Shell’s new $12 Billion Investment in Sugarcane Ethanol with Cosan

Shell’s new $12 Billion Investment in Sugarcane Ethanol with Cosan

Sugarcane for EthanolBy John Addison (8/25/10)

Shell (NYSE: RDSA) and Cosan (NYSE: CZZ), one of the world’s largest sugarcane ethanol companies based in Brazil, signed binding agreements to form a $12 billion joint venture for the production and commercialization of ethanol and power from sugar cane. The resulting joint venture, if completed, will be the third largest ethanol producer in the world with 4,500 retail stations and annual production capacity of 2 billion liters (440 million gallons).

This venture gives Shell an opportunity to lower the carbon footprint gasoline which can have ethanol blended to 10 percent and still be supported by the warranties of all major auto makers. Currently Shell is producing more oil from tar sands using environmentally destructive processes that increase the carbon footprint of gasoline, diesel, and jet fuel refined from tar sands crude.

Sugarcane is the currently the most efficient feedstock for larger scale ethanol production. While corn ethanol delivers little more energy output than the total energy necessary to grow, process, and transport it; sugarcane ethanol delivers eight times the energy output as lifecycle energy input. Also, sugarcane typically produces twice as much fuel per acre as corn.

Brazil produces almost as much sugarcane ethanol as the United States produces corn ethanol, but at a fraction of the energy cost. Sugarcane is also grown in the southern U.S., from Florida to Louisiana to California.

Brazil is free from needing foreign oil. Flex-fuel vehicles there get much better mileage than in the U.S. If you drive into any of Brazil’s 31,000 fueling stations looking for gasoline, you will find that the gasoline has a blend of at least 20% ethanol, as required by law. 29,000 of the fueling stations also offer 100% ethanol. Ethanol in the U.S. is normally delivered on trucks, increasing its cost and lifecycle emissions. Brazil’s largest sugar and ethanol group, Cosan SA announced the creation of a company to construct and operate an ethanol pipeline.

Most sugarcane is grown in the southern state of Sao Paulo. Economics do not favor its growth in rain forests, although those who favor blocking its import make that claim. It is cattle, soy, palm oil, logging, and climate change that most threaten the rain forests. Some environmentalists are concerned that a significant percentage of Brazil’s sugarcane is grown in the cerrado, which is one of the world’s most biodiverse areas. The cerrado is rich with birds, butterflies, and thousands of unique plant species. Others argue that without sugarcane ethanol, more oil will come from strip mining Canadian tar sands and from a new “gold rush” for oil in the melting artic.

“In addition, the residue of sugarcane ethanol, bagasse, can be used for further energy production. While this may likely be used for generating carbon-neutral electricity, it could also be used in cellulosic biofuel production, potentially generating an additional 400-700 gallons per acre.” (California Low Carbon Fuel Standard Technical Analysis p 87-88)

Sugarcane growers are planning the development of varieties that can produce a larger quantity of biomass per hectare per year. These varieties are being called “energy cane” and may produce 1,200 to 2,000 gallons of ethanol per acre, contrasting with 300 to potentially 500 gallons of ethanol from an acre of corn. Sugarcane ethanol is currently the low-cost winner of biofuels.

Advanced Biofuels

Shell will contribute its 16% equity interest in Silicon Valley-based advanced biofuels company Codexis (NASDAQ: CDXS) to the new Cosan JV with the goal of deploying next generation biofuels technologies in the future. Codexis has a multi-year research & development partnership with Shell to develop advanced biofuels from non-food based biomass including sugarcane stalks.

The proposed joint venture, which still requires regulatory approval, will produce and commercialize ethanol and power from sugar cane and distribute a variety of industrial and transportation fuels through a combined distribution and retail network in Brazil.  It will also explore business opportunities to produce and sell ethanol and sugar globally.

With annual production capacity of over 2 billion liters, the proposed joint venture will be one of the world’s largest ethanol producers.  The inclusion of Shell’s equity interests in Iogen Energy and Codexis would enable the joint venture to deploy next generation biofuels technologies in the future.  The company will also generate electricity from sugar cane bagasse in cogeneration plants at all mills.  Ten cogeneration plants are already operational.

With total annual sales of about 18 billion liters of fuels, the proposed joint venture will have a competitive position in the Brazilian fuels distribution market built upon a network of about 4,500 retail sites.

Shell is also investing and partnering in other advanced biofuel ventures. Shell is a venture investor in Virent Energy Systems which converts plant sugars directly into a range of high performance liquid transport fuels such as biogasoline. Shell also has a joint venture Cellana in Hawaii that is developing a small pilot facility to grow marine algae and produce vegetable oil for conversion into biodiesel.

Clean Fleet Biofuels Reports

Better Place Moves Ahead with 100,000 Electric Cars

Better Place Moves Ahead with 100,000 Electric Cars

Better Place Switch StationBy John Addison (8/18/10)

Hot, Flat, and Crowded

An entire nation will be covered in 2011 with electric car charge stations. One car company has received a non-binding order for 100,000 electric cars. The company managing the entire project is Better Place, headquartered in Silicon Valley USA. Israel is the nation that desperately wants to end its dependency on oil from hostile neighbors. Renault is the French company supplying up to 100,000 vehicles.

The advanced lithium-ion batteries are made by AESC, a joint venture of Nissan-NEC. Any car with a depleted lithium battery can be recharged in hours or simply have a robot switch in a new battery in one minute. By the end of 2011, Israel will have 70 robotic switching stations so that cars can cross the nation without waiting for recharging.

Electrifying the transportation of a nation takes a lot of money. Better Place has over $200 million from venture capital investors. Better Place just received an added $350 million from HSBC, a financial giant with deep roots in Hong Kong.

The vehicle electrification of a nation involving technology and financial partners from many countries could be a poster child for Thomas Friedman’s bestseller Hot, Flat, and Crowded. In electrifying a nation’s automotive transportation, Better Place will provide program management, system integration, large-scale project financing, vehicle procurement, battery switch stations, and a network of charging stations. Better Place will deploy its sophisticated software services to support the network of charging stations, provider driver information such as the location of the nearest public switch station or charging unit, and provide the electric utility with all needed information.

Hugh McDermott, VP Global Utility Alliances for Better Place, included some details of the Israel project when I attended his presentation at Plug-In 2010 Conference. Already operational in Israel are a few Renaults converted to be plug-ins, a few charging stations, and two Better Place battery switch stations. Better Place will conduct a full system test of the network of charge and switch stations, including software, by October 1, 2010.

Thousands of new Renault Fluence Z.E., a stylish battery-electric 4 door sedan that seats 5, will be in daily use in Israel by the end of 2011. All of the new Fluences will support Level 2 smart charging with J1772 connectors. All will have removable lithium batteries that can be robotically switched in about 3 minutes. Fifty to 100 of the new Renaults will be in Israel by the end of 2010.

Better Place CEO states that he has placed an order for 100,000 electric cars from Renault; the Renault-Nissan Alliance states that 100,000 is a memorandum of understanding. In either case, the agreement is likely to result in thousands of Renault Fluences being delivered with switchable batteries.

150 fleet owners have signed to take delivery of the Renaults by the end of 2011. Thousands of individual orders are also expected. By the end next year, 1,000 Better Place charging stations will be available for these electric Renaults and other plug-in vehicles. Twenty battery switch stations are expected to be installed by the end of 2011. 70 stations would give all drivers in the nation a location every 25 miles to have a fully-charged battery in minutes. By law, all vehicles in Israel must be electric by 2020.

Shai Agassi’s Vision

Last month, I attended a speech by Shai Agassi, Better Place’s CEO and founder. TIME Magazine named him to the 2009 TIME 100, the world’s 100 most influential people, and one of TIME’s “Heroes of the Environment 2008.” He passionately spoke of a better world, cleaner air, reduction of climate risk, and energy security. He sees electric cars as less expensive over their lifetime and falling prices as battery price performance continues to improve. He envisions batteries being charged with renewable energy.

Shai Agassi envisions Better Place removing the higher upfront cost of an electric car, by allowing customers to lease or subscribe to the vehicles, batteries, and charging, much as your wireless provider includes mobile phones with wireless subscription plans. His speech emphasized the need for cars with switchable batteries, so that drivers could have the same “fast fill-up” experience that they now get at a gasoline station.

The subscription model is great. The program and project financing capabilities are welcome by the industry. Most auto makers do not want switchable batteries. Whether I talk with Ford, Toyota, or GM, battery packs are seen by automakers as their core competency. Most welcome the battery cells being made by battery giants, especially if they have a joint venture partnership, but the pack design, shape, and vehicle integration are seen as core to the automakers.

Renault-Nissan Alliance

The Renault-Nissan Alliance is open to battery switching. The Alliance is investing $5 billion in the development of electric cars. In 2011, Nissan plans to sell over 20,000 LEAF electric cars in the U.S. alone. Nissan future plant in Tennessee has the capacity of making 150,000 electric cars per year. The lithium-ion battery pack in the LEAF is not removable. In fact, it is shaped and placed for passenger comfort and car weight balance, not for switching.

Battery packs for Nissan and Renault electric cars are made by AESC, a joint venture between electronics giant NEC and Nissan. AESC also makes the removable battery pack for the Renault Fluence.

Renault will be selling four Z.E. (zero emission) models in 15 European and other countries in 2012: the Fluence larger 4 door sedan, the Zoe young-hip subcompact 4 seat city car, the Twizy 2-seater reminiscent of the GEM, and the Kangoo Van for commercial fleets. Nissan will be selling the LEAF in the U.S. Renault has no announced plans to sell the Z.E. family in the U.S.

Better Place’s battery switching could be a fairly ideal way to electrify millions of fleet vehicles globally. Better Place battery-switching is already being demonstrated at Nihon Kotsu, Tokyo’s largest taxi operator. Better Place is developing a partnership with Cherry Automobile in China. Large taxi and other fleets are in discussion with Better Place from San Francisco to Shanghai, and from Chicago to Copenhagen.

Although most major auto makers are unlikely to embrace switchable batteries for consumer cars, they would be open to business partners who purchase electric cars in volume and then provide them to consumers in a low-cost lease that includes vehicle charging and no worries about long-term battery depletion.

Better Place is positioned to be successful, even if battery-switching is confined to millions of fleet vehicles. Communities need program managers to pull all the smart charging infrastructure pieces together, finance vehicles and infrastructure, and provide the network software services to manage.

Shai Agassi was an executive at Apple and SAP. He has personally been part of taking disruptive technology and business models and making them billion dollar successes. In cities around the world his team and partners are creating a Better Place.

Ford Focus Electric Cars from New Green Michigan Plant

Ford Focus Electric Cars from New Green Michigan Plant

Ford Focus ElectricBy John Addison (8/16/10)

Ford Focus EV Gets Green Plant

Ford’s new Focus Electric Car and Plug-in Hybrid will be built in one of the auto industry’s greenest manufacturing plants. Ford is working with Detroit Edison to install a 500-kilowatt solar photovoltaic panel system at Michigan Assembly. The system will be integrated with a 750-kw energy storage facility that can store two million watt-hours of energy using batteries.

The renewable energy captured by the project’s primary solar energy system will help power the production of fuel-efficient small cars, including Ford’s all-new Focus and Focus Electric going into production in 2011, and a next-generation hybrid vehicle and a plug-in hybrid vehicle coming in 2012. My test drive of the Ford Focus Electric.

A secondary, smaller solar energy system will be integrated at a later date to power lighting systems at Michigan Assembly. The combined systems are expected to give Michigan Assembly the largest solar power array in Michigan and save an estimated $160,000 per year in energy costs. The installation of the system begins later this year.

Although the 500kW does not match the megawatts of solar that Toyota uses in California operations, Ford is advancing automaker use of large scale energy storage, reuse of automotive lithium batteries, smart microgrid, and solar charging.

Michigan Assembly will operate on a blend of renewable and conventional electricity managed by Xtreme Power’s Dynamic Power Resource on-site energy storage and power management system. Xtreme Power, a venture capital backed firm in Austin, Texas, manufactures integrated power management, smart control, and storage systems from 500 kW to 100 MW. XP technology is unique in its ability to provide immediate power when needed through precision control and complex power capabilities (VARs), and the ability to time shift large amounts of power/energy, all at a relatively low lifecycle cost. This is the industry’s first large-scale solid-state power management system. The XP solution comprises four components integrated into a comprehensive system: (1) hyper-efficient energy storage; (2) proprietary power electronics that enable very high power at very high efficiency; (3) smart control system of specialized hardware and software; and (4) factory integration which ties the first three components together under stringent quality control settings.

The renewable energy collected by the solar system will go directly into the energy-efficient microgrid. When the plant is inactive, such as holidays, the collected solar energy will go into the energy storage system for later use, providing power during periods of insufficient or inconsistent sunlight. Michigan Assembly’s energy storage system will be able to recharge from the grid during off-peak hours when energy is available at a lower cost. This in turn will provide inexpensive power during peak operating hours when the cost per kilowatt-hour is higher, and reduce peak demand on the grid.

Ten Charging Stations using Solar Power

Ford also will install 10 electric vehicle-charging stations at Michigan Assembly to demonstrate advanced battery charging technologies using renewable energy and other smart-grid advances. The stations will be used to recharge electric switcher trucks that transport parts between adjacent facilities. Xtreme Power will provide an active power management system on the charging stations. Ford also will demonstrate the possibility for using electrified vehicle batteries as stationary power storage devices after their useful life as vehicle power sources is over.

“Ford is strongly committed to its sustainability strategy to support positive social change and reduce the environmental impact of its products and facilities,” said Sue Cischke, Ford group vice president, Sustainability, Environment and Safety Engineering. “Michigan Assembly is the latest Ford manufacturing facility to utilize renewable power for production.”

Cradle to Cradle

Drive a typical gasoline car in the U.S. and you will emit about 10 tons of CO2 every year. Drive a Ford Fusion Hybrid, however, and only emit 4.7 tons annually – half of a an average car, and only a third of a larger SUV, such as the 2010 Ford Expedition 4WD FFV, with 13.3 tons of CO2 annually.

Ford plans to offer customers families of cars with a variety of fuel efficient drive systems. “The new Ford Focus is a clear demonstration that our ONE Ford strategy is providing global consumers with great products that harness the best of Ford Motor Company,” said Alan Mulally, Ford’s president and CEO. “The efficiencies generated by our new global C-car platform will enable us to provide Ford Focus customers with an affordable product offering quality, fuel efficiency, safety and technology beyond their expectations.” Ford is planning on a Global C platform for 12 to 14 different vehicles with a volume of 2 million units per year. Such volume, common chassis and many common components, can give Ford improved profit margins and room to price hybrid and electric cars competitively.

Clean Fleet Report predicts that in 2012 an all-new Ford Focus family will be offered with choices that include a gasoline-sipping EcoBoost engine, a Focus Hybrid, a Focus Plug-in Hybrid, and Focus Electric. The hybrid, plug-in hybrid, and battery electric will all use lithium-ion batteries. All will offer better fuel economy than the current 30 mpg and lower emissions than the 2010 Focus with 6.5 tons of CO2 per year.

You can find the mileage and carbon emissions of most cars with the U.S. EPA and DOE’s valuable fueleconomy.gov. The EPA combined miles per gallon rating is based on 45% highway and 55% city driving. The carbon footprint is carbon dioxide equivalent (CO2e) based on 15,000 miles of driving, using the GREET 1.7 model.

Drive the new Ford Focus Electric with a 70 percent efficient electric drive using grid power, instead of that 15 percent efficient gasoline motor drive system, and emissions will be far below a Toyota Prius. Charge the Focus EV with solar or wind power and your source-to-wheels emissions of CO2 drops to zero.

But what about all the emissions associated with energy intensive manufacturing and mining of everything from iron to lithium? Historically about 90 percent of a car’s emissions over its 15 years of use are from burning fuel, and only 10 percent from the mining and manufacturing. This is why environmental groups, the EPA, and websites like the Clean Fleet Report focus on source-to-wheels emissions, which is also called well-to-wheels due to our history of fuel from oil wells.

Ford, and other automakers, are following the classic practices of reduce, reuse, and recycle. As Ford electrifies hybrids and electric cars, many mechanical parts are replaced with lighter electric parts. Some steel gets replaced with lighter aluminum, plastic, and bioplastic. Hundreds of pounds are removed from a car, which allows it to go farther on less fuel. At end-of-life metals and parts are often recycled. Some lithium batteries will be repurposed in plants, renewable energy backup, and electric utility applications. Over 95 percent of auto battery materials are eventually recycled.

Ford’s new lean and green plant will build a new generation of cars, low in carbon footprint and high in industry impact.

Will Hyundai Beat Toyota and Honda in Lithium-Ion Hybrids?

Will Hyundai Beat Toyota and Honda in Lithium-Ion Hybrids?

By Juan Carlos Zuleta (8/12/10)

On March 29, 2009 I asked myself: Why Toyota (TM) and Honda (HMC) dislike lithium? My short answer to that question was: Because it was in their own interest to behave this way.

As is well known, these car makers pioneered the use of hybrid technology with nickel metal hydride batteries. Both created the conditions for a very profitable niche market, the hybrid electric vehicle market. So they had much to gain from delaying the arrival of the real electric car revolution since this would help them make more profits out of a rather obsolete but still commercially viable battery technology until the new emerging battery technology is finally introduced into the market. By doing so, they were also contributing to postponing the arrival of the sixth techno-economic paradigm with lithium as its main factor.

But this, of course, was a flawed strategy. In another blog published in April last year I argued that following a rather cautious and conservative approach to a lithium-based transition to electric propulsion in the global car industry implied their lagging behind General Motors insofar as electric automobile technology.

In a Seeking Alpha article published in July 2009, I went on to argue:

“Until now, most analysts thought that there was no real potential for use of Li-ion batteries in Hybrid Electric Vehicles (HEVs). They erroneously believed that Nickel-Metal Hydride (NiMH) batteries were the best choice for today’s HEVs, whereas Li-ion batteries were reserved for tomorrow’s Plug-in Hybrid Electric Vehicles (PHEV), Range Extended Electric Vehicles (REEVs) and Battery Electric Vehicles (BEVs).”

This argument, of course, never made sense. It rested on the unreasonable two-fold assumption that Li-ion batteries are not ready for prime-time and that plug-ins (and, for that matter, REEVs and BEVs) are a scam. For one thing, Hitachi’s notice tears apart the first half of the above contention. For another, Toyota’s latest decision to begin mass-producing PHEVs by 2012 and Nissan’s conviction that “now’s time to go electric” completely demolish the second half of it. Indeed one should not be surprised since PHEVs can be really thought of as an extension of HEVs. So if Li-ion batteries are to be used quite soon in plug-ins and both range-extended and battery EVs, then why not utilize them now for conventional hybrids as well?”

And I then concluded:

“Given both GM’s re-launch and Nissan’s renewed financial situation after having been granted a $ 1,6 billion loan to develop advanced Li-ion batteries for its new pure electric car, to retain its largest share in the automobile market of the world, Toyota will probably need to modify significantly its current conservative business strategy.”

As of now, both Toyota and Honda appear to have made some progress in this regard. Toyota has already launched its first 500 plug-in hybrid electric vehicles (PHEV) with Li-ion batteries for testing in Japan, North America and Europe and has recently announced that as part of its new partnership with Tesla it will mass-produce a new version of the all-electric RAV4 also with such advanced battery technology. Honda’s new CEO announced a few weeks ago that in the next-generation Civic Hybrid to be launched in 2011 it will use Li-ion batteries supplied by Blue Energy, a joint venture company between GS Yuasa and Honda.

The question is now whether these efforts will be enough to prevent Hyundai (HYMLF.PK) from leapfrogging them in the hybrid electric car market following its recent announcement that later this year it will launch the 2011 Sonata Hybrid, the world’s first mass-produced hybrid with a lithium-ion battery pack. And the most obvious answer at this point is: Probably not.

So this leads us to a new query: Will Toyota and Honda rethink their business strategy now so as to finally become more aggressive in terms of using Li-ion batteries in their next different car models? And my humble opinion is that chances are they will.

THINK City EV Test Drive

THINK City EV Test Drive

By John Addison (8/9/10)

I drove the THINK City EV on San Jose’s streets. The U.S. vehicle is a 2 seat, 2-door hatchback. THINK got adequate acceleration on city streets, even in its range extending Eco mode. My brief test drive did not include steep hills or entering a freeway. Acceleration did not come close to my Mitsubishi iMiEV test drive; on a freeway, I would have acceleration concerns.

Even though THINK has no power steering, it is easy to navigate. Not ready for prime time, the prototype car that I drove rattled.

When Think targets consumers in 2012, it will need to price well below the Nissan LEAF’s $32,780 price, to be successful. With U.S. consumers, the utilitarian 2-seat THINK will compete with larger sedans such as the LEAF, and smaller electric cars with more sex appeal from Toyota, Honda, Mitsubishi, and Smart.

THINK started pioneering electric vehicles 19 years ago. It’s been owned and dropped by Ford; in and out of bankruptcy. The new THINK has big ambitions and big backers, such as U.S. venture capital giant KPBC, Valmet, and EnerDel. The new Think EV for the U.S. market will be built in Indiana. The electric car’s 22kWh lithium battery is built in Indiana by EnerDel. Other new suppliers are now being selected for the U.S. built car that will be somewhat different than the European version.

THINK could do well with the U.S. fleets that already use some 20,000 light-electric vehicles (LEV), like the 25 mph Chrysler GEM, to shuttle people, cargo, and maintenance people with their equipment. Millions of LEVs are in use globally. University and corporate campuses are popular places for these LEVs. Much bigger than an LEV, the THINK City EV is almost 123 inches long, weighs about 2,300 pounds, and has more cargo space than competitive battery-electric micro and sub-compacts.

Upgrading these LEV fleets may be a significant opportunity for THINK. These LEVs typically max out at 25 mph, and only have a 25 mile electric range. The THINK EV’s larger size, highway speed, and 100 mile range would be ideal for many applications. Fleets sometimes have trouble getting old equipment off the books. A trade-in program would appeal.

THINK already has 1,700 of its new generation EVs on the road in northern Europe. In The THINK EV has done well with municipal and commercial fleets in Northern Europe. Brazil, major electrical equipment supplier CPFL recently purchased 3 THINK EVs. As THINK prepares for U.S. manufacturing, it is in discussions with a number of U.S. fleets.