Executive Summary

OVERVIEW als requirements, feedstock requirements, and so forth. The variety of effects, coupled with the Recent interest in alternative for light-duty existence of the three separate “policy drivers” for highway vehicles (automobiles and light trucks) is introducing alternative fuels, create a complex set of based on their potential to address three important trade-offs for policymakers to weigh. Further, there societal problems: unhealthy levels of ozone in are temporal trade-offs: decisions made now about major urban areas; growing U.S. dependence on promoting short-term options will affect the imported ; and rising emissions of carbon range of options open to future policymakers, e.g., dioxide and other greenhouse gases. This assess- by emplacing new infrastructure that is more or less ment examines the following alternative fuels: adaptable to future fuel options, or by easing methanol, ethanol, natural gas (in either compressed pressure on oil markets and reducing pressure for (CNG) or liquid (LNG) form), electricity (to drive development of nonfossil alternative fuels. Table 1 electric vehicles (EVs)), hydrogen, and reformulated presents some of the trade-offs among the alternative . fuels relative to gasoline.

Substituting another fuel for gasoline affects the Much is known about these fuels from their use in entire fuel cycle, with impacts not only on vehicular commerce and some vehicular experience. Much performance but on fuel handling and safety, materi- remains to be learned, however, especially about

Photo credtt General Motors Corp.

GM’s Impact , though a prototype requiring much additional testing and development, represents a promising direction for alternative fuel vehicles: a “ground up,” innovative design focused on the unique requirements of the fuel sources, in this case electricity.

–l– 2 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

Table l—Pros and Cons of Alternative Fuels Advantages Disadvantages Methanol ...... Familiar liquid fuel Range as much as 1/2 less, or larger fuel Vehicle development relatively advanced Would likely be imported from overseas Organic emissions (ozone precursors) will have lower Formaldehyde emissions a potential problem, esp. at reactivity than gasoline emissions higher mileage, requires improved controls Lower emissions of toxic pollutants, except formaldehyde More toxic than gasoline efficiency should be greater Ml 00 has non-visible flame, explosive in enclosed tanks Abundant natural gas feedstock Costs likely somewhat higher than gasoline, esp. during Less flammable than gasoline transition period Can be made from coal or wood (as can gasoline), though Cold starts a problem for Ml 00 at higher cost Greenhouse problem if made from coal Flexfuel “transition” vehicle available Ethanol ...... Familiar liquid fuel Much higher cost than gasoline Organic emissions will have lower reactivity than gaso- Food/fuel competition at high production levels line emissions (but higher than methanol) Supply is limited, esp. if made from corn Lower emissions of toxic pollutants Range as much as 1/3 less, or larger fuel tanks Engine efficiency should be greater Cold starts a problem for E1OO Produced from domestic sources Flexfuel “transition” vehicle available Lower CO with gasohol (1 O percent ethanol blend) Enzyme-based production from wood being developed Natural Gas ...... Though imported, likely North American source for Dedicated vehicles have remaining development needs moderate supply (1 mmbd or more gasoline dis- Retail fuel distribution system must be built placed) Range quite limited, need large fuel tanks w/added costs, Excellent emission characteristics except for potential of reduced space (LNG range not as limited, compara-

somewhat higher NOX emissions ble to methanol) Gas is abundant worldwide Dual fuel “transition” vehicle has moderate performance, Modest greenhouse advantage space penalties Can be made from coal Slower refueling Greenhouse problem if made from coal Electric ...... Fuel is domestically produced and widely available Range, power very limited Minimal vehicular emissions Much battery development required Fuel capacity available (for nighttime recharging) Slow refueling Big greenhouse advantage if powered by nuclear or solar Batteries are heavy, bulky, have high replacement costs Wide variety of feedstocks in regular commercial use Vehicle space conditioning difficult Potential battery disposal problem Emissions for power generation can be significant Hydrogen ...... Excellent emission characteristics-minimal hydrocarbons Range very limited, need heavy, bulky fuel storage Would be domestically produced Vehicle and total costs high Big greenhouse advantage if derived from photovoltaic Extensive research and development effort required energy Needs new infrastructure Possible use Reformulated Gasoline ...... No infrastructure chanqe except refineries Emission benefits remain highly uncertain Probable small to moderate emission reduction Costs uncertain, but will be significant Engine modifications not required No energy security or greenhouse advantage May be available for use by entire fleet, not just new vehicles SOURCE: Office of Technology Assessment, 1990.

what a large-scale supply system would cost and ● sensitivity of costs and performance to numer- how it would perform relative to the gasoline ous (and difficult to predict) future decisions system. Key sources of uncertainty are: about regulating, manufacturing, financing, and marketing the fuel systems—for example, ● rapidly changing vehicle and fuel supply sys- design decisions trading off vehicle perform- tem technology; ance and fuel efficiency; and ● continuing evolution of the competing gasoline- ● for most of the fuels, limited experience with based system, for example, further improve- transportation use, often confined to laboratory ments in catalytic controls. or prototype systems that don’t reflect con- straints imposed by mass production require- In particular, most of the fuels have substantial ments or ‘‘real world” maintenance problems; potential for long-term technology advances that Executive Summary ● 3 could drastically alter costs and impacts: advanced quantities of CNG--enough to replace at least a few batteries for EVs, enzyme hydrolysis processes for hundred thousand barrels per day of gasoline, producing ethanol from lignocellulose materials, perhaps somewhat more-could come from domes- and so forth. tic and other North American sources; the rest would be imported by ship, as LNG, from distant sources. Given these uncertainties and potentialities, pro- Most likely, virtually all methanol will be imported jections of the costs and benefits of alternative fuels by ship. And reformulated gasoline, which merely rely on a series of assumptions about technology reshapes gasoline rather than replacing it, should successes, capital charges, feedstock costs, vehicle have little effect beyond that caused by the addition efficiencies, shipping methods, and so forth that are of oxygenates that may be made from natural gas or single points in a range of possible values. Changing biomass. Nevertheless, use of methanol and CNG these assumptions to other still-plausible values will still can enhance energy security by reducing change the cost and benefits results, sometimes pressure on oil markets and diversifying to an energy drastically. feedstock (natural gas) whose resource base is less Meeting Society’s Goals fully developed than oil’s, and thus has a greater potential for new sources of supply—and a less Air Quality Effects easily manipulated market. The degree of additional All of the fuels offer some potential to reduce security may be enhanced if the United States urban ozone and toxic emissions. Hydrogen, elec- supports the development of secure methanol or tricity, and natural gas offer large and quite certain LNG supply sources and if investors insist that per vehicle reductions (though emissions from supplier nations be large equity holders (and thus, power generation must be considered in evaluating risk-sharers) in the capital-intensive supply system. electricity’s net impact on air quality). Methanol and The longer term options, e.g., hydrogen and ethanol (as M85 and , mixtures of the alcohols electric vehicles, and ethanol or methanol from with 15 percent gasoline to improve cold starting), lignocellulosic materials, offer excellent energy offer smaller and, at this time, less quantifiable but security benefits if their costs are competitive with probably still significant reductions. For methanol, alternatives. improved control of formaldehyde is critical to its emissions benefits. The potential for reformulated Global Warming gasoline is speculative, because the makeup of this fuel is not yet known. For most of the fuels, insuring The potential of alternative fuels to affect green- that the potential benefits are actually obtained house gas emissions is primarily a long-term poten- requires vehicle emission standards that properly tial. Those fuels and technological systems most account for the differences in chemical composition likely to be used in the next few decades should not (and ozone-forming potential) between alternative have a large impact, either positive or negative, on fuel-related emissions and gasoline-related emis- net emissions. For example, combustion of metha- nol or natural gas produces less CO per unit of sions. 2 energy output than gasoline; however, producing The areawide ozone-reduction benefits of all and transporting these fuels will, in most cases, be fuels are limited by projected reductions in the more energy intensive than producing and - emissions “target’ for the fuels-the share of urban ing gasoline. Their net emissions of CO2 and other ozone precursor emissions attributable to light duty gases, weighted by their relative warming impact vehicles. This share is expected to decrease from 45 and added over the entire fuel cycle, are likely to be to 50 percent during the mid to late 1980s to 25 to 30 only slightly smaller than the emissions generated percent by 2000. by gasoline. Ethanol’s net greenhouse emissions gain some benefit from the regrowth of the feedstock Energy Security corn, but most or all of this benefit will be The most likely near-term alternative fuels— counteracted by other energy losses in the farming reformulated gasoline, methanol, and CNG--do not and fuel production system. Electricity for recharg- offer the kinds of energy security advantages ex- ing EVs, if generated with today’s power system, pected from options such as coal-derived liquid will rely heavily on coal-fired powerplants and fuels, which rely on a domestic feedstock. Moderate cannot reduce greenhouse emissions significantly. 4 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

And reformulated gasoline is most likely to have demanded returns as the supply system is stabilized slightly higher greenhouse emissions, assuming that and risk is reduced; on the other hand, at some point refining energy will increase somewhat. the natural gas feedstock costs will rise with increasing demand. The midpoint of the long-term All of these fuels, and hydrogen as well, have the cost range is somewhat higher than gasoline cost. long-term potential to generate much lower levels of greenhouse gases if they turn to renewable, low- Similar wide ranges of potential costs apply to all chemical-input biomass feedstocks or solar or nuclear- of the fuels (except reformulated gasoline, which is generated electricity. For example, both ethanol and expected to be perhaps $0.10 to $0.30/gallon more methanol can be produced from wood and other expensive than gasoline), though the ranges may be lignocellulose material, methanol by gasification, shifted upwards or downwards from methanol’s ethanol by enzyme hydrolysis. Though neither range. Ironically, the cost to society of introducing process currently is economically competitive with alternative fuels will rise if gasoline conservation standard alcohol production methods, further devel- programs succeed in stopping the growth of gasoline opment of both processes should reduce costs. demand, because the cost of new infrastructure for Electric and hydrogen-powered vehicles (the latter the fuels would not then be offset by a reduced need using hydrogen produced by electrolyzing water) for new gasoline infrastructure. can use electricity produced essentially without CO2 emissions from nuclear or solar sources or biomass materials. Even gasoline can be produced by gasify- Commercialization Hurdles ing lignocellulose materials, with strong net green- house benefits. Also, for all the fuels, there are Commercialization of alternative fuels is made numerous shorter term efficiency improvements and difficult by gasoline’s entrenchment in the light- process changes that can produce small reductions in duty fuels market. Gasoline has the advantages of net greenhouse emissions. very large investments in existing supply infrastruc- ture; long years of consumer acceptance and famili- Other Key Issues arity; and a regulatory structure for fuels handling and use designed specifically for that particular fuel. costs For example: with the exception of reformulated Estimates of the likely cost of alternative fuels at gasoline, which can be considered simply an addi- the pump may plausibly vary over a wide range tional, more expensive grade of gasoline rather than because of their dependence on assumptions about a true alternative, none of the alternative fuels will the relative success of solutions to existing technical permit a vehicle to travel as far as would an equal problems, feedstock sources and prices, manufac- volume of gasoline. For hydrogen, electricity, and turer design decisions, and other uncertain factors. CNG, the decrease in range is at least fourfold; for OTA’s examination of the potential costs of metha- methanol, ethanol, and LNG, the difference is two to nol, for example, reveals a range from below one or less. Other differences that can affect gasoline costs to 50 percent above gasoline costs. In consumer acceptance include, for some but not all a transition period when it is being introduced, fuels, slower refueling, different handling require- however, methanol should be significantly more ments, and lower availability for several years after expensive than gasoline unless oil prices escalate introduction. Consumer response to any of these during this period. Over time, costs could come differences, or to the design changes necessary to down because of economies of scale realized as the overcome them (for example, larger fuel tanks to system gets larger, better technology, and lower overcome reduced range), is uncertain. Executive Summary ● 5

SUMMARY AND CONCLUSIONS alternative fuels that do not rely on fossil fuel feedstocks or that can otherwise offer a net reduction During the oil crises of the 1970s, Federal in greenhouse emissions. policymakers initiated a variety of programs de- The alternative fuels of primary interest for the signed to enhance U.S. energy security, mainly by U.S. fleet of automobiles and light trucks are: supplementing or replacing gasoline with alternative fuels produced from domestic coal and oil shale. ● the alcohols methanol and ethanol, either alone These programs generally were not viewed as or blended with gasoline; successful, and they were largely abandoned with ● compressed or liquefied natural gas (CNG or the perceived end of the oil crisis in the early 1980s. LNG); ● liquefied petroleum gas (LPG) and ; During the past year, the debate on reauthorizing ● hydrogen; and the Clean Air Act caused a resurgence of interest in ● electricity. alternative transportation fuels as an option for In addition, gasoline that has been reblended to reducing ozone levels in urban areas that cannot reduce emissions, so-called ‘‘reformulated gaso- otherwise meet air quality standards. In addition, the line,’ is a recent addition to the list of new fuels. The original concerns about energy security and the fuels and their basic characteristics are described in mounting trade deficit have reemerged as oil imports box A. have grown rapidly over the past few years and as petroleum-driven conflict louves in the Middle East. This report provides abroad overview of the costs A third concern—the possibility of greenhouse and benefits of introducing methanol, ethanol, climate change—has increased interest in those natural gas, electricity, hydrogen, and reformulated

Box A—Alternative Transportation Fuels gasoline-a motor vehicle fuel that is a complex blend of hydrocarbons and additives, produced primarily from the products of petroleum and natural gas. Typical octane (R+M/21) level is 89.

methanol--commonly known as wood alcohol (CH3OH), a light, volatile, flammable alcohol commonly made from natural gas. Volumetric energy content is about half that of gasoline (implies range for the same fuel volume is about half that for gasoline, unless higher efficiency is obtained), Octane level of 101.5, which allows use in a high compression engine. Much lower vapor pressure than gasoline (low evaporative emissions, but poor starting at low temperatures). natural gas-a gas formed naturally from buried organic material, composed of a mixture of hydrocarbons,

with methane (CHd) being the dominant component. Octane level of 120 to 130. Volumetric energy content at 3,000 psi is about one-quarter that of gasoline. liquid petroleum gas, LPG--a fuel consisting mostly of propane, derived from the liquid components of natural gas stripped out before the gas enters the pipeline, and the lightest hydrocarbons produced during petroleum refining.

ethanol—grain alcohol (C25OH), generally produced by fermenting starch or sugar crops. Volumetric energy content is about two-thirds of gasoline. Octane level is 101.5. Much lower vapor pressure than gasoline.

hydrogen—H 2, the lightest gas. Very low energy density even as a cryogenic liquid, less than that of

. Combustion will produce no pollution except NOX. Can be used in a fuel cell, as well as in an internal combustion engine. electricity-would be used to run electric motors, with batteries as a storage medium. Currently available batteries do not attain a high energy density, creating range problems. reformulated gasoline-gasoline that has been reblended specifically to reduce exhaust and evaporative emissions and/m to reduce the photochemical reactivity of these emissions (to avoid smog formation). Lower vapor pressure than standard gasoline (which reduces evaporative emissions), obtained by reducing quantities of the more volatile hydrocarbon components of gasoline. Addition of oxygenates to reduce carbon monoxide levels.

l~e ave~e of rese~ch octane (R) and motor octane (M), which is the value found m tie reti P~P. 6 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

gasoline1 into the U.S. light-duty fleet, and addition- function in healthy children and adults after exercis- ally provides more detailed analysis of a few ing for about an hour or two. Medical concern particularly contentious issues such as the air quality centers as much-or even more-on possible chronic impacts and costs of methanol use. This report is an damage from long-term exposure as on short-term interim product of an ongoing OTA assessment of effects, although research on chronic risks is limited Technological Risks and Opportunities for Future and inconclusive. U.S. Energy Supply and Demand. The focus of the assessment and this report is the next 25 years in the Ozone is produced when volatile organic com- U.S. energy system. While 25 years seems a long pounds (VOCs) and nitrogen oxides (NO,) combine time period for projection purposes, it is short in in sunlight. VOCs, a broad class of air pollutants that terms of major transitions in energy sources, green- includes hundreds of specific compounds, come house warming strategies, and other similar con- primarily from such manmade sources as automo- cerns. Consequently, some of the longer term bile and truck exhaust, evaporation of solvents and greenhouse options, such as using wood and other gasoline, chemical manufacturing and petroleum lignocellulose materials to produce methanol or refining (in some rural areas, however, natural ethanol, and the longer term greenhouse concerns emissions sources can dominate). NOX arises from such as the potential for an eventual turn to coal as fossil fuel combustion. Major sources of NOX a liquid fuel feedstock, are not addressed in detail in include highway vehicles and utility and industrial the report. However, policymakers addressing deci- boilers. sions for the short-term should recognize that decisions ranging from establishing research priori- 4 In a recent OTA study, Catching Our Breath, we ties to constructing new fuel infrastructures affect concluded that much of the Nation will still not be prospects for the longer term options. able to meet the goals of the Clean Air Act even by A recent report from the National Research 2000. Over the next 5 to 7 years, available technol- Council, Fuels to Drive Our Future,2 discusses in ogy can lower summertime manmade VOC emis- detail the potential for producing motor fuels from sions by 35 percent (3.8 million tons/yr) compared domestic sources such as coal, oil shale, and to 1985 levels, bringing into compliance about half biomass. Similarly, hydrogen as a potential motor of all areas that now fail to attain the standard for fuel is addressed in a recent World Resources ozone. Existing control methods can substantially Institute report entitled Solar Hydrogen: Moving improve the air quality of the other half of the areas, Beyond Fossil Fuels.3 but meeting the ozone standard in these areas will require new, innovative, and nontraditional control The Perceived Benefits of Alternative Fuels methods. Ozone Control The Nation has already failed several times to Ozone control has become a primary driving force meet the deadlines set by Congress--first in 1975 behind the push to alternative fuels because, 15 years and again in 1982 and 1987. In Catching Our after the passage of the original Clean Air Act, ozone Breath, we stated that when amending the Act, pollution remains a serious national concern. About Congress must include both measures to achieve 100 cities, housing about half of the American near-term emissions reductions using today’s con- population, do not meet the standard for ozone, the trol methods and measures to insure that the Nation principal component of urban smog. At concentra- can continue to make progress after 2000. We view tions above the standard, ozone can cause coughing, alternative fuels as one of several promising longer painful breathing, and temporary loss of some lung term measures.

IL~ is not ~d&m~ed ~-.au~e its supply limitatio~ prevent it from pla~g a major long.te~ energy s~ty role. Wem dtarlative fllek USe tO be confiied to the primary ozone nonattainment cities, LPG would be a viable option. ~ommittee on Production Technologies for Liquid Transportation Fuels, National Research Council, Fuels to Dive Our Future (WashingtoxL DC: National Academy Press, 1990). 3J.M. Ogden and R*H, wil~5, solar Hydrogen: &foving BeyondFossi/Fuels ~as~to~ DC: world Resources Institute, October 1989).

4u.s. Conue5s, Offlce of Te~~o]oW As5e55men~ catching Our Breath: N- steps in Reducing urban ozone, OTA-O-412 (wmh@to~ DC: U.S. Government Printing Office, July 1989). Executive Summary ● 7

Figure l—Volatile Organic Compound (VOC) likely contribution to ozone formation per gram of Emissions in Nonattainment Cities in 1994, gas emitted. The attractiveness of using alternative by Source Category, After All Additional fuels as an ozone control measure clearly depends on Control Methods Are Applied the costs and effectiveness of such use relative to the costs and effectiveness of competing measures. As Percent of 1994 VOC emissions discussed below, the costs of alternative fuel use are o% 10“/0 20 ”/0 30% 40 ”/0 as yet quite uncertain, while the effectiveness is Highway vehicles Air, rail, marine reasonably well known only for some of the fuels. Mobile sources Organic solvent evap An additional uncertainty is the extent to which Surface coating further improvements maybe achieved in emission Petroleum industry controls for gasoline-fueled vehicles. If highway Gasoline marketing vehicles’ share of urban VOC emissions is reduced TSDFs even below the projected 25 to 30 percent level Other industries Source size representing the frost round of emission require- Chemical manufact. I Large ments expected from the new Clean Air Act, the Solid waste disposal w small emissions reduction benefits of moving to the Nonresid. fuel comb. Miscellaneous alternative fuels will be reduced. Total = 7.5 million tons/year Aside from controlling ozone, alternative fuels should help to reduce the emissions of toxic pollutants associated with gasoline use. These in- Stationary sources that emit more than 50 tons per year of VOC clude benzene, gasoline vapors, l,3-butadiene, and are included in the “Large” categories. (See figure 2-3 for 1985 polycyclic organic matter. With the exception of emissions in nonattainment cities before additional controls applied.) methanol vehicles’ increased emissions of formalde- SOURCE: Office of Technology Assessment, 1989. hyde, use of the alternative fuels is not likely to produce any counterbalancing emissions of similar Ozone control efforts have traditionally focused toxicity. And with methanol vehicles, their higher on reducing VOC emissions. As shown in figure 1, direct emissions of formaldehyde are partly offset in about 25 to 30 percent of VOC emissions remaining the ambient air by the shift in VOC emissions after today’s controls are applied will come from associated with methanol use. Some of the VOCs are cars and trucks. Programs to introduce cleaner, chemically transformed in the atmosphere into alternatively fueled vehicles by using, for example, formaldehyde, and a methanol vehicle is a smaller methanol or compressed natural gas (CNG) instead “indirect” source of formaldehyde than a compara- of gasoline, should lower emissions further, as ble gasoline vehicle. would measures to reduce the Nation’s use of cars. Energy Security Another quarter of the remaining VOC emissions After a few years of quiescence, energy security will come from solvents used in a wide variety of industrial, commercial, and home uses, from paint- has again become a major U.S. concern. The key ing and cleaning heavy equipment to washing statistic driving that concern is the annual level of paintbrushes. Further control of these sources is net U.S. oil imports, which had dropped to 27 percent of requirements by 1985 but rose to 46 possible. And for some areas, controlling NO, percent in 1989, and continues to rise steadily as emissions in addition to VOCs maybe an important ozone control measure, both locally and in areas U.S. oil production drops. As illustrated by figure 2, upwind of certain nonattainment cities. which displays the Energy Information Administra- tion’s latest forecast, U.S. oil imports are expected How do alternative fuels fit into the Nation’s to grow rapidly over the next few decades, to nearly ozone control requirements? All of the fuels dis- 61 percent of demand by 2010 in the base cases The cussed here have the potential to reduce either (or United States paid $44.7 billion for its 1989 oil both) the mass emissions of VOCs from highway imports, representing nearly half of its merchandise vehicles or the reactivity of the VOCs, that is, their trade deficit of$111 billion, and expenditures would

5Ener~ Momtion Administratio~ AnnuuZEnergy Outlook 1990, DOWJ-A-0383(90), Janw 1~. 8 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

Figure 2—EIA Projections of Petroleum the industry’s infrastructure, including skilled labor, Supply, Consumption, and Import Requirements that would be needed for a drilling rebound is to 2010, Base Case eroding. .- Cumulative million barrels per day 25 Despite these problems, OTA concludes that, on History Forecast balance, the United States’ energy supply is some- what more secure today than in the 1970s. Shifts in I 20.3 the oil market that we consider to be supportive of 20 increased short- to medium-term energy security include: ● the existence of the Strategic Petroleum Re- 15 serve and increased levels of strategic storage 12.3 in Europe and Japan; Net imports ● increased diversification of world oil produc- tion since the 1970s, with OPEC losing 17 10 percentage points of world market share from 1979-89; ● the end of U.S. price controls on oil and most Lower 48 A natural gas, allowing quicker market adjust- 10.0 8.0 ment to price and supply swings; 5 ● the increasing role of the spot market, adding flexibility to oil trade; ● Natural gas liquids the major investments of OPEC producers in & other T \ the economies of the Western oil-importing I 1 0 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I nations, especially in their oil-refining and 1970 1980 1990 2000 2010 marketing sectors; SOURCE: Energy Information Administration, Annua/ Energy Out/ook, 1990. ● the lessening importance of the Strait of Hor- muz as a potential bottleneck due to the rise with expected increases in import volumes and construction of new pipelines out of the Persian oil price. As in the 1970s, four basic elements Gulf; and underlie the concern: the near-total dependence of ● the recent political changes in the Eastern Bloc the U.S. transportation sector on petroleum; the nations and lowering of East-West tensions. United States’ limited potential to increase oil Nevertheless, energy security concerns remain an production; the preponderance of oil reserves in the important policy driver, and their importance could Middle East/Persian Gulf area; and the political grow over time if current trends in U.S. oil supply instability and hostility to the United States existing and production continue and, as expected by many in parts of that area. analysts, OPEC market power continues to grow. In some ways, the first two of these elements have Futher, important and unsettling shifts in military grown more severe since the energy crises of the power balances in the Middle East, in particular the 1970s. During the past 10 years, the share of total greatly increased military capability of Iraq, intro- U.S. petroleum use by the transportation sector— duce an important uncertainty into energy security whose prospects for fuel switching in an emergency assessments. are virtually zero-has grown from 54 to 64 percent. The development of alternative transportation In addition, the prospects for a rapid rebound of U.S. fuels can have a positive effect on energy security, petroleum production in the event of a price rise by: seem weaker than in the 1970s. The boom and bust oil price cycle of the post-boycott period, and ● diversifying fuel supply sources and/or getting especially the price drop of 1985-86, has created a supplies from domestic or more secure foreign wariness in the oil industry that would substantially sources, delay any major boost in drilling activity in response ● easing pressure on oil supplies through reduced to another price surge. And, with the passage of time, demand for gasoline, and Executive Summary ● 9

. reducing the impact of an oil price shock. Figure 3--World Exportable Gas Surplus as of Dec. 31,1987 The magnitude of the effect will depend on such U. S.S.R factors as the feedstock used for the fuel and strategic arrangements for obtaining the feedstock or fuel, the volume of alternative fuel use, and the selection of dedicated vehicles or flexible fuel vehicles. The effect on energy security could be negative, however, if any Federal subsidies of the price of “secure” energy sources are too high, or regulatory requirements for their use too costly. The availability of ample foreign exchange is a powerful Iran weapon in an energy emergency, so that the financial ll,Other impact of an alternative fuels program that had a large negative net impact on the overall U.S. trade Abu I balance and/or on the Federal deficit conceivably Iia could outweigh the positive value of reduced oil Qatar Norway - -‘- imports. SOURCE: Jensen Associates, Inc., Natural Gas Supp/y, Demand, and Although the security benefits of some fuels are Price, February 1989. indisputable, analysts disagree about others. Fuels establishing long-term trade pacts with secure meth- such as electricity, hydrogen, and ethanol are likely anol sources could enhance the potential benefits. to be domestically produced and thus unambiguously advantageous to energy security (if they can be Another way to enhance energy security maybe produced cheaply enough). Corn-based ethanol’s to produce alternative fuels from domestic coal-an dependence on intensive agriculture, which may option not explored in this report. Problems with the suffer on occasion from drought, may make it less use of coal include its adverse impact on greenhouse secure than the others, however. Methanol or natural warming (unless the CO2 produced can be captured gas, on the other hand, will be imported from and stored, which seems unlikely) and its high costs, countries with large gas reserves (though a moderate though these may be lowered over time. Similarly, level of use, perhaps up to several alternative fuels can be made from wood and other hundred thousand barrels per day of oil substitution, lignocellulosic materials, with substantial green- could be supported using North American gas house benefits if the use of agricultural chemicals is sources), and their effect on energy security will minimized and the feedstock is managed in a truly depend on which countries enter the market, the type renewable fashion. of financial arrangements made between producers and suppliers (the large capital requirements of a The availability of a domestic feedstock is not methanol or LNG supply system could enhance the confined to the alternative fuels; gasoline can be stability of supply, but only if the producer nations made from coal and wood. In fact, gasoline can be are large equity holders), the worldwide price made from natural gas as well. Clearly, the energy relationship between natural gas and oil (that is, will security benefits associated with a particular fuel a large oil price rise automatically raise gas—and have little to do with that fuel’s chemical makeup, methanol-prices?), and other factors. Because and much to do with its feedstock materials. two-thirds of the world’s gas reserves, and a higher estimated share of the world’s exportable gas Global Warming surpluses (figure 3), reside in the Middle East and Eastern Bloc, some analysts deny that the United The potential need to slow and reverse the growth

States would receive any security benefit from of worldwide emissions of carbon dioxide (C02) and turning to natural gas-based methanol. OTA con- other greenhouse gases has altered thinking about cludes that the Nation can derive a security benefit energy supply sources, enhancing the perceived because large-scale methanol use will reduce pres- value of sources that do not use fossil fuels or that sures on world oil supplies; also, strategies such as use fuels low in carbon. 10 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

The greenhouse effect is a warming of the Earth enough, by themselves, to significantly alter the and atmosphere as the result of the thermal trapping course of greenhouse warming; ignoring all emis- of incoming solar radiating by CO2, water vapor, sions sources as small as the light-duty fleet would methane, nitrous oxide, chlorofluorocarbons, and eliminate most options to curb the greenhouse effect. other gases, both natural and manmade. Past and Further, U.S. adoption of alternative fuels will ongoing increases in energy use and other anthropo- increase the likelihood that other nations will do the genic (man-caused) emissions sources are pushing same. The U.S. fleet’s emissions thus understate the 8 up atmospheric concentrations of these gases; C02 potential benefit of U.S. action. To successfully concentrations, for example, have increased by combat global warming, nations must be prepared to about 25 percent since the mid- 1800s. Scientists take actions that will have an important effect only believe that these growing concentrations will lead over the course of decades and in concert with to significant global temperature increases: a global similar actions taken on a global scale. average of 3 to 8 ‘F (1.5 to 4.5 ‘C) from a doubling 7 Alternative fuels for light-duty vehicles are of of CO2 concentrations or the equivalent. Other effects of the warming include an expected rise in concern for global warming for the following sea level, drastic changes in rainfall patterns, and reasons: increased incidence and severity of major storms. 1. The fuels generate, over their fuel cycle, Despite a substantial scientific consensus about different amounts and mixes of greenhouse the likely long-term change in average global gases than does gasoline. In general, however, temperatures, there is much disagreement and uncer- the fuels and feedstock choices most likely for tainty associated with the rapidity of the changes, the the near term-in particular, methanol from effects of various temperature feedback mechanisms natural gas and natural gas itself-have the such as clouds, the role of the ocean, the relative potential for only modest benefits over gaso- greenhouse effect of the various gases, regional line in their overall greenhouse effect; and impacts, and other factors. These uncertainties affect reformulated gasoline would offer no benefits. arguments about the value of alternative fuels; for Methanol and ethanol made from wood, which example, uncertainties about the differential role of might become practical with further develop- the various greenhouse gases complicate analyses of ment of gasifiers (methanol) and enzyme- the relative impact on warming of the various fuels, based conversion processes (ethanol), would because each fuel emits, over its fuel cycle, a yield significant greenhouse benefits. The different mix of gases. longer term choices, e.g., hydrogen and elec- tricity based on nonfossil sources, can yield To what extent are the potential users of alterna- very significant benefits. In contrast, fuels tive fuels-in this case, light-duty vehicles-a derived from coal-including gasoline-from- major source of greenhouse gases, and thus a good coal-would yield substantial increases in target for action to reduce emissions? The U.S. greenhouse gases over ordinary gasoline. light-duty fleet accounts for about 63 percent of U.S. 2. Current choices about alternative fuels may transport emissions of CO2, 3 percent of world CO2 influence future fuel choices with significant emissions, and about 1.5 percent of the total greenhouse effects. For example, turning to greenhouse problem. This latter value has been natural gas as a feedstock for transportation variously interpreted as being a significant percent- fuels might conceivably have the effect of age of the greenhouse problem, or as proving that delaying a transition to nonfossil fuels, by focusing on the U.S. fleet to gain significant holding down oil prices, providing additional greenhouse benefits is a mistake. In OTA’s view, fossil supplies, and, perhaps, by being more few if any sectors of the U.S. economy are large attractive than gasoline in some regards. As

%t is, the incoming solar energy is reradiated by the Earth as heat (thermal energy) and then absorbed or ‘trapped” in the atmosphere rather than radiating out to space. 7~t is, other gases have a W arming effect that is some multiple of C02’S effect so a combination of increases of various gases can be translated into an effective C02 increase by appropriately weighting the increased concentration of each gas. 80~~s ocMm ~d Env~o~ent ~ogr~ ~ently is conductfig a study On policy optio~ to Cmb I-J.s. greenhouse emissions, Czil?liZte change: Ozone Depletion and the Greenhouse Effect. Executive Summary . 11

another example, building an EV system will associated with gasoline. It is difficult to predict how generate electricity load growth that, by flat- consumers will react to these differences in fuel tening the daily demand curve, could encour- characteristics. age utilities to consider nuclear plants (with With a few exceptions (electric and CNG vehicles zero CO2 emissions) for their new generation capacity, since nuclear is most economical designed to be recharged at home), the fuel distribu- serving this type of demand pattern. Further, tion network will be severely limited geographically building of new infrastructures for near-term in the early years of an alternative fuels program. alternative fuels may affect our ability to move Consequently, early vehicles will either be limited in to longer term fuels, e.g., a natural gas system operation to those areas with available fuel supplies might possibly ease the way for hydrogen, or, more likely, will be designed to operate as another gaseous fuel, whereas the construction multifuel vehicles. For example, prototype flexible of a new infrastructure for methanol may fuel vehicles (FFVs) can operate on any blend of hinder the later adoption of a system using gasoline and either methanol or ethanol up to about gaseous fuels. And finally, premature intro- 85 percent alcohol (at higher concentrations, cold duction of any technology can have sharply starting is a problem). As shown in figure 4, several negative effects on future consumer accep- vehicle systems must be modified to allow the tance of that technology. The importance of vehicle to operate in this mode. Commercially these effects is extremely sensitive to the available dual-fuel vehicles can operate on either timing of technology development and other gasoline or natural gas by the flip of a switch. And uncertain factors and, as shown by the example hybrid electric vehicles (EVs) would combine a of natural gas, there may be plausible green- battery/ combination with a fuel house arguments both for promoting the com- and either a small internal combustion engine or a mercialization of a particular fuel, and for fuel cell. opposing such commercialization. To gain increased travel flexibility over single- fuel vehicles, multifuel vehicles must sacrifice some Introducing Alternative Fuels Into potential advantages afforded by the alternative the Light-Duty Fleet fuels’ special characteristics. For example, metha- nol, ethanol, and natural gas are high octane fuels; a Although the physical characteristics of the alter- vehicle dedicated to their use, which did not have to native fuels are in some ways superior to that of operate well on gasoline, could use a high compres- gasoline, there are substantial barriers to introducing sion engine with improved efficiency and power. To such fuels into transportation markets. Aside from retain operability with gasoline, in multifuel the potential that the alternative fuels will cost more vehicles must stay at lower compression levels. to produce than gasoline, these fuels have limited or Consequently, as fuel availability for the alternative no established transportation markets or infrastruc- fuels improves over time, manufacturers are likely to ture, whereas gasoline has both. The physical system shift their production lines towards vehicles dedi- for producing, storing, and distributing gasoline is in cated to these fuels, with significantly improved place and operating smoothly; massive amounts of performance and efficiency. capital and engineering time have been invested in engine modifications to optimize performance for The large barrier to commercialization of alterna- gasoline; the regulatory system for controlling the tive fuels caused by gasoline’s entrenchment in the safety and environmental impacts of light-duty market, coupled with the likelihood that, at least in vehicles is designed specifically for gasoline; and the beginning, alternative fuels will be more costly most consumers have a close familiarity with and than gasoline, implies that alternative fuels may get acceptance of gasoline and its capabilities and a decent chance for market share only if government dangers. In contrast, important facets of the infra- gives them a strong push. The primary dilemma for structure for the alternative fuels will have to be built government policymakers is, then, is it worthwhile virtually from scratch, the fuels will alter vehicle to do so? The alternative fuels certainly do have performance, in some ways for the worse (particu- some intriguing potential, as discussed below, but larly with regard to range), and they will introduce they also have disadvantages and risks. A reasoned new dangers, though possibly easing old ones decision concerning government incentives for these 12 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

Figure 4—Technical Difference Between Flexible-Fuel and Conventional Automobiles Ethanol of Signal from On-board computer Fuel system methanol on-board computer . with revised strategy Gasoline (Adjusts spark timing materials and fuel flow) / \ / ~ mm

{

II \ II I \ 1 / K\ /1 I ICY ‘\ I ~ Fuel system Sequential materials Oxygen sensor Optical sensor fuel. injected engine exhaust gas (larger flow injectors) (provides signal to on-board computer)

SOURCE: Ford Motor Co. fuels requires a dispassionate analysis of these fuels’ and changing, with the outcome of develop- pros and cons relative to gasoline. ment and problem-solving programs highly uncertain. For example, full success of ongo- Conclusions about the costs, problems, and likely ing research on low-cost manufacture of etha- performance of the alternative fuels are based on a nol from lignocellulose materials (e.g., wood variety of evidence. First, their long use in nonvehic- waste) would radically improve ethanol’s en- ular applications has yielded considerable experi- vironmental and economic attractiveness. Sim- ence with distributing and handling the fuels. ilarly, successful development of catalysts that Second, many of the fuels have been used in vehicles can reliably control exhaust formaldehyde for years, and although these vehicles perform less levels over a vehicle lifetime would enhance well than advanced vehicles are expected to, much significantly the standing of methanol as an of this experience still is relevant to projections of option for ozone control. future, wider use. Third, limited testing of advanced vehicle prototypes has begun to clarify the potential 2. Moving from lab to marketplace. The transi- of the fuels, as well as their problems. And fourth, tion from successful research project to com- unlike gasoline, which is a complex and nonuniform mercial, mass-produced product is a complex blend of hydrocarbons, most of the suggested process involving massive scaleups and design alternative fuels have simple chemical structures and performance trade-offs. The unpredicta- and are relatively uniform in quality, which should bility of this process limits the reliability of help improve the accuracy of performance projec- projections based only on laboratory or vehicle tions. prototype testing. In particular, consumer reac- tions to differences in vehicle and fuel distri- Despite this evidence, participants in the alterna- bution characteristics (shorter range or less tive fuels debate disagree sharply about virtually all luggage space, slow refueling, less or more aspects of fuel performance and cost. Part of these power, etc.) will profoundly influence system disagreements undoubtedly are due to the usual design, yet these reactions will become clear hyperbole associated with strong and opposing only as the fuels are introduced, and they might commercial interests and environmental values. still change over time. There also are strong technical reasons, however, 3. Effects of program size. The scale of alterna- why the disagreements exist. In particular: tive fuels development is a key determinant of 1. Changing technology. The technology for the costs and characteristics of fuel supply producing alternative fuels is still developing systems and vehicles, yet there is little possi- Executive Summary ● 13

bility of predicting how large a program would Methanol can also be made from coal, though at be, or if it were likely to spread worldwide. For higher costs and environmental impacts than from example, domestic gas sources or pipeline natural gas. As noted earlier, this does not represent imports from Canada or Mexico could supply an advantage over gasoline because gasoline too can a moderate-sized program of natural gas vehi- be made from coal. Methanol also can be made from cles, but larger scale development would wood and other lignocellulose materials, though at require LNG imports from abroad—with dif- still higher costs with current technology. Substan- ferent costs and energy security implications. tial improvements in wood gasifiers appear likely 4. Continued evolution of the gasoline system. with further research. The relative benefits of any new alternative Major disadvantages of methanol are the likeli- fuel depend on its comparison with the gaso- hood that it will cost more than gasoline, especially line system, and this system may change during the early years of a methanol fuels program; markedly within the next decade. For example, loss of as much as half of the driving range without there is some evidence that improved catalytic a larger fuel tank; the loss of some of the air pollution converters will reduce the photochemical reac- benefits if FFV users frequently select gasoline tivity of exhaust emissions from gasoline- instead of M85; and the need for a separate fuel fueled vehicles and thus reduce ozone forma- delivery infrastructure. Methanol is more toxic than tion from these vehicles. If confirmed, this gasoline, and there is concern that accidental poison- would reduce the relative benefits of alterna- ings could increase with development of methanol tive fuels. fuels programs. However, methanol’s lower flam- Although it may be impossible to rank the mability would likely lead to substantial reductions alternative fuels in a reamer that is relatively in injuries and fatalities from vehicle frees, probably impervious to shifting assumptions and conditions, more than offsetting any rise in poisonings. it is possible to describe the major advantages and The use of methanol made from natural gas is disadvantages of the alternatives and to show the unlikely to provide a large greenhouse benefit, no kinds of conditions that would tend to favor or more than a 10 percent reduction in net emissions discourage them. with quite optimistic assumptions. Methanol from Methanol’s major advantages in vehicular use are coal would be a large net greenhouse loser without some way of disposing of the CO ; methanol that it is a convenient, familiar liquid fuel that can 2 readily be produced from natural gas using well- produced from woody biomass could be a strong greenhouse net winner, though it would introduce proven technology; and as a blend of 85 percent 9 methanol/15 percent gasoline (M85), it is a fuel for other environmental concerns. which vehicle manufacturers can, with relative ease, Although methanol would likely be imported,10 it design either a dedicated or flexible fuel vehicle could play a positive security role because of the (FFV) that will outperform an equivalent gasoline nature of the suppliers or differences between the oil vehicle and obtain an advantage in some combina- and methanol markets. There are enough potential tion of emissions reduction and efficiency improve- suppliers of methanol in relatively secure areas that ment. The availability of a ‘‘transition vehicle”-- a concerted effort at promoting specific preferred the M85 FFV--with few drawbacks from, and some supply sources-through trade agreements or other advantages over, a gasoline-fueled vehicle is partic- meansll--could bring the United States significant ularly important because it greatly eases the difficul- benefits over dependence on Middle Eastern oil. ties of introducing methanol into the fleet. Another Several South American nations as well as Trinidad important advantage of methanol is that world and Australia have sufficient reserves and locational resources of natural gas, its primary feedstock, are advantages to be viable methanol suppliers (figure 5 plentiful. shows the locations of gas-rich areas that could

%specially about the long-term renewability of the wood feedstock.

lo~e Nofi Slope of Alaska does contain enough reserves of mtural gas to be a technically viable methanol supplier to the lower48 Sta% but Nofi Slope methanol would not be competitive economically with methanol from other sources. However, the United States does, of course, retain the option of subsidizing North Slope methanol production (or forcing industry to subsidize it via legislative mandate) for energy security purposes. ll~ere my, however, be ~lc~ties ~~ f~ &ade aWeement5 were tie United States to attempt to es~blish ~ch a CIOSd fiel ma.rketrelatiomhip. 14 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles Executive Summary ● 15 become low-cost suppliers of methano112). And methanol and gasoline), and uncertainty about future because natural gas development is decades behind progress in controlling formaldehyde emissions. oil development, with a much greater proportion of And whatever net emissions changes are caused by gas reserves still undeveloped, entry into the market using methanol vehicles, the effect of these changes of new suppliers is much easier for methanol than it on levels of urban ozone will vary with location and is for oil-adding to market stability. And finally, meteorological conditions. Ozone benefits from the high capital investments necessary to develop reduced organic emissions will occur only in urban methanol supplies bring further stability to markets, areas where ambient concentrations of volatile

by increasing the financial costs to the supplier of a organic compounds are low enough, relative to NOX trade cutoff. concentrations, that reducing organic emissions is an effective ozone strategy. In a few urban areas— Under certain circumstances, the energy security Atlanta, for example-and in many rural areas, of developing methanol as a transportation fuel controlling NOx, is a more promising ozone control might last only for a few decades. After a period of strategy, and methanol use would provide little or no rapid resource development, if large new reserves of ozone benefits. To conclude, we do not reject the 30 natural gas are not found, market power could percent reduction as a possible average effect, but evolve towards the holders of the largest blocks of some of the available data suggest smaller benefits, resources-the Middle Eastern OPEC countries and and whatever the average effect, the actual outcome the Eastern Bloc. At this time, security advantages would vary widely around that average. of these alternative fuels could fade. Of course, if the current positive shift in the strategic relationship Claims about the expected costs of methanol between the West and the Eastern Bloc continues, similarly have ranged from “competitive with and reliance on these nations might seem quite accepta- possibly below gasoline costs” to “much higher ble from a security standpoint. than gasoline. ” Much of the range can be accounted Proposals for introducing methanol into ozone for by legitimate differences in assumptions about nonattainment areas have been extremely controver- the scale of a methanol program, likely gas feedstock sial, because competing claims about its expected sources, capital risk factors, and so forth. The costs and air quality benefits have varied over an extremes of the range, however, tend to assemble unusually wide range. several low probability assumptions (either all optimistic or all pessimistic) together at once, and in Claims for the “per vehicle” reduction in ozone a few instances choose values for key parameters forming potential available by substituting M85 for that seem unlikely. OTA concludes that methanol gasoline range from 30 percent or higher (Environ- will most likely be more expensive than gasoline (at mental Protection Agency, California Air Resources current prices) in the early stages of an alternative Board) to little or none (some industry and consult- fuels program. There may, however, be a few ant studies). Although considerable effort has been countries willing to subsidize some methanol pro- expended to estimate the ozone impacts of introduc- duction to obtain hard currency or for other reasons, ing M85 vehicles, especially for the Los Angeles making available a modest supply at low cost. Basin, a number of factors confound the estimates Without government guarantees, the methanol’s and lead OTA to conclude that M85 has significant gasoline-equivalent price is likely to be at least but poorly quantified and highly variable potential $1.50/gallon during this period; government guaran- to reduce urban ozone. In particular, there have been tees could bring it down as low as $1.20 if natural gas few tests of M85 vehicles that have measured the feedstock costs were very low. If the program were individual compounds in their emissions, even to grow quite large over time and were perceived to though such ‘‘speciation’ of emissions is important be stable, scale economies and lower costs of capital in accurately determining their photochemical reac- would significantly lower methanol costs relative to tivity. Other confounding factors include the essen- gasoline, with the lower end of the range dipping tially prototype nature of available methanol vehi- below $1.00/equivalent gallon. However, the uncer- cles, potential future changes in the reactivity of tainty of the costs, and their sensitivity to various gasoline exhausts (altering the trade-off between government decisions and other factors, remains 12some ~ew, ~Speci~y he A~~n Nofi Slope and Canadian frontier, wo~d rqu~e tec~ological advances to become IOw-cost Supphers. 16 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

Table 2—Two Scenarios of Methanol Costs, $/Gallon (Base Cases: $l.OO/mmBtua natural gas cost)

Scenario Transition period, Established market, free market scenario some government few guarantees, guarantees, flex fuel vehicles dedicated vehicles Part of fuel cycle (cost, $/gallon) (cost,$/gallon) Production ...... 0.55-0.65 0.28-0.30 Shipping ...... 0.03-0.08 0.02-0.03 Distribution ...... 0.03 0.05-0.06 Markup ...... 0.09-0.12 0.06-0.09 Taxes ...... 0.12-0.13 0.12 Retail price ...... 0.82-1.01 0.53-0.60 Midrange price ...... 0.85-0.95 0.53-0.60 Efficiency factor ...... 1.9 1.67-1.82 Gasoline equivalent price . . . . . 1.61-1.81 0.89-1.09 Gasoline equivalent prices if natural gas costs change $0.50/mmBtu gas ...... 1.51-1.71 0.81-1.06 $1.50/mmBtu gas ...... 1.71-1.81 0.96-1.15 a mmBtu = millions of British thermal units SOURCE: Office of Technology Assessment. very high. Table 2 illustrates the components to two from $0.06/gallon of Federal gasoline taxes. Some cost ‘‘scenarios” that represent relative extremes in farm States allow gasohol a further exemption from methanol/gasoline competitiveness. State taxes. Methanol prospects for market success would Under certain grain market conditions, ethanol benefit from the following: production may generate reductions in required ● commercialization of direct oxidation methods Federal crop subsidies and other significant secon- of methanol production from natural gas (see dary economic benefits to the Nation (aside from the figure 6), benefits generated by any reduction in oil use). ● development of a world trade in methanol Under other conditions, however, it may generate produced from remote sources of natural gas, large secondary costs. In particular, a major expan- ● freer evidence of major air quality benefits, sion of ethanol use might raise the Nation’s food bill particularly in cities other than Los Angeles, by billions of dollars. ● development of practical cold-starting methods The environmental effects of increasing corn for M1OO, and production for ethanol manufacture are a matter of ● development of improved controls for formal- - concern, because corn is an energy-intensive, agri- dehyde emissions. cultural-chemical-intensive, and erosive crop (see Ethanol is, like methanol, a familiar liquid fuel table 3). The net environmental impacts of ethanol that can be quite readily used, with few problems, in use will be highly dependent on the overall adjust- vehicles competitive in performance with gasoline- ment of the agricultural system to large-scale fueled vehicles. Important advantages are its ease of ethanol production. The stillage byproduct of etha- use as a fuel component of gasoline suitable for nol production is a high protein cattle feed that can existing vehicles and its attractiveness as a stimulus displace soybean production. As long as this dis- to the farm economy, since its primary feedstock is placement occurs, the net agricultural impacts such corn. as soil erosion and pesticide use are reduced; if byproduct markets become saturated, net environ- Ethanol made from food crops appears to be the mental impacts may increase sharply. The level of most expensive of the major alternative fuels. ethanol production that would saturate the bypro- Current ethanol production is profitable only be- duct market is uncertain. cause of a $0.60/gallon subsidy provided by the Federal Government through exemption of “gaso- An important claim made for crop-based ethanol hol,” a 10 percent blend of ethanol with gasoline, is that it will generate significant greenhouse bene- Executive Summary ● 17

Figure 6-Converting Methane to Methanol Making methanol from methane with today’s technology generally involves a two-step process. The methane is first reacted with water and heat to form carbon monoxide and hydrogen—together called syn- thesis gas. The synthesis gas is then catalytically converted to methanol. The second reaction unleashes a lot of heat, which must be removed from the reactor to preserve the activity of the temperature-sensitive catalyst. Efforts to improve methanol synthesis technology focus on sustaining catalyst life and increasing reactor productivity. Step 1

Synthesis Gas ,..:.. Methane . .,.“ .“0 ::’.”.;., +gg~ ‘. “..,.,,. .“. . ..:.,... . ?r:-~, “:>~:;~~$, —1 % ~ Carbon Monoxide Hydrogen

& t:” w Heat Pressure

Pressure Heat \\ I \ /\ z Step 2 J-

t In a novel alternative to the two-step method, chemical catalysts are being developed that mimic the bio- logical conversion of methane by enzymes. The iron-based catalyst captures a methane molecule, adds oxy- gen to it, and ejects it as a molecule of methanol. If this type of conversion could be performed on a commercial scale, it would eliminate the need to first reform methane into synthesis gas, a costly, energy- intensive step.

SOURCE: EPRI Journal, “Methanol: A Fuel for the Future?” October/November 1989. 18 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

Table 3-Environmental Impacts of Agriculture for ethanol production from wood and lignocellu- losic materials materials are substantially reduced in Water Water use (irrigated only) that can conflict with other uses or cost—a goal of current research programs at the cause ground water mining. Solar Energy Research Institute and elsewhere. In Leaching of salts and nutrients into surface and ground waters, particular, ethanol from these sources should pro- (and runoff into surface waters) which can cause pollution of drinking water supplies for animals and humans, excessive vide a significant greenhouse benefit in addition to algae growth in streams and ponds, damage to aquatic the elimination of the food/fuel competition problem habitats, and odors. inherent in a corn-to-ethanol production system. Flow of sediments into surface waters, causing increased turbidity, obstruction of streams, filling of reservoirs, destruction Ethanol’s likely contribution to improved air of aquatic habitat, increase of flood potential. Flow of pesticides into surface and ground waters, potential quality has been another area of some contention. buildup in food chain causing both aquatic and terrestrial Recent testing and air quality modeling indicate that effects such as thinning of egg shells of birds. use of gasohol, a 10 percent ethanol blend in Thermal pollution of streams caused by land clearing on stream banks, loss of shade, and thus greater solar heating. gasoline, reduces carbon monoxide emissions even Air in newer vehicles (previously it was thought that . Dust from decreased cover on land, operation of heavy farm newer vehicles would not benefit). Also, although machinery. addition of ethanol to gasoline increases its vapor ● Pesticides from aerial spraying or as a component of dust. . Changed pollen count, human health effects. pressure and thus its evaporative emissions, this ● Exhaust emissions from farm machinery. negative effect is compensated for by the emissions’ Land lower photochemical reactivity and a reduction in . Erosion and loss of topsoil decreased cover, plowing, increased ozone formation caused by the lower CO emissions. water flow because of lower retention; degrading of productivity. . Displacement of alternative land uses-wilderness, wildlife, Thus, the use of blends is unlikely to increase ozone esthetics, etc. concentrations even if fuel vapor pressure is not . Change in water retention capabilities of land, increased adjusted back to the original level. flooding potential. ● Buildup of pesticide residues in soil, potential damage to soil microbial populations. The ability of high concentration ethanol fuels to ● Increase in soil salinity (especially from irrigated agriculture), reduce ozone levels is essentially untested with degrading of soil productivity. modern U.S. vehicles, and this potential remains a . Depletion of nutrients and organic matter from soil. source of contention. Assumming that emissions of Other ● Promotion of plant diseases by monoculture cropping practices. acetaldehydes (which are high for ethanol fuels, low . Occupational health and safety problems associated with for gasoline) can be satisfactorily controlled, it operation of heavy machinery, close contact with pesticide seems likely that ethanol use will offer an ozone residues and involvement in spraying operations. reduction benefit, given ethanol’s physical char- SOURCE: Office of Technology Assessment, 1990. acteristics—but this remains untested. Recent test- ing should offer needed evidence on this potential. fits, with the regrowth of its feedstock corn crop compensating for much of the CO2 produced by its Introduction of ethanol as a transportation fuel combustion in vehicles. As with its other environ- would benefit from: mental impacts, the greenhouse impact also depends ● testing of its emissions performance as a neat on factors such as avoidance of byproduct market fuel in catalyst-equipped vehicles; saturation. Even under the best circumstances, ● development of low-cost production systems however, substantial amounts of CO2 will be pro- duced by corn growing and harvesting, ethanol using woody biomass as a feedstock; distillation, and other parts of the cycle. ● indications that other markets for American OTA concludes that it is unlikely that ethanol corn will remain depressed for the long term; production and use with current technology and fuel ● improvements in distillation technology, or use patterns will create any significant greenhouse commercialization of membrane or other ad- benefits. vanced separation technologies; and ● development of an international market in the Both ethanol costs and environmental conse- fermentation byproducts from ethanol produc- quences would improve significantly if technologies tion.

lq~e to~ Consma cost may be higher once vehicle costs are factored in. Executive Summary ● 19

Natural gas may be cheaper as a fuel than Natural gas in the form currently used in vehicles— gasoline13; the net cost to the consumer depends on as compressed natural gas, CNG—has some impor- the precise parameters of the distribution system. It tant drawbacks as a transportation fuel, primarily can fuel a dedicated vehicle of equal performance to limited range (CNG at 3,000 psi has one-fourth the gasoline-powered vehicles, with generally lower volumetric energy density of gasoline), higher emissions (except for potentially higher NOX emis- vehicle cost, slow refueling, and a limited base of sions) and equal or higher efficiency. In particular, technology development for gas-powered vehicles. natural gas’ ability to yield large ozone benefits is Also, the transition vehicles that must establish the much clearer than is the case with M85. Other market would likely be dual-fueled vehicles, which important advantages include the availability of the have high first costs and some performance penalties 14 United States’ extensive pipeline network and ex- when using gas. Some of these disadvantages, tensive U.S. experience in gas handling. The use of particularly the range limitations, may be amelio- natural gas may also confer some moderate green- rated by using gas in its denser liquefied form, LNG. house benefits, because of natural gas’ low carbon/ New storage technology for LNG, which must be hydrogen ratio (yielding low CO2 emissions per unit kept at –258 ‘F, appears to offer the potential for of energy), but the effect is highly sensitive to practical vehicular use. several system variables that can vary over a wide range. Because methane, the principal constituent of Electricity as a vehicular “fuel” has the impor- natural gas, is itself a powerful greenhouse gas, high tant advantages of having an available supply tailpipe methane emissions coupled with distribu- infrastructure (except for home charging stations15 or tion system leakage conceivably could cause a net an alternative recharging mechanism) that is ade- greenhouse loss. quate now—if refueling takes place at night—to fuel The use of natural gas could confer energy several tens of million vehicles, and of generating no security benefits, though these will depend on the vehicular air emissions. The latter attribute is nature of the market structure. Suppliers of natural particularly attractive to cities with severe ozone gas will not necessarily be the same as supplers of problems. Also, with the exception of some imports methanol; methanol’s natural gas feedstock must be from Canada, the electricity needed to run a fleet of very low in cost to be competitive, whereas natural electric vehicles would be domestically produced. gas suppliers can use a higher priced feedstock so Recent improvements in ac converters have im- long as transportation costs to market are not too proved the prospects for successful electric vehicles. high. If a natural gas program were to grow very Because current commercial batteries simply cannot large, however, eventually the marginal suppliers compete in range and performance with gasoline- would be the same countries that could serve as powered vehicles, however, the primary determinant methanol suppliers. of the future of EV’s is the success of ongoing battery research and engineering development, and/ Potential natural gas suppliers for a U.S. transpor- or the willingness of the driving public to accept tation market are, in order of probability, Canada, substantial changes in vehicle performance and Mexico, and then a variety of nations shipping gas refueling characteristics. The outlook for significant in the form of LNG. According to the Department of improvement in commercial battery technology— Energy, likely LNG suppliers for the United States especially regarding energy density and power— are Algeria, Norway, Nigeria, and Indonesia, which now appears promising, but there remain substantial may be viewed as a group as reliable suppliers. And, uncertainties about the costs and, in most cases, the as with methanol, factors such as high capital costs durability of advanced batteries, and previous confi- of the supply system, the early stage of development dent predictions about imminent breakthroughs in of world gas resources, and ongoing changes in battery technology have repeatedly proved incor- U.S./Eastern Bloc relationships are all positive rect. The market prospects are further limited by the factors for improved energy security. cost and difficulty of rapid recharge.

IdHowever, ~ese pe~ties need not be as substantial as might appear from the performance of most current dual-fueled vehicles, Wtich do not incorporate timing and other adjustments that will improve performance with gas.

W the ve~cle IMS an onbomd charger, the recharging station will be simply an electric socket (probably with 220volt capacity) witi gmwd-fatit protection. Adding this type of socket to an existing house can cost several hundred dollars, however. 20 ● Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles

Despite virtually zero vehicular emissions, EVs EVs, along with hydrogen vehicles, are often will have air emissions impacts because of the characterized as a primary means of reducing emissions from the electricity production needed for greenhouse emissions because nonfossil means of their recharging. Although EV fleets in different generating large quantities of electricity (e.g., nu- parts of the country would be recharged from quite clear, hydro) are in common use, while nonfossil different mixes of powerplants, in general, for at means of creating large quantities of liquid and least the next decade or two, much of the power gaseous fuels are not. The greenhouse potential of would likely come from coal-fired baseload steam- EVs is obviously quite real, and could be realized electric plants. Although nuclear and hydroelectric with a resurgence in nuclear power and/or the sources would be more desirable as recharging large-scale commercialization of other nonfossil sources from the perspective of air emissions technologies. For generating plants based on renew- (including greenhouse emissions), they are less able energy, plants using biomass are more likely to likely than coal-fired plants to be cycled down at be used for recharging EVs than those using direct night and to have excess capacity to contribute. solar energy, because the latter are more suitable for Consequently, the use of EVs to replace gasoline providing daytime peak power. Development of new vehicles trades off a reduction in urban hydrocarbon, electricity storage systems would, of course, broaden the potential uses of solar electric powerplants. carbon monoxide, and NOX emissions (from the removal of the gasoline vehicles) against an increase In the near future, the greenhouse impact of an EV in regional emissions and long range transport of system is most likely to be small. The impact will NOX and S0x, (from the increase in power genera- depend on the mix of power generation facilities tion). The quantitative trade-off depends on the fuel available to recharge the vehicles and the efficiency burned and controls used; uncontrolled coal-fried of both the EVs and the vehicles they replace. As powerplants burning high sulfur coal (typical of noted above, except in the few areas where excess plants in the Ohio River Basin) can easily produce nuclear or hydro capacity is available, EV recharg-

10 or 20 times more SOX than a modern plant with ing will come from fossil-fueled plants, primarily scrubbers burning low or medium sulfur coal. New coal-powered, with negative greenhouse implica- Clean Air Act regulations governing acid rain tions. Also, the net impact depends on the vehicles emissions will likely narrow the environmental actually replaced, not on some ‘‘average’ vehicle. trade-offs among powerplants by imposing new The modest performance of likely EVs most resem- emission controls on the worst polluters. bles that characteristic of highly fuel-efficient vehi- cles; if the most efficient vehicles in the gasoline Some recent EV designs, in particular the General fleet are those being replaced, the net greenhouse Motors Impact, may overcome some of the short- advantage will be smaller than generally estimated. comings generally associated with electric vehicles. One analysis by researchers at the University of The Impact achieves a substantial boost in range by California at Davis of the net effect of using attaining extremely high levels of vehicle efficiency, coal-fired power to charge EVs calculates that incorporating an extraordinarily effective aerody- greenhouse emissions would increase 3 to 10 percent namic design (drag coefficient of 0.19 v. 0.29 for the over gasoline vehicles. If new, efficient gas-fueled most efficient commercial gasoline vehicle) and combined cycle powerplants can be used to recharge ultra-low-friction tires among other measures. (Achiev- EVs over the next few decades, however, such a ing high vehicle efficiencies is an important strategy system would gain significant greenhouse benefits, for all alternative fuels because of their low energy up to 50 percent where such powerplants were the content per unit volume. It is particularly critical for sole electricity source. Figure 7 illustrates the effect EVs and hydrogen powered vehicles, with the on net greenhouse emissions of changing the elec- lowest densities of all the fuels.) However, the tricity recharging source. Impact and other vehicles remain much more Hydrogen’s primary appeal is its cleanliness-its expensive to operate than gasoline-powered vehi- use in vehicles will generate very low emissions of cles, primarily because of the need for frequent hydrocarbons and particulate (from lubricating oil battery replacement, and they have critical develop- consumption), virtually no emissions of sulfur ment needs that must be met before they can be oxides, carbon dioxide, or carbon monoxide, and successfully commercialized. only moderate emissions of NOX. Primary draw- Executive Summary ● 21

Figure 7—Effect of Electricity Source on yield an overall fuel supply system that generated Greenhouse Impact of Electric Vehicles virtually no greenhouse gases, but costs will be

(Total fuel cycle considered except construction materials manufacture) prohibitively high without major success in cost 3 reductions such as those associated with improve- Coal 10 ments in PV module efficiency and longevity. Even -1’a the most optimistic projections about cost reduc- Year 2000 mix -23 ~ tions have photovoltaic hydrogen systems compet- Conventional gas -30 - ing with gasoline only when gasoline prices rise by about 50 percent. Many might consider this added Comb. Cycle gas -49 cost to be quite acceptable, however, given hydro- Nuclear - -91 gen’s potential value to reducing urban ozone and greenhouse emissions. Solar - -100

Decrease Increase 4 b Gree nhouse Reformulated gasoline is especially appealing as Im pact —T—– — –—– r r - I ‘v l—- ! a potential fuel because it requires no vehicle -120 -100 -80 -60 -40 -20 0 20 40 Percent increase from gasoline vehicle adjustments (though these might be desirable under Vehicle: EV powered by sodium sulfur batteries, ac powertrain, some circumstances to maximize performance) or 150-mile range, 650-pound weight penalty v. competing gasoline new infrastructure, aside from modifications to car. existing refineries. Of particular value is the poten- SOURCE: D. Sperling and M.A. DeLuchi, Transportation Fuels and Air Po//utjon, prepared for Environment Directorate, OECD, March tial to use reformulated gasoline to reduce emissions 1990, draft. from existing vehicles; market penetration-and the air quality benefits associated with such penetration— backs are high cost fuel, limited range (liquid require only providing adequate fuel supplies, unlike hydrogen has one-sixth the energy density of gaso- the other fuels that must wait for fleet turnover. line), and difficult and expensive onboard storage-- However, with the exception of a small quantity of either in heavy and bulky hydride systems that will supply available in southern California and a few adversely affect range and performance, or in bulky other cities, reformulated gasoline is primarily a cryogenic systems that will reduce available space concept; formulas for fuel constitution, and likely onboard the vehicle. In several ways, hydrogen costs, await the results of a just-started testing vehicles share many pollution and performance program being sponsored by the oil and automobile characteristics with EVs, but with the potential for industries, and the ultimate ability of reformulated rapid refueling, countered by more difficult fuel gasoline to lower emissions is unclear at this time. handling. As noted above, the development of Further, it is impossible at this time to predict how vehicle efficiency technology is critically important much reformulated gasoline the petroleum industry for successful introduction of hydrogen vehicles (as will be capable of producing. And reformulated it is for EVs) because of hydrogen’s extremely low gasoline offers lesser benefits in energy security energy density. (except, possibly, to the extent that its use prevents At the moment, the least expensive source of large refinery closures from competition with alternative, quantities of hydrogen (but still at substantially imported fuels) or greenhouse emissions. than other higher system costs than gasoline) is from fossil fuels, because it is primarily oil-based and may fuels, either from natural gas reforming or coal increase refinery energy use somewhat. The oxygen- gasification, the latter of which would exacerbate ate component of reformulated gasoline may offer problems with greenhouse gas emissions. Produc- some energy security benefits since it will likely be tion of hydrogen from photovoltaic (PV) systems produced from natural gas-based methanol or do- (using the electricity to electrolyte water) would mestically produced ethanol.