The New Math of Alternative Fuels
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There is a vast of resources in newspapers, scholarly journals and web that provides empirical data of alternative fuels, but what do these numbers really mean? Alternative fuels that are believed to be more environment friendly have gained popularity as more people are becoming more aware of the damaging effects of the greenhouse gasses emitted by fossil fuels (includes petroleum and coal). Backed by government support for research and development to reduce green house gasses, significant improvement in the process of alternative fuels such as solar, wind, biofuels, biomass and geothermal have generated major cost reductions in price per kilowatt-hour of energy produced from these alternative fuels. This document aims to explain the meaning of these empirical data provided by the various article. It aims to explain the meaning of these numbers in terms of whether these alternative fuels are already economically viable. Over the past years, price is the major deterrent of the use of alternative fuels. Finally this document also gives a projection through the given present numbers and other supportive documents of what would be the future of this alternative energy sources.
The price per unit energy will be the determining factor of any alternative fuel. If the price is competitive to fossil fuel then this type of alternative energy source will become economically viable. The price will determine the demand and supply in relation to the other sources of energy. If the cost of production is competitive to petroleum, the dominant fossil fuel energy source, then more company will venture into producing it. So that if more company ventures into it, then the supply will rise and eventually as it becomes more and more abundant, competition will bring down its price. Another factor is the availability of raw materials to produce or harness this alternative energy because if the supply is scarce, then the price can never be brought down beyond the equilibrium point of supply and demand that gives enough profit to the sellers. No matter how cheap the resulting price per unit energy produced, if there are not enough raw materials to meet the demand, the demand will simply cause an excessive price that is very much higher than the price per unit energy of fossil fuels. So in these cases they are still supported by conventional sources of electricity to meet the total demand. The demand for fuel will continuously grow because of the ever growing global population. If we compare the supply of raw materials to produce these alternative fuels to the decreasing reserves of fossil fuels, then we should be able to estimate additional factors that would help determine its economic viability. Aside from the price and availability of raw materials to produce it, we also need to look at the security issues that these alternative fuels will bring. The security issues will bring down the demand of this alternative fuel if the general public will not feel safe of its use.
Above all these, there is another factor that must be taken into consideration, the global drive towards environment friendly energy sources. This drive will cause an increase it its demand so that if all other factors are relatively equal then more people will choose environment friendly alternative fuel over the fossil fuels. The global drive towards greener environment has triggered widespread research on alternative fuels. This demand will continue to increase as more and more people are beginning to feel the environmental stress of pollution from the use of fossil fuels. This includes global warming and the rising cases of diseases related to these excessive pollutants. Education has also been instrumental in raising global awareness for environment friendly alternative fuels and further increased the public interest of environment friendly alternative fuels. Companies who would venture into large scale production of these alternative fuels can take advantage of this demand to sell at large volume but lower price for as long as the supply is sufficient.
Let us look at the various alternative fuels and see the price and availability in relation to the fossil fuels. The unit of energy that will be used to compare the different alternative sources would be in kilowatt-hour (kWh). The alternative fuels that will be examined includes, solar, wind, biofuels, biomass, and geothermal. In the residential electricity tariffs of 1999 from Energy Information Administration, the cost of electricity in the US is 8.1 cents/kWh (Solarbuzz.com 1). The lowest in the world is 2.5 cents/kWh in Indonesia while the highest is 21.2 cents/kWh in Japan. So that if the price of generating electricity is competitive to these prices of present day electricity tariffs then we can say that the said alternative energy is already economically viable. Combine these with the availability of the said alternative fuel, then we can conclude its economic viability. So let us look at the various alternative fuels.
Solar energy is gaining some strides as the materials of solar panels have drop down after years of research and technology. The efficiency of these solar panels have also improved through a technology called concentrating solar power (CSP). Despite these efforts the average price of electricity produced using solar panels still remains at around 35 to 45 cents/kWh (Smith 1). This is still even much higher than the maximum cost of electricity of 21 cents/kWh in Japan. The raw materials needed to harness solar energy is very abundant, sun light itself is free, and the silicon materials needed for solar cells is also very abundant in the planet. Even with this almost infinite supply, solar energy is still not economically viable because the price is still very high. In the future, there are hopes for the economic viability of solar cells because solar energy remains one of the cleanest source of energy since it comes from the almost infinite source, the sun. Breakthrough in solar cell technologies may bring the price below the 10 cents/kWh in the future and become the main source of our electricity.
Second to hydropower, wind stands out as one of the oldest source of electricity. In the 80s wind-power electricity cost 80 cents/kWh; in the 90s it cost 10 cents/kWh, and today it cost roughly 3 to 4 cents/kWh according to the International Energy Agency (Smith 1). These price reductions are brought by improvements in the materials of wind turbines resulting in much higher efficiencies. This reduction in the cost of production has resulted in the growth of wind energy production by 27% in 2006(Smith 1). In US alone, wind-generating capacity expanded by 36 percent in 2005, reaching 9,149 megawatts (Brown 1). Despite these cheap cost of production and rapid growth, wind cannot replace all of our energy sources because strong winds are only available on certain areas. The price of 3 to 4 cents/kWh can only be achieved in areas where there is enough wind speed to power the turbines. Although much growth is still expected in the future, but as the supply increases, the demand is also increases making it very much apparent that wind alone cannot supply all our energy needs.
Biofuels includes Ethanol, an alcohol that is derived from fermenting carbohydrates, and biodiesel, an oil by product from plant or animal oil. Ethanol can be used to replace gasoline with little modification to the combustion engine that we have. Biodiesel can be used to replace petroleum diesel to power diesel engines with no modification in the engine. The price per gallon of ethanol is roughly $1.6 per gallon (Smith 1). Using the energy cost calculator of $1.6 per gallon at http://www.geocities.com/daveclarkecb/EnergyCalc.html we get roughly 25 cents/kWh of energy (Clark 1) after converting at 1kWh per 3.6MJ (mega joule). This is still very much higher compared to the present price of electricity of 8 cents/kWh in US. Considering also that it takes tons of corn, sugarcane or other plants to produce a barrel of ethanol, the supply will not be sufficient to supply all the demand of energy that we need. Biodiesel on the other hand cost almost the same, it ranges from $1.3/gallon to $2.0/gallon (Oregon.gov Renewable Resource 1). Therefore the cost of producing electrical energy from biodiesel is roughly the same. Similarly the supply of biodiesel is not the same as the petroleum oil because it takes tons of soya or animal fats to produce a barrel of biodiesel. So at the present the price of Biofuels and supply is not yet economically viable to replace conventional fuels. At present ethanol and biodiesel serves as additives to gasoline and diesel, respectively. They provide reduction to greenhouse gasses when added to conventional fuel.
According to Smith, Biomass is generating more electricity than wind, solar and geothermal sources combined in the US (1). Biomass is also a process of making use of the large waste materials produced annually. Since this another way of getting rid of waste materials, countries like US have to make to produce electricity through Biomass. The EIA predicts that the cost of power from conventional biomass combustion will be 5.1 cents per kilowatt-hour (REPP Library 1), which is even lower than the average cost of electricity in the US of 8 cents/kWh. Although it is still more expensive than producing electricity by burning coal which cost only 3 to 4 cents/kWh, it is already economically viable. The supply of biomass may not be sufficiently enough to provide all our power needs but will be able to supply a considerable amount of the total demand considering that we pile up tons of waste annually. In the future cost are still expected to go down as more advances in technology would make conversion of biomass to electricity more efficient.
According to Smith, Geothermal energy may have greater potential at much lesser risk to the environment compared to the rest of the alternative fuels (1). Geothermal plants are one of the most reliable of all electricity sources because they can operate regularly at 90 percent or more of their rated capacity year-round and can run continuously (Renewable Northwest Project 1). Currently, the cost of electricity from Geothermal plants ranges from 6 to 10 cents/kWh. This is again very much competitive compared to fossil fuels. Yet despite this promise, geothermal energy cannot supply all of mankind’s energy demand because we have limited geothermal sites. Sites are normally located in outskirts area far from the bigger cities which requires a much higher energy. The cost of transmission lines to bring the energy to larger cities also raises the prices of geothermal energies higher.
Looking at all the above values and availability, Biomass is the most competitive in price and capacity. Large supply of waste from cities can be used to fuel biomass plants. Yet it cannot supply the total demand of energy it must be supported by wind, which is again very competitive in price but limited supply. Another support of energy is from Geothermal plants which is again price competitive. Through these combinations of economically viable alternative fuels it might be able to achieve complete independence from fossil fuels and produce a friendly environment in the future. Although at this stage more research and government support is required to make these alternative fuels work. Biofuels and Solar energy sources may provide additional support in the future if given time and resources.
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