The Coming Lithium Shortage
Late last week, William Tahil, the director of research for Meridian International Research in France, sent me a copy of a white paper his firm just published entitled, The Trouble with Lithium. It is one of the most disconcerting documents I've seen in a long time. I was so troubled by its contents that I immediately contacted Mr. Tahil and asked to do a telephone interview with him to discuss his findings. By the time you read this, we should be into that dialog, but I wanted to give you, as a premium subscriber, advance notice of it.

The gist of the paper is that there is not enough lithium carbonate and lithium chloride -- the two key salts used to formulate lithium metal for advanced batteries -- in the world to produce the necessary batteries to convert the world's gasoline and diesel fleet to HEV0 (conventional hybrids), PHEVs and battery electric vehicles or BEVs. And even if there were sufficient deposits, most of which are located above 3000 meters in the Bolivian, Chilean and Argentine Andes in ancient dry lake beds, at current rates of worldwide production it would take 75 years to build one billion 5kWh battery packs.

But won't demand for more lithium result in greater production and therefore lower prices? Not necessarily as you'll learn when I talk to Mr. Tahil. Well, what about mining the oceans and how about all those deposits of Spodumene; and isn't there a study out of Sweden that indicates there's plenty of lithium for billions of electric cars? All good questions and I'll be asking them and more. But to kindle your curiousity , here's just one chart from Meridian's paper.

Big Business and Environmental Leaders Call for Climate Action
In an revealing sign of the times, some of the world's largest multi-national corporations have joined hands with top-tier environmental groups in a unified call for action on global climate change. Alcoa, BP, Caterpillar, Duke Energy, DuPont, FPL Group, GE, PG&E have partnered with several environmental groups including NRDC, Environmental Defense, Pew Center and World Resources Institute in forming the US Climate Action Partnership, which just this week published its first Climate Report.

In the report, the group makes the following recommendations to Congress:

* Enact Legislation as Quickly as Possible
* That legislation needs to achieve GHG stabilization over long term at 450-550 ppm of CO2.
* The overall approach must also be cost-effective
* A cap and trade system is essential
* Establish short and mid-term GHG emission targets
* Emission offsets purchases should be allowed
* Emission allowance allocations also need to be established
* Cost control measures needed to ensure long-term price signal stability
* Establishment of national emissions inventory and registry
* Credit given for early action
* Federal R&D/demonstration programs need to be established
* Sector-specific policies and measures needed.

The last of these recommendations is focused largely on coal-based energy systems, which fuel half of the electric power grid on the United States and 70% of China's, the world's two largest GHG emitters. The partnership specifically recommends the following:

Policies are needed to speed transition to low- and zero-emission stationary sources and strongly discourage further construction of stationary sources that cannot easily capture CO2 emissions for geologic sequestration. Regardless of how allowances are generally allocated, they should not be allocated to such new sources.

Congress should require the EPA to promulgate regulations promptly to permit long-term geologic sequestration of carbon dioxide from stationary sources. Congress should fund at least three sequestration demonstration projects in depleted and abandoned oil and gas fields and saline aquifers with CO2 injection, each at levels equivalent to emissions produced by a large coal-based power plant.

One of the oft-heard objections to electric-drive vehicles is the fact that they are powered by electricity generated by dirty, coal-fired power plants; therefore, they can't be any cleaner. This assertion has been answered many times and shown to be in error on a number of points, but if we are to prevent it from becoming true, then carbon sequestration and other pollution control measures, as well as increased reliance on renewable energy, need to be speedily implemented. We can't build anymore coal-fired plants without making sure they have to be upgraded to new technology as it becomes available; and we no longer permit the grandfathering of obsolete plants.

Only then can we say EVs are non-polluting.

Where Fuel Cells Make To Sense
Steady progress continues to be made in fuel cell technology from micro fuel cells to stationary power units, though cost and durability continue to be issues. What you're hearing less of is work on automotive fuel cells, though work here continues as well. But what we appear to be seeing is a realization that while the technology is ideal for low-power and high-power uses like laptop computers and industrial-sized generators, it seems less well suited to automotive uses, though clearly it does work. In late November, I finally got to drive GM's Hydrogen3 fuel cell Zafira around the block in front of the U.S. Capitol Building in Washington, D.C.

But as EROEI (energy return on energy invested) becomes a much more critical part of evaluating any technology, it seems to me that the real promise of fuel cell technology isn't in the car, but on the ground. A recent study by Frost and Sullivan supports this view noting that whereas competing power generating technologies are at best 30-35% efficient, stationary fuel cells are 40-49% efficient in energy utilization; and when the heat is utilized from the fuel-cell reaction, the overall efficiency rises to between 80-85%. Where this heat is a problem for automobile engineers, it's a boon to co-generation.

Which helps explain why pioneer fuel cell maker Plug Power and German-based Vailant Group have been awarded a $6.8 million grant by the EU and the U.S. Energy Department to develop fuel cell-based co-generation units that provide both power and heat (and possibly cooling) from the primary fuel source. This approach makes vastly more sense to me as the pathway towards fuel cell commercialization than trying to shoehorn fuel cells into cars at the current state-of-the-art.

Whatever Happen to Peak Oil?
Oil prices appear to be in free fall. Prices have dropped for the first time in a year-and-a-half below $50 a barrel. Pundits cite this as proof the peak oil theory is dead and done for. But is it really? I suspect we'll hear from ASPO and ODAC, both groups that study peak oil shortly, but in the meantime, I'll offer my take on what's happening, starting with the weather.

Up until a last two weeks or so, the weather has been unusually warm in North America, which has lessened the demand for heating oil, allowing refiners to build up inventories and reduce the amount of fuel they've had to buy on the open market.

Next, I think more Americans are coming to the realization that oil is a finite resource and that prices are likely to continue to be volatile, ranging as they have from $75 a barrel to less than $50 in the last year, and that oil prices are now driven as much by political events as production availability. A labor strike here, a terror threat there, and saber-rattling generally everywhere can set off a wave of speculative trading. Gone are the sanguine days when our Saudi friends could be relied upon to help stabilize the market.

As a result, the car buying public is starting to shift their purchases away from gas guzzlers to smaller, more fuel efficient vehicles. Industry too is realizing, as the group of multinationals in the US CAP partnership demonstrate, that energy efficiency and reducing one's carbon footprint, is not just good for public relations, it's also good for the bottom line.

Coming back to Meridian's lithium supply study, the paper notes that the explosion of basic commodity prices on metals like lithium, cobalt and nickel in the last 12-18 months may, in fact, be indicators that we've really reached peak oil. Until recently, lithium metal traded for $1/kg. In 2006, it was going for $5/kg and some Japanese battery makers are apparently offering up to $10/kg or $10,000 per metric tonne, "a tenfold increase in 2 years," Tahil reports.

The very fact that oil prices are as volatile as they are suggests to me that peak oil is very much alive and well.

Time to Set Floor on Oil Prices
In one of those strange, uncomfortable political juxtapositions, I find myself agreeing with Iran's Mahmoud Ahmadinejad and Venezuela's Hugo Chavez that we need to set a floor on the price of oil and I think $50 a barrel is a good place to start. And why would I want this you ask, and who sets the floor and how do you police it? The answer to the first question is easy. I want to prevent the market from dropping to the point where investments in energy alternatives -- from cellulosic ethanol research to advanced batteries for electric cars -- becomes economically unattractive... yet again.

In addition, higher oil prices encourage Americans to also replace their gas-guzzlers with more fuel efficient models, which then encourages car makers to offer those models, letting the market work.

Who do you have administer it and how? Those are questions for professional policy wonks, but I'd like to see that any difference between the U.S. benchmark of $50 and the International futures price, if less than the floor, be paid to the U.S. government in the way of an import surcharge and that those funds be rolled into tax incentives to encourage buyers to continue to downsize their vehicles or shift to hybrids.

And while I am in a taxing mode, how about implementing a carbon tax along the lines of what Charles Komanoff is proposing at his new web site, CarbonTax.Org. And I think we all agree that any schemes we come up with can't be regressive and end up harming those less capable of bearing the burden. I interviewed Congressman Roscoe Bartlett late last week -- that interview will be on the site later this week -- and he agrees that if we raise taxes on fuel or carbon, that we reduce it by an equal amount somewhere else, preferably in federal withholding taxes so the program is revenue neutral.

We're going to need all kinds of creative ideas like this -- and the support of our citizenry -- to make this work and happen ASAP.

Until next time, stay plugged into EVWorld...