INSIGHT: Methanol's comeback as a possible vehicle fuel in the US

20 February 2013 16:27  [Source: ICIS news]

By Lane Kelley

HOUSTON (ICIS)--The recent push for methanol as an alternative transportation fuel seems a lot like a third-party presidential candidacy in the US.

The appeal of such candidates usually is that they have major differences with competitors in both of the two major parties. The big selling points for methanol are that it is made from natural gas in the US, not oil, and is a lot cheaper than gasoline.

Little-known candidates always have to fight for name-recogntion. A high point in the methanol push came about two years ago, in late 2010, when researchers at MIT released a study declaring that there were no technological hurdles to using methanol as a transportation fuel and a number of advantages.

If the report had come from a trade group - say, the Methanol Institute - it would have been just more industry shop talk and dissolved like a raindrop in the downpour of information on the internet. But the MIT researchers gave the idea instant credibility.

More respect came from an op-ed in the New York Times in early 2012, 'The methanol alternative to gasoline', written by former US Homeland Security Secretary Tom Ridge and former Secretary of Transportation Mary Peters.

Their piece cited President Barack Obama’s call for using natural gas as a fuel alternative to oil and gasoline to reduce the strategic importance of oil. “But first we need cars that run on methanol, a high-octane fuel made from converted natural gas,” said Ridge and Peters.

The MIT study and New York Times op-ed were big publishing events for the methanol-as-fuel campaign, yet they were only footnotes in an ongoing phenomenon already occurring in North America. That would be the shale boom and the rebuilding of the US methanol industry to take advantage of cheap natural gas, its major feedstock.

A reasonable expectation that has gained traction steadily over the past two years is that the US will produce all the methanol it needs by 2017-18, with no need of imports.

Besides being derived from natural gas, another big pitch for methanol is that it’s much cheaper than gasoline.

At current spot levels, methanol costs less than half the price of gasoline in the US. But it will only take you half as far - you probably need to buy two gallons of methanol to get as much mileage as one gallon of gasoline.

Imagine what would happen to the price of methanol if it took off as an automotive fuel in the US? This was just one of the questions raised in what so far has been the only critical piece in the methanol campaign, 'The (possible) problem with methanol' which appeared in early January on the Council on Foreign Relations website.  Written by a policy expert in New York, Michael Levi, the essay said creating a new market for methanol (as an auto/truck fuel) would raise the price.

Levi said in a phone interview that the general response to his essay was that it was anti-methanol. “It’s not,” Levi said. “I’m not against this. It’s just that if you’re going to get people to do this, it’s best that you come up with a way to tell them what they’re going to get out of it. And I would say that in general about all of the alternative ideas being shopped out there, about biofuels and electrification and all the other ideas about reducing our dependence on foreign oil.”

Another policy expert disagreed. Gal Luft, co-director of the Institute for the Analysis of Global Security, a Washington-based think tank, said competition tends to drive prices down, not up.

Luft went to China last year to study the country’s use of methanol as an auto fuel. Methanol made from coal has become a viable alternative there, replacing 5% of the country’s gasoline demand in less than a decade, Luft found. There have been over 100m vehicle refuelings with methanol in China, many in cars that run on M100 or M85 made by four major automakers (Cherry, Geely, Shanghai Automotive and Maple).

So far, methanol at the pump in China is the cheaper fuel, with M100 at 34% of the cost of gasoline. Luft says that as long as the price of a gallon of methanol is less than 62.5% of the price of a gallon of gasoline, methanol is less expensive per mile.

In a phone interview, Luft said that methanol, because it is made from natural gas in the US, would help reduce oil’s strategic importance here. “My philosophy can be said in one word,” said Luft. “Competition.”

But the methanol-as-fuel campaign has already encountered competition in the US and come up short.

Methanol had been used in Indy race cars for decades, but in 2007 the Indy Race League endorsed pure ethanol - Indiana is a major producer of corn, the feedstock for ethanol in the US.

California began an experimental programme in 1980 allowing drivers there to convert from gasoline to methanol, and the programme lasted until 2005, when it was terminated by then-California Governor Arnold Schwarzenegger, who stopped the methanol program in favour of using ethanol in cars.

Schwarzenegger predicted that methanol “would be back,” paraphrasing one of his famous movie lines, and he was right, considering the recent methanol-as-fuel push. But the petrochemical is clearly on a losing streak when paired against ethanol, at least in the US. Even the MIT study that touted methanol as a safe and viable transportation fuel noted that it was not as good a fuel as ethanol in terms of energy density and ease of handling.

Methanol also has a major regulatory hurdle in the US: it has not been approved as an alternative auto fuel by the Environmental Protection Agency (EPA), which has written regulations for corn ethanol. 

Converting a car to run on 100% methanol is said to cost only $100, but automakers have been reluctant to make the adjustment without EPA approval. A bill in the US House of Representatives, the Open Fuel Standard Act, would require auto companies to design cars that can run on all manner of fuels, including methanol, but the bill has been  in committee for two years and has not come up for a vote yet.

Small wonder that a recent pro-methanol entry on the Motley Fool investment website said “methanol makes sense as a fuel China”.

By: Lane Kelley
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