Re: attn: William Mook - How is your company doing?

From: William Mook (william.mook_at_mokindustries.com)
Date: 01/07/05 

Date: 7 Jan 2005 05:56:04 -0800

charliew2 wrote:
> "William Mook" <william.mook@mokindustries.com> wrote in message
> news:1105020532.954117.238980@z14g2000cwz.googlegroups.com...
> > As the cost of electricity from sunlight changes the best way to
market
> > it changes. This thinking can be compared to the best way to sell
> > computing power as the cost of computing changes. These 'platform'
> > changes occur with falling costs.
> >
> > I see three major channels developing as electricity prices fall.
> > These are;
> >
> > 1. - The cost of equipment exceeds the value of the energy produced
> > over the lifetime of the equipment's operation. At these prices,
it
> > makes more sense to sell the equipment rather than the energy the
> > equipment produces. This limits us to niche markets. This is
where
> > solar energy is today.
> >
> > 2. - The cost of equipment is less than the value of the energy
> > produced over the lifetime of the equipment's operation. At these
> > prices, it makes sense to sell energy, not equipment. This is when
> > solar energy will become mainstream. As the cost falls we move
from
> > home and site of use installations to centralized installations as
the
> > transmission costs are easily supported by sufficiently low solar
> > generator costs.
> >
> > 3. - The cost of equipment is less than the value of the energy
> > contained in fuel costs alone from conventionally generated energy
> > equal to the energy produced over the life of the equipment. This
is
> > when it makes sense to make synthetic fuels from solar energy. As
we
> > drop below this cost we can make synthetic fuels from sunlight and
sell
> > them at a profit.
>
> As you mention below, you are dealing with markets, where supply and
demand
> sets prices. Due to this, there are a couple of factors which will
> influence the decision to use cheap solar electricity to produce
synthetic
> fuels:
>
> * There is somewhat less than 100% conversion efficiency in turning
sunlight
> into something like hydrogen.

Yes.

> The additional step of turning hydrogen back
> into electricy ensures that the overall efficiency of electricity ->
> hydrogen -> electricity results in a hydrogen fuel that produces
> substantially less electricity that it took to make it.

Yes. Let's say that you're 80% efficient in getting hydrogen from
electricity and you're 80% efficient in getting electricity from
hydrogen. That's 64% overall. Let's say there are transmission and
storage losses, so that you only get half as much energy after fooling
around with hydrogen.

All this means is that hydrogen won't be an important resource unless
and until we can produce solar electricity at half the price
electricity sells for.

Consider a solar collector that costs 10 cents per peak watt. If the
collector operates trouble free for 20 years without fuel generating
electricity when the sun shines - the cost of that capital tied up in
the equipment is the major cost. Say about a penny a year per watt at
these prices.

Now, how much energy do you get and what do you pay for it at these
prices per peak watt?

The answer is it depends on how much the sun shines. Now, while you
can't be very good at predicting weather on a day to day basis, you can
be very good at predicting how much sun will illuminate an area over
the course of a year. This is like not being able to predict the toss
of a coin, but predicting with great accuracy that after 1,000 tosses,
around 500 will be heads and 500 will be tails.

So, we can say with certainty that in places like Pennsylvania there
will be 1,200 hours of sunlight per year. In places like Nevada there
will be 2,400 hours of sunlight per year.

Okay, now, we have a watt sitting in a place like Pennsylvania, or
Nevada, and it costs us a penny a year in tied up capital. That watt
will produce 2.4 kWh in Nevada, and 1.2 kWh in Pennsylvania in a year.
So, the price of energy will be something less than a penny a kWh in
Pennsylvania and something less than half a penny a kWh in Nevada.

It takes around 40 kWh to make a kg of hydrogen. So, at 10 cents per
peak watt, hydrogen would cost something like 40 cents per kg to make
from solar sources in Pennsylvania, and something like 20 cents per kg
to make from solar sources in Nevada.

The only question the market asks, is there a demand for hydrogen at
these prices?

Well, sure there is. This represents a great value.

> This inefficiency
> must be made up by pricing hydrogen high enough to account for this
> inefficiency.

Hydrogen produced by electrolysis has a cost of production that
reflects the cost of electricity needed to make the hydrogen.

The selling price of hydrogen has a price set by its value to the
market.

If the selling price for hydrogen exceeds the cost of production for
hydrogen produced in this way then people will make a profit selling
hydrogen produced in this way, and the market will create suppliers of
hydrogen produced in this way.

Its just that simple.

> * When you have solar electricity, and before you turn it into
hydrogen,
> there will be competing processes for that electricity.

So? Map the use of energy in an industrial city. You'll find that
direct use of the sun can only account for about 15% of all the energy
used. Why? Because the sun isn't shining when 85% of the energy is
being used.

If we make solar energy at far less cost than conventional energy - by
reducing the cost of solar generators dramatically to something like 10
cents per watt - then, it makes sense to make more energy from sunlight
than needed when the sun is shining and store it as a synthetic fuel.
Then, distribute that fuel to people who use energy. If the cost of
that synthetic fuel is competitive with other fuels, synthetic fuels
will displace the use of those other fuels.

Consider,

(1) The demand for fuel is larger than the demand for electricity.
(2) The markets for fuels are more transparent less regulated and
operate more freely than the markets for electricity.
(3) Fuels made from solar sources are a handy way to store and use
solar energy when the sun isn't shining.
(4) Fuels made from solar sources operating in sunny regions are a
handy way to store and use solar energy in less sunny regions.

Improved cost - efficiency of collection more than makes up for
conversion losses in this last case.

> Anyone and everyone
> who is attempting to maximize their profit will look at all of the
various
> uses and prices of electricity that they are dealing with, and they
should
> choose to use cheap electricity to offset the cost of the highest
priced
> fuel that they are using (I am including electricity as a fuel in
this
> case).

Energy is watt-hours, power is watts. So, a graph of power versus time
produces areas that represent energy use.

The demand for energy in an industrial society peaks twice throughout
the day when graphed this way. The first peak occurs just before
sunrise. the second peak occurs just after sunset. Times when the sun
isn't useful.

There is actually a dip in energy use around noon as people break for
lunch. A time when the sun is usually at its peak, weather permitting.

Sunlight, when it is available at all through cloud cover, starts a
little after sunrise at nearly zero output, rises to a peak at local
noon, and falls to nearly zero a little before sunset.

So, if you attach solar panels directly to your power grid, as you
suggest, and size the solar array to match demand during the peak solar
insolation, you'll have a cosine curve who's area is 15% of the demand
curve just described. That's best case for direct connect.

This will certainly be done, but if its the ONLY thing you do, you'll
artificially limit the market penetration of solar energy.

To gain larger market share you'll have to come up with a way to store
energy efficiently and make it available at places and times when the
sun isn't shining. That way, you can make a solar array so large that
it produces a cosine curve whose area on the graph described equals the
area of the demand curve multiplied by some factor to account for
conversion losses.

Synthetic fuels are a way to do this.

Of course, this has to be done at a capital cost so low that the
resulting fuel costs are competitive with existing fuel costs.

Low conversion efficiency means a requirement for low capital costs.

But conversion of electricity to hydrogen is relatively efficient. So,
we need an array that produces about 5x the average demand when the sun
is at its peak, and we need a way to store that energy when we're not
using it directly. Hydrogen produced by electrolysis at a sufficiently
low cost is one way to do this.

> This means that it is definitely not a foregone conclusion that
> cheap solar electricity will be used to produce hydrogen, as that
decision
> will be determined by the user of the solar electricity. Any plans
that
> assume that cheap solar electricity will be used for hydrogen
production had
> better take this into account to avoid a lot of hydrogen
infrastructure with
> insufficient hydrogen to put into that infrastructure.

Well, the easiest way to make use of hydrogen is to use it to make
hydrocarbons. We can take CO2 from the air and combine it with
hydrogen to make methane. We can polymerize methane to produce
synthetic oils. All this at a cost of efficiency of course. But, at
sufficiently low prices, we're still golden.

Check it out. Methane costs about $500 per metric ton. If we had
hydrogen at $400 per metric ton as described above, and used the
Sabatier process to convert CO2 emissions to methane we'd have;

CO2 + 4H2 --> CH4 + 2H2O

A metric ton of hydrogen when combined with free carbon-dioxide becomes
two metric tons of methane. With hydrogen at $400 per ton and methane
at $500 per ton, we make a $600 profit at these prices -even though we
throw away HALF the energy in the conversion process.

Methane can be polymerized to produce octane and other long molecules,
with very little additional energy, and in fact we get a little
hydrogen out, which is recycled to the process above.

The advantage of this whole process is that we don't have to wait on
the world to change its entire energy infrastructure in order to use
hydrogen to supply energy and clean up our air today. In fact, as we
convert from oil to hydrogen over the next 50 years, we can clean up
our air by scrubbing the CO2 out of it to make methane and oil. Unsold
oil can be put back into spent wells, reversing the process we're
presently engaged in.

With solar panels made at low enough costs - this can all be done at a
profit.

> * Even under the circumstances where cheap solar electricity *is*
used to
> generate synthetic fuel, it is easily possible that a process will
take
> carbon and hydrogen and produce a hydrocarbon with it. If the source
of the
> carbon is atmospheric CO2, there will be no net increase in
greenhouse gases
> from burning such a fuel. Such synthetic fuel has *many* advantages
over
> hydrogen,

I agree - except that doing it in this way throws away half the energy
in the hydrogen, (precisely your point) so the market has an incentive
to innovate new uses for hydrogen once we produce massive quantities of
hydrocarbons with hydrogen and CO2.

> which is exactly why there is such reluctance to switch from
> hydrocarbon fuels to hydrogen in this time frame.

Well, this all flies in the face of what you started out saying.
Conversion efficiencies for hydrogen processes are far higher than for
hydrocarbon processes. Check it out.

The Sabatier reaction converts CO2 and H2 into CH4. Which throws away
half the energy contained in H2. This isn't a problem, if the cost of
H2 is low enough. But, it does produce a condition that rewards the
use of H2 ultimately. Further, polymerizing CH4 into long chain
synthetic oil molecules doesn't take much energy, but it does throw
away about 20% more of the energy, so we're down to 40% of the energy
we started out with in hydrogen.

Then, when we burn oil or methane in generators or automobiles we're
between 20% and 40% efficient. Heaters are of course 90% efficient.
But still, for most of the uses we have for these synthetic fuels we're
down to 8% of the original hydrogen for transportation, 16% of the
original hydrogen for generators, and 36% of the original hydrogen for
heating.

This isn't an argument against selling hydrocarbons - there is a great
market for hydrocarbons presently. No, but it is a statement that
shows there are powerful economic reasons for innovating new uses of
hydrogen. Because fuel cells that use hydrogen directly are 85%
efficient!

Fact is, we'll start out making electricity, and as we grow beyond the
ability of the grid to absorb all the energy solar power makes, we'll
find ways to store and retrieve it. We'll ultimately make hydrogen,
and use that hydrogen to make hydro-carbons cheaply, and finally, sell
hydrogen as a fuel, as the market develops for that fuel.

> > This allows us to capture energy at times and places
> > that allow efficient solar operation, and sell the resulting fuels
we
> > make with that energy anywhere that fuel is needed. London for
> > example, might never be a good place to generate solar energy, but
> > people in London can easily buy solar derived fuels made in the
deserts
> > on the world's energy exchanges.
> >
> > So, to answer your question directly. It makes more sense to sell
> > synthetic fuels produced in large efficient centralized solar
> > operations - fuels like hydrogen to utilities who efficiently
operate
> > fuel cells that convert that hydrogen to electricity, than to sell
you
> > panels that you then must pay someone to install and someone else
to
> > maintain, and that you must operate as best you can.
> >
> > Of course pricing is set by the market. So, you will always pay
what
> > the market will bear for your energy, regardless of the costs to me
or
> > anyone.
> >
> > Where will the profits show up? That's an important question. And
who
> > will pay in terms of their profits? That's another important
question.
> >
> > Creating a new disruptive technology has the potential to attract
> > negative attention of very poweful players. But, it also has the
> > potential to attract positive attention - depending on where in the
> > supply chain you position yourself and how you enter the market and
the
> > price points you maintain.
> >
> > We are working through all of this now, and very shortly you will
see
> > the results of our efforts.
> >
> >
>
> (cut)

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