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Venture capitalist Vinod Khosla is putting his bet on cellulosic ethanol. Here's his answers to five questions about the future of energy. (http://money.cnn.com/2007/01/22/news/newsmakers/whatsnext_khosla.fortune/index.htm?postversion=2007012610)

http://www.cleanmpg.com/photos/data/500/Iowa_Switchgrass.jpgFortune - Jan. 26, 2007

Biofuels, mainly ethanol from grasses and underutilized biomass.

NEW YORK - You got on the ethanol bandwagon early. What's on tap for 2007?

This will be the year of cellulosic ethanol - fuel made from grasses, wood chips, and other underutilized biomass. New fuels like butanol will also come along. I wouldn't be surprised to see biogasoline either. We'll see biofuels move from their role as an additive to gasoline to a primary fuel for automobiles.

What still stands in ethanol's way?

You'll see critics, often funded by the petroleum interests, increase their attacks on biofuels through surreptitious PR campaigns, while publicly supporting these renewable fuels. We might even see oil prices manipulated down to thwart this transition, which is essential for our planet.

What other areas of alternative energy should we be watching?

Coal. We will continue to see a push for "clean coal," as it's a way for a few of the traditional power-generation firms to delay action. Clean coal will be in a horse race with wind and solar. I'd personally handicap solar thermal, not photovoltaic solar or clean coal to win.

How will Congress and the presidential candidates affect the equation?

The biggest leverage will come from the similar positions of the presidential candidates for 2008. Most of the rumored candidates already support an aggressive biofuels policy, as do the Democratic majorities in Congress and the Bush administration.

Where are you investing, outside of green tech?

We're excited about mobile applications and see breakthroughs in semiconductors and batteries.

We've certainly seen oil price manipulation -- and quite a bit of it. What I can't figure out is this: was the price of gasoline sky-high for three years due to BushOil manipulation (so the BOBs* would get even richer)? Or was the price manipulated down for the November elections?

In the past, the current administration has given billions of our tax dollars to the oil companies. Why? Who knows. It must be great to be one of the BOBs. The current administration was perfectly happy to let hybrid tax credits expire ($2k-3k), but not the Hummer/Escalade Guzzler credits ($25k!)

Bush's unofficial/volunteer mouthpiece, Rush Limbaugh, has waged a multi-year campaign against ANY form of conservation, technology change, or CAFE reform. He even went so far as to call driving a hybrid "anti-Christian and Anti-American".

The people standing in the way of energy independence and carbon-neutrality are wealthy and powerful foes.

[*BOB = Bush Oil Billionaires]

Hi AshenGrey:

___The ones who will get hurt the most with regards to high oil prices are the ones who are most intimately involved with its distribution and profits imho. Now that GM has given the OK to consider a PHEV w/ the Volt announcement and upcoming Saturn VUE DualMode PHEV, the Japanese now have the go ahead to sell them as well. All this talk of the batteries not being ready is hogwash. Although PHEV’s will only appear like a trickle at first, there are some seriously ticked off people in this country and the PHEV will become the patriotic purchase no matter if the domestics offer them or not irregardless if we are still involved with IRAQ or oil prices are hovering at $2.00 or $4.00 +. At least I hope so anyway?

___Back on topic … As for Ethanol, I am becoming more and more pessimistic. Cellulosic based production is still very expensive ($2.50 + per from my understanding) and with gasoline running at less then $1.50 per wholesale, ethanol doesn’t stand a chance of doing anything other then draining our wallets in the manner in which we produce it here in the states. Meaning Corn. The Brazilians on the other hand are making Ethanol at $0.60 per from their vast tracts of sugar cane fields and now you are talking a very heady economic reason to switch. I believe Ethanol as a fuel additive/extender for E10 throughout the Midwest is a great idea for reducing our demand but as far as GHG emissions, it barely makes a dent. E85 in this country with all CAFÉ’ loopholes, its low carbon content, and its use in half @$$ed designed FFV’s makes absolutely no sense whatsoever today or tomorrow here in the US because of the costs to procure and the crops we use to make the stuff from.

___Good Luck

___Wayne

Cellulose ethanol isn't cost effective right now, true, but the price of gasoline is only temporarily low. All it will take to ratchet prices up to $3-$5/gallon would be for any of the following to happen:

-- Another unprovoked war touched off by the Dumb Cowboy.
-- Another Cat-5 hurricaine hitting the Gulf of Mexico
-- The House of Saud falling to terrorist insurgents
-- And oil embargo from one of Bush's many enemies in South America
-- Or any massive and unforseen mechanical failure (such as a pipeline rupture) or massive destruction of facilities (by an earthquake, for example).

If two or three of these things happen, you could see gasoline approach $10/gallon.

To put it another way: we know how much it costs to collect straw and turn it into alcohol. Grass is basically a weed and will grow wherever it is planted, even in relatively hostile envoironments.

Corn ethanol, on the other hand, strikes me as being a bit risky. I can see the megacorporations stealing our nation's food supply for making car-booze. I can easily see corn ethanol production jacking the price of cereal to $15/box.