability
      and certainty: Russia, Venezuela, and Nigeria, for example (ETES pp.
      1-2). Deep-water drilling and other opportunities for increases in supply
      of conventional oil may provide important increases in supply but are
      unlikely to change this basic picture.

      Even if other production comes on line, e.g. from unconventional sources
      such as tar sands in Alberta or shale in the American West, their
      relatively high cost of production could permit low-cost producers,
      particularly Saudi Arabia, to increase production, drop prices for a time,
      and undermine the economic viability of the higher-cost competitors, as
      occurred in the mid-1980's. For the foreseeable future, as long as
      vehicular transportation is dominated by oil as it is today, the Greater
      Middle East, and especially Saudi Arabia, will remain in the driver's seat.

      3. The petroleum infrastructure is highly vulnerable to terrorist and
      other attacks.

      The radical Islamist movement, including but not exclusively al Qaeda, has
      on a number of occasions explicitly called for worldwide attacks on the
      petroleum infrastructure and has carried some out in the Greater Middle
      East. A more well-planned attack than what has occurred to date -- such as
      that set out in the opening pages of Robert Baer's recent book, Sleeping
      With the Devil, (terrorists flying an aircraft into the unique
      sulfur-cleaning towers in northeastern Saudi Arabia) -- could take some six
      million barrels per day off the market for a year or more, sending
      petroleum prices sharply upward to well over $100/barrel and severely
      damaging much of the world's economy. Domestic infrastructure in the West
      is not immune from such disruption. U.S. refineries, for example, are
      concentrated in a few places, principally the Gulf Coast. The recent
      accident in the Texas City refinery-- producing multiple fatalities--points
      out potential infrastructure vulnerabilities. The Trans-Alaska Pipeline
      has been subject to several amateurish attacks that have taken it briefly
      out of commission; a seriously planned attack on it could be far more

      In view of these overall infrastructure vulnerabilities we do not suggest
      that policy should focus exclusively on petroleum imports, although such
      infrastructure vulnerabilities are likely to be the most severe in the
      Greater Middle East. It is there that terrorists have the easiest access
      and the largest proportion of proven oil reserves, and low-cost production
      are also located there. Nor do we hold the view that by changing trade
      patterns anything particularly is accomplished. To a first approximation
      there is one worldwide oil market and it is not generally useful for the
      U.S., for example, to import less from the Greater Middle East and for
      others then to import more from there. In effect, all of us oil-importing
      countries are in this together.

      4. The possibility exists, particularly under regimes that could come to
      power in the Greater Middle East, of embargoes or other disruptions of supply.

      It is often said that whoever governs the oil-rich nations of the Greater
      Middle East will need to sell their oil. This is not true, however, if the
      rulers choose to try to live, for most purposes, in the seventh century.
      Bin Laden has advocated, for example, major reductions in oil production.

      In 1979 there was a serious attempted coup in Saudi Arabia. Much of what
      the outside world saw was the seizure by Islamist fanatics of the Great
      Mosque in Mecca, but the effort was more widespread. Even if one is
      optimistic that democracy and the rule of law will spread in the Greater
      Middle East and that this will lead after a time to more peaceful and
      stable societies there, it is undeniable that there is substantial risk
      that for some time the region will be characterized by chaotic change and
      unpredictable governmental behavior. Reform, particularly if it is
      hesitant, has in a number of cases been trumped by radical takeovers
      (Jacobins, Bolsheviks). There is no reason to believe that the Greater
      Middle East is immune from these sorts of historic risks.

      5. Wealth transfers from oil have been used, and continue to be used, to
      fund terrorism and Its ideological support.

      Estimates of the amount spent by the Saudis in the last 30 years spreading
      Wahhabi beliefs throughout the world vary from $70 billion to $100 billion.
      Furthermore, some oil-rich families of the Greater Middle East fund
      terrorist groups directly. The spread of Wahhabi doctrine - fanatically
      hostile to Shi'ite and Suffi Muslims, Jews, Christians, women, modernity,
      and much else - plays a major role with respect to Islamist terrorist
      groups: a role similar to that played by angry German nationalism with
      respect to Nazism in the decades after World War I. Not all angry German
      nationalists became Nazis and not all those schooled in Wahhabi beliefs
      become terrorists, but in each case the broader doctrine of hatred has
      provided the soil in which the particular totalitarian movement has
      grown. Whether in lectures in the madrassas of Pakistan, in textbooks
      printed by Wahhabis for Indonesian schoolchildren, or on bookshelves of
      mosques in the US, the hatred spread by Wahhabis and funded by oil is
      evident and influential.

      It is sometimes contended that we should not seek substitutes for oil
      because disruption of the flow of funds to the Greater Middle East could
      further radicalize the population of some states there. The solution,
      however, surely lies in helping these states diversify their economies over
      time, not in perpetually acquiescing to the economic rent they collect from
      oil exports and to the uses to which these revenues are put.

      6. The Current Account deficits for a number of countries create risks
      ranging from major world economic disruption to deepening poverty, and
      could be substantially reduced by reducing oil imports.

      The U.S. in essence borrows about $2 billion a day, every day, principally
      now from major Asian states, to finance its consumption. The single
      largest category of imports is the approximately $1 billion per working day
      borrowed to import oil. The accumulating debt increases the risk of a
      flight from the dollar or major increases in interest rates. Any such
      development could have major negative economic consequences for both the
      U.S. and its trading partners.

      For developing nations, the service of debt is a major factor in their
      continued poverty. For many, debt is heavily driven by the need to import
      oil that at today's oil prices cannot be paid for by sales of agricultural
      products, textiles, and other typical developing nation exports.

      If such deficits are to be reduced, however, say by domestic production of
      substitutes for petroleum, this should be based on recognition of real
      economic value such as waste cleanup, soil replenishment, or other tangible

      7. Global-warming gas emissions from man-made sources create at least the
      risk of climate change.

      Although the point is not universally accepted, the weight of scientific
      opinion suggests that global warming gases (GWG) produced by human activity
      form one important component of potential climate change. Oil products
      used in transportation provide a major share of U.S. man-made global
      warming gas emissions.


      The above considerations suggest that government policies with respect to
      the vehicular transportation market should point in the following directions:

      1. Encourage improved vehicle mileage, using technology now in production.

      Three currently available technologies stand out to improve vehicle mileage.


      First, modern diesel vehicles are coming to be capable of meeting rigorous
      emission standards (such as Tier 2 standards, being introduced into the
      U.S., 2004-08). In this context it is possible without compromising
      environmental standards to take advantage of diesels' substantial mileage
      advantage over gasoline-fueled internal combustion engines.

      Substantial penetration of diesels into the private vehicle market in
      Europe is one major reason why the average fleet mileage of such new
      vehicles is 42 miles per gallon in Europe and only 24 mpg in the
      US. Although the U.S. has, since 1981, increased vehicle weight by 24 per
      cent and horsepower by 93 per cent, it has actually somewhat lost ground
      with respect to mileage over that near-quarter century. In the 12 years
      from 1975 to 1987, however, the US improved the mileage of new vehicles
      from 15 to 26 mpg.

      Hybrid gasoline-electric

      Second, hybrid gasoline-electric vehicles now on the market show
      substantial fuel savings over their conventional counterparts. The
      National Commission on Energy Policy found that for the four hybrids on the
      market in December 2004 that had exact counterpart models with conventional
      gasoline engines, not only were mileage advantages quite significant (10-15
      mpg) for the hybrids, but in each case the horsepower of the hybrid was
      higher than the horsepower of the conventional vehicle. (ETES p. 11) If
      automobile companies wish to market hybrids by emphasizing hotter
      performance rather than fuel conservation they can do so, consistent with
      the facts.

      Light-weight Carbon Composite Construction

      Third, constructing vehicles with inexpensive versions of the carbon fiber
      composites that have been used for years for aircraft construction can
      substantially reduce vehicle weight and increase fuel efficiency while at
      the same time making the vehicle considerably safer than with current
      construction materials. This is set forth thoroughly in the 2004 report of
      the Rocky Mountain Institute's Winning the Oil Endgame
      ("WTOE"). Aerodynamic design can have major importance as well. This
      breaks the traditional tie between size and safety. Much lighter vehicles,
      large or small, can be substantially more fuel-efficient and also safer.
      Such composite use has already been used for automotive construction in
      Formula 1 race cars and is now being adopted by BMW and other automobile
      companies. The goal is mass-produced vehicles with 80% of the performance
      of hand-layup aerospace composites at 20% of the cost. Such construction
      is expected to approximately double the efficiency of a normal hybrid
      vehicle without increasing manufacturing cost. (WTOE 64-66).

      2. Encourage the commercialization of alternative transportation fuels
      that can be available soon, are compatible with existing infrastructure,
      and can be derived from waste or otherwise produced cheaply.

      Biomass (cellulosic) ethanol.

      The use of ethanol produced from corn in the U.S. and sugar cane in Brazil
      has given birth to the commercialization of an alternative fuel that is
      coming to show substantial promise, particularly as new feedstocks are
      developed. Some six million vehicles in the U.S. and all vehicles in
      Brazil other than those that use solely ethanol are capable of using
      ethanol in mixtures of up to 85 percent ethanol and 15 per cent gasoline
      (E-85); these are called Flexible Fuel Vehicles ("FFV") and require,
      compared to conventional vehicles, only a somewhat different kind of
      material for the fuel line and a differently-programmed computer chip. The
      cost of incorporating this feature in new vehicles is trivial. Also, there
      are no large-scale changes in infrastructure required for ethanol use. It
      may be shipped in tank cars, and mixing it with gasoline is a simple matter.

      Although human beings have been producing ethanol, grain alcohol, from
      sugar and starch for millennia, it is only in recent years that the genetic
      engineering of biocatalysts has made possible such production from the
      hemicellulose and cellulose that constitute the substantial majority of the
      material in most plants. The genetically-engineered material is in the
      biocatalyst only; there is no need for genetically modified plants.

      These developments may be compared in importance to the invention of
      thermal and catalytic cracking of petroleum in the first decades of the
      20th century - processes which made it possible to use a very large share
      of petroleum to make gasoline rather than the tiny share that was available
      at the beginning of the century. For example, with such
      genetically-engineered biocatalysts it is not only grains of corn but corn
      cobs and most of the rest of the corn plant that may be used to make ethanol.

      Such biomass, or cellulosic, ethanol is now likely to see commercial
      production begin first in a facility of the Canadian company, Iogen, with
      backing from Shell Oil, at a cost of around $1.30/gallon. The National
      Renewable Energy Laboratory estimates costs will drop to around
      $1.07/gallon over the next five years, and the Energy Commission estimates
      a drop in costs to 67-77 cents/gallon when the process is fully mature
      (ETES p. 75). The most common feedstocks will likely be agricultural
      wastes, such as rice straw, or natural grasses such as switchgrass, a
      variety of prairie grass that is often planted on soil bank land to
      replenish the soil's fertility. There will be decided financial advantages
      in using as feedstocks any wastes which carry a tipping fee (a negative
      cost) to finance disposal: e.g. waste paper, or rice straw, which cannot be
      left in the fields after harvest because of its silicon content.

      Old or misstated data are sometimes cited for the proposition that huge
      amounts of land would have to be introduced into cultivation or taken away
      from food production in order to have such biomass available for cellulosic
      ethanol production. This is incorrect. The National Commission on Energy
      Policy reported in December that, if fleet mileage in the U.S. rises to 40
      mpg -- somewhat below the current European Union fleet average for new
      vehicles of 42 mpg and well below the current Japanese average of 47 mpg -
      then as switchgrass yields improve modestly to around 10 tons/acre it would
      take only 30 million acres of land to produce sufficient cellulosic ethanol
      to fuel half the U.S. passenger fleet. (ETES pp. 76-77). By way of
      calibration, this would essentially eliminate the need for oil imports for
      passenger vehicle fuel and would require only the amount of land now in the
      soil bank (the Conservation Reserve Program ("CRP") on which such
      soil-restoring crops as switchgrass are already being grown. Practically
      speaking, one would probably use for ethanol production only a little over
      half of the soil bank lands and add to this some portion of the plants now
      grown as animal feed crops (for example, on the 70 million acres that now
      grow soybeans for animal feed). In short, the U.S .and many other
      countries should easily find sufficient land available for enough energy
      crop cultivation to make a substantial dent in oil use. (Id.)

      There is also a common and erroneous impression that ethanol generally
      requires as much energy to produce as one obtains from using it and that
      its use does not substantially reduce global warming gas emissions. The
      production and use of ethanol merely recycles in a different way the CO2
      that has been fixed by plants in the photosynthesis process. It does not
      release carbon that would otherwise stay stored underground, as occurs with
      fossil fuel use, but when starch, such as corn, is used for ethanol
      production much energy, including fossil-fuel energy, is consumed in the
      process of fertilizing, plowing, and harvesting. Even starch-based ethanol,
      however, does reduce greenhouse gas emissions by around 30 per
      cent. Because so little energy is required to cultivate crops such as
      switchgrass for cellulosic ethanol production, and because electricity can
      be co-produced using the residues of such cellulosic fuel production,
      reductions in greenhouse gas emissions for celluslosic ethanol when
      compared to gasoline are greater than 100 per cent. The production and use
      of cellulosic ethanol is, in other words, a carbon sink. (ETES p. 73)

      Biodiesel and Renewable Diesel

      The National Commission on Energy Policy pointed out some of the problems
      with most current biodiesel "produced from rapeseed, soybean, and other
      vegetable oils - as well as . . . used cooking oils." It said that these
      are "unlikely to become economic on a large scale" and that they could
      "cause problems when used in blends higher than 20 percent in older diesel
      engines". It added that "waste oil is likely to contain impurities that
      give rise of undesirable emissions." (ETES p. 75)

      The Commission notes, however, that biodiesel is generally "compatible with
      existing distribution infrastructure" and outlines the potential of a newer
      process ("thermal depolymerization") that produces renewable diesel without
      the above disadvantages, from "animal offal, agricultural residues,
      municipal solid waste, sewage, and old tires". It points to the current
      use of this process at a Conagra turkey processing facility in Carthage,
      Missouri, where a "20 million commercial-scale facility" is beginning to
      convert turkey offal into "a variety of useful products, from fertilizer to
      low-sulfur diesel fuel" at a potential average cost of "about 72 cents per
      gallon." (ETES p. 77)

      Other Alternative Fuels

      Progress has been made in recent years on utilizing not only coal but slag
      from strip mines, via gasification, for conversion into diesel fuel using a
      modern version of the gasified-coal-to-diesel process used in Germany
      during World War II.

      Qatar has begun a large-scale process of converting natural gas to diesel fuel.

      Outside the realm of conventional oil, the tar sands of Alberta and the oil
      shale of the Western U.S. exist in huge deposits, the exploitation of which
      is currently costly and accompanied by major environmental difficulties,
      but both definitely hold promise for a substantial increases in oil supply.

      3. Plug-in hybrids and battery improvements

      A modification to hybrids could permit them to become "plug-in-hybrids,"
      drawing power from the electricity grid at night and using all electricity
      for short trips. The "vast majority of the most fuel-hungry trips are under
      six miles" and "well within the range" of current (nickel-metal hydride)
      batteries' capacity, according to Huber and Mills (The, Bottomless Well,
      2005, p. 84). Other experts, however, emphasize that whether with existing
      battery types (2-5 kwh capacity) or with the emerging (and more capable)
      lithium batteries, it is important that any battery used in a plug-in
      hybrid be capable of taking daily charging without being damaged and be
      capable of powering the vehicle at an adequate speed. By most assessments
      some battery development will be necessary in order for this to be the
      case. Such development should have the highest research and development
      priority because it promises to revolutionize transportation economics and
      to have a dramatic effect on the problems caused by oil dependence.

      With a plug-in hybrid vehicle one has the advantage of an electric car, but
      not the disadvantage. Electric cars cannot be recharged if their batteries
      run down at some spot away from electric power. But since all hybrids have
      tanks containing liquid fuel plug-in hybrids have no such disadvantage.

      Moreover the attractiveness to the consumer of being able to use
      electricity from overnight charging for a substantial share of the day's
      driving is stunning. The average residential price of electricity in the US
      is about 8.5 cents/kwh, and many utilities sell off-peak power for 2-4
      cents/kwh (id at 83). When one takes into consideration the different
      efficiencies of liquid-fueled and electric propulsion, then where the
      rubber meets the road the cost of powering a plug-in hybrid with
      average-cost residential electricity would be about 40 per cent of the cost
      of powering the same vehicle with today's approximately $2.50/gallon
      gasoline, or, said another way, for the consumer to be able to buy fuel in
      the form of electricity at the equivalent of $1/gallon gasoline.* Using
      off-peak power would then equate to being able to buy 25-to-50 cent/gallon
      gasoline. Given the burdensome cost imposed by current fuel prices on
      commuters and others who need to drive substantial distances, the
      possibility of powering one's family vehicle with fuel that can cost as
      little as one-tenth of today's gasoline (in the U.S. market) should solve
      rapidly the question whether there would be public interest in and
      acceptability of plug-in hybrids.

      Although the use of off-peak power for plug-in hybrids should not initially
      require substantial new investments in electricity generation, greater
      reliance on electricity for transportation should lead us to look
      particularly to the security of the electricity grid as well as the fuel we
      use to generate electricity. In the U.S. the 2002 report of the National
      Academies of Science, Engineering, and Medicine ("Making the Nation Safer")
      emphasized particularly the need to improve the security of transformers
      and of the Supervisory Control and Data Acquisition (SCADA) systems in the
      face of terrorist threats. The National Commission on Energy Policy has
      seconded those concerns. With or without the advent of plug-in hybrids,
      these electricity grid vulnerabilities require urgent attention.


      The dangers from oil dependence in today's world require us both to look to
      ways to reduce demand for oil and to increase supply of transportation fuel
      by methods beyond the increase of oil production.

      The realistic opportunities for reducing demand soon suggest that
      government policies should encourage hybrid gasoline-electric
      vehicles, particularly the battery developments needed to bring plug-in
      versions thereof to the market, and modern diesel technology. The
      realistic opportunities for increasing supply of transportation fuel soon
      suggest that government policies should encourage the commercialization of
      alternative fuels that can be used in the existing
      infrastructure: cellulosic ethanol and biodiesel/renewable diesel. Both
      of these fuels could be introduced more quickly and efficiently if they
      achieve cost advantages from the utilization of waste products as feedstocks.

      The effects of these policies are multiplicative. All should be pursued
      since it is impossible to predict which will be fully successful or at what
      pace, even though all are today either beginning commercial production or
      are nearly to that point. The battery development for plug-in hybrids is
      of substantial importance and should for the time being replace the current
      r&d emphasis on automotive hydrogen fuel cells.

      If even one of these technologies is moved promptly into the market, the
      reduction in oil dependence could be substantial. If several begin to be
      successfully introduced into large-scale use, the reduction could be
      stunning. For example, a 50-mpg hybrid gasoline/electric vehicle, on the
      road today, if constructed from carbon composites would achieve around 100
      mpg. If it were to operate on 85 percent cellulosic ethanol or a similar
      proportion of biodiesel or renewable diesel fuel, it would be achieving
      hundreds of miles per gallon of petroleum-derived fuel. If it were a
      plug-in version operating on upgraded lithium batteries so that 20-30 mile
      trips could be undertaken on its overnight charge before it began utilizing
      liquid fuel at all, it could be obtaining in the range of 1000 mpg (of

      A range of important objectives - economic, geopolitical, environmental -
      would be served by our embarking on such a path. Of greatest importance,
      we would be substantially more secure.


      *In the original June 2005 draft of this paper the reader would have seen
      an estimate that the cost of powering a hybrid with average (8.5 cents/kwh)
      residential electricity from the grid would be about one-quarter the cost
      of powering the same vehicle in its normal operating mode using $2/gallon
      gasoline. This was because we were utilizing an estimate in Huber and
      Mills that "Burning $2-a-gallon gasoline, the power generated by current
      hybrid-car engines runs about 35 cents per kilowatt-hour (kWh)." (id p.
      83). After assessing comments received on the June draft paper we are now
      convinced that, whatever the proper number for hybrids' power generation at
      an earlier time, the better estimate for the cost of operating the most
      modern hybrids in their normal mode as of August 2005 is a little less than
      half this 35-cents/kwh estimate. Thus the use of average-cost electricity
      from the grid would equate to about half the cost of using $2/gallon
      gasoline, not one-quarter. We would stress that these comparisons take
      account of the different efficiencies of gasoline and electric power and
      represent differences where the rubber meets the road, not differences
      between the cost of different types of energy as stored in a tank or a

      -- -- -- -- -- -- -- -- -- -- -- --
      Felix Kramer fkramer@...
      Founder California Cars Initiative
      -- -- -- -- -- -- -- -- -- -- -- --
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