Ethyl alcohol – C2H5OH – CH3-CH2-OH:

I don’t think of ethanol as an alternative fuel; I think gasoline should be the alternative fuel that meets 10 to 20 percent of my needs. We definitely don’t need hydrogen. We don’t need new car engines, designs, or distribution. In less than five years, we can, with very little cost, make an irreversible change in our trajectory. With little cost to consumers, little cost to automakers, and no money from the government.

Biofuels: Think Outside The Barrel, Vinod Khosla, Google TechTalks, March 29, 2006

Khosla, a well-known venture capitalist, has been examining how Brazil did it, how they benefited including greatly reduced oil imports, and he presents a plan for how the U.S. can do it. He starts by pointing out that once you discount subsidies and taxes, the production costs of ethanol are only about $1.00/gallon vs. $1.60 for gasoline. Then he walks through why we should do this, and how to do it.

Why? Cheaper fuel, better energy security, more farm income, significant carbon emission reduction, and better business model for automobile manufacturers. U.S. car makers are already shipping many ethanol-ready cars and trucks; look for flex fuel. Even many of the oil companies are already heading in this direction: Shell and BP are already researching ethanol. Even oil companies don’t really like dealing with dictators about oil fields, because of the business risks involved.

How? Very pragmatically, including allowing ethanol imports above the already-federally-mandated minimum requirements until U.S. production can catch up. And switching current farm subsidies for growing nothing to growing ethanol. I’m a little dubious about a Silicon Valley billionaire discussing agriculture, but he did say plausible things about avoiding monoculture, promoting crop rotation, different crops in different regions, and he’s right that the crops involved are relatively benign. Switch grass, corn, or sugar cane instead of cotton or tobacco? I’d agree those crops are more benign. Let Khosla explain his plan; watch the video.

My favorite part of the video is when he points out that the recent "ethanol" subsidies approved by Congress actually go to those who blend ethanol with gasoline, in other words, to the oil companies. The oil reps were willing to stick it out into the wee hours of the morning and everybody else who remained let them get away with it so they could go to sleep. Naturally Khosla recommends getting rid of this subsidy, or at least switching this subsidy to ethanol plant builders.

The beauty of Khosla’s solution is that it doesn’t require any new subsidies or tax breaks, and it doesn’t depend on the government starting the process. He’s not in favor of subsidies at all, but he deals with the political realities that will probably require keeping some subsidies.

The beauty of Khosla being the one proposing this plan is that it’s hard to argue that he doesn’t know business.

There is also some irony in one of the principal people behind some of the most successful Internet companies producing a plan to get the U.S. off of oil that could actually work in a relatively brief amount of time. Now that’s risk management!

-jsq

PS: Seen on Bruce Sterling’s Beyond the Beyond.