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

Times are tough for the biofuel movement. Concerns have been rampant about how much gas it takes to produce a gallon of ethanol and about how much farmland and corn would be needed to produce enough fuel to make a dent in our gasoline addiction. Combine that with the popularity of the Prius and the sex appeal of Tesla’s sporty all-electric cars, and biofuels like ethanol are looking like something only Willie Nelson could love.

Not so fast, says famed Silicon Valley venture capitalist Vinod Khosla of Khosla Ventures. In a rare sit down interview with the cleantech bull, Khosla explained why most of the concerns about ethanol are either based on myths or don’t take into account the rapidly changing science in the field. It’s not that electric cars and hybrids won’t help, but when you consider the billions of cars coming on the market from fast-growing economies like India and China, electric cars on a mass scale just aren’t realistic, he says.

But, increasingly, ethanol is. Khosla argues it’s cheap and plentiful enough to make 80% of new cars coming onto the roads in the next 10 years low-carbon emitters. He doesn’t just mean ethanol made from corn. Already scientists are making ethanol from bark, switch grass and other non-food bio-materials that can be planted easily and widely.

Despite his bullishness, Khosla doesn’t believe the government should be picking favorites or propping up the industry with rich corn subsidies. He advises that the government set strict standards for carbon emissions, then get out of the way while private industry slogs it out to find the best and most commercially viable solutions to meet those standards.

For all this to play out, Khosla considers it his job to do something many VCs have shied away from in recent years: Funding risky “science project” style investments and making them work physically and economically. Only then will Wall Street believe in biofuels, and that’s when the real investment in changing the environment will begin.