“We’ve got a coalition of tree huggers, do-gooders, sodbusters, hawks, and evangelicals.”

That’s a quote from former CIA Director James Woolsey describing the population of political lobbyists pushing the government to help boost cellulosic ethanol, made from “everything from prairie switchgrass and wood chips to corn husks and other agricultural waste,” according to this story in Fortune.

Fortunate factors are now working together, aided and abetted by the aforementioned strange bedfellows. Advances in biotech have made it possible to produce the same grade fuel out of materials with no food value at all. The price of oil has risen now to levels where ethanol can be competitive — exactly the circumstances that prompted Brazil to develop its sugar-cane based ethanol infrastructure.One of the biggest boosters of ethanol is a California tech entrepreneur:

There are venture capitalists, and then there’s Vinod Khosla. A co-founder of Sun Microsystems and a partner at Kleiner Perkins, he was an early backer of Juniper Networks, whose technology helped end decades of dominance by traditional telecom manufacturers. A lean, 50-year-old native of India, Khosla says, without a hint of modesty, “I love the challenge of breaking monopolies.”

Frustrated that Kleiner Perkins wasn’t taking enough risks after the dot-com crash, Khosla opted out of Kleiner’s most recent fund and started his own group, Khosla Ventures. He’d been dabbling in environmentalism but never expected to become an investor. Brazil’s success, however, made him wonder about ethanol’s U.S. potential. “I spent two years trying to convince myself that this was never going to be more than another minor alternative fuel,” he says. “What I discovered was that ethanol might completely replace petroleum in this country. And a lot of countries. This was a great shock to me.”

Pretty soon Khosla was surprising plenty of others. He put together a PowerPoint presentation, “Biofuels: Think Outside the Barrel,” which he fires up on a moment’s notice. He has made the pitch on ethanol to the President’s Council of Advisors on Science and Technology and elsewhere in the White House. He is also behind California’s upcoming ballot initiative to fund a subsidy for gasoline retailers that add E85 fuel pumps. “Getting distribution going is the real problem,” says Khosla. “We need to increase blending and then introduce E85 pumps, and the possible will become the probable.”

His conversion to energy investing is part of a Silicon Valley trend, as VCs seek the rapid growth and giant markets that computers once offered. VantagePoint Venture Partners in San Bruno, for instance, established a fund called New Energy Capital that invests in ethanol, wind power, and other energy projects. Nth Power, a San Francisco energy-investment firm, estimates that $700 million of the $21 billion flowing into venture funds last year were earmarked for “clean technology” startups.

Ethanol has had to overcome the perception that any government policy to promote the fuel was really just a way to pay off the corn processors…and the additional perceptions that the use of corn and sugar cane for fuel would both put a crimp on the world’s food supply, and be vulnerable to price hikes based on food demand. The evolution of cellulosic ethanol should prompt those whose boondoggle alert goes off when the word ethanol is bandied about to reprogram their stress meters.

“Cellulosic ethanol.” Remember that phrase.

2 thoughts on ““We’ve got a coalition of tree huggers, do-gooders, sodbusters, hawks, and evangelicals.”

  1. I have been engaged in grass roots actions for the last 25 years and am gratified that ethanol from cellulose sources is becoming a reality. I’m 67 and want to devote the remained of my working life to to relacing oil with ethanol. I’ll be in good company!

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