All posts by Michael S. Davies, CFA, CMVP

Oil continues to trade above $100 per barrel with the NYMEX CRUDE FUTURE closing at $101.84 on the last day of February 2008 and the US House of Representative passes legislation to raise $18 billion in new taxes for Big Oil to foster development of alternative energies. While President Bush plans to veto the legislation and Republicans claim the legislation unfairly impacts the oil industry, let’s look at the numbers. The legislation calls $18 billion tax over the next ten years so the impact amounts to $1.8 per year. The oil demand is approximately 20.6 million barrels per day according the to latest data from the Energy Information Administration. With oil at $100 per barrel the US will spend about $2 billion a day on oil and that equates to over $750 billion a year. In comparison to the total amount of oil we use, the tax is about 2/10th of one percent.

Figure 1 US Oil Supply and Demand

Well maybe that’s not a fare comparison. The bill, H.R. 6, the CLEAN Energy Act. would roll back two tax breaks for the five largest U.S. oil companies and offer tax credits for energy efficient homes and gas-electric hybrid vehicles.
According to the CNN article, the money to be collected over the 10-year period would provide tax breaks for solar, wind and other alternative energies and for energy conservation. The legislation was approved 236-182, and is expected to cost the five largest oil companies an average of $1.8 billion a year over that period, according to an analysis by the House Ways and Means Committee. So in other words this bill just repeals tax breaks given to Big Oil to become more competitive in the global market.

Figure 2 Oil Prices and World Rig Count

So what is the $1.8 in tax impact on Big Oil? Let’s just look at the impact this would have if just Exxon Mobil Corp (XOM) had to endure the tax only. Exxon Mobil generated $404 billion revenues in 2007, which means if Exxon had to face this tax only, it would be less than ½ of 1% of revenues. Considering that some states impose a 6% sales tax on consumers, a tax impact of 0.2% on the largest oil companies seems rather innocuous.

If the world has to depend upon OPEC oil production, questions do arise over the expansion of oil production and OPEC’s willingness to supply oil despite oil over $100 per barrel. As figure 3 illustrates production among OPEC nations is faltering. Could this be a prelude to Peak Oil?

Figure 3 OPEC Oil Production

The bottom line is that without incentives and further research on alternative energies, the world continues to be held hostage to oil and hydrocarbon fuels which are directly linked to rising CO2 levels and climate change.

World oil demand continues to rise despite efforts to limit demand. Renewable energies such as solar and wind have the potential to limit our dependence on hydrocarbon fuels, but one issue remains prominent – storing energy. While the sun provides radiation for solar and generates wind, when its cloudy or dark we are unable to produce solar energy. One must provide a means to store that energy for when it is needed. Fuel cells enable energy conversion and fill a reliable role in alternative energy strategies.

A chart compiled by Wasserstoff-Energie-Systeme GmbH (h-tec) provides an easy to understand depiction of how fuel cells integrate with solar and wind energy solutions. Fuel cells provide the enabling technology that allows hydrogen to serve as the storage and transport agent. The solar energy that is produced during the daylight hours is used in an electrolyzer to produce hydrogen that in turn, is then used to operate the fuel cell producing electricity at night when it is needed. This process is called the solar-hydrogen energy cycle. Figure 1 illustrates the importance of energy storage in adopting alternative energies.

Figure 1 Solar-Hydrogen Energy Cycle

Demand for oil and hydrocarbon fuels continues to grow despite effort to conserve. Total Petroleum Consumption shows increasing oil demand from China and India while demand in the U.S. grows at a slower pace. With improving efficiencies and lower production costs, fuel cells could provide a solution to our appetite for oil in motor vehicles. Figure 2 describes how fuel cells and electrolyzers (fuels running in reverse) work.

Figure 2 Fuel Cells

Fuel cells are devices that convert chemical to electrical energy – in essence; it’s an electrochemical energy conversion device. In the chemical process of a fuel cell, hydrogen and oxygen are combined into water, and in the process, the chemical conversion produces electricity. In the electrolyzer, an electrical current is passed through water (electrolysis) and is the reverse of the electricity-generating process occurring in a fuel cell.

Hydrogen fuel cells offer tremendous opportunity for storing and transporting energy enabling broad applications for home, business, motor vehicle and large-scale energy projects. The follow provides a review of current technologies applicable to hydrogen fuel cells. Factors to consider in using hydrogen fuel cells include operating efficiency, operating temperature range, and material used for the electrolyte (the catalyst that separates hydrogen) and fuel oxidant (that transfers the oxygen atoms).

Figure 3 Hydrogen Fuel Cell Technologies

One of the most practical fuel cell technologies for motor vehicle use include Proton Exchange Membrane (PEM) because it operates at normal ambient temperatures and offers high electrical efficiency. There are several useful web sites that illustrate the benefits of hydrogen fuel cells. h-tec and the National Renewable Energy Laboratory provide some very useful information on hydrogen fuel cells.

We are also seeing progress on fuel cell vehicles that could ultimately ameliorate are demand for oil, if not eliminate it entirely, all with no carbon dioxide or other harmful emissions. We see most major automakers developing hydrogen powered fuel cell vehicles. GM is making progress introducing several models using GM’s Fuel Cell Technology.
Honda’s experimental hydrogen refueling station in Torrance, CA uses solar to produce hydrogen for their hydrogen fuel cell vehicle Honda’s FCX .

The bottom line is that the availability of cheap oil is on the decline and without further research on alternative energies we may find the global economy in a very tenuous position. Further research into solar and hydrogen fuel cells could significantly reduce our dependence on oil.

From the Industrial Revolution we learned that economic growth is inextricably linked to energy and as a result, our future is dependent upon equitable access to energy. When the Stourbridge Lion made entry as the first American steam locomotive in 1829 it was used to transport Anthracite coal mined in nearby Carbondale, PA to a canal in Honesdale that in turn linked to the Hudson River and onto New York City. Coal fueled the growth of New York and America’s Industrial Revolution because coal was cheap and more efficient than wood.

Advances in science and technology gave way to improvements in manufacturing, mining, and transportation. Energy became the catalyst to industrial growth. Steam power such as Thomas Newcomen’s steam powered pump in 1712 developed for coal mining and James Watt’s steam engine in 1765 were initially used to bring energy to market.

In terms of heating efficiency, coal at the time offered almost double the energy, pound for pound, in comparison to wood. Energy Units and Conversions KEEP Oil offers higher energy efficiencies over coal and wood, but as with most hydrocarbon fuels, carbon and other emissions are costly to our economy and environment.

With rapid growth in automobile production in the U.S., oil became the predominant form of fuel. According to the Energy Information Administration, in 2004 the U.S. spent over $468 billion on oil.

Figure 1 U.S. Energy Consumption by Fuel

We all need to become more conversant in understanding energy costs and efficiency and as a corollary, better understand the benefits of renewable energy such as solar, wind, and hydrogen fuel cells. A common metric we should understand is the kilowatt-hour (KWH) – the amount of electricity consumed per hour. The KWH is how we are billed by our local electric utility and can be used to compare costs and efficiency of hydrocarbon fuels and alternative energies.

One-kilowatt hour equals 3,413 British Thermal Units (BTUs). One ton of Bituminous Coal produces, on the average, 21.1 million BTUs, which equals 6,182 KWH of electric at a cost of about $48 per short ton (2,000 pounds). That means coal cost approximately $0.01 per KWH. To put that into perspective, a barrel of oil at $90/barrel distilled into $3.00 gallon gasoline is equivalent to 125,000 BTUs or 36.6 KWH of energy. Gasoline at $3.00/gallon equates to $0.08 per KWH. So gasoline at $3.00 per gallon is eight times more expensive than coal.

Is oil and gasoline significantly more efficient than coal? Let’s compare on a pound for pound basis. A pound of coal equates to about 10,500 BTUs or approximately 3.1 KWH per pound. A gallon of gasoline producing 125,000 BTUs weighs about 6 pounds equating to 6.1 KWH per pound (125,000 /3,413 /6). While gasoline is almost twice as efficient as coal, coal’s lower cost per KWH is why it is still used today to generate electric.

The Bottom Line: the economics of energy determines its use – coal still accounts for approximately half of our electric generation because it has a lower cost than other fuels. However, there are two factors to consider 1) the cost of carbon is not calculated into the full price of coal or other hydrocarbon fuels and 2) the cost of conventional fuel is calculated on a marginal basis while alternative fuel costs are calculated on a fixed cost basis. Meaning the cost of roads, trucks, and mining equipment is not factored into the price of each piece of coal, only the marginal cost of producing each ton of coal. For solar, hydrogen fuel cells, and wind energy systems, the cost to construct the system is factored into the total cost while the marginal cost of producing electric is virtually free. We need a framework to better measure the economics of alternative energy. The impact of carbon on our climate and global warming are clearly not measured in the costs of hydrocarbon fuels nor is the cost of protecting our access to oil such the cost the Iraq War.

Despite the carbon issues surrounding coal, (coal has higher carbon-to-hydrogen ratio in comparison to oil or gas) coal is more abundant and therefore is cheaper than oil. As electric utilities in 24 states embrace alternative energies through such programs as Renewable Portfolio Standards (RPS), perhaps the benefits of alternative energies will begin to combat the negative economics of hydrocarbon fuels.

Ethanol may emit less CO2 and help reduce the demand for foreign oil in the short term, but ethanol and in particular, corn-based ethanol raises food prices, is less efficient than gasoline, diesel, and biodiesel, and is not a substitute for oil.

According to research compiled by National Geographic Magazine , the energy balance of corn ethanol, (the amount hydrocarbon fuel required to produce a unit of ethanol) is 1-to-1.3 whereas for sugar cane ethanol the ratio is 1-to-8. This suggests corn-based ethanol requires significantly more energy to produce than sugar cane ethanol. Corn ethanol is only marginally positive.

A major issue with corn ethanol is its impact on corn prices and subsequently, food prices in general. It is the price of oil that is impacting the price of corn because nearly all ethanol produced in the U.S. is derived from corn. Therefore, corn prices are inextricably linked to oil prices as well as to the supply and demand of corn as food and feedstock. Corn Prices while volatile and impacted from weather and other variables appear to follow the rising price of oil as illustrated in Figure 1. In turn, corn prices are also influencing other commodity prices where corn is used for feed for livestock.

The rising motor vehicle usage in China and India is escalating the already tenuous situation in the oil markets. With ethanol tied to oil prices we are beginning to see corn prices exacerbate the inflationary pressures at the retail level. Over the last year consumers are paying more for food with large increases in the prices of eggs, cereal poultry, pork, and beef which are tied to corn.

Figure 1 Corn Prices

Senate legislation for Renewable Fuels Standard calls for ethanol production to increase to 36 billion gallons by 2022 with 21 billion derived from as cellulosic material such as plant fiber and switchgrass . Corn is expected to comprise 42% of the ethanol production in 2002 from virtually all today. The fact is that ethanol production at its current level of 6 billion gallons equates to only 4% of our gasoline usage and is already impacting food prices. Gasoline consumption in 2005 amounted to 3.3 billion barrels or 140 billion gallons. Current estimates put gasoline consumption at 144 billion gallons a year in 2007. Even if vehicles could run entirely on ethanol, there is not enough corn harvest to substitute our demand for oil. We need a cohesive and coordinated effort using multiple technologies to develop alternative energies to reduce our dependence on foreign oil.

Performance

According to Renewable Fuels Association ETHANOL FACTS:
ENGINE PERFORMANCE, ethanol offers higher engine performance with octane rating of 113 in comparison to 87 for gasoline and has a long history in the racing circuit. In 2007, the Indy Racing League, sponsors of the Indianapolis 500 started using ethanol in racecars. However, the higher engine performance may come at a cost of lower fuel efficiency.

Table 1 Specific Energy, Energy Density & CO2

Efficiency

Gasoline offers 56% higher energy efficiency (specific energy) over ethanol as measured by kilo-joules per gram (kj/g). (As a reference: 1 kilowatt-hour = 3,600 kilojoules = 3,412 British Thermal Units) Biodiesel with 35 kj/g is 33% more energy efficient than ethanol at 24.7 kj/g.

In terms of energy density, ethanol would require larger storage capacity to meet the same energy output of gasoline diesel, and biodiesel. Ethanol requires a storage tank 48% larger than gasoline and 41% larger than diesel for the same energy output.
Please see Hydrogen Properties and Energy Units

For a quick review of Specific Energy and Energy Density – (Molecular Weight Calculator) the specific energy of a fuel relates the inherent energy of the fuel relative to its weight and is measured in kilo-joules per gram.

CO2 Emission

The molecular weight of CO2 is approximately 44 with two oxygen molecules with an approximately weight of 32 and one carbon atom with a weight of 12. During the combustion process, oxygen is taken from the atmosphere producing more CO2 then the actual weight of the fuel. In the combustion process a gallon of gasoline weighing a little over six pounds produces 22 pounds of CO2.

CO2 emission is a function of the carbon concentration in the fuel and the combustion process. During combustion ethanol produces approximately 13 pounds of CO2 per gallon. Gasoline and diesel produce approximately 22 and 20 pounds per gallon, respectively. CO2 emissions per gallon appear quite favorable for ethanol. However, the results are less dramatic when CO2 emissions are compared per unit of energy produced.

Figure 2 CO2 per KWH

When measured in pounds of CO2 per kilowatt-hours (KWH) of energy, the results show ethanol producing 6% less CO2 than diesel or biodiesel and 5% less than gasoline. In the case of ethanol, the lower specific energy of the fuel negates the benefit of its lower CO2 emissions. Meaning more ethanol is consumed to travel the same distance as gasoline or diesel thereby limiting the benefit of its lower CO2 emissions.

The bottom line is ethanol does not ameliorate our dependence on foreign oil and while it demonstrates higher performance for racecars, it is still less efficient than gasoline diesel, and biodiesel, and diverts food production away from providing for people and livestock. The reality is there are special interest groups that obfuscate the facts about ethanol for their own benefit. The real solution to our imminent energy crisis is alternative energies including cellulosic ethanol, solar, hydrogen fuel cells, and wind.

Peak oil has been a discussion for several decades after the theory developed by Dr. M. King Hubbert was put forth to alert the world of the impending decline in oil production. Recent data from the Energy Information Administration (EIA) oil production from the twelve members of OPEC has declined from its peak in 2005, despite increased global drilling activity.

Figure 1 OPEC Oil Production

Higher oil prices is driven demand for energy exploration and drilling is up significantly in the U.S. and the world according to Baker Hughes Worldwide Rig Count. Oil price continue to remain above $90/barrel and despite the increased oil drilling activity, oil production remains relatively flat.

Figure 1 demonstrates the tenuous nature of OPEC oil production with oil production declining almost 4% from the peak average production of 31.2 million barrels per day. One must remember that oil production is variable with up and down trends over time. However, with oil over $900 a barrel we are not seeing significant production increase despite the rise in oil drilling. Figure 2 illustrates world-drilling rigs in comparison to oil prices on a global basis. The U.S. accounts for over half the world oil drilling rigs yet our production is less than 10% of total global production.

Figure 2 Rig Count and Oil Production

What does all this mean? For one peak oil may be a reality or sooner then we like. Secondly, with concern over climate change and global warming, there is no real spending on alternative energy to help mitigate a potential shortage in oil. More spending on solar and hydrogen fuel cells is required to ameliorate the eminent disruption in oil flow. Without an orchestrated government mandate to develop alternative energies all nations face a national security issue that has the potential to cripple economic activity.

A brief review of history and in particular the industrial Revolution, it’s quite apparent that economic growth is inextricably linked to energy. As energy is tied to our economy, our future is dependent upon equitable access to energy. This in turn sets the framework of our dependence on oil and hence, why our national security is tied to securing the flow of oil.

Eighteenth-Century England gave birth to the Industrial Revolution. Four critical components provided the framework enabling the Industrial Revolution: Labor, Technology, Risk Capital, and Energy

Improving efficiencies in agriculture lead to an increase in the food supply while minimizing the amount of labor required to cultivating crops. The improving agriculture efficiencies lead to population growth and an available labor force that began to migrate to the cities.

Advances in science and technology gave way to improvements in manufacturing, mining, and transportation. It was the harnessing of steam power such as Thomas Newcomen’s steam, powered pump in 1712 for coal mining and James Watt’s steam engine in 1765 that lead to railroads and machinery.

Risk capital was also an important element for the development of the Industrial Revolution. Risk capital and the entrepreneurial spirit that allowed capital to be applied innovation helped transition England into the largest economy in the world.

And Energy. Access to an available source of energy was instrumental fueling the Industrial Revolution. With wood being used for just about everything in the early 1700’s from housing, wagons, tools, and fuel, deforestation lead to energy scarcity. It was coal that enabled the growth of Industrial Revolution by providing an accessible energy source.

With rapid growth in automobile production in the U.S., oil became the predominant form of fuel. According to the Energy Information Administration, in 2004 the U.S. spent over $468 billion on oil. Given that we import nearly 60% of the oil we consume, most of our wealth travels abroad. More emphasis on alternative energies could help ameliorate our dependence on oil.

Figure 1 U.S. Energy Consumption by Fuel

While solar and wind energy have seen some very strong growth, alternative energy still account for less then 2% of our global energy production.

We need to realize that our dependence on oil could cripple our economy. Supply constraints or disruption to oil flow could derail economic activity. It should be an imperative for our national security to develop alternative energies.

Improving economics and high market valuations should help drive research for alternative energy. With the release of Q3/07 financials, it’s clear that the economics of solar photovoltaic (PV) suppliers is improving. Some of the leading pure play publicly traded PV stocks are demonstrating significant improvements in financial performance that should drive further investment into solar and green technology. The improving economics of solar should continue to drive further investment into alternative energy companies as venture capital firms and Wall Street find that alternative energy is a significant secular trend with sustainable economic foundation.

Most visible among the solar PV suppliers is First Solar (FSLR) with y/y revenue growth for Q3/07 increasing 290% and gross margins exceeding 50% and operating margins above 30%. FSLR’s management was clear in articulating that these strong Q3 numbers reflect ramping on of its German manufacturing facility and would not be sustainable. However, with gross margins exceeding 50% and operating margins above 30% Wall Street takes notice and rewards the firm with valuation multiple envious of leading technology companies such as Google (GOOG) and Cisco Systems (CSCO).

Figure 1 Revenues, Margins, and Capacity

The stronger financial performance of solar PV suppliers is significant because it improves the viability of the solar PV business model thereby attracting more investors and in turn drives funding for alternative energy start up companies. FSLR went public in November 2006 with a closing price of $24.74 on its first day. With a closing price one year later of $212.63, FSLR offers investors a yearly return of 759%. The attractive return generated by solar stocks tends to attract more investors and drives market valuations higher thus feeding the flow of additional venture capital funding.

In terms of market valuation FSLR trades at a significant premium to most companies in the S&P 500 as well as leading technology companies including GOOG and CSCO. . Most solar PV companies trade at higher market valuation multiples than CSCO and GOOG. Both FSLR and Sun Power (SPWR) trade at premium price-to-sales (P/S) and price/earnings-to-growth (PEG) multiples in comparison to some leading technology stocks. In terms of PEG ratios, FSLR and SPWR trade at 2.9x and 2.2x respectively while CSCO and GOOG trade at 1.3x and 1.2X, respectively. In comparison, the S&P 500 index trades at a PEG of 0.8x while the technology and energy segments trade at 0.6x and 2.2x, respectively. These high market valuations prove the venture capital community with high exit values on their current crop of alternative energy investments. Please see Figure 2.

It is this premium market valuation multiple that suggests the importance of alternative energy. Wall Street tends to be a leading indicator and keen in its ability to identify secular trends. Major trends command premium valuations and reward venture capital with attractive exist strategies. Wall Street rewards cash flow growth fueling further venture capital funding that in turn, fuels the flow of intellectual and financial capital. The value migration measured by price-to-sales multiples and illustrated by A. Slywotsky in his book Value Migration provide a framework to gauge the significance of trend towards alternative energies. Capital gravitates to the business model that creates economic value and is measured by a stock’s price-to-sale ratio. By that measure solar stocks is where the value is headed.

Figure 2 Price-to-Sales Ratio

The bottom line is that high market valuations attract research funding and brain power. Rising oil prices, rapid industry growth, and high public market valuations of solar PV companies, should act to attract further venture capital funding of alternative energy companies. Increased solar funding should translate into increased research and talent migration that could improve solar efficiency and reduce costs that in turn could bring solar to electric grid parity.

Rising oil prices have driven exploration and drilling activity, yet oil production remains anemic in comparison. Could the latest data suggest oil production is nearing a peak? With global demand expected to rise over 30% by 2030 according to a recent article in the Wall Street Journal, Handicapping the Environmental Gold Rush the latest oil production figures suggest we are indeed vulnerable to energy shocks.

High oil prices have driven demand for energy exploration and investment into oil and gas drilling rigs. In the U.S., rig count is up 181% with 1,749 rigs in operation in 2007 from 622 in 1999 according to Baker Hughes Worldwide Rig Count. Oil prices are up quite dramatically in the last few weeks with latest price above $94/barrel.

Figure 1 Worldwide Rig Count and Oil Prices

Figure 1 illustrates world-drilling rigs in comparison to oil prices. The U.S. accounts for over half the world oil drilling rigs yet our production is less than 10% of total global production. While oil prices are nearly as high as they were back in the 70’s (accounting for inflation) we are not witnessing the tremendous oil-drilling explosion as we did back then.

Part of the explanation could lie with oil production. If we look at recent data, oil production appears to be leveling off while demand is expected to increase significantly as developing countries increase their use of motor vehicles. Data from the U.S. Department of Energy (DOE) and Ward’s Communications, Ward’s World Motor Vehicle Data show that the number of motor vehicle on the road is up 48% from 1990 to 2005 with countries like China experiencing the most dramatic increase. Yet oil production over this same period is up only 27%.

Figure 2 US Rig Count and Oil Production

In the U.S., rig count is up 118% from 1999, yet petroleum production is actually down 7%. On a global basis, oil and petroleum product production increased 13% since 1999 while global rig count increased 112%. The U.S. and the rest of the world is experiencing diminishing returns on investments in oil production wile usage, led by motor vehicle consumption continues to escalate. In the U.S. more than 60% of oil consumption goes to vehicle use.

With all of the attention given to oil and hydrocarbon fuels, alternative energies are just a small fraction of our energy needs. We need to dramatically increase our research efforts into alternative energies such as solar, wind, and hydrogen fuel cells energies.

After reviewing some of the details of Honda’s experimental solar-power hydrogen refueling station in Torrance, CA and its fuel cell vehicle several questions concerning efficiency and practicality come to mind. It most be noted that solar and hydrogen don’t emit harmful byproducts such as carbon dioxide or carbon monoxide so both technologies are important to our energy security. First let’s look at the efficiency of hydrogen and second the efficiency of generating hydrogen from solar.

As we learned from science class, hydrogen is the most abundant element in the universe. Hydrogen has approximately 3 times the energy per unit mass as gasoline and requires about 4 times the storage volume for a given amount of energy according to a Hydrogen Energy report from Stanford University. In further review of additional information on hydrogen we are also making some adjustments to our fuel-ranking table.

We are revising Table 1 that was used in our post of October 3, 2007 for data on the energy density for hydrogen from 2.5 kilowatt-hours (KWH) per gallon to 10.1 KWH/gal and is reflected in the revised Table 1 below. The discrepancy lies in measuring the weight of hydrogen in liquid volume. We are calculating the energy density of hydrogen using the high heat values of hydrogen of 61,000 British Thermal Units (BTUs) and a weight 0.57 pounds per gallon from the Stanford Hydrogen Report.

As a reference: 1 KWH = 3,600 kilojoules = 3,412 BTUs

Revised Table 1 Specific Energy, Energy Density & CO2

Hydrogen offers tremendous energy potential, but as we see from Table 1, hydrogen has a low energy density meaning it requires a large storage container to make it practical for use in a motor vehicle. Several car manufacturers including GM and Toyota have developed hydrogen vehicles. Hydrogen can be used in internal combustion engines replacing gasoline or in fuel cells to generate electric to power the vehicle. However, there are some limitations to the current technology that may limit the economic viability hydrogen powered vehicles in the near term. But there are no detrimental emissions with hydrogen as apposed to hydrocarbon fuels thus providing tremendous benefits as vehicle efficiency improves.

Honda’s solar-powered hydrogen fueling station takes nearly a week in sun to produce enough hydrogen to power Honda’s FCX concept hydrogen fuel cell vehicle. Honda employs a Proton Exchange Membrane Fuel Cell (PEMFC) that converts hydrogen to electric that in turn, powers the vehicle. The Honda FCX fuel cell vehicle has two fuel tanks that can be filled with up to 156.6 liters of hydrogen or about 43 gallons that offers 430km (267 miles) driving range. The hydrogen fuel cell vehicle provides a reasonable driving range, but with a fuel efficiency of 6.5 miles per gallon (MPG), suggests more research is needed.

BMW’s Hydrogen 7 can travel 125 miles on hydrogen and 300 on gasoline before refueling. In tests the BMW 745h liquid-hydrogen test vehicle has 75 kg tank has a Hydrogen Fuel Efficiency of 10 km/liter or about 25.2 MPG and cruising speed of 110 MPH. Not too bad for an internal combustion engine that is able to run on gasoline or hydrogen.

Figure 1 Specific Energy

Given the changes to hydrogen’s energy density we are also adjusting hydrogen density (Figure 2) to reflect liquid hydrogen and high-energy value as noted by Hydrogen Properties College of the Desert.

Revised Figure 2 Energy Density: KWH per Gallon

We still have more questions given hydrogen’s very high specific energy, (3 times that of gasoline) and low energy density (4 times the volume of gasoline). Hydrogen is more efficient then petroleum fuel, yet when used as a fuel cell in a vehicle Honda’s MPG of 6.5 MPG is quite low. The fuel efficiency of BMW’s Hydrogen 7 of 25.2 MPG is only at parity with gasoline.

The efficiency of using solar energy to generate hydrogen may not be the most efficient method. One report from Walt Pyle, Jim Healy, and Reynaldo Cortez Solar Hydrogen Production by Electrolysis indicated that a 1-kilowatt solar photovoltaic device could generate 1 cubic meter of hydrogen in 5.9 hours. Essentially, 5.9 KWHs from a 1KW solar cell produces 1 cubic meter of hydrogen. We know that a pound of hydrogen in liquid state equals approximately 61,000 BTUs (51,500 BTUs at low heat value) or 17.9 KWH.

Research at Caltech, suggests that photoelectrochemistry The Lewis Group may offer a more efficient means of generating hydrogen. We will continue to explore solar efficiency and hydrogen fuel cells to evaluate the economics of alternative energy.

The bottom line is that our dependence on foreign oil is the biggest threat to national security and without cultivation of alternative energies we continue to endure an untenable situation. Further research into solar and hydrogen fuel cells could significantly ameliorate our dependence on oil.

Despite efforts that have enabled the U.S. to limit its demand for oil, world oil demand is up significantly. Advances in technology such as solar energy and vehicle fuel cell could help the world reduce its dependence on oil.

Figure 1 Oil and Gold Prices

The U.S. Department of Energy (DOE) and the U.S. Environmental Protection Agency (EPA) today released the Fuel Economy Guide for 2008 model year vehicles Fuel Economy Leaders: 2008 Model Year Coming in first place is the Toyota Prius (hybrid-electric) with city/highway miles per gallon (MPG) of 48/45. With higher fuel costs more people are factoring in fuel efficiency into their purchase decision. However, it is the purchase of pickup trucks and SUV that account for most of the vehicle purchases in the U.S. and these vehicles are dramatically less fuel-efficient than hybrids and small four-cylinder automobiles.

Despite the trend towards larger vehicles, the U.S is not experiencing a rapid rise in oil demand. Yet oil prices continue to climb. While geopolitical risk may account for the bulk of the recent price increase, latest information from the U.S. Energy Information Administration (EIA) Total Petroleum Consumption shows increasing oil demand from China.

Figure 2 Oil Demand: U.S. and China

Figure 2 illustrates that while oil demand in the U.S. has grown only modestly since 2000, the growth in China’s oil demand is rising rapidly. The recent data from the EIA shows oil demand through Q2/07. The demand for oil in the U.S. is up 5% from 2000 while in China oil demand is up 59% over the same period.

Improving vehicle fuel efficiency may abate rapidly rising oil demand in the U.S., but more emphasis on diesel and hybrids could take us a lot further. For example, Toyota has been slow to introduce its diesel line of pickup trucks in the U.S. while it offers a broad line of more fuel-efficient vehicle outside the U.S. Toyota offers several cars and trucks in Europe with impressively high fuel efficiencies that are not available in the U.S. Infact, the Toyota Hilux two-wheel drive pickup truck offers a four-cylinder diesel engine with an MPG of 44.8 on the highway and 29.1 in the city.

We are also seeing progress on fuel cell vehicles that could ultimately ameliorate are demand for oil, if not eliminate it entirely, all with no carbon dioxide or other emissions. We see most major automakers developing hydrogen powered fuel cell vehicles. Honda for one has the right concept in employing solar energy to make hydrogen.

Honda’s experimental hydrogen refueling station in Torrance, CA increases the solar incre3ases the efficiency of hydrogen fuel by using solar energy to produce hydrogen. The hydrogen is then used to power Honda’s Honda’s FCX concept hydrogen fuel cell vehicle with the only emission being pure water vapor. These fuel cell vehicles may not be ready for prime time, they provide a clear reality to what is achievable.

The bottom line is that supply and demand dictate price and the availability of cheap oil is on the decline. Further research into solar and hydrogen fuel cells could significantly change our dependence on oil.

With the Solar Decathlon is taking place in Washington DC today promoting commercially available solar energy technology and oil prices pushing to an all time high of $84/barrel, where are we in terms of cost parity with hydrocarbon fuels. Advances in solar energy technology, lower production costs, and rapidly rising oil costs could bring solar energy into parity with hydrocarbon fuels within five years.

The cost of solar energy remains prohibitively high at about $0.45 per kilowatt-hour (KWH) for an installed system. (a kilowatt-hour equals a 100-watt light in operations for 10 hours and equals 3,412.14 British Thermal Units – BTU) As a reminder, there is significant variance in cost per KWH ($0.23-to-$0.68) because a solar energy system is dependent upon daily available sunlight, which varies from about two hours a day in Alaska to almost six hours in Arizona. Solar energy costs are based on data from solar photovoltaic (PV) supplies SunPower (SPWR) and Sharp Solar.

In comparison to hydrocarbon fuels, one gallon of gasoline has an energy value equal to approximately 125,000 BTUs and cost around $3.00/gallon. The energy value of a gallon of gasoline equates to 36.6 KWH, therefore its price is about $0.08 per KWH. So there is significant disparity between gasoline at $0.08/KWH and solar energy at $0.45.

Fortunately, there are a number of initiatives seeking to improve the economics of solar energy. When we measure the cost of solar energy in dollars per watt we find a complete solar energy systems cost around $8.90/watt. (If we amortize the $8.90/watt over a twenty year expected life of a solar energy system, it amounts to $0.45/KWH) To improve the economic value of solar energy we can lower production costs and/or improve solar efficiency in terms of raising the KWH of electric produced per solar panel.

From the Lewis Group. at Caltech, we learned about several technological approaches to improving solar energy efficiency. Among some of the leading solar technologies are multi-junction semiconductor cells and solar concentrators. In a multi-junction cell, individual cells are made of layers, where each layer captures part of the sunlight passing through the cell. One of the key limits to solar efficiency are the semiconductor band gaps where excess solar energy is lost to heat instead of being converted to electric. Solar concentrators amplify available sunlight and increase the watts per square meter per solar panel.

Last year the Department of Energy reported that solar energy achieved a new record in efficiency performance. The news release, New World Record Achieved in Solar Cell Technology. suggesting that solar concentrators and multi-junction PV cells could surpass the Shockley-Queisser single-junction solar efficiency limit of approximately 31% for single layer solar cell. The multi-junction, concentrator solar cell produced by Boeing-Spectrolab (a Boeing company BA) achieved a world-record conversion efficiency of 40.7% in lab experiments while commercial products operate at 26.5%-to-28.3% efficiency range.

The DOE believes breakthroughs in solar efficiency such as these may lead to systems with an installation cost of only $3 per watt, which translates into a cost of $0.15/KWH. In addition, solar PV cell suppliers are diligently working to reduce production costs. SunPower is targeting a 23% solar efficiency as a goal to reduce its solar energy system cost by 50% by 2012. Semiconductor solar cells benefit from economies of scale, which could reduce cost by 20% for each doubling of production. These solar initiatives should act to reduce solar energy costs.

Meanwhile, as energy costs rise with oil at $84/barrel, the cost of gasoline is expected to increase. If gasoline at the local filling station rises to $6.00/gallon, its cost in KWH jumps to $0.16/KWH. At that price gasoline would be above those achievable through solar energy advancements of $0.15/KWH.

Figure 1 Photovoltaic Device: Efficiency/Cost

With pricing on PV cells falling below $3.00/watt (or $0.15/ kilowatt-hour), solar energy will be close to parity with conventional hydrocarbons. If the cost of gasoline rises to $6.00 a gallon, it would cost $0.16/KWH while current cost of electric is about $0.11/KWH because of the low cost of coal. The bottom line is innovative research initiatives have the potential to deliver disruptive technologies that significantly changes the economics of delivering an energy solutions to all nations.

Further review:
Please see research at California Institute of Technology’s division of Chemical and Chemical Engineering at The Lewis Group.
Imperial College, Jenny Nelson’s Third generation Solar Cells.
DOE’s National Renewable Energy Lab (NREL) Third Generation Solar Photon Conversion (Exceeding the 32% Shockley(Exceeding the 32% Shockley—Queisser Limit)
Solar Energy Market Data Solarbuzz

My September electric bill arrived the other day and I was interested in comparing my energy savings after swapping 60 and 100-watt light bulbs for Compact Fluorescent Light bulbs (CFL), as recommended by the U.S. Department of Energy (DOE). Our progress in migrating to solar and wind energy is moving slower than expected. The CFL bulbs were a cheap investment so last year 12 standard light bulbs (two 100-watt and ten 60-watt) for ten 60-watt and two 100-watt CFL bulbs.

The results are impressive with improving energy reductions and money savings. Energy usage as measured by kilowatt-hours (KWH) is down an average of 30% from last and attributable to CFL, outdoor solar lighting as well as electric conservation efforts. However, the savings attributable to the CFL bulbs, of nearly $8 per month equate to an impressive return on investment of over 190% in one year.

While our initial calculations suggested energy savings (for lighting) called for reductions of over 70% when switching to CFL bulbs, the electric bill reduction was not that dramatic because large appliance usage account for a larger portion of electric power bill. However, when measuring the return on investment for a fast, cheap, and easy step to lower your electric bill, the CFL produces real savings,

The CFL bulbs cost around $4.00 for either a 100-watt or 60-watt equivalent light bulb. GE’s compact fluorescent lights were installed in August 2006 at a total cost of $48.00 (12 times $4.00 a light). According to GE the 60-watt CFL used 15-watts of power and the 100-watt CFL used approximately 26-to-29 watts of power. So theoretically, energy use, assuming lights were in operation for 4 hours per day, would save about 71 KWH a month. Our electric rates are currently at $0.108 per KWH which is at par with the U.S. average rate of Electricity Prices for Households $0.104 per KWH in 2006. Therefore, the CFL bulbs are saving about $7.71 per month from our electric bill amounting to $92.50 in savings over a year. That yields an investment return of 193% on a $48 investment in CFL bulbs.

Figure 1 CFL Energy Savings

Now of course, power usage varies by household, including the diligent habits of our children, so savings will vary. The bottom line is little steps sometimes produce big results – CFL bulbs do help reduce your electric bill with a small investment and also help the environment as each 1.3 KWH reduction in power use reduces carbon dioxide (CO2) emissions by 1 pound. Coal generates about half the electric power in the U.S. and produces roughly ¾ of a pound of CO2 for every KWH of electric. That means for every 1.3 KWH of electricity used (a 100-watt light used for 13.3 hours) produces one pound of CO2. CFL help reduce CO2 emissions by approximately 1.4 pounds per bulb based on light usage of just 1-hour/day a month.

The U.S. Department of Energy (DOE) is quite correct in suggesting that if every household in the U.S. substituted a 100-watt standard light bulb for a Compact Fluorescent Light bulb (CFL), it would eliminate an amount of carbon dioxide (CO2) equivalent to one million automobiles. However, it is the bigger picture that matters, – motor vehicles contribute the most to CO2 emissions. We must not forget that by focusing on CO2 emissions, they are admitting that CO2 is a real issue that potentially leads to global warming and climate change.

Let’s look at some facts about our carbon footprint. A 100-watt light in operation for 13.3 hours produces approximately one pound of CO2 when the electricity is generated by coal. Coal has significantly higher carbon emissions per kilowatt-hour (KWH) than oil or gas. Please see Carbon content of fossil fuels . Coal generates about half the electric power in the U.S. and produces roughly ¾ of a pound of CO2 for every KWH of electric. That means for every 1.3 KWH of electricity used (a 100-watt light used for 13.3 hours) we produce 1 pound of CO2. And remember it’s the oxygen in the air that contributes nearly 73% to the weight of CO2. This is why more CO2 is created than the actual weight of the fuel.

Using the same fuel emissions data, a motor vehicle with an average fuel efficiency of 22 miles per gallon (MPG), produces approximately 90 pounds of CO2 for every 100 miles driven. A gallon of gasoline produces nearly 20 pounds of CO2. That equates to one pound of CO2 for every mile driven by an SUV with a fuel efficiency of 19 MPG. (19.9 pounds/gallon times 1 mile divided by 19 MPG)

While it makes sense to address the issue of CO2 emissions, particularly as coal accounts for half of electric power generation and has higher CO2 emissions per KWH than oil, the real issue is an energy plan that givers us energy independence. Energy independence should equate to national security.

With the rapid growth in vehicle use around the world, it would be nice to know what are the most efficiency, economic, and least carbon emitting fuels. The number of motor vehicles on the road is increasing rapidly. The number of cars and trucks in China is up over 3,600 percent in the last thirty years. Data from the U.S. Department of Energy (DOE) and Ward’s Communications, Ward’s World Motor Vehicle Data provide an interesting view of the growth in motor vehicle use.

Figure 1 China Truck and Car Registration

While the U.S. still accounts for the largest motor vehicle market, the rest of the world is quickly accelerating towards more vehicles on the road. Figure 2 shows the number of vehicle registrations over the last thirty years for China, the U.S. and the rest of the world (ROW). Vehicle registration growth in the U.S. has been growing at a 2% per year rate from 1975 to 2005. The largest growth in vehicle registration is in China and India where growth in the last ten years is up 195% and 99%, respectively.

Figure 2 World Vehicle Registration

With an explosion in motor vehicle use, what fuel should we be using to better performance and reduce emissions? Let’s go back to two basic concepts of energy: Specific Energy and Energy Density. For a quick review, (Molecular Weight Calculator) the specific energy of a fuel relates the inherent energy of the fuel relative to its weight. Specific energy is often measured in kilo-joules per gram (kj/g). One kilo-joule equals one kilowatt-second meaning one kilowatt-hour (KWH) equals to 3,600 kilo-joules. Also one British Thermal Unit (BTU) equals 1,055.05585 joules. A reference to the specific energy and energy values of most fuels can be found at Hydrogen Properties

Figure 3 Specific Energy

By specific energy hydrogen is the clear leader. However, vehicles must inherently carry their fuel supply, so to determine which fuel is best for motor vehicles, energy density of the fuel is the next measurement. While vehicle fuel efficiency is dependent upon a number of factors such as engine type and performance, make and model of vehicle, road conditions and fuel, we are focusing on fuel energy.

Figure 4 Energy Density: KWH per Gallon

Figure 4 illustrates how fuels compare with respect to energy density, that is, energy relative the container size. We again are using KWH to measure energy value. Hydrogen, because it is so light, requires 15.9 times the container volume to provide the same energy as diesel. Biodiesel provides more power per gallon than Ethanol, which requires 1.6x, the container size for the same amount of energy as diesel. Biodiesel and diesel are relatively similar with respect to energy density. While both Ethanol and Biodiesel are both form of renewable energy, Biodiesel offers more bang per gallon. Before we are able invest more into hydrogen and solar energy to bring alternative energy into parity with conventional hydrocarbon fuels, diesel and biodiesel offer better energy efficiency among hydrocarbon fuels.

Table 1 Specific Energy, Energy Density & CO2

As a final assessment of hydrocarbon fuels, let’s compare carbon dioxide (CO2) emissions among our list of fuels. CO2 emission is a function of carbon concentration and combustion process of the fuel. Fuel energy research at the Department of Environmental Protection (EPA) and DOE indicate 99% to nearly 100% combustion of with fuels used in vehicles. That means almost all of the atoms in the fuel are converted to either heat or byproducts such as CO2.

Figure 5 illustrates how much CO2 is produced per gallon of fuel. Remember the molecular weight of CO2 is about 44 with oxygen contributor nearly 73% of the weight and is taken from our atmosphere during combustion. This is why more CO2 is created than the actual weight of the fuel. A second factor needs to be considered when evaluating CO2 emission and that is how much CO2 is produced per energy value. In comparing CO2 emissions per KWH of energy, Ethanol produces about 7% less CO2 than diesel or Biodiesel and 5% less than gasoline. Neither of these estimates considers the emissions from the processing to produce Ethanol or Bioiesel.

Figure 5 CO2 per Gallon

The bottom line is Ethanol and Biodiesel provide marginal relief to our energy crisis with biodiesel offering better efficiency and Ethanol marginally less CO2 missions. The only real solution to our imminent energy crisis is alternative energies such as solar, hydrogen fuel cells, and wind.

From our post last week we visited some research at California Institute of Technology’s division of Chemical and Chemical Engineering The Lewis Group and its focus on energy conversion and trade-offs between costs and efficiencies for photovoltaic (PV) devices.

We are providing a brief and very oversimplified analysis of the physics behind solar energy, and to that end, an overview of semiconductor band gaps and new technological approaches to optimize solar energy conversion efficiency. Our prior discussions on energy conversion process, dealt with of the properties of various materials used in silicon and thin-film solar cells. (see Research at Caltech may provide clues to improving solar cell efficiency Energy bands and band gaps provide a way of understanding some of the limitation of solar energy efficiency.

Semiconductor Band Gaps
In semiconductors, the band gap refers to the separation between the valence band, where the electrons are shared among the atoms in the material, and the conduction band where electrons can travel. When the material absorbs light, the electrons, when excited to the band gap threshold level, are able to jump to the conduction band and in the process, create electrons and positively charged holes, that in turn generate electric current.

The energy bands refer to the large number of tightly spaced energy levels associated with crystalline materials. Because electrons behave in wave like movements, their movement interferes with neighboring atoms. The physical properties of semiconductor material are much then those of metals. The minimum energy required to free an electron in metal, ( photo-electric effect) is significantly less than that of semiconductors. For metals the energy bands are more or less continuous, the valence band and the conductive band overlap.

In semiconductor materials such as crystalline, energy bands are grouped into bands, hence energy bands. In crystalline material, the energy bands are split between an upper band called the conductive band and a lower band called the valance band. The energy band gaps in photovoltaic semiconductors are different depending upon materials used. The separations of energy bands in crystalline materials results in gaps between the energy bands and are referred to as the energy band gaps. There are discrete and direct band gap materials. Direct band gap refers to having the conductive band minimum energy value and the maximum valance band energy at the same value such as metals. Please see Bart Van Zeghbroeck’s Principles of Semiconductor Devices chapter 2 for a review of energy bands and semiconductor band gaps.

Figure 1 Semiconductor Band Gaps

With a host of physics equations, models, functions, and laws, one can calculate the energy band gaps for semiconductor materials. In addition, one can alter the band gap of the material through, heat, pressure, or introducing impurities into the material (doping the material) to change its physical properties. In general, the more direct the band gap, the more efficient the band gap material. However, research is working processes to improve efficiencies through doping the material and introducing new materials. The processes seek to narrow the band gap of the semiconductor and thereby improve their efficiencies.

One must remember the cost efficiency tradeoff in evaluating which semiconductor material is best in achieving efficiency and cost parameters. Again, the Shockley-Queisser limit of approximately 30%-to-32% for single junction solar cell and a thermodynamic limit of about 83% are also constraint to improving solar energy efficiency. Please see “Detailed Balance Limit of Efficiency of p-n Junction Solar Cells” (W Shockley and HJ Queisser, Journal of Applied Physics, 1961). Semiconductor materials have limited efficiency because excess photon energy generates heat and not electric current.

Research studies on improving solar energy efficiency are embracing numerous fronts including concentrators and multi-junction semiconductors to impact ionization and spectral conversion. For a quick review, please Imperial College, Jenny Nelson’s Third generation Solar Cells. Multi-junction semiconductors employ two or triple junction semiconductor material to capture excess photon energy. A good overview on solar energy is presented by the DOE’s National Renewable Energy Lab (NREL) Third Generation Solar Photon Conversion (Exceeding the 32% Shockley(Exceeding the 32% Shockley—Queisser Limit)

Figure 2 Approaches to PV Cell Efficiency

There should be considerable excitement given the potential that greater efficiency should be able to drive solar energy costs lower. With PV cells below $3.00/watt (or $0.15/ kilowatt-hour), solar energy with be close to parity with conventional electric rates which are about $0.11/KWH. The bottom line is innovative research has the potential to offer the disruptive technology that significantly changes the economics of delivering an energy solutions to all nations.

Oil prices remain at historically high levels and threaten our economy with higher home heating and transportation costs. With a lot of rhetoric over Peak Oil as well as claims that Tar Sands offer a viable substitute for oil, let’s examine a couple of facts to determine the feasibility and sustainability of supplementing our current demand for oil with tar sands.

According to Bureau of Land Management’s on line resource for Oil Shale and Tar Sands, tar sands are a mixture of clay, sand, water, and bitumen, which is liquid hydrocarbon oil like substance. Tar sands consist of about 10%-to-15% liquid hydrocarbon and an 80%-to-85% mixture of mineral water, clay, and sand, and 4%-to-6% water. It takes about two tons of tar sands, which are extracted, mainly through strip mining, and processed to produce one barrel of oil.

According to Alberta Energy, sand oil production was at 966,000 barrels per day (bbl/d) in 2005 and is expected to reach 3 million bbl/d by 2020 and possibly even 5 million bbl/d by 2030. Alberta’s sand oil reserves at 1,704 million barrels, but proven and extractable using current technology, the estimate is 175 billion barrels which is second to Saudi Arabia’s 260 billion according to CBS 60 Minutes

However, with productions level of Alberta’s sand oil at 3 or even 5 million barrels per day, it represents just 4%-to-6% of the world’s oil needs. The U.S. consumed an average of approximately 20.5 million bbl/d in 2006 as indicated by the Energy Information Administration.

If it takes two tons of tar sand to produce one barrel of oil, the ability to increase production to 3 million barrels per day would amount to mining of 2.1 billion tons of tar sand. Total coal mining in the U.S. for 2006 was 1.1 billion tons according to EIA Coal Data At 5 million barrels per day, equivalent to about 6% of the world oil production in 2006, would amount to 3.6 billion tons of tar sand. That would be significantly larger than the 1.3 billion tons total world production of Iron ore in 2005 Info Comm. That appears to be a lot of mining for a 6% increase of oil on the world market. The added tar sand oil would make a significant contribution to U.S. oil needs.

According to the Canadian Association of Petroleum Producers capital investment in Alberta’s oil sands amounted to $10.4 billion in 2005. That’s not a bad investment considering that even with production levels of 1 million barrels a day, revenue potential could be $29 billion a year with oil over $80 per barrel.

Figure 1 U.S. Oil Supply and Demand

Given the that tar sands only provide a fraction of our energy requirements and is burdened by carbon emission even during extraction, a commitment to solar energy fuel cells may offer a better return on investment. The bottom line is oil derived from tar sand is only a supplement to our energy demands, it’s non-renewable, adds to carbon emissions, requires extensive processing, and must be mined.

With rising energy prices and growing concern over global warming, will advances in solar and alternative energies enable the development of affordable and efficient energy solutions. Caltech research on the energy conversion process may offer some insight.

Energy conversion, ways of converting sunlight to electric and chemical energy, offers promising advancements to make solar and hydrogen energies more practical and affordable. On the forefront of energy conversion research, the framework of developing disruptive energy technologies, is The Lewis Group, that is part of the California Institute of Technology’s division of Chemical and Chemical Engineering. The Lewis Group is working in several research areas some geared towards to better understanding of energy capture, conversion of light into electrical and chemical energy, and energy storage. These research projects include photo-electrochemical, which focuses on the chemistry of semiconductors and materials, surface modification of semiconductors to improve electrical properties, and nanocrystalline titanium dioxide that could potentially lead to significantly lower cost for converting sunlight to electrical energy. The Lewis Group research projects are much more than improving photovoltaic devices; they are also exploring ways to convert sunlight into stored fuel energy.

While we are providing a brief and very oversimplified view of the solar energy research, it is important to understand the dynamics of energy conversion because the conversion process impacts the efficiency and the production cost of photovoltaic (PV) devices and fuels cells. The Lewis Group has an interesting PowerPoint presentation available for download providing an overview of energy from consequences of CO2 emissions to the latest in new technologies to improve alternative energies. Of particular interest are the historical efficiency trends for various materials used in crystalline and thin-film solar cells, energy conversion strategies of turning light to fuel and electric, and the cost/efficiency tradeoff in photovoltaic devices.

Cost/Efficiency Tradeoff
Photovoltaic devices are limited in their practical efficiencies governed by the thermodynamic limits and production costs that involve tradeoffs in materials, production processes, and PV device packaging. The Lewis Group provides a thorough illustration of the efficiency trends for various PV devices materials such as crystalline silicon used in semiconductors as well as the new approaches to thin film PV including amorphous silicon, cadmium telluride (CdTe), copper indium deselenide (CIS) and copper indium gallium deselenide materials (CIGS). These thin film material could offer substantial PV devices price reductions as a result of higher efficiency or lower production costs.

Figure 1 Cost/Efficiency Tradeoff

There is a tradeoff between improving the efficiency of a PV device, that is the amount of electric energy per solar panel, and the cost to produce the PV device. The average efficiency for a PV device is between 15%-to-16% and the average cost between $100-to-$350 a square meter. The cost per square meter and PV efficiency measured in watts per square meter can equate to a cost per watt, which ranges from $1.25/watt to $2.00/watt. SunPower (SPWR), offers the leading PV single junction device efficiency of 22% employing crystalline silicon and is expected to reach 500 megawatts (MW) production capacity by late 2009 from 330 MW in 2007. First Solar (FSLR) is ramping its thin film cadmium telluride (CdTe) solar technology by leveraging its low cost advantage with high volume production with its 75 MW in operations Ohio and 100 MW coming online in Germany. Startup Nanosolar is focusing on thin film solar PVs with a blend of copper indium gallium deselenide (CIGS) materials along with a manufacturing process much like printing, by placing the material blend upon metal foil. Evergreen Solar (ESLR) employs an integrated manufacturing process from wafers to cells and panels based on its proprietary String Ribbon Wafer technology with production levels at 118 MW in 2007.

There is presently a practical limit to solar efficiencies of approximately 30% and a thermodynamic limit of about 83%. The Shockley-Queisser limit at 30% for single junction solar cell efficiency is a function photon absorption in a material. “Detailed Balance Limit of Efficiency of p-n Junction Solar Cells” (W Shockley and HJ Queisser, Journal of Applied Physics, 1961) found that photons delivering excitation energy above a threshold (the band gap) for charge carrier electrons is lost to heating, meaning excess photon energy generates heat and not electric current. Photons with energy levels below the band gap pass through the material and photons above the threshold are absorbed. The absorbed photons transfer their energy to excite the electrons in the material and create pairs of negative electrons and positive charges that, because of their repulsion, travel to opposite ends thereby generating electric current.

According to the Lewis Group, other factors that limit PV cell efficiency include reflective loss of approximately10% for a material like silicon and a fill factor constraint that peaks at 83%. The fill factor restraint is attributable to the current-voltage characteristics of a PV cell that deals with matching the photocurrent density and voltage.

NREL (DOE lab) and Spectrolab (a Boeing company BA) using a multijunction semiconductor approach along with solar concentrators have achieved solar cell efficiencies of 40.7% in lab experiments while commercial products operate at 26.5%-to-28.3% efficiency range. Solar cell suppliers could reduce costs through production improvements or improve PV efficiencies without adding to costs. PV cell suppliers should benefit from economies of scale to reduce production costs while advances in technology improve PV efficiencies.

Research conducted by the Lewis Group at Caltech indicates that materials selected for PV devices have unique properties in their ability to absorb sunlight and generate electricity. In their analysis of semiconductor materials, the Lewis Group research found two parameters, determined by the physical properties of the material, that influence the PV’s efficiency. One is the thickness of the material, measured in microns, required to absorb enough sunlight to bring particular atoms in the material to an excited state, thereby freeing the electron to generate an electric current. The second parameter in the PV material is length of time the excited electrons last before recombining to generate heat instead of electric. Some materials such as silicon require material thickness of 100 microns while gallium arsenide (GaAs) only 1-to-3 microns.

Energy Conversion
Conversion of energy into electric or fuel is advancing through research in photoelectrochemical materials for solid and liquid fuels. Improvements in efficiencies for PV devices and fuel cells offer tremendous potential for transportation and home electric use.

Figure 2 Efficiency of Photovoltaic Devices

From figure 2, it seams quite apparent that PV efficiency has improved substantially since the 1950’s. Please see the Department of Energy (DOE) Basic Research Needs for Solar Energy Utilization for detailed analysis of solar energy. Further progress in PV and fuel cell technologies is predicated upon successful funding of further research. The bottom line is that only through innovative research will a truly disruptive technology be developed that has the ability of changing the economics to deliver an energy solutions to all nations.