US Energy Policy: Fantasy vs. Reality

Transcription

Renewable Fuels: A Cautionary Tale
Lucian Pugliaresi
Energy Policy Research Foundation, Inc
TRB Alternative Fuels and Transportation Energy
Committee
Session on Low-Carbon and Renewable Fuel Policy: Issues and
Updates
Washington, DC
January 11, 2010
Energy Policy Research Foundation, Inc. | 1031 31st St, NW Washington, DC 20007 | 202.944.3339 | www.eprinc.org
EPRINC
Fighting Ignorance About Oil and Gas Markets Since
1944*
www.eprinc.org
* It’s taking longer than we thought.
2
What are the Energy Policies of the Obama
Administration?
•
1 million plug-in-electric hybrid vehicles (PHEVs) on the road by 2015
•
5 million new green jobs by investing $150 billion over 10 years
•
Reducing US oil consumption within 10 years by 2- 3 mb/d
•
Requiring 10 percent of the nation's electricity to come from renewable energy
by 2012 and 25 percent by 2025 -- and full implementation of RFS
•
Establishing an economy-wide cap-and-trade program that cuts US greenhouse
gas emissions (Waxman-Markey calls for cuts of 2 gigatons by 2030)
Not a Complete List!!!!
EPRINC’s Take Aways
US Energy/Environment Policy Driven by Twin Assumptions of:
•Security of supply, dwindling petroleum reserves, high oil prices,
require crash program to transition to the fuels of the future
•Environmental benefits of switching are assured and very high
but little consideration of:
•Risk of Failure is Difficult to Hedge– Particulary with W-M, RFS and
LCFS – Mandates are Especially Worrisome
•No Easy Exit Strategy for Wrong Choices
More Take Aways
•Backstop Price for Oil : What is it and why is it so
important?
•Reality of Energy Security (volatility versus running
out)
•Modeling versus the Real World (i.e., gasoline and
other products made jointly from crude oil)
•The Missing Humility Factor
The Peak Oil Problem:
Does This Mean We Need Crash Program to Transition to the
Fuels of the Future?
6
A Series of Unfortunate Events Leading to New Expectations
95
Positive Expectations
Expectations Shift
Russia takes over Sakhalin
II, Chavez Nationalizes
Projects
Yukos -- Kremlin taking
control of Russian oil
development
140
Oil development
in Iraq delayed
120
100
85
80
80
Continuing civil
strife in Sudan,
Nigeria
Congress continues ban
on ANWR and offshore
development
75
Outlook positive for
expanded output from
Nigeria, Mexico, Venez.,
Russia, North Slope
4.2
40
Nigeria
rebels
hurt
output
20
OPEC Excess Capacity remains
limited
5.8
1.9
70
2001
60
2002
2003
World Oil Production (EIA)
OPEC Excess Capacity (EIA)
1.3
2004
0.95
2005
1.3
2006
2
2007
1.7
2008e
Expected Production (EIA 2001 Predictions)
Crude Oil Price
0
$/bbl
Global Production, million b/d
90
160
Negative Expectations
San Joaquin Valley
Testing Hubbard-Method Predictions for Reserves and Production
(Billions of Barrels)
1964
1982
2000
7.7
11.8
16.1
Percent
Attributable to
1915
49%
69%
76%
Cumulative
production as of
8.0-9.5
11.9-12.1
16.1-16.2
44-112
189
597(actual)
Cumulative
Discoveries
Year 2000
production
projected in:
(mb/d)
Source: EPRINC, October 2006. Does the Hubbard Method Provide a Reliable Means for Predicting
Future Oil Production, Richard Nehring, October 2006,
8
Permian Basin
Testing Hubbard-Method Predictions for Reserves and Production
(Billions of Barrels)
1964
1982
2000
Cumulative
Discoveries
17.6
27.9
35.2
Percent
Attributable to
1950
85%
86%
84%
Cumulative
production as of
19-27.5
28.5-30.5
35.8-37.5
Year 2000
production
projected in:
(mb/d)
162-479
326-479
910(actual)
Source: EPRINC, October 2006. Does the Hubbard Method Provide a Reliable Means for Predicting
Future Oil Production, Richard Nehring, October 2006,
9
Renewables and the Problem of
the Blend Wall
EISA ’07 Renewable Fuels Standard
50
45
Biomass based Diesel
40
Billion Gallons
35
Any Advanced
30
Cellulosic Advanced
25
20
Corn Ethanol / Other
15
EPACT 05
10
10% Ethanol Penetration (The
Blend Wall)
5
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0
Source: DOE, EIA Data and June 2009 STEO. Blend wall assumes projected
2009 gasoline consumption found in the June 2009 EIA STEO.
11
Retail Fuel Prices
$7.00
$6.00
$5.00
$4.00
E85 BTU Adjusted*
$3.00
Gasoline
$2.00
Diesel*
$1.00
1/1/09
6/1/08
11/1/07
4/1/07
9/1/06
2/1/06
7/1/05
12/1/04
5/1/04
10/1/03
3/1/03
8/1/02
1/1/02
6/1/01
11/1/00
4/1/00
$0.00
*Price is per gallon of gasoline equivalent (BTU basis), according to DOE conversion
standards: 1 Gallon of Gasoline = 1.333 gallons of E85 and 0.904 gallons of diesel.
Source: DOE Data
12
Energy Subsidies Not Related to Electricity Production
Category
Coal
Refined Coal
Natural Gas and Petroleum Liquids
Ethanol/Biofuels
Geothermal
Solar
Other Renewables
Hydrogen
Total Fuel Specific
Total Non-Fuel Specific
Total End-Use and Non-Electricity
Fuel Consumption
(Quadrillion BTU)
1.93
0.16
55.78
0.57
0.04
0.07
2.5
*
60.95
NM
NM
FY 2007 Subsidy and Subsidy (dollars per
Support (million
Million BTU)
2007 dollars)
78
214
1921
3249
1
360
184
230
6237
3597
9834
0.04
1.35
0.03
5.72
0.02
2.82
0.14
NM
0.1
NM
NM
Source: EIA Data
13
Ethanol Subsidies
Total 2008 Ethanol Subsidies:
$9.15 billion
Total Subsidy Per Gallon of Ethanol:
$1.08
TotalSubsidy Per Gallon of Gasoline Displaced, BTU
Equivilent
$1.63
(Total does not include cost of fuel, only the fuel subsidy), * = EPRINC Estimate, not all subsidies are listed
Source: http://www.globalsubsidies.org/files/assets/Brochure_-_US_Update.pdf , EPRINC calculated Blender's Credit
14
FFVs and E85 Usage
10.00%
7
9.00%
Million Vehicles
6
8.00%
5
7.00%
4
6.00%
3
4.00%
5.00%
3.00%
2
Light Duty E85 FFV's In
Use
% of FFV's Actually
Operating on E85
2.00%
1
1.00%
0.00%
0
2003 2004 2005 2006 2007
Source: EIA Data, DOE Data, EPRINC Calculations
15
The Blend Wall in a low RBOB World
2.5
Estimated all-in cost for ethanol: corn
+ operating costs + capital costs
2
Blender's Credit:
$0.45/gallon
$/gallon
1.5
1
Price difference between
ethanol and RBOB
0.5
After serving its role as an
oxygenate, ethanol must
compete directly with gasoline
Ethanol loses significant
value as it moves into E85
Falling values for ethanol will
be mirrored by rising values for
RINs
0
1
2
3
4
5
6
7
8
9
10
11
12
13
% of Gasoline Pool
RBOB (NYMEX Futures: March Delivery)
Ethanol's Value Relative to Gasoline
Corn Feedstock - $ per gallon of Ethanol
All In-Cost of Ethanol Production
Ethanol (CBOT Futures: March Delivery)
16
EIA AEO 2010 Biofuels Projection
• “Biofuels grow, but fall short of the 36 billion gallon RFS target in 2022, exceed
it in 2035.”
•
Richard Newell, EIA, at SAIS, December, 2009
17
Cost and Effectiveness of Cash for Guzzlers Program
Baseline=18 mpg,
12,000 VMT
Voucher Program Cost
Value
for One
Million
Vehicles
New Car, +4 MPG
$3,500
New Car, +10 MPG
$4,500
New Light Truck/SUV,
+2 MPG
$3,500
New Light Truck/SUV,
+5 MPG
$4,500
$3,500,000,0
00
$4,500,000,0
00
$3,500,000,0
00
$4,500,000,0
00
Gallons
Saved Per
Vehicle,
Annually
Total Fuel Savings
for One Million
Vehicles Over
Eight Years,
Gallons
Cost Per
Gallon Saved
Over Eight
Years
Fleet Fuel
Consumption
Reduction
Compared to
2008 Rate
121.2
969,600,000
$3.61
0.0882%
238.1
1,904,800,000
$2.36
0.1733%
66.7
533,600,000
$6.56
0.0485%
144.9
1,159,200,000
$3.88
0.1054%
Sources: EIA Data, EPA Data, EPRINC Calculations
18
Implementation Risks
Waxman-Markey and the US
Refining Sector
Number of U.S. Refineries and Capacity
350
20
18
300
16
mbd
12
200
10
150
8
6
100
4
50
2
0
0
Capacity
Source: EIA data
Refineries
Refineries
250
14
Total Gasoline Imports Share of Finished Motor Gasoline
Product Supplied
18.00%
16.00%
% of marketshare
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: EIA data, EPRINC calculations
US Refinery Capacity Utilization
1985-2009
17.5
17
mbd
16.5
100
95
90
85
16
80
15.5
15
14.5
75
70
14
65
13.5
60
Source: EIA data, EPRINC Calculations
% Utilization
18
U.S. Percent Utilization of Refinery Operable
Capacity
U. S. Operable Crude Oil Distillation Capacity
(Thousand Barrels per Day)
Compliance Costs: US Refining Industry
80
70
billion $ annually
60
Red area above
yellow line represents
“free” allowances
allocated to refiners
Cost of Allowances to Cover Product
Combustion
50
Cost of Allowances to Cover Stationary
Source Emissions
40
30
Total Cost of Allowances, Stationary
Source and Product Combustion – net
of 2 % allocation
20
10
0
2012
2015
2020
2025
2030
Effective Cost of Production: US Product Slate
Source: EPRINC Calculations from OGJ and proprietary refinery data sets of complexity, product slate valuations, and
location. Product slate standardized to common EPRINC product/cost value index.
U.S. Refiners' Future Cost of Production
(2015 - 2030)
25
$ per barrel
20
Blend Wall Costs
Stationary Emissions Costs @ $15/ton - 80%
Pass-Through
15
Stationary Emissions Costs @ $15/ton - 90%
Pass-Through
Section 199 Costs
10
Product Combustion Costs @ $15/ton
Effective Production Cost
5
0
5 mbd
10 mbd
15 mbd
Source: EPRINC Calculations, EIA Data
25
Stationary Emission Costs and Potential Capacity Losses
2015-2030
Source: EPRINC report: The American Clean Energy and Security Act:
An EPRINC Assessment of Capacity and Employment Losses in the Domestic Refining Industry
.
Extra Slides for Questions and
Answers
Billion Gallons Ethanol Equivalent
The RFS Already Maximizes U.S. Low-GHG Biofuel Use
Through 2025
RFS gap
40
Biodiesel
imports
30
Sugar
F-T Cellulosic
B-C Cellulosic
20
Biodiesel
U.S.
10
B-C Cellulosic
F-T Cellulosic
Grain
0
2010 2015 2020 2025 2030 2010 2015 2020 2025 2030
EIA AEO 2008
WBS Reference Case
• The 2008 AEO & a 2008 DOE Policy Analysis Office study project that RFS2
cellulosic biofuel waivers will be required through 2030 (AEO) or 2025 (Policy
Analysis Office). Since then, the recession has further delayed investment.
28
EIA W-M Base Case Petroleum Demand
20
18
16
14
mb/d
12
Biodiesel
10
Ethanol
8
Total Crude and Refined Petroleum
Product Supply*
6
4
2
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
0
Source: EIA Forecasts
29
30
31
Fleet Tailpipe Emission Reductions
Replacing 1
million vehicles
from…..
Reduces total
CO emissions
by…..
Reduces total
VOC emissions
by…..
Reduces total
NOx emissions
by…..
1980
0.1050%
0.1203%
0.8004%
1990
0.0000%
0.1088%
0.3446%
2000
0.0000%
0.0576%
0.1223%
32
33
400
8
350
7
300
6
250
5
200
4
%
CBOT Ethanol Futures
NYMEX RBOB Futures
150
3
Ethanol Production's Share of Finished
Motor Gasoline Supplied (%)
Mar/09
Dec/08
Sep/08
Jun/08
Mar/08
Dec/07
Sep/07
Jun/07
0
Mar/07
0
Dec/06
1
Sep/06
50
Jun/06
2
Mar/06
100
Dec/05
cents per gallon
Product Prices and Share
Source: EIA Data, CME Group, EPRINC Calculations. All prices are for front month futures contracts. Prices are not BTU adjusted.
34
Lifecycle GHG Emissions
Source: EPA, http://www.epa.gov/OMS/renewablefuels/420f09024.htm
35
36
37
A Selection of Ethanol Subsidies
2008 Ethanol Subsidies
Market Price Support on Domestic Production
Market Price Support on Exports
Volumetric Excise Tax Credit (Blender's Credit)*
Reductions in State Motor Fuels Tax
Federal Small Producer Tax Credit
Excess of Acclerrated Over Cost Depreciation
Federal Grants, Demonstration Projects, R&D
Access to Tax-Exempt Solid Waste Bonds
Deferral of gain on sale of farm refineries to coops
Crop Support to Corn
Crop Support to Sorghum
Credits for Clean Fuel Refueling Infrastructure
$ Million
2,240
30
4,335
440
170
680
350
110
20
730
20
20
38
Ethanol Subsidies
Total 2008 Ethanol Subsidies:
$9.15 billion
Total Subsidy Per Gallon of Ethanol:
$1.08
TotalSubsidy Per Gallon of Gasoline Displaced, BTU
Equivilent
$1.63
(Total does not include cost of fuel, only the fuel subsidy), * = EPRINC Estimate, not all subsidies are listed
Source: http://www.globalsubsidies.org/files/assets/Brochure_-_US_Update.pdf , EPRINC calculated Blender's Credit
39

US Energy Policy: Fantasy vs. Reality

Transcription

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