Wednesday, June 3, 2009

Why Ethanol - Not Electric Cars and Hybrids - Is the Answer

Silicon Valley venture capitalist Vinod Khosla of Khosla Ventures explains why biofuels are the answer for fossil fuel replacement for personal transportation in the near term. As I have said before, liquid fuels are key to providing economical transportation. He also brings up the point that first generation biofuels (corn ethanol) are only stepping stones to more viable and efficient future fuels.

Also important to remember is the busted link between corn ethanol and American food prices. This "fact" was thrown around in the media last year as food and fuel prices soared. In hindsight, the sharp increase in corn prices had a much stronger correlation to the commodities bubble than an increase in ethanol production, which is conveniently overlooked.


joewein said...

Khosla did not address on what land these bio fuels would be growing. Whether you use sugars from cane or maize (corn) or cellulose from trees, you are still working with finite land with adequate rainfall that requires planting and harvesting, which uses primary energy.

I would like to see Khosla explain how he envisages running 1 billion cars on bio fuels from plants without at the same time driving prices of food that 6.5 billion people depend on sky high.

Where electric cars have a crucial advantage is that electric energy can be produced without depending on limited fresh water and soil. Solar power can come from deserts, wind power from offshore wind farms or high altitude winds and enhanced geothermal can tap thermal energy almost anywhere on this planet.

While there is a role to play for many alternative technologies, I remain yet to be convinced that bio fuels will ever play a major one.

Chief said...

I cannot speak for Khosla, but my view is there will be a combined complement of alternative energy, hopefully primarily a market-based solution. Which, of course, will not allow first generation biofuels (or nearly any other current alternative) to succeed presently, but instead drive innovation to the best solution.

My view is 2nd and 3rd generation biofuels will play a key role. These would take little, if any, arable land. Currently, the government incentives for first generation biofuels will push the infrastructure (E85 pumps/distribution/flex-fuel cars, etc) to be built so as the prices drop they can be quickly adopted. This should help smooth the extreme price shocks we saw in 2008. I also agree EVs will play a huge role, provided battery technology advances. My personal ideal would be a flex fuel plug-in hybrid.

The biggest player in the future will no doubt be the one that can innovate the most, which is a danger of too much government subsidies. We run the risk of inefficiently allocating scarce resources, which no one can afford to do.