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James Woolsey testimony to Senate Foreign Relations Committee
Nov 17, 2005 (From the CalCars-News archive)
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We've included below the second half of the testimony (the first half outlines the challenges to oil supply, etc.) by former CIA Director James Woolsey to the Senate Foreign Relations Committee. It's a highly readable, very up to date summary of the opportunities, and it anticipates many questions and objections.

A FEW CONCLUSIONS:
Given the burdensome cost imposed by current fuel prices on commuters and others who need to drive substantial distances, the possibility of powering one's family vehicle with fuel that can cost as little as one-tenth of today's gasoline (in the U.S. market) should solve rapidly the question whether there would be public interest in and acceptability of plug-in hybrids. ...
The battery development for plug-in hybrids is of substantial importance and should for the time being replace the current r&d emphasis on automotive hydrogen fuel cells.

If even one of these technologies is moved promptly into the market, the reduction in oil dependence could be substantial. If several begin to be successfully introduced into large-scale use, the reduction could be stunning.


The full text of this testimony is available in PDF format at: http://foreign.senate.gov/­testimony/­2005/­WoolseyTestimony051116.pdf

This is an updated version of the paper he wrote with George Shultz, available at http://fightingterror.org/­pdfs/­O%26S8-5-05.pdf or http://autos.groups.yahoo.com/­group/­calcars-news/­message/­161 (text)

U.S. Senate Committee on Foreign Relations November 16, 2005 High Cost of Crude: The New Currency of Foreign Policy Testimony of R. James Woolsey

Mr. Chairman and Members of the Committee. It's a real pleasure to appear before this Committee today on this issue. I am appearing solely on my own behalf and represent no organization. By way of identification I served as Director of Central Intelligence, 1993-95, one of the four Presidential appointments I have held in two Republican and two Democratic administrations; these have been interspersed in a career that has been generally in the private practice of law and now in consulting. The substantial majority of the points I will make today are drawn from an August 2005 paper by former Secretary of State, George P. Shultz, and myself, although I have updated some points due to more recent work; the two of us are Co-Chairmen of the Committee on the Present Danger and the full paper may be found at the Committee's web site (www.fightingterror.org).

Just over four years ago, on the eve of 9/11, the need to reduce radically our reliance on oil was not clear to many and in any case the path of doing so seemed a long and difficult one. Today both assumptions are being undermined by the risks of the post-9/11 world, by oil prices, and by technological progress in fuel efficiency and alternative fuels.

There are at least seven major reasons why dependence on petroleum and its products for the lion's share of the world's transportation fuel creates special dangers in our time. These dangers are all driven by rigidities and potential vulnerabilities that have become serious problems because of the geopolitical realities of the early 21st century. Those who reason about these issues solely on the basis of abstract economic models that are designed to ignore such geopolitical realities will find much to disagree with in what follows. Although such models have utility in assessing the importance of more or less purely economic factors in the long run, as Lord Keynes famously remarked: "In the long run, we are all dead."

These dangers in turn give rise to two proposed directions for government policy in order to reduce our vulnerability rapidly. In both cases it is important that existing technology should be used, i.e. technology that is already in the market or can be so in the very near future and that is compatible with the existing transportation infrastructure. To this end government policies in the United States and other oil-importing countries should: (1) encourage a shift to substantially more fuel-efficient vehicles within the existing transportation infrastructure, including promoting both battery development and a market for existing battery types for plug-in hybrid vehicles; and (2) encourage biofuels and other alternative and renewable fuels that can be produced from inexpensive and widely-available feedstocks -- wherever possible from waste products.

PETROLEUM DEPENDENCE: THE DANGERS:

<snip>

THREE PROPOSED DIRECTIONS FOR POLICY:

The above considerations suggest that government policies with respect to the vehicular transportation market should point in the following directions:

1. Encourage improved vehicle mileage, using technology now in production.

Three currently available technologies stand out to improve vehicle mileage.

Diesels

First, modern diesel vehicles are coming to be capable of meeting rigorous emission standards (such as Tier 2 standards, being introduced into the U.S., 2004-08). In this context it is possible without compromising environmental standards to take advantage of diesels' substantial mileage advantage over gasoline-fueled internal combustion engines.

Substantial penetration of diesels into the private vehicle market in Europe is one major reason why the average fleet mileage of such new vehicles is 42 miles per gallon in Europe and only 24 mpg in the US. Although the U.S. has, since 1981, increased vehicle weight by 24 per cent and horsepower by 93 per cent, it has actually somewhat lost ground with respect to mileage over that near-quarter century. In the 12 years from 1975 to 1987, however, the US improved the mileage of new vehicles from 15 to 26 mpg.

Hybrid gasoline-electric

Second, hybrid gasoline-electric vehicles now on the market show substantial fuel savings over their conventional counterparts. The National Commission on Energy Policy found that for the four hybrids on the market in December 2004 that had exact counterpart models with conventional gasoline engines, not only were mileage advantages quite significant (10-15 mpg) for the hybrids, but in each case the horsepower of the hybrid was higher than the horsepower of the conventional vehicle. (ETES p. 11

Light-weight Carbon Composite Construction

Third, constructing vehicles with inexpensive versions of the carbon fiber composites that have been used for years for aircraft construction can substantially reduce vehicle weight and increase fuel efficiency while at the same time making the vehicle considerably safer than with current construction materials. This is set forth thoroughly in the 2004 report of the Rocky Mountain Institute's Winning the Oil Endgame ("WTOE"). Aerodynamic design can have major importance as well. This breaks the traditional tie between size and safety. Much lighter vehicles, large or small, can be substantially more fuel-efficient and also safer. Such composite use has already been used for automotive construction in Formula 1 race cars and is now being adopted by BMW and other automobile companies. The goal is mass-produced vehicles with 80% of the performance of hand-layup aerospace composites at 20% of the cost. Such construction is expected to approximately double the efficiency of a normal hybrid vehicle without increasing manufacturing cost. (WTOE 64-66).


2. Encourage the commercialization of alternative transportation fuels that can be available soon, are compatible with existing infrastructure, and can be derived from waste or otherwise produced cheaply.

Biomass (cellulosic) ethanol.

The use of ethanol produced from corn in the U.S. and sugar cane in Brazil has given birth to the commercialization of an alternative fuel that is coming to show substantial promise, particularly as new feedstocks are developed. Some six million vehicles in the U.S. and all new vehicles in Brazil other than those that use solely ethanol are capable of using ethanol in mixtures of up to 85 percent ethanol and 15 per cent gasoline (E-85); these are called Flexible Fuel Vehicles ("FFV") and require, compared to conventional vehicles, only a somewhat different kind of material for the fuel line and a differently-programmed computer chip. The cost of incorporating this feature in new vehicles is trivial. Also, there are no large-scale changes in infrastructure required for ethanol use. It may be shipped in tank cars (and, in Brazil, in pipelines), and mixing it with gasoline is a simple matter.

Although human beings have been producing ethanol, grain alcohol, from sugar and starch for millennia, it is only in recent years that the genetic engineering of biocatalysts has made possible such production from the hemicellulose and cellulose that constitute the substantial majority of the material in most plants. The genetically-engineered material is in the biocatalyst only; there is no need for genetically modified plants.

These developments may be compared in importance to the invention of thermal and catalytic cracking of petroleum in the first decades of the 20th century - processes which made it possible to use a very large share of petroleum to make gasoline rather than the tiny share that was available at the beginning of the century. For example, with such genetically-engineered biocatalysts it is not only grains of corn but corn cobs and most of the rest of the corn plant that may be used to make ethanol.

Such biomass, or cellulosic, ethanol is now likely to see commercial production begin first in a facility of the Canadian company, Iogen, with backing from Shell Oil, at a cost of around $1.30/gallon. The National Renewable Energy Laboratory estimates costs will drop to around $1.07/gallon over the next five years, and the Energy Commission estimates a drop in costs to 67-77 cents/gallon when the process is fully mature (ETES p. 75). The most common feedstocks will likely be agricultural wastes, such as rice straw, or natural grasses such as switchgrass, a variety of prairie grass that is often planted on soil bank land to replenish the soil's fertility. There will be decided financial advantages in using as feedstocks any wastes which carry a tipping fee (a negative cost) to finance disposal: e.g. waste paper, or rice straw, which cannot be left in the fields after harvest because of its silicon content.

Old or misstated data are sometimes cited for the proposition that huge amounts of land would have to be introduced into cultivation or taken away from food production in order to have such biomass available for cellulosic ethanol production. This is incorrect. The National Commission on Energy Policy reported in December that, if fleet mileage in the U.S. rises to 40 mpg -- somewhat below the current European Union fleet average for new vehicles of 42 mpg and well below the current Japanese average of 47 mpg - then as switchgrass yields improve modestly to around 10 tons/acre it would take only 30 million acres of land to produce sufficient cellulosic ethanol to fuel half the U.S. passenger fleet. (ETES pp. 76-77). By way of calibration, this would essentially eliminate the need for oil imports for passenger vehicle fuel and would require only the amount of land now in the soil bank (the Conservation Reserve Program ("CRP") on which such soil-restoring crops as switchgrass are already being grown. Practically speaking, one would probably use for ethanol production only a little over half of the soil bank lands and add to this some portion of the plants now grown as animal feed crops (for example, on the 70 million acres that now grow soybeans for animal feed). In short, the U.S .and many other countries should easily find sufficient land available for enough energy crop cultivation to make a substantial dent in oil use. (Id.)

There is also a common and erroneous impression that ethanol generally requires as much energy to produce as one obtains from using it and that its use does not substantially reduce global warming gas emissions. The production and use of ethanol merely recycles in a different way the CO2 that has been fixed by plants in the photosynthesis process. It does not release carbon that would otherwise stay stored underground, as occurs with fossil fuel use, but when starch, such as corn, is used for ethanol production much energy, including fossil-fuel energy, is consumed in the process of fertilizing, plowing, and harvesting. Even starch-based ethanol, however, does reduce greenhouse gas emissions by around 30 per cent. Because so little energy is required to cultivate crops such as switchgrass for cellulosic ethanol production, and because electricity can be co-produced using the residues of such cellulosic fuel production, reductions in greenhouse gas emissions for celluslosic ethanol when compared to gasoline are greater than 100 per cent. The production and use of cellulosic ethanol is, in other words, a carbon sink. (ETES p. 73)

Biodiesel and Renewable Diesel

The National Commission on Energy Policy pointed out some of the problems with most current biodiesel "produced from rapeseed, soybean, and other vegetable oils - as well as . . . used cooking oils." It said that these are "unlikely to become economic on a large scale" and that they could "cause problems when used in blends higher than 20 percent in older diesel engines". It added that "waste oil is likely to contain impurities that give rise of undesirable emissions." (ETES p. 75)

The Commission notes, however, that biodiesel is generally "compatible with existing distribution infrastructure" and outlines the potential of a newer process ("thermal depolymerization") that produces renewable diesel without the above disadvantages, from "animal offal, agricultural residues, municipal solid waste, sewage, and old tires". (This has recently been designated "Renewable Diesel" in the Energy Act of this past summer.) The Commission points to the current use of this process at a Conagra turkey processing facility in Carthage, Missouri, where a "20 million commercial-scale facility" is beginning to convert turkey offal into "a variety of useful products, from fertilizer to low-sulfur diesel fuel" at a potential average cost of "about 72 cents per gallon." (ETES p. 77)

Other Alternative Fuels

Progress has been made in recent years on utilizing not only coal but slag from strip mines, via gasification, for conversion into diesel fuel using a modern version of the gasified-coal-to-diesel process used in Germany during World War II.

Qatar has begun a large-scale process of converting natural gas to diesel fuel.

Outside the realm of conventional oil, the tar sands of Alberta and the oil shale of the Western U.S. exist in huge deposits, the exploitation of which is currently costly and accompanied by major environmental difficulties, but both definitely hold promise for a substantial increases in oil supply.


3. Plug-in hybrids and battery improvements

A modification to hybrids could permit them to become "plug-in-hybrids," drawing power from the electricity grid at night and using all electricity for short trips before they move to operating in their gasoline-electric mode as hybrids. With a plug-in hybrid vehicle one has the advantage of an electric car, but not the disadvantage. Electric cars cannot be recharged if their batteries run down at some spot away from electric power. But since all hybrids have tanks containing liquid fuel plug-in hybrids have no such disadvantage.

The "vast majority of the most fuel-hungry trips are under six miles" and "well within the range" of current (nickel-metal hydride) batteries' capacity, according to Huber and Mills (The, Bottomless Well, 2005, p. 84). Current Toyota Priuses sold in Japan and Europe have a button, that Toyota has removed for some reason on American vehicles, that permits all-electric driving for up to a kilometer; all that is really needed is to equip hybrids with adequate batteries so that this capability can be extended. Over half of all US vehicles are driven less than 30 miles/day, so a plug-in hybrid that can obtain that range might go for many weeks without visiting the gasoline station. Other experts, however, emphasize that whether with existing nickel-metal-hydride battery types or with the more capable lithium-ion batteries now commercially available for computer and other applications, it is important that any battery used in a plug-in hybrid be capable of taking daily charging without being damaged and be capable of powering the vehicle at an adequate speed and argue that battery development will be necessary in order for this to be the case.

But the California experience with electric vehicles (EV's) in the 1990's suggests otherwise. It demonstrated that batteries used in those vehicles, particularly the nickel-metal-hydride ones that were used in later EV models (some of which are still on the road), have easily shown the capability for being charged daily for a number of years. And at U. Cal. (Davis) Professor Andy Frank has been designing and operating plug-in hybrids for years that now, with commercially-available batteries, operate all-electrically for 60 miles at up to 60 mph before the hybrid gasoline-electric feature needs to be used. Whether development is needed for some improvements to lithium-ion batteries or only financial incentives for mass production of them or the more mature nickel-metal-hydride batteries, such efforts should have the highest priority because plug-in hybrids promise to revolutionize transportation economics and to have a dramatic effect on the problems caused by oil dependence.


Moreover the attractiveness to the consumer of being able to use electricity from overnight charging for a substantial share of the day's driving is stunning. The average residential price of electricity in the US is about 8.5 cents/kwh, and many utilities sell off-peak power for 2-4 cents/kwh (id at 83). When one takes into consideration the different efficiencies of liquid-fueled and electric propulsion, then where the rubber meets the road the cost of powering a plug-in hybrid with average-cost residential electricity would be about 40 per cent of the cost of powering the same vehicle with today's approximately $2.50/gallon gasoline, or, said another way, for the consumer to be able to buy fuel in the form of electricity at the equivalent of $1/gallon gasoline. Using off-peak power would then equate to being able to buy 25-to-50 cent/gallon gasoline. Given the burdensome cost imposed by current fuel prices on commuters and others who need to drive substantial distances, the possibility of powering one's family vehicle with fuel that can cost as little as one-tenth of today's gasoline (in the U.S. market) should solve rapidly the question whether there would be public interest in and acceptability of plug-in hybrids.

Although the use of off-peak power for plug-in hybrids should not require substantial new investments in electricity generation for some time (until millions of plug-ins are on the road), greater reliance on electricity for transportation should lead us to look particularly to the security of the electricity grid as well as the fuel we use to generate electricity. In the U.S. the 2002 report of the National Academies of Science, Engineering, and Medicine ("Making the Nation Safer") emphasized particularly the need to improve the security of transformers and of the Supervisory Control and Data Acquisition (SCADA) systems in the face of terrorist threats. The National Commission on Energy Policy has seconded those concerns. With or without the advent of plug-in hybrids, these electricity grid vulnerabilities require urgent attention.


Conclusion

The dangers from oil dependence in today's world require us both to look to ways to reduce demand for oil and to increase supply of transportation fuel by methods beyond the increase of oil production.

The realistic opportunities for reducing demand soon suggest that government policies should encourage hybrid gasoline-electric vehicles, particularly the battery work needed to bring plug-in versions thereof to the market, and modern diesel technology. The realistic opportunities for increasing supply of transportation fuel soon suggest that government policies should encourage the commercialization of alternative fuels that can be used in the existing infrastructure: cellulosic ethanol and biodiesel/renewable diesel. Both of these fuels could be introduced more quickly and efficiently if they achieve cost advantages from the utilization of waste products as feedstocks.

The effects of these policies are multiplicative. All should be pursued since it is impossible to predict which will be fully successful or at what pace, even though all are today either beginning commercial production or are nearly to that point. The battery development for plug-in hybrids is of substantial importance and should for the time being replace the current r&d emphasis on automotive hydrogen fuel cells.

If even one of these technologies is moved promptly into the market, the reduction in oil dependence could be substantial. If several begin to be successfully introduced into large-scale use, the reduction could be stunning. For example, a 50-mpg hybrid gasoline/electric vehicle, on the road today, if constructed from carbon composites would achieve around 100 mpg. If it were to operate on 85 percent cellulosic ethanol or a similar proportion of biodiesel or renewable diesel fuel, it would be achieving hundreds of miles per gallon of petroleum-derived fuel. If it were a plug-in version operating on either upgraded nickel-metal-hydride or newer lithium-ion batteries so that 30-mile trips or more could be undertaken on its overnight charge before it began utilizing liquid fuel at all, it could be obtaining in the range of 1000 mpg (of petroleum).

A range of important objectives - economic, geopolitical, environmental - would be served by our embarking on such a path. Of greatest importance, we would be substantially more secure.

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