Many people make the mistake of comparing apples to oranges. One has to compare futures to futures and current status to current status. All technologies improve, but some improve more than others.

The Prius gets 46 mpg, while a similar-sized Toyota Corolla gets 31 mpg. One of our investments (Transonic) is trying to make an engine that (if it works!) can be placed in a Prius to produce a vehicle that will have lower carbon emissions than the hybrid Prius at below $1,000 in marginal cost. Other efficient engine efforts abound. If battery technology efforts like Seeo (one of our investments), EEstor, silicon nanowire batteries (or similar efforts that others have funded and many we are evaluating) are successful, we will get the same effect (better petroleum mpg) with a plug-in — if we can also clean up our grid at the same time!

From my perspective, if I have to pick between a 5-10 times lower cost/performance battery and a cleaned-up electrical grid in the next 5-10 years (or even 20-25 years), or pick cellulosic fuels in 50 percent more efficient ICE engines, I consider the latter lower risk and significantly more probable.

I am confident that cellulosic biofuels without significant land-use impact or biodiversity impact can achieve costs of $1.25/gallon in less than five years and below $1.00 per gallon in 10 years (more details on that, especially on land use / biodiversity and sources of biomass, in a upcoming paper). At this price point, the technology will be adopted broadly and rapidly worldwide, even if oil prices decline substantially.

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If hybrids and clean electricity progress faster, or biofuels progress slower, then we will get electricity powering the cars of tomorrow soon. Within 25-50 years, we may well see a transition to an all-electric propulsion fleet, depending on the relative technical progress in battery, fuel, and engine efficiency technology.

One has to guess at the probability and expected value (cost) of such uncertain outcomes. Nonetheless, it appears to me that biofuels are likely to be a significant source of our non-oil transportation energy needs for the next few decades. The extent to which we use them is going to be a function of the cost of oil, the cost of biofuels, and the scalability of biofuel technologies — as addressed in the chart below.

Powering the Automotive Fleet for the Future (from our 2007 biofuel pathways paper [PDF])

Essentially, I consider replacing coal-based electricity plants (50-year typical life) a much longer, tougher slog than replacing oil with biofuels (15-year car life). No one will dispose of old plants. Incrementally, we will start adding new, cleaner plants, but it will take a long time to clean up the U.S. (and especially the worldwide) grid. (I do believe renewable power plants will take a large share of new plant construction quickly — see my coal paper [PDF].)

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As my white papers make clear, I consider hybrids and biofuels complementary strategies. Incidentally, the GM Volt serial plug-in hybrid is rumored to be a flex-fuel car. Its evolution, and that of its cohorts, will depend upon the relative progress of the technologies. As ICE engine efficiency, biofuels carbon content, battery cost/performance, and electric grid carbon content progress at different rates, the relative percentage of the cars powered from each of these sources will change. Meanwhile, we continue to invest in breakthrough engines, batteries, and biofuels, and hope that all technologies progress rapidly.

Where do I see hope for hybrids (aside from unforecasted battery breakthroughs)? I am cautiously bullish on serial hybrids, which can run on the battery but offer gasoline as a backup fuel — always available in the tank if the battery runs out. Configurations that, like the Prius, use small amounts of battery capacity (1.6kWh Prius vs 16kWh rumored for the GM Volt) but in serial hybrid configurations like the Volt are promising, as they help engine management and hence engine efficiency.

I have chosen to ignore the expensive cars like the $100,000 Tesla or the Audi plug-in, even though they are potentially successful cars. At that price, they aren’t likely to impact the worldwide adoption of low-carbon cars. I have also chosen to ignore folks who rant at SUV buyers. As one blogger said: Why are you telling other people what they value? What does what you value have to do with what others value? We can’t change consumer preferences as a fix-all; we need technologies to meet consumer and societal needs while reducing CO2 emissions as much as possible.

For the record, I am a fan of much higher CAFE standards, because they make sense as national and global policy (the recently passed bill was a start). With regards to public funding, I am not a fan of continuing any subsidies for hybrids, biofuels, solar power, wind, etc., beyond the first five to seven years of their market introduction. Aid ought to be developmental, not neverending (for example, large oil subsidies still continue). We have helped all technologies, clean and not so clean, get started (e.g., nuclear, with over $100 billion in cumulative subsidies; we’re currently subsidizing IGCC coal with carbon capture and sequestration). I find it somewhat ridiculous that we still have massive subsidies — much larger than we offer renewables — for fossil fuels such as coal and oil, as well as nonfossil fuels like nuclear power.

One potential worry for me is a scenario where battery costs actually rise if 50-80 percent of the world’s car fleet is running on batteries and the raw materials start to escalate in cost. (This happened to corn, silicon, and other commodities; biomass is unlikely to suffer from this, for reasons explained in an upcoming paper.) Cost and sustainability at scale matter more than anything else.

But as Alan Kay said, the best way to predict the future is to invent it.” Our goal is to back entrepreneurs who are doing just that, be they ethanol, butanol, cellulosic gasoline or diesel (we are not fans of classic biodiesel), solar, wind, batteries, higher efficiency lights, cars, pumps, homes, appliances, and more. We have invested in all of these areas, as detailed in my green investing paper [PDF].

I think, as my papers detail, within 25 years we can get most gasoline replaced by biofuels that reduce carbon emissions by 75-85 percent, and have 75 percent or more of the world’s car fleet capable of running on these fuels within ten years. That market penetration, infrastructure switchover, consumer acceptance, and cost effectiveness is unlikely to happen with any other technology. (It’s possible, of course, with breakthroughs I hope happen but am not currently seeing. If they do happen, I will be the first one funding them — I’m out trying to find them right now.)

Some of you will surely pick nits, find errors in our calculations, or disagree with the numbers (all corrections are welcome), but I doubt any of it will change my fundamental conclusions. If it does, you will see a new post and a new direction from us.

PS: GM unveiled a V6 flex-fuel Hummer and a partnership with Coskata, which produces cellulosic ethanol. A Prius running on gasoline will have twice the carbon emissions per mile as this 16mpg (estimated) Hummer V6 running on Coskata’s ethanol. Papers on renewable electric/coal/nuclear power, biodiesel, biomass, biofuels pathways, food vs. fuel, and green investing, as well as our portfolio, are available here.

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