This paper surveys issues affecting the supply of fuel-grade methanol for the California Energy Commission's alternative fuels demonstration programs and operations by other public agencies such as transit and school districts. Establishing stable and reasonably priced sources of methanol (in particular) and of alternative fuels generally is essential to their demonstration and commercialization. Development both of vehicle technologies and of fuel supply and distribution are complementary and must proceed in parallel. However, the sequence of scaling up supply and distribution is not necessarily smooth; achievement of volume thresholds in demand and through-put of alternative fuels are marked by different kinds of challenges.
Four basic conditions should be met in establishing a fuel supply: (1) it must be price competitive with petroleum-based fuels, at least when accounting for environmental and performance benefits; (2) bulk supply must be meet volumes required at each phase; necessitating resilience among suppliers and a means of designating priority for high value users; (3) distribution systems must be reliable, comporting with end users' operational schedules; (4) volatility in prices to the end user for the fuel must be minimal.
The California Energy Commission's California Fuel Methanol Reserve (CFMR), based on a framework of agreements with the methanol industry to mobilize private sector storage and distribution facilities was designed in an effort to meet these conditions. However, conditions in the world methanol markets have threatened to overwhelm the price/supply stabilization hitherto provided by the CFMR, with demand for methanol as a feedstock for MTBE pricing methanol out of the existing direct fuel market.
California clean air regulations include a mandatory “make-available” provision for alternative fuels, including methanol, once alternative-fueled vehicle production reaches certain thresholds. Because of the gradual market development thus far, triggering of these provisions may affect the situation but is unlikely to alter it dramatically.
Current and projected fuel volumes appear to be insufficient to induce necessary economies of scale in production and distribution for fuel use. Despite their benefits, existing programs will suffer absent measures to secure economical fuel supplies. One solution is to develop sources that are dedicated to fuel markets and located within the end-use region.
Methanol still represents an important alternative fuel, since it is readily available from renewable sources, offers clean air benefits and is an excellent energy carrier, especially for advanced vehicle propulsion systems such as fuel cells.