Monday, June 05, 2006

BioTown Independence

I was intrigued by an article in Sunday's New York Times concerning a town in Indiana that aims to become energy independent by harnessing the energy potential of hogs, soy and corn. They intend to replace their gasoline "imports" with ethanol, diesel with biodiesel, and natural gas with methane from manure. With only 533 people in town, Reynolds, Indiana might just succeed, and I wish them well, especially if they take this to its extreme and actually close all the open loops implied by this approach. At the same time, Reynolds provides a cautionary tale in our present concerns about energy. As bizarre as it may sound coming from a blog called Energy Outlook, I see a real risk that we're placing entirely too much importance on energy and losing our perspective.

Consider the challenge faced by the people of Reynolds. Not only must they grow enough crops to produce about 250,000 gallons per year of fuel, based on average per capita consumption in the US, and convert enough manure to displace the natural gas used by all their homes and businesses, but if they want to do this right, they also have to generate enough excess gas to run their ethanol and biodiesel plants and to replace the natural gas that went into making all the fertilizer this operation is going to require. This is a useful experiment, because it would finally settle a question that has dogged the fuel ethanol industry since its inception: how large is the energy surplus it creates? The latest estimate is 20%, but if skeptics are right, there's a net deficit and any attempt to "close the loops"--at least using traditional, rather than cellulosic ethanol--will fail.

There's another way to look at this endeavor, though. The scale of the challenge for the self-proclaimed "BioTown" is enormous, not because energy companies have gotten us addicted to cheap energy and then squeezed us to maximize their profits, as some suggest, but rather because the energy surplus created by fossil fuels is so large. BioTown, which the governor of Indiana apparently sees as "a stunt," might just succeed at becoming self-sufficient in energy, but scaling this up across the entire country would stand the whole economy on its head.

In our worries about the stability and cost of imported oil, we can't afford to lose sight of the fact that energy isn't an end-result for a country like ours; its very importance derives from its key position near the beginning of so many value chains, as a key input in much of our economic activity. In order to be cost-effective, our sources of energy much be highly leveraged. In other words, they need to return large quantities of energy for modest energy inputs, to provide the energy surplus to fuel our GDP. That's not an argument against renewable energy, per se, but it does provide a tough criterion that some of our current alternative energy efforts could not pass. If every town in America followed Reynolds in becoming energy self-sufficient, we'd have all the energy we need for our homes and cars, but nothing to sell to the countries that make our computers, TVs, iPods, and all the other goods we import.

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