Monday, June 29, 2009Save GM With Ethanol
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GM missed out on a big opportunity when it decided back in the '90s not to build a hybrid car similar to Toyota's Prius. It didn't see any profits coming from such a car, and it would have had a tough time selling shareholders on a new car that might lose money.
But the Prius gave Toyota something GM didn't anticipate: a branding boost that lifted its models across the board, as consumers associated Toyotas with technology, fuel efficiency, and progress. More people bought Corollas and Camrys because of the Prius.
GM may have lost out on the hybrid, and it may have its eggs in the Chevy Volt plug-in-electric basket as far as branding goes, but as GM restructures, the Obama administration has an opportunity to help it develop in a different area, where it has a competitive advantage: ethanol.
GM believes it is ahead of the curve on ethanol. It has already produced and sold flex-fuel vehicles with fuel censors that let drivers fill up with both E85 and regular gas; and it has invested in two companies looking to bring cellulosic-ethanol refineries on line in the next year, using different methods of producing the fuel. It projects that 61 percent of its fleet will be flex-fuel vehicles by 2012.
The government already supports ethanol through the farm bill and other legislation, but if it can do more to engineer a coordinated production of ethanol, delivery to gas pumps, and a fleet of cars that use it, the whole system will become cheaper as the economy of scale grows for both GM and ethanol-fuel producers. The question is whether ethanol can cut emissions and consumer costs enough to compete with hybrids -- if it can, drivers will be dazzled by a new technological development. And if GM leads the way, it will reap the financial rewards.
This is easier said than done. More ethanol subsidies, on top of already massive government investments, would surely upset petroleum refiners, and this kind of government involvement in manufacturing and industry is frowned upon by capitalists. The administration has already taken flak for intervening in GM; more criticism surely would follow if it were to dictate GM's car design and coordinate ethanol policy with restructuring.
The administration would, in a sense, also be manufacturing an entire economy, building both supply and demand at the same time. This could be dangerous, both economically and politically.
But it's worth noting that Obama picked a secretary of energy, Steven Chu, who is a big fan of cellulosic ethanol. Just this week, Chu said he thinks all American-made cars ought to run on E85.
Perhaps the best way to dazzle consumers with technology is by developing a hybrid that runs on ethanol -- one-upping the Prius. GM could brand itself as the company that combined technologies to make a clean, quasi-electric, quasi-alternative-fuel car that departs from dependence on regular gas in two respects, rather than one.
At the moment, GM doesn't have anything like that in development, though the Volt's backup combustion engine can run on ethanol. But the company does see alternative-fuel vehicles as the near-term tech solution, with hydrogen fuel cells further down the line. As GM's new owner, the Obama administration has a unique opportunity to rig things in GM's favor by coordinating its ethanol policy with GM's plans.
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The funny thing about using Ethanol is that even as it is touted as a "greener" alternative to petroleum, it actually produces more pollutants when burned. Nor does it produce the same amount of power; doesn't burn as efficiently.
Also, the corn-based Ethanol product causes farmers to sell their corn for fuel instead of food, thereby raising the price of available (food)corn. As demand increases, more farmland will be needed to offset both the demand for food corn and fuel corn.
It seems counter-productive, in the long run.
http://www.sciencedaily.com/releases/2005/07/050704110527.htm
Once NASCAR goes E85, then Government Motors shall follow.
Until Joe-6 pack sees his star(s) joining the rest of the high performance world (American Lemans, Moto GP, Indy series), the argument will still be "cost saving + performance enhancing + good for the planet" over my dead body and regular gas
Could GM get behind Turbodiesel instead? Or some other 'improvement' that is actually better for the environment than regular gasoline?
Another problem with Ethanol, from a business standpoint, is that there are no barriers to entry with E85 technology. Steven Chu quotes that
"I've been told it costs about $100 in gaskets and fuel lines to turn a car so that it can go all the way to E85,"
So if,god forbid, E85 were to catch on, there would be nothing to stop the competition from making a trivial adjustment to their cars and eliminate GM's advantage.
The Volt on the other hand, will run on leapfrog technology that will bring GM up to speed in terms of green car credibility. Unfortunately, by the time Volt comes out, Toyota will have its plug-in Prius selling at half the price.
The only reason corn is even a remotely viable alternative is because of ridiculous government subsidies. We grow so much corn that we can't even eat it so we burn it. People in Minnesota even have corn burning stoves because the stuff is so cheap...
I'd recommend biodiesel over ethanol. You can make it from algae, or bacteria specifically bred for making oil. More energy output per energy input, and it is not prone to price shocks due to government subsidies.