The Cost Of Gasoline Versus The Cost Of Alternatives

The Cost of Gasoline versus the Cost of Alternatives

Kimberly Nunnery

May 1, 2006

Dr. Rosemary Carlson

FIN 660

Executive Summary

Due to the recent rise in the price of gasoline, more resources than ever have been allocated to the research and development of alternative fuel sources, with emphasis on replacing the modern automobile with one that either does not run on gasoline or uses very little of it. This rise gas prices places a significant amount stress on any company that uses modern internal combustion engines as their main source of transportation to consider switching to the newly developed alternatives.

The two main alternatives for the modern automobile are automobiles that have combustion engines that use ethanol instead of octane and automobiles that use hydrogen powered fuel cells to drive electric motors. While the price of gasoline will no doubt remain astronomical, the costs of switching to an alternative may be even higher. This analysis will compare the consequences of switching to an ethanol based fuel source to using hydrogen powered automobiles as well as compare these consequences to the hardships that would come with the rising prices in gasoline.

Since fuel prices are predicted to either stay high or continue to rise and using automobiles that run on hydrogen powered fuel cells will require a major infrastructure transformation, the switch to using ethanol will be the most cost effective decision.

Analysis

Consequences of using alternatives to gasoline

I. Hydrogen powered fuel cells

The good:

Hydrogen is clean. Chemically, hydrogen is the simplest molecule: it is simply one proton with one electron, but in the gas stage it always comes in pairs, H2. The energy that comes from hydrogen fuel cells is created when you give the H2 molecule an oxygen molecule to play with. The oxygen and hydrogen molecules bond, or join together, to form H2O, more commonly known as water. This reaction gives off a moderate amount of energy. Converted into electricity, this energy can be used to power electric motors in fuel cell powered automobiles. In essence, you can just fill your 'battery' up with hydrogen gas, and as you drain it of energy, it simply releases water vapor (Wikipedia, 2006).

The Bad:

Hydrogen itself is not found in the mines, nor does it come out of some well. Hydrogen has to be manufactured, and generally this process requires a tremendous amount of energy input. Currently, the only way to get enough energy to make enough hydrogen for a large population would be to burn fossil fuels like coal. A system using solar energy and wind energy could be used, which would be pollution free, but building such a system would require extensive research and would be extremely expensive (Energy Efficiency and Renewable Energy 2006).

Another problem with hydrogen is that, unlike the liquid octane we use today, hydrogen is a gas under normal conditions. Since hydrogen is a gas, one cannot simply fill up a can of hydrogen. A new system would have to be developed for the transportation and storage of hydrogen. The costs of building and maintaining such an infrastructure would be extremely high, and would take many years to complete. Transporting gaseous hydrogen, especially at high pressures, would also be very dangerous. Anyone who has ever heard of the story of the Hindenburg knows that hydrogen is not very safe to store. The tiniest spark can ignite a flame, and a hydrogen flame burns virtually invisible to the human eye (Behar, 2005).

A newly developed way to store hydrogen is to cool it to -253o Celsius to change it to a liquid. This cooling makes the fuel a thousand times denser, increasing the energy-to-space ratio and allowing a significantly larger amount of fuel to be transported with an automobile. The problem with this promising solution is that the hydrogen must be kept at or below -253o Celsius or the fuel will turn back into a gas (Behar, 2005).

The Price:

Hydrogen powered vehicles are still in the developmental stages. However, major breakthroughs in technology, and money from the government, has made hydrogen powered automobiles seem a likely successor of the modern automobile. A company called Anuvu, which develops fuel cells in Sacramento, Calif., sells Nissan Frontier pickups powered by fuel cells and hydrogen for about $100,000. Anuvu also sells large cargo vans that run on hydrogen fuel cells for a slightly higher $150,000 each (Llanos 2004).

Since the 70's BMW, maker of some of the world's most luxurious cars, has been developing hydrogen based technologies, and has been relatively successful in doing so. BMW has two hydrogen powered models in development today. The 750Hl is a luxury sedan with specifications comparable to its gasoline powered cousins. The more radical H2R is basically a race car, capable of speeds of over 185 miles per hour. Both of these models do not operate on fuel cells. Instead, they burn the hydrogen directly in a combustion engine.

One of BMW's main competitors, Mercedes Benz, has been focusing mainly on fuel cell technology. The reason these BMWs and Mercedes have not had wide scale production is simple. Best stated in an MSNBC report on hydrogen cars, Juergen Hubbert, head of DaimlerChrysler's Mercedes division said, "Costs are still by far too high" (Schmeid 2004).

II. Ethanol

The Good:

The most important factor in the decision to use ethanol as a fuel as opposed to hydrogen is that, because ethanol is similar to gasoline in the fact that they are both liquid under normal conditions, the infrastructure required to store and transport ethanol is identical to the infrastructure in place today. Unlike switching to hydrogen as an alternative to gasoline, switching to ethanol or a blend of ethanol would require much less initial capital investment.

Ethanol, sometimes known as biofuel, can be burned in many of today's automobiles' combustion engines with little to no changes to the engine itself. Since the alcohol is similar to gasoline the two fuels can be mixed, resulting in gasohol. Recently, a mix of 85% ethanol and 15% gasoline, called E85, has been popular.

Ethanol