Monday, May 09, 2011

The Next Oil Patch

In the last post “A New Look at Ag Waste” on May 6th I cited new data from Novozyme that suggests the U.S. is the proud owner of what could be the next oil patch  -  agriculture waste.  Novozyme suggests the U.S. holds 25% of the world’s ag waste reserve.  Of course, Novozyme and its cellulosic ethanol partner Lignol have a vested interest in regarding refuse as a resource.

All the same, if ag waste has little energy value, it is the same as owning a big chunk of nothing.  It makes sense to step back and compare agriculture waste to all the other potential energy sources.  It is a task of comparing apples and oranges.

Scientists compute “energy density” to determine the amount of energy stored in a given system or space per unit volume.  Think of it in terms of pressure.  The higher the energy density, the more energy is stored or can be transported for the same amount of volume.  Unfortunately, it is difficult to compare say gasoline in a liquid form to agriculture waste which includes a wide array of materials from wood chips corn stalks to even pig poop. 

Another helpful concept is “specific energy.”  This is the energy density of a fuel source per unit mass.  For example, energy density is the amount of energy per mass or volume of food you eat.  You can compute the energy value of your lunch from the label by dividing the energy per serving usually expressed in calories by the serving size usually in grams or ounces.  Energy density is thus expressed in cal/g, kcal/g.

The thing is no single energy source is both a winner in terms of energy density and specific energy.  A list of a few fuel sources demonstrates the frustrating comparisons.

Fuel Source                           Specific Energy                    Energy Density
Methane                            55.6                                 0.378
Natural Gas                        52.6                                 0.364
Gasoline                            46.4                                 34.2
Diesel                               46.2                                  37.2
Crude Oil                           46.2                                 37.0
Biodiesel (veggie oil)          42.2                                  33.0
Coal                                 32.5                                  72.4
Ethanol                             30.0                                  24.0
Wood (dry)                        18.0                                 20.0

Of course, agriculture waste represents a wide array of possible materials  -  none of which are created equal in terms of energy density.  Thus it is probably not appropriate to use wood alone as a proxy for a comparison of agriculture waste with other fuel sources.  The energy density of coconut husks, for example, is approximately 9.8 while alfalfa straw offers 18.4 and sugar cane bagasse 19.0.

As fascinating as these two measures might be for the scientists who calculate them, they still falls short of a reliable means to compare agriculture waste to other fuels sources.  It is possible to multiply specific energy by energy density to produce what scientists call “specific energy density.”  The resulting computation is megajoules per kilogram.

Fuel Source                           Specific Energy Density
Sugar Cane Bagasse                      9.6
Seed Casings                              14.6
Dung                                         15.0
Dried Plants                                16.0
Wood                                        21.0
Methanol                                    22.7
Ethanol                                      26.8
Charcoal                                    30.0
Fat                                           37.7
Biodiesel                                    37.8
Coal                                          33.5
Crude Oil                                    41.9
Diesel                                        48.1
Natural Gas                                50.0

If the U.S. twin policy objectives are qualitative  -  reduce dependence upon petro-terrorists and safeguard the environment  -  should energy efficiency of a fuel source be the only consideration?

Reading this list an investor might conclude that it is not worth it to mess with agriculture waste (especially the dung item).  However, it would be short sighted to make the decision on specific energy density alone.  We also looked at the amount of energy per produced per kilogram of carbon dioxide by-product of the energy production process. 

Fuel Source                           Energy per CO2
Sugar Cane Bagasse                     7.41 
Wood                                          8.27 
Coal                                            9.33
Crude Oil                                    12.31
Biodiesel                                    13.26
Gasoline                                    14.64
Natural Gas                                16.67
Methane                                    20.30

This final ranking according to energy per carbon dioxide production suggests natural gas and methane sources are the most compelling fuel sources.  Both have respectable “specific energy density” and rank among the highest energy to pollution ratios. 

Agriculture waste might be the next oil patch if somehow it can be converted efficiently to methane.  Look for future posts on methane producers.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

No comments: