College of Agriculture and Life Sciences. Academics. Research. Extension

Perspectives Online

« N.C. State scientists discover chemical cues that stimulate egg laying by pregnant mosquitoes | Main | YOU DECIDE: Can consumers make gas prices fall?»

YOU DECIDE: If it can be done, should it be done?

July 11, 2008

MEDIA CONTACT: Dr. Mike Walden, 919.515.4671 or michael_walden@ncsu.edu

Dr. Mike Walden
Media representatives: For a black-and-white or color copy of this photo, call 919.513.3127 or e-mail dave_caldwell@ncsu.edu.

With oil prices approaching $150 a barrel and gas at more than $4 a gallon, everyone is looking for an alternative to these two fuels.

And just about every day, it seems, the "next fuel" is discovered.

Recently I read about Canadian scientists claiming to have extracted fuel from the unwanted and disliked kudzu plant. I had to smile when I saw this, because a couple of years ago I wrote a novel (the "economic thriller" Micro Mischief), which was based on this very premise! Who would have ever thought?

But "kudzu fuel" is just the latest. People are excited about fuel from crops, grass, animal waste, wind, rocks (oil shale), the sun, ocean tides, under the ground (geothermal) and from hydrogen, to name a few.

However, any fuel - indeed, any invention - must pass two tests to be successful. The first is simply that the invention is technically possible: it must work. This means that we can use the kudzu plant to make a fuel to power our cars and trucks, or that solar power can be transformed into electricity to heat and cool our homes.

The technical test also goes beyond the laboratory. A fuel is of no practical value unless it can be delivered from the production point to the end user. So promoters of alternative fuels must also think about how that fuel will be trucked, piped, wired or otherwise sent to the millions of necessary convenient outlet points for consumer use. This has been an issue with ethanol.

Safety and pollution are other considerations in the technical feasibility of fuels. Clearly, we want a fuel to be safe in its production, delivery and use. While safety is taken for granted with current fuels like oil and gasoline, it is an issue with the fuel that many see as the successor to oil: hydrogen. Advocates of hydrogen power are working hard to overcome questions about safety, and they will have to pass the safety tests beyond a shadow of a doubt for the fuel to be feasible and accepted.

So, too, with pollution.

We want alternative fuels to be low polluters both as they are manufactured and as they are used. By this standard, there are some concerns about fully electrically powered vehicles. The issue is that electricity is not a basic fuel; it must be generated from some other source like oil, coal, water or nuclear plants. So if, for example, a shift to electric cars increases coal-based electricity generation, air pollution may actually rise.

If all the technical tests for a fuel are passed, there still looms one more hurdle: the economic test. For any fuel to be successful, enough consumers must be willing to pay a price high enough to cover all the fuel's costs.

It's this economic test that's making it so hard for many alternative fuels to break through to widespread use.

Although it has become cheaper, by most measures solar power is still more expensive than other heating and cooling fuels, especially when the cost of installing the panels is included. The same goes for wind power and tide power.

Some suggest the government level the price playing field between conventional fuels and alternative fuels by increasing taxes on conventional fuels and providing subsidies to alternative fuels. Indeed, many alternative fuels do receive subsidies in their discovery, production and purchase by users. But there's always an issue of the size of such subsidies and their impact on federal and state budgets.

And, of course, any move to substantially increase taxes on conventional fuels (such as gasoline), especially at a time when those prices are historically high, would likely run into severe opposition.

It's the twin issues of technical feasibility and economic reality that make the development of alternative fuels so difficult.

One prediction that, at least to this economist, is a sure thing: As the price of conventional fuels rises, more and more alternative fuels will pass both tests.

But you decide if we can get from here to there any faster!

- 30 -

Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University's College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The Department of Communication Services provides his You Decide column every two weeks. Earlier You Decide columns are at http://www.cals.ncsu.edu/agcomm/writing/walden/decide.htm

Related audio files are at http://www.ncsu.edu/waldenradio/

Posted by Dave at July 11, 2008 02:47 PM