Sun King* – Star Island: Where History and the Future Meet – Part 2

At Franklin Pierce University we offer an MBA in Energy and Sustainability Studies. In this program we provide students with all the business basics that are taught in traditional MBA programs such as marketing, finance, business leadership, etc but we also provide them the opportunity to focus 25% of their studies specifically into energy and sustainability studies. In these energy focused courses, students are required to submit a final project on an energy related topic of their choice. These projects are usually of very high quality and I end up learning a great deal from them myself.

This week I bring you Part 2 of a great project that was submitted by Chris Moore, one of the students in the Energy and Sustainability Program, who wrote about a New Hampshire focused project in the GM550: The Future of Energy, Business and Society course this past Spring.  You can find Part 1 here.

Star Island:  Where History and the Future Meeting – Part 2. Authored by Chris Moore for GM550: The Future of Energy, Business and Society at Franklin Pierce University

http://www.flickr.com/photos/davidwilson1949/8442350647/in/photostream/

In Part 1, the energy challenges for a Star Island and its resort hotel, located off the coast of New Hampshire were described. All the energy for the island was provided by old diesel fueled generators that would soon be out of compliance and energy costs were high. For all those reasons and more, a Request For Proposal (RFP) was released by the Star Island Corporation (SIC) to find a solution to the Island’s energy problem.  SIC received several proposals from highly qualified bidders for this project, however  there was one innovative bid that captured their attention. It was the genius of Clay Mitchell and the talented team at his alternative-energy company, Revolution Energy, that won over the SIC Board of Directors.

Green Solutions by Clay Mitchell and Revolution Energy, LLC:

”Solar was the only logical solution”, Clay commented during our conversation of how he and his team chose the generating source.  He continued, “There is not enough wind out there in the summer time when the Island is at peak demand; wind was never really a serious option”.

His solution is simple in concept - photovoltaic solar panels with propane gas backup - yet incorporates the latest in electrical controls and solar technology to maximize all efficiencies from the system.  The most recognizable part of the system will be a nearly one-acre solar array made up of six or seven individual panels and situated on a relatively remote part of the Island. See the figure below. 

Because the Island sees its peak energy demand during the summer season and has very little demand in the winter, the solar arrays are able to be positioned at a 10 degree angle which optimizes for the path of the summer sun.  This nearly flat positioning was also most acceptable to the historical committees of SIC and the town of Rye, NH because it did not detract, visually, from any of the Island’s historical landmarks.  These solar voltaic panels along with two new ultra-efficient and quiet propane backup generators will feed into a large battery bank which will be housed where the old diesel generators are currently located.

The 200 kW solar arrays will produce approximately 52% of the annual kilowatt hour energy demand during the operating season and the remaining demand will be satisfied by two new ultra-efficient propane generators.  The chart below shows the Island’s demand curve against the solar array’s power-generation curve for the operating season of the Island. It is worth noting that the kilowatt hours calculated for the Island’s energy demand incorporates a reduction of nearly 25%.  This reduction is the result of various energy efficiency upgrades within the buildings on Star that would be part of the Island’s energy overhaul with this project. According to Clay Mitchell, those energy savings will be accomplished using a variety of approaches; including ratcheting back on the operation of the energy intensive reverse osmosis unit the island uses to generate drinking water. In the future, drinking water will be supplied by treating water from a roof collection system and bringing in fresh water directly from the mainland more frequently. Other energy savings actions will include upgrading all kitchen equipment with high efficiency units, upgrading lighting units, as well as operational changes and, in the future, equipment changes to the wastewater treatment operation.

The two new ultra-efficient propane generators will be fully synchronous and controlled by a charge controller to help replenish the battery banks when they dip below a certain level of discharge, ensuring high quality electricity is always available when demanded. The generators will operate at a far higher efficiency when charging the batteries than they would if following the load of the island as the current diesel generators do.

Propane was chosen as a backup fuel source for two reasons; one, modern propane generators are quiet and extremely efficient, and two, because of the ease and relative safety of transportation of this fuel-type out to the Island.  Star Island will now be able to self-transport propane tanks to and from the island by way of their own maintenance boat, allowing for an increased level of energy independence. Of course, the risk associated with land or water based oil spills is also eliminated.

The generators will also be capable of bypassing the batteries altogether and will be able to provide the entirety of the demanded load in the unlikely event of failure in the battery bank.  Redundancies such as this are planned-in throughout the entire system to ensure the continuity of operations for the island. 

Financing a green endeavor:

Engineering the most efficient solar power generating system was a top priority of Clay Mitchell and Revolution Energy LLC, however he knew that this project was dead in the water if adequate financing was not available for SIC.  The financing solution proposed to Star Island Corporation that will allow them to move forward with the project involves two key features; 1) a Power Purchase Agreement (PPA), and 2) a means to utilize the federal government’s 30% alternative energy tax incentive by offering buy-in by outside investors.  A PPA was a logical route for Star to take because they have little to no flexibility from their Board-voted annual operating budget for capital expenditures, this project would be far too costly to undertake on their own.  Secondly, being a non-profit organization, Star Island Corporation is ineligible to directly benefit from the alternative energy tax incentives offered by the federal government. This fact opens up a prospective funding source for the project by courting capital investments from outside investors who can benefit from these potential tax incentives.

The proposal by Revolution Energy LLC involves the development of a secondary project-LLC named “Revolution Energy Star Island LLC”.  Revolution Energy Star Island LLC will own all equipment of the project, it will be the party responsible for implementing and managing the PPA and it will also be the entity that investors can participate in to receive the available tax credits and other project revenues as determined by the LLC operating agreement.  By approaching the project in this way, Star Island has no upfront costs with the design and installation of the system; they will essentially purchase power that the solar arrays generate from Revolution Energy Star Island LLC at a far lower rate than what they are paying with the current diesel generators.   As the owners of the installation, Revolution Energy Star Island LLC (and their investors) will be able to utilize the alternative energy tax incentives afforded by the federal government, without which this project would not be economically feasible.

There are several different avenues that Revolution Energy LLC could take to finance the final project package.  In the end, the package will likely be a blend of available finance options. Construction financing and long-term financing may be held by two different entities. Construction financing will likely be financed through Revolution Energy LLC’s pre-existing lines of credit with Provident Bank and Bank of America. Long-term debt may be held in part by individuals investing in the project to receive the available tax incentives.

Looking forward; a process of continuing improvement:

Replacing the existing diesel generators with a clean renewable power source on Star Island is merely the beginning of a laundry list of capital projects slated for their next three to five year strategic plan.  Jack Farrell, Star Island’s manager and strategic planner, mentions some projects to tackle after the power generation is in order, “finding a solution to replacing our antiquated wastewater treatment facility and managing our potable water systems are two on the very top of the list”. He adds, “what we came to realize very quickly was that all the systems out there are completely interdependent.  A change in our electricity supply will have an effect on all systems; the same is true for the drinking water system, the wastewater system…you name it, they are all connected.”

As it currently stands (at the time of this posting), the financial details and funding sources for the project are still being developed.  “It is hard to get tax equity investors right now at this level, sadly”, Clay laments when asked about the future of the project.  At this time the project is not a sure thing and shovels have yet to hit the ground, but Clay and his team at Revolution Energy have remained resolute and dedicated to bringing this much needed solution to Star.  The challenges of implementing a new power generation system at a unique setting such as Star Island is a formidable undertaking, but the potential pay-offs for the Island are tremendous.  Star Island will benefit greatly from harnessing the quiet power of the summer sun to operate their facilities and provide their guests with desired amenities.  Star Island is committed to a simple, sustainable and low impact existence; these ideals were established by necessity several hundred years ago and are the soul of Star Island’s way of life today.

http://www.flickr.com/photos/davidwilson1949/8446976290/sizes/c/in/photostream/

Chris Moore

Franklin Pierce University

12/15/13

(*Sun King: Pure unadulterated headbanging joy from The Cult, a 1980’s post-punk heavy metal group from the UK. These guys clearly spent a lot of time listening to their parents’ Black Sabbath and Deep Purple albums.  Turn up the volume and enjoy)

Crossing Muddy Waters* - Trying to Understand Retail Propane Pricing - Propane in New Hampshire – Part 2



As a consequence of the upturn in natural gas recovery from shale gas deposits, a great deal of propane has been produced as a byproduct, so much so that the US is now exporting significant quantities of propane. However, here in New England we don't seem to be benefitting from this surge in propane production. In this week's post, I endeavor to understand why we pay so much for propane in New Hampshire. 



In my last post, Under Pressure, I presented some facts and figures about propane usage in New Hampshire. I pointed out that propane was a versatile fuel as it can be easily stored, it can be used for both heating and cooking and it is particularly useful in remote areas where there is no natural gas supply. I also presented data showing that propane usage in NH is higher than in the other New England states and that propane, on an energy output basis, is presently the most expensive fossil fuel in New Hampshire.

Before we dig into propane pricing, it is useful to understand the production, processing and distribution of propane. To do so, let's follow the fate of a propane molecule that is associated with a natural gas deposit down in Texas - as that is the origin of a lot of our propane supply here in New England. The raw natural gas drawn from a natural gas well can contain between 70 and 90% methane but also, depending on the deposit, between 0 and 20% of hydrocarbon gases like ethane, propane, butanes and sometimes longer hydrocarbon chain molecules, like pentanes and hexanes. There might also be 0 to 8% carbon dioxide, as much as 5% sulfur as hydrogen sulfide, some nitrogen and water, and a host of other minor level contaminants. The first processing step is the removal of any easily condensable material, like water and long-chain hydrocarbons. This is normally done close to the natural gas well. The gas is then pumped to a natural gas processing plant where sulfur, mercury, nitrogen, and carbon dioxide are removed. Our propane molecule is all the while being batted along these various separation processes following the methane.
 
The gas mixture is then subjected to a low temperature cryogenic process in which all the other hydrocarbons, like our propane molecule as well as natural gasoline, a mixture of pentanes and hexanes, isobutene, butane and ethane, are condensed into liquid, hence the term natural gas liquids or NGL. The methane gas, now free of the bulk of contaminants, is fed into a natural gas pipeline for storage or distribution. The mixed natural gas liquids, now known as Y grade, along with the propane molecule we are following, are then routed through a pipeline to the fractionation plant where the mixture is slowly warmed up and separated into various component fractions. First to be recovered is the natural gasoline fraction, followed by butane and isobutene and then, finally, propane and ethane are separated. Our propane molecule, along with the rest of the propane fraction, after the pummeling in the fractionation plant, is then pumped to large underground storage caverns in Mont Belvieu, Texas, which serves as the main distribution hub for propane throughout the country. Pricing of propane at the Mont Belvieu hub also serves as the basis for commodity pricing of propane used by energy traders in the US. As I mentioned in my previous post, propane is also a byproduct of the crude oil refining processes: propane from Gulf Coast crude oil refining operations can also be piped to and stored in the Mont Belvieu depot.
 
To make its way to New Hampshire, our propane molecule is then pumped across country in the Texas Eastern Transmission pipeline, known as TET, to distribution points in New York State. From there it is distributed to New England retailers in rail tanker cars or propane tanker trucks. Propane is then stored onsite at various propane retailers (see photo below) and from there it is transported by a smaller propane truck to be pumped into storage tanks at residences. Propane also makes its way into New England from East Coast petroleum refineries, natural gas operations in Pennsylvania, imports from Canada and, occasionally, waterborne imports from East and Gulf coast locations, or even Europe.

 
An illustrative diagram from the EIA, showing the flow of propane from well head to a home, is presented below.

There are two large propane storage terminals in New England. Both are located on the coast - one is in Providence, RI, and the other is in Newington, NH. Both are used to receive large shipments of waterborne propane but it is my understanding that these shipments are far and few in between at the moment as a result of low propane prices and the economics of waterborne propane shipments. In April this year, a plan to install a 22 million gallon propane storage facility in Searsport, Maine, was shelved due to local opposition and changing economic conditions in the propane business. The original intent of the project was to bolster propane storage for the State of Maine which was faced with a severe propane shortfall in the winter of 2007.

Let us now turn our attention to the matter of propane pricing. Presently propane is selling for $2.99/gallon for bulk residential delivery in NH but its price at the Mont Belvieu hub is $0.85/gallon. (Just last week, I filled my 5 gallon propane tank for my gas grill and it cost me $4/gallon.) I find these spreads between the commodity and retail prices very interesting, especially as we have to bear them. I want to understand how a product that costs less than $1/gallon in purified form at the main hub ends up costing us $4/gallon or higher. I find it useful to compare fossil fuel price spreads to those between crude oil and gasoline at the pump. Crude oil last week was about $106 per barrel (Brent pricing) and at 42 gallons per barrel, this calculates out to $2.53 per gallon of crude. Compare this to refined gasoline prices at the pump at $3.53 per gallon, which gives us a $1/gallon spread to cover refining, transportation, storage, taxes, marketing and a profit margin. Now I know this comparison of crude oil to refined gasoline at the pump is, at best, an approximation - as 1 gallon of crude does not necessarily lead to one gallon of gasoline but, for our purposes, it will suffice. The table below provides some spreads for hydrocarbon fuels and, even though these spreads are not exactly comparable, they provide a useful basis of comparison for the propane spread.

I have highlighted the propane ratio - which is on the low end at the moment. There are times, particularly in the high usage winter months, that this ratio will climb to 4.5 or as high as 5.
 
What are the reasons for these high spreads in propane prices? Why should propane cost more than 3.5 to 4.5 times its wholesale price at the hub - especially at a time when we are swimming in excess propane in the USA? In fact, we now have so much propane in the US as a result of the natural gas boom, that we are exporting large amounts of propane from the US.

It proved challenging to find someone in the NH propane industry to chat to me about these price issues. In every case, my calls to various propane dealers and even to the New England Propane Association went unanswered. I suppose one could generously assume that these folks were busy and simply did not have time to share with me the complexity of the propane business. Without an insider's understanding of the business, one is left with publically available information so here is what I know:  

• The propane industry is an unregulated industry and, as such, does not come under the purvey of the Public Utilities Commission.
• There are a large number of propane distributors in New Hampshire, ranging from small operations to larger ones.
• The Consumer Protection and Antitrust Bureau of the NH Attorney General's office receives approximately 30 propane-related complaints per year.
• The propane business is highly seasonal, with sales peaking in the winter months -see the figure below.

 

 
• Propane dealers have to hold inventories of propane through the slow summer months and they have to bear the carrying costs associated with their propane inventories throughout the year.
• There are various different types of retail propane contracts out there. Some dealers will lease a storage tank to a customer. However, should a customer want to change suppliers, they have to pay significant costs to have the leased tank emptied and removed. These high changeover costs can essentially "lock in" a customer, making it difficult to change propane suppliers. A better solution would seem to be to own one's own tank but this requires a big upfront investment and some propane dealers only service their own tanks. It would seem that propane users would be beholden to a regional group of propane dealers and some propane users have complained of being held "captive" by their propane dealers.
• Generally, there is little transparency in the propane market as it is not a regulated commodity like natural gas or electricity. As such, residential propane users are subject to the whims and fluctuations in their regional distribution markets which may make getting competitive prices challenging.
• Propane prices fluctuate considerably from dealer to dealer and direct comparisons are sometimes difficult. Sometimes quoted prices are "all-in" delivery prices and sometimes they exclude delivery charges and other miscellaneous charges that get tacked on, such as hazardous material handling fees. According to the folks at the NH Office of Energy Planning, OEP, the spread of propane prices can sometime vary as much as a $1/gallon across the State.

As I worked to understand more about the propane industry, local pricing started to perplex me, especially when I compared it to national pricing averages. Consider the following facts:

• Propane production has increased in the past few years due to the natural gas boom – see the chart below.

• Due to the surfeit of propane, prices are down. In fact, propane prices used to be tightly coupled to those of crude oil. For many years, the commodity price of propane, the Mont Belvieu hub price, would run at between 60 and 70% of that of crude oil. Now the relationship has broken down and propane commodity prices are averaging about 40% of crude oil prices. This is reflected in lower propane commodity prices during the past two years as shown in the figure below. Since the peak in June 2008, propane prices are now 54% lower. In fact, commodity propane prices are close to what they were in 2004.

And what of retail propane prices in NH? Retail propane prices are collected by a survey conducted by the NH OEP and are passed along to the Energy Information Agency, EIA, where the data are made available for access. However, pricing data are only collected during the heating season, from October to March, which is the reason for the annual gaps in the NH retail propane price data I have presented in the chart below.

As can be seen, we in NH seem to have been subjected to a steady increase in the price of propane since 2004 and prices this past heating season were 226%(!) higher than those in 2004. It is interesting - and puzzling at the same time - to try to understand why long-term retail propane pricing has not reflected longer term changes in the underlying commodity prices. As I have noted earlier in this blog, the residential propane business is a very seasonal one and the challenge for propane dealers is that the bulk of retail propane sales are made in the winter months. However, they seem to be able to compensate for this by generally pushing prices higher during each heating season.

Even though I write from a NH perspective, the reader should appreciate that NH is not being singled out regarding residential propane prices: similar variations in residential propane prices have been observed throughout the US. But, here in NH propane consumers feel them more acutely as NH residential propane prices are, on average, 19% higher than the national average. That 19% average is perhaps reflective of the fact that we are pretty far down the propane distribution chain and it takes a lot to get that propane from Mont Belvieu, Texas, all the way to NH. It should be noted that I determined the 19% figure by averaging the retail prices for the individual heating seasons for the US and for NH and then calculated the ratio of the NH average heating season retail prices to those of the overall US numbers. In the figure below you can see the results of these calculations. The premium of NH propane prices to those of the US average fluctuates from year to year around the 1.19 average line but it is rather notable that the premium associated with NH retail propane this past 2012/2013 heating season is way above the average and NH propane cost 30% more than the US average. This clearly shows that NH propane consumers are not benefitting from lower commodity prices. While the US is now awash in propane and is exporting it, propane users in NH would seem to be subject to the whims of an unregulated propane market.

There is clearly much I do not fully understand about pricing issues in the retail propane market but, when compared to other fossil fuel sources, it is certainly lacking in transparency. The retail propane market is like crossing muddy waters* - one looks down and wonders what lies below the surface. Perhaps the readers of this blog might know more.

Regardless, the data clearly indicate that propane premiums in NH are presently excessive, compared to historical averages, and it will be interesting to see if they come back into line during the next heating season. For propane consumers in NH, it could be an expensive experiment.

Until next time, fill up your propane tank to the brim during the summer and remember to turn the lights off when you leave the room.

Mike Mooiman
Franklin Pierce University
mooimanm@franklinpierce.edu
8/16/13

(Crossing Muddy Waters* - A John Hiatt tune from a 2000 album with the same name. John Hiatt has always been one of my favorite singer songwriters and has been covered by dozens of artists including Bonnie Raitt, Bob Dylan, Keith Urban, Iggy Pop, etc. etc. He is worth discovering if you don't know his music. Enjoy Crossing Muddy Waters.)

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Under Pressure* - Propane in New Hampshire – Part 1

As I drive through New Hampshire, I have seen a good number of the distinctive white propane storage cylinders dotting the landscape next to homes and commercial buildings, in backyards or sometimes rusting in fields. I got the sense, which I later confirmed, that propane usage in NH is higher than other New England states and I decided to do some research on this fuel source and its usage.

Image: 'Propane tank' http://www.flickr.com/photos/10031227@N07/3745353765

Natural gas, which consists largely of methane, and propane are similar in some respects. They are both hydrocarbon gases and they are both odorless and colorless. The distinctive smell of propane and natural gas that we know is due to the odorant distributors are required to add to the gas for safety reasons. The odorant is normally a smelly sulfide compound, like ethanethiol in the case of propane.

Methane consists of a single carbon and four hydrogen atoms and propane has three carbons and 8 hydrogen atoms. The chemical structures of the various hydrocarbon gases one might find in natural gas and store-bought propane are shown below.

Both gases can be compressed for storage purposes but a particularly attractive feature of propane is that it can be readily converted to a liquid form by compressing the gas at moderate pressures. It is this easy conversion of propane gas into liquid form, enabling useful amounts to be stored on-site in steel storage tanks of various sizes, that makes it a versatile fuel. At 80^oF the pressure in a propane storage tank is about 150 pounds per square inch (psi) which is not much higher than the pressures in my road bike tires which I typically inflate to 110 psi with a bicycle pump. Natural gas can also be liquefied, but very low temperatures and higher pressures are involved.

Most of us are familiar with propane in its liquefied form in those 5 gallon propane tanks that many of us have attached to our backyard barbeques (unless you are a charcoal purist - which I used to be). Once condensed into a liquid, propane weighs quite a bit. In fact, a full 5 gallon tank of propane can contain almost 20 lbs of propane - which is why those little cylinders are so heavy once they are filled. The weight of the 5 gallon empty tank is about 20 lbs so a full tank weighs about 40 lbs. Liquid propane is readily converted back into a gaseous form simply by turning open the valve on the tanks and releasing the pressure.
 
Propane, like methane, is a clean-burning hydrocarbon gas with fewer harmful combustion products than oil or coal. The main emission products are carbon dioxide and water, but on a per energy unit basis, propane does release ~20% more carbon dioxide than natural gas. Out of all the carbon-based fuels, methane has the lowest amount of carbon released, per unit of energy released, which is the reason that carbon emissions in the US have dropped as we have moved from coal-fired to natural gas-fired electricity generation. The table below shows the carbon dioxide emissions per million BTUs produced by the combustion of different fossil fuels.

Other than backyard barbequing, propane has a host of other uses including petrochemical production, home heating and cooking, a fuel for industrial forklifts and extensive use in powering farm-based irrigation and refrigeration systems. It also has a growing importance, due to its portability and easy storage, as a back-up fuel for renewable energy systems such as solar power.
 
Some of the attractive features of propane include the following:

• High energy density once liquefied and available in many different storage sizes.
• Highly portable fuel.
• Bulk transportation by pipeline, rail car or tanker truck.
• Useful alternative to natural gas where natural gas pipelines are not available. It is often the fuel of choice in remote areas.
• Versatile home-based fuel that can be used for heating, hot water and cooking applications.
• Easy onsite storage and, if leaks occur, they do not contaminate the ground like oil.

To get an understanding of the propane business, it is helpful to know where propane comes from. Propane is a byproduct of the natural gas and oil business and it is not produced for its own sake. The byproduct nature of propane means that propane supply, and thus pricing, are highly dependent on oil refining output and natural gas supply. When natural gas is recovered from conventional or shale gas deposits, it is often accompanied by other hydrocarbon gases, such as ethane, propane, propylene and butanes. Natural gas that contains a lot of these other hydrocarbons is referred to as "wet" gas. These other gases are removed during the processing of natural gas, which serves to remove water, sulfur and other byproducts as well. The hydrocarbon gases are also separated into separate fractions - ethane, propane, butane, etc., - each of which has its own specific use. Propane is also a byproduct of the crude oil refining process, during which longer chain hydrocarbon molecules are cracked into shorter chain molecules such as propane, butane, pentane, etc.

Propane was first harvested and liquefied as a useful byproduct of oil refining which is why it is also sometimes called Liquid Petroleum Gas, or LPG. Because the propane we get is a byproduct of various gas separation processes, it does contain other components. The consumer grade we purchase is known as HD-5 (Heavy Duty – no more than 5% propylene) and it is required to contain over 90% propane, a maximum of 5% propylene and 5% ethane and butanes. It can also contain trace amounts of water and sulfur.
 
As with other energy forms, propane usage in New Hampshire has increased over time. Recent data indicate that over the 1960 to 2011 period, usage has increased 3.8% on a compounded annual basis, outstripping total NH energy use which grew by 2.4% over the same period. Even though growth in propane usage has been greater than that of general energy consumption, propane is a very small percentage of our total New Hampshire energy use: in 2011 it represented only 3.6% of the total consumption of energy in NH. So, in the larger scheme of things, some might view propane as unimportant, but for folks out in remote areas, without access to natural gas, it is very critical. The consumption figures for 2011 were 3.7 million barrels of propane, which is equivalent to 152 billion gallons (at 42 gallon/barrel) or 13.9 trillion BTU. The figure below shows the growth in NH propane consumption since 1960.

The following chart shows the 2011 annual consumption of propane in the New England States and it shows that my original hunch, that propane usage in NH was high, was correct.

However, if the numbers are adjusted to a per capita basis as I have done in the table below, it is Vermont and then New Hampshire that lead the pack on a per person basis. The state that uses the most propane overall is Texas, which is responsible for 60% of the US propane consumption. The reason for this high consumption is the large petrochemical industry in Texas and the bulk of propane consumption in Texas is for the production of petrochemicals used to produce plastics and other organic compounds.

Propane is a useful fuel but one of the biggest concerns associated with propane is its cost. In the table below, I show a listing of the costs of the various home energy sources we use in NH along with their recent energy prices. This is an update of one previously published in Closer to Home. Included in the table are the energy content per BTU/unit, the cost in $ per million BTU ($/MMBTU) and then, using energy conversion efficiency concepts for each fuel, I have calculated the cost of the useful energy produced from each type of energy, assuming the energy source is used for heating only.

It is easier to examine this information in graphical form and, to this end, I have generated the chart below which allows us to directly compare the costs of the input and useful heating output values for each of these fuel sources on a common basis, $ per million BTU. The chart tells us a lot but if we focus on propane which is right at the top of the chart, it is clear that at this time, propane is the most expensive fuel in the State on energy output basis. Presently, natural gas is by far the cheapest energy source in NH.

Like other energy sources, propane prices have risen over time as shown in the figure below and, for the most part, propane prices have moved in lock step with oil prices. The figure also clearly shows the decrease in natural gas prices since the large-scale advent of fracking technology in 2008 which is used to harvest natural gas from shale deposits. The tight relationship between propane and oil prices is somewhat explained by the fact that propane is a byproduct of oil production but propane is also a byproduct of natural gas drilling and there is presently a surfeit of propane due to all the natural gas we are harvesting. What's more, there is now so much propane being produced that we are now exporting propane from the US. New Englanders do not appear to have benefitted much from the increased supply of propane: that will be the topic of Part 2 of this blog where I will be looking at the supply, demand and pricing issues pertinent to propane usage in New England.

Many of us use propane at some time or another so a few safety comments about propane are appropriate. In terms of home usage, whether using a gas grill or for home heating, it is important to understand that propane is a highly combustible gas under pressure* and it is crucial to make sure that all the gas line fittings are tightly fastened and that there are no leaks. You can easily check for leaks using a soapy water solution and for those of you using propane for home heating and cooking, I would strongly recommend the installation of a combustible gas monitor in your home which can detect dangerous levels of methane and propane. If there is a propane leak you might be able to smell it, but sometimes, because propane is heavier than air, it can accumulate to dangerous levels in basements and trenches in or around your home where you might not be able to smell it. My advice is to back up your nose with technology. A home combustible gas detector unit only costs about $50 and is a wise investment. It will also work if you have natural gas in your home.

To wrap up this week's post, I thought I would cover a topic that is of great interest to all us home grillers. One of the great mysteries of gas grilling is how to determine how much propane is left in the propane cylinder and whether you will run out before all the hamburgers are grilled. Now, if you are like me, you have run out of propane when grilling on a Sunday evening when no refilling stations are open and you have had to endure dirty looks from your significant other and beer-fueled jibes from friends. Well, those days are over - there is an easy way to determine how much propane you have left. Simply weigh the cylinder on a regular bathroom scale and subtract the tare weight which you can find stamped on the top ring of the cylinder. The pictures below are of my propane cylinder just a few days ago. As you can see the weight of the cylinder is 28.5 lbs and the tare weight is 18lbs so my tank contained 10.5 lbs of propane – it was about half full.

The next thing to figure out is how much propane a grill will consume. Typically a home barbeque with all the burners running has a rating of about 40,000 BTU/hr. The BTU content of propane is 91,333 BTU/gal and, at 4.23 lbs propane per gallon, this is equivalent to 21,550 BTU/lb. This means that you should be able to grill for about 1 hour for every 2 lbs of propane you have in the propane tank. So, based on the photos above, I have enough in my tank to grill for about five hours. By the way, those pressure gauges that you can buy for propane tanks are pretty useless. Because propane is a liquefied gas, the vapor pressure is constant as long as there is propane in the tank. The pressure will only begin to drop when there is no longer any liquid in the tank and by then it might be too late and you are likely to run out of propane while grilling.

Until next time, don't run out of propane and remember to turn the lights off when you leave the room.

Mike Mooiman
Franklin Pierce University
mooimanm@franklinpierce.edu
7/14/13


(*Under Pressure – A big 1980s hit for Queen and David Bowie who put this song together while improvising in a recording studio in Montreux, Switzerland. It retains some of its improvisational roots in its "Um, boom, ba, bay.." type lyrics and its distinctive bass riff is something every bass player fools around with one time or another. It is easy to find this song on Youtube but here is an interesting version featuring Annie Lennox and David Bowie practicing for the Freddie Mercury tribute concert. David Bowie could not be more relaxed, singing and smoking at the same time.)

 

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