Liquid Gas

With natural gas prices low, methanol due for a comeback, says Fuel Freedom Foundation

Samantha Oller, Senior Editor/Fuels, CSP

Freedom Fuel Foundation

IRVINE, Calif. -- It rhymes with "ethanol" but could be less controversial and more cost-effective: At least one alternative-fuel advocacy group, launched by software entrepreneurs, is placing all of its bets on methanol produced from natural gas.

The Fuel Freedom Foundation describes itself as a nonpartisan group dedicated to breaking America's addiction to petroleum by placing all fuels--from regular unleaded and diesel to natural gas, ethanol and electricity--on an equal competitive footing at the car dealership and fuel stations. And it has some high-profile backers, beginning with Eyal Aronoff, who cofounded Quest Software (sold to Dell in 2012), as well as former software exec and entrepreneur Joseph "Yossie" Hollander.

In an exclusive interview with CSP Daily News, Aronoff noted that methanol has faced the same barriers to entry as other alternative fuels, beginning with petroleum's entrenched position in the auto fleet, supply chain and regulatory establishment. But with the natural gas boom, those built-in competitive advantages may not hold much longer.

"What we have been seeing in the last few years is a phenomenon of the separation in price between natural gas and petroleum," Aronoff told CSP Daily News. "This separation creates a very interesting possibility: fuels created from natural gas, which would be, in principle, much cheaper than those made from petroleum."

Aronoff refers to methanol, or "wood alcohol," which can be created from various bio feedstocks but most economically from natural gas. Back in the 1990s, methanol was available as an alternative fuel for compatible vehicles--most extensively in California--and it continues to fuel racecars at the Indianapolis 500. Its expansion stalled as focus and political tailwinds turned toward corn-based ethanol.

But with natural gas prices at record lows, methanol is due for a comeback, the foundation believes. Unfortunately, there is one pretty big roadblock: Auto manufacturers do not currently make commercially available methanol-powered models.

Aronoff argues that this hurdle, at least from a technical standpoint, is simple to surmount, and naturally, the solution is software. Car manufacturers, he said, have created a single physical engine structure that can accommodate the many different fuels used throughout the world; for example, regular unleaded in the United States, methanol in China and E100 in Brazil. The only difference between these cars beyond their fueling system is the software in the car's computer that determines how the engine burns fuel.

"We figured out that by upgrading software in a car, plus maybe a few changes to the fuel system--the lines, fuel injectors--we can convert a large portion of the existing fleet to run on basically any liquid fuel," he said, including methanol. The cost would be under $300 per vehicle.

Multiplied across the U.S. automotive fleet, however, this figure gets big fast, and how the upgrades would be paid for is not yet clear. "Our assumption is that the [automobile] drivers would have to do it," Aronoff said. "But we do think in terms of retailers, they have a great vested interest … to help in propagating this and maybe funding this." His reasoning: Methanol has only 49% of the energy of one gallon of gasoline, which means that drivers would need to fill up more often.

"Of course, for a gas station owner who makes a large portion of profits from the c-store, if people have to come more often, that's a great advantage," he said. The Fuel Freedom Foundation plans to meet with the largest gasoline retailers--Aronoff named Kroger, Walmart (through Murphy USA) and Costco--to discuss the possibility of assisting with vehicle conversions and installing methanol.

A possible methanol fueling installation could involve a shipping-container size device that would convert natural gas into methanol on site, similar to equipment that already exists for compressed natural gas (CNG) fueling installations. Based on the current price of natural gas, it would price around $1.50 per gallon, not including taxes. The Fuel Freedom Foundation is planning demonstration projects in a couple states to be announced toward year's end.

To make up for the inconvenience of having to fill up more often, methanol would have to be priced at a satisfactory differential to regular unleaded--just like E85, which has 73% to 83% of the energy of a gallon of gas, according to U.S. Department of Energy figures. Aronoff--who considers E85 "the ugly stepbrother of E10," noting that most ethanol created in the country is sold in E10, indexing the price of ethanol to that of gasoline--believes methanol will not suffer the same fate.

Methanol has the advantage of not requiring a food crop as a feedstock, avoiding the pricing dynamics that corn-based ethanol faces. "In terms of converting natural gas to a liquid fuel like methanol, or byproducts to create methanol—the availability of feedstock is very, very large," Aronoff said. "We have five times the reserves of natural gas than oil."

By Aronoff's calculations, methanol created from natural gas would enjoy a significant margin compared to regular unleaded. "We believe this will create great motivation and incentives for players," he said, noting that Valero is investing $700 million in a methanol plant at its St. Charles, La., refinery.

"This is the first shot over the bow," he said. "If methanol becomes a viable fuel because the cars could take it, we would see competition. Companies that jumped into it early would make huge profits … but eventually it will bring down the price of gasoline, and everything will go down."

Acknowledging that it will tough to get any kind of legislative sweeteners for methanol passed, the Freedom Fuel Foundation is making the case with commercial interests, from regulators to auto manufacturers to fuel retailers, that methanol is in their best interest, citing the competitive pricing, lower greenhouse gas emissions and urban pollution, and the appeal of a domestically sourced fuel.

"We believe it's in the best interest of everyone," said Aronoff, "except for small group of people who own oil property."

For more on developing the infrastructure for alternative fuels such as methanol, see the October issue of CSPmagazine.