Alternative Motor Fuels
Hugh Hughson
Doug Shepherd
September 22, 2006
Alternative Motor Fuels
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The push for alternatives
A brief overview of fuel types
Vision for the future
Tax Implications
Oregon’s alternative approach
The Push for Alternatives
• Environmental concerns
• Supply, demand and price concerns
• Governments:
– Incentives (e.g., tax exemptions, fixed/percentage based blends)
– Directives (e.g., mandated fuel blends)
• Two approaches:
– Improved fuel efficiency (e.g., new engine technology,
aerodynamics)
– New fuels
Compressed Natural Gas
• Underground deposits
– Pro’s
• Existing distribution network (e.g., pipelines)
– Con’s
• Non renewable
• High octane but low energy content (44,000 BTU)
• Significant retooling of fuel station infrastructure and
vehicles (must be compressed to 3,000 – 3,600psi., therefore
larger, heavier and more expensive tanks)
• Existing/competing demand (e.g., home heating)
Ethanol
(1 of 2)
• Grain alcohol using a distillation process
– Pro’s
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Higher octane therefore cooler engine
Greenhouse gas neutral
Supports a struggling agriculture sector
Most vehicles can use E10 without modification
– Con’s
• Lower energy content compared to gas (E85 =
80,000 vs. 124,800 BTU)
• Corrosive solvent – need stainless steel or plastic
for fuel injection, pumps, tanks and hoses (vehicle
and distribution chain)
Ethanol
(2 of 2)
• Less volatile therefore gas blended for cold weather
• Environmental impact - intensive farming/feedstock
process (e.g., pesticides, fertilizers, equipment and
transport)
• Insufficient feedstock to meet demand
– One acre of corn can produce 300 gallons of ethanol
– Need to dedicate 71% of US farmland to meet current fuel
consumption
– Notes
• US in 2005 produced 4.3 billion gallons (3% of current
consumption) (others say 15 billion)
• Cellulosic ethanol using enzymes to break down
waste grasses (not food) into ethanol
Biodiesel
(1 of 2)
• Vegetable oils, animal fats and cooking oils
– Pro’s
• Similar energy content (4% lower for BCTT)
• Reduced CO2 emissions (B100 -75%, B20 -15%)
• Vehicles can use without modification (any blend and
diesel engines more tolerant of varying fuel quality)
– Con’s
• Blending and clouding issues – therefore additives
or heating required (should be heated to 70C to mix
properly with cold diesel)
Biodiesel
(2 of 2)
• High cost to produce ($1/gallon more) (80% of final
product is feedstock)
• Insufficient feedstock to meet demand
– Total agricultural production in Canada could supply B10
to the entire fuel market
• Petroleum industry/infrastructure reluctant to
handle because of quality, contamination and
blending concerns
– Notes
• Quality of finished product which varies by the type
of feedstock and the manufacturing process
• 75 million gallons produced in 2005 (compares to 3
billion litres in Europe)
Electricity
• Rechargeable battery packs (pure and hybrid - battery
packs and electrical generation during slowing and stopping)
– Pro’s
• Existing distribution network (e.g., power lines)
• Inexpensive (2 cents per mile)
• Lower emissions (10% of current ic engine)
– Con’s
• Pure has limited range (100-120 miles per charge)
and slow charging
• Environmental impact – only 2.3% of electricity comes
from renewable resources
• Vehicles are expensive and technology breakthrough
required
Methanol
• Wood alcohol using steam and catalyst
– Pro’s
• Greenhouse gas positive
• Higher octane therefore cooler engine
– Con’s
• Lower energy content (64,000 BTU)
• Corrosive solvent and invisible flame
• Less volatile therefore gas blended for cold weather
– Notes
• Most methanol comes from natural gas (i.e., non
renewable) but can be obtained from coal and
fermenting organic matter (e.g., sewage, manure)
PuriNOx
• Diesel (80%-92%) plus water and emulsifier
– Pro’s
• Reduced PM emissions (50-60%)
• Most vehicles can use without engine modification
– Con’s
• Lower energy content (power loss 15%-20%)
• Fuel must be agitated or fuel/water separates
• Cold weather problems
Hydrogen
• Water and electricity releasing oxygen
– Pro’s
• Abundant supply of water
• Highest energy per unit of mass of all chemical fuels
(120MJ/kg compared to 42MJ/kg for petroleum)
– Con’s
• Expensive (electricity and mostly non-renewable resources)
• Significant retooling of fuel station infrastructure and
vehicles (must be compressed 5,000+psi., or must be frozen 423F therefore larger, heavier and more expensive tanks)
– Notes
• Technology breakthrough required
• President Bush wants hydrogen powered cars on the market by
2020
Current Environment
• Government targets:
– Canada – a 45% E10 and 5% biofuel content by
2010
– USA - a 4% (28 billion) renewable fuel content
by 2012
– EU has a 5.7% target by 2010
• There is no clear alternative fuel “winner” (but
the days of a single fuel source are gone)
Current Environment
• Petroleum Industry
– Focused on ultra low sulphur diesel (USLD)
– Reluctant to handle alternative fuels because of:
• Supply and quality concerns
• Infrastructure concerns
• Car Industry
– Research and development (i.e., more efficient
engines, more flexible fuel vehicles - already 34 models
E0 – E85, and fuel cells);
– To make a variety of power trains; and
– To extend warrantees to alterative fuels
Tax Implications/Challenges
• Revenue:
– If tax incentives are offered (vs. mandated volumes)
– If lower taxed “fuels” are used (e.g., electricity,
vegetable oil)
– If fuels are manufactured below the tax radar
(e.g., biodiesel)
– If there are difficulties auditing taxpayers
• Administration:
– Reporting processes (if tax incentives used)
– Refunds of new fuels (if tax incentives used)
Tax Implication/Challenge
• IFTA:
– Licensees required to keep records and report
each fuel type separately
– Jurisdictions required to provide tax rates for
each fuel type
– Result:
• Infinite number of tax rates
• Licensees unable to report correctly
• Difficulties auditing fuel records and consumption
rates
• Potential tax evasion
Tax Implication/Challenge
• IFTA Board resolution (2005):
– Blended fuels should be reported as one fuel
type/tax rate (e.g., diesel)
– Use the exempt fuel provisions (R830) to
encourage the use of alternative motor fuels
The Future
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Fuel costs will rise
Fuel demand will rise (i.e., 2 million barrels /day)
Alternative fuels will not satisfy demand
We will be forced to change how we live:
– More high density housing
– Softer real estate in bedroom communities
– Choose between renewable fuel and food
• Demand for food is expected to double in 50 years
• Demand for transportation fuel is expected to double
in 32 years
The Future
• Variables:
– Research and development
– Cost competitiveness of petroleum fuels to new
fuels
– Cost competitiveness of new fuel vehicles to
existing:
• Internal configuration/carrying capacity (e.g., fuel storage)
• Life costs
– Purchase/resale prices compared current vehicles
– Operating costs per kilometre/mile
– Additional maintenance costs
Oregon’s Alternative Approach
Thanks