It’s been a couple of years since I last watched Vinod Khosla talk about biofuels. During the second half of 2006 he cruised around the country giving a big pep talk on the promise of corn ethanol. This was during the news-cycle lead-up to President Bush’s early 2007 SOTUS, and the advent of US ethanol mandates. Also at that time we saw a big ethanol ipo wave, as most of the companies which are now bankrupt first came public.
Ethanol was of course doomed to fail. There is simply not enough energy content in young organic material to provide the feedstock for a sustainable business model. Vinod Khosla was told at the time that he was wrong, and, that the majority of his unsupportable claims for ethanol were incorrect. The birth-death cycle of corn ethanol now bears this out. Despite all the lovely ethanol company websites, the false Green claims and the amber waves of grain all golden in the sun, neither corn ethanol or other biofuels were able to compete against the true miracle liquid known as oil. It wasn’t because of marketing, subsidies, consumer preference, or cultural stupidity. The failure of biofuels is a direct result of a rather brutish fact: turning organic material into liquid fuel may be an achievement in alchemy, but it does not capture much energy.
Yesterday at this week’s Milken Conference, Vinod Khosla could be found discussing the same trajectory that he promoted several years ago, this time for cellulosic ethanol (H/T to Paul Kedrosky who sent me the clip overnight). And yes, Khosla is still framing the prospect of biofuels as a scalable, workable replacement for oil. Sigh.
After spending nearly ten years myself studying energy, coal, uranium, natural gas, solar, wind, government policy, and of course the master commodity, oil, I have pretty much come up with a working model for how I think the next decade or two will play out. As for biofuels, they will play no significant role in the world’s energy mix. And while all the other fossil fuels show some possibilities for enhanced use–and here I am thinking mainly of natural gas and coal–I remain committed to oil as the miracle, concentrated energy source that can be increasingly leveraged to build out a future energy architecture. That future energy architecture in my view will have at its core solar energy. Which is kind of a nice story, poetically speaking, because oil itself is ancient solar energy.
States, regions, and countries that either have the ability or are already monetizing their oil inheritance and using the 
proceeds to build large array solar should be watched. This is one of the reasons I remain quite interested in (currently “doomed”) California. Whether the Californians know it or like it, they will indeed someday and maybe soon be forced to monetize their offshore oil. This would neither be a tragedy for the environment, nor a strategic folly as long as every penny of the proceeds was used to build utility grade solar in the deserts, and electrified transport along the coast. That said, my point is broader than its implications for California.
In my Oil to Solar model, the world will increasingly migrate to more efficient use of Oil, thus distributing oil’s concentrated power more deeply into the world’s population of 6.7 billion people. This of course means each person in the Western OECD countries will use alot less oil–so that 25 people in the developing countries can use oil just a little bit more, or use oil for the very first time. The global solar buildout wave, while currently underway in both developed and developing countries will eventually accelerate in the developed world, where the legacy automobile grid is a disadvantage, but where the legacy electrical grid is big plus.
The Oil to Solar model will, in my opinion receive lots of marginal help from other fossil fuels and other alternative energy, such as Wind. In addition, it’s still not clear that an electrical grid can be anchored by Solar (although there is work being done in this area as well, relating to overnight storage). So it’s likely that Nuclear, Coal, and Natural Gas will continue to play a role, even long-term roles. But as a model for both investment, and policy, and as a way to avoid such dead-ends as biofuels, I think it will work as a guide for the next two decades.
-Gregor
Photos: Grains in the Dakotas, and, a Large PV Solar Array at Nellis AFB, Nevada.
Further Reading: Vinod Khosla Debunked, Robert Rapier, R-Squared Blog, 24 July 2006
Further Viewing: Vinod Khosla at Google, Think Outside the Barrel, 29 March 2006