venture capitalists go for ethanol: Crops for Cars: Fuels of the Near Future
By Darryl D'Monte**
Feb 28, 2006
It isn't often that venture capitalists (VC) stray into anything connected to the environment. Indeed, their concerns are usually diametrically opposed, since the VC invests in anything that turns in a profit, while hard-core environmentalists look to the needs of people at the bottom of the pyramid rather than the bottom line.
So it was intriguing to find a casually dressed white polo-necked Vinod Khosla, who is based in California, giving a formal dinner address at the Delhi Summit on Sustainable Development, organized by the Energy & Resources Institute (TERI) in February. He is a partner at Kleiner, Perkins, and Caufield & Byers, whose clients include such famous brands as America Online, Sun, Genentech, Amazon, and Compaq. He was a co-founder of Daisy Systems and founding Chief Executive Officer of Sun Microsystems, where he pioneered open systems. According to Wikipedia, "Vinod Khosla is a venture capitalist considered one of the most successful and influential personalities in Silicon Valley."
His subject was "Biofuels: Think Outside the Barrel," which was itself unconventional. He came straight to the point by declaring that he was talking about "energy with a different perspective. There are lots of energy technologies which are small, niche…You don't need oil for cars and light trucks." His pitch was to switch to ethanol, which is a biofuel, a la Brazil. It emits 80-90 percent less carbon, which is the main greenhouse gas. Volkswagen was thinking of not making any more gasoline cars in Brazil, since ethanol there was less than $US 35 a barrel. Surprisingly, in California, which is (as a stand-alone) one of the world's biggest economies, there are as many cars running on ethanol as on diesel today.
His formula was Flex(ible) Fuel Vehicles or FFVs – in sharp contrast to the gas-guzzling and environment-unfriendly SUVs, which are ubiquitous in California. These can switch from gasoline to ethanol and only require minor modifications: different gaskets and a rubber hose. By relying on ethanol, Brazil was able to save $US 50 billion on oil imports. It not only saves 40 percent of the petrol used by cars but in the process provides 22 percent more farm employment. FFVs there have jumped from just 3 percent of the total number of automobiles to 71 percent in three years.
Biofuels: Food for Thought
Being a persuasive VC, who has convinced hundreds of investors to opt for his pet projects in the past, he was pro-active enough to come up with three issues which might be obstacles on the path to biofuels. One was the land use. In the US, the Natural Resources Defense Council, one of the most reputed environmental bodies, had calculated that by 2050, the US would need to plant crops on 114 million acres to provide all the energy needed for road transport. This is not as much as it sounds. For example, the US already pays farmers not to grow soybean on 40 million acres, simply to support them.
In Khosla's simple arithmetic, with irrigation and other inputs, it was possible to grow 20 tons of crops per acre with each ton of crop yielding 100 gallons of ethanol. Thus 50 million acres would generate as much as 100 billion gallons. Corn was expensive as the choice of crop; it would do only in the short run. He recommended switching over to a tall grass called miscanthus in the US, which would yield a higher profit. Khosla mentioned how President Bush had cited ethanol in his recent State of the Union message.
The second stumbling block cited by some critics of biofuels is whether farmers employ more energy (by way of irrigation, mechanization, fertilizer, and pesticides) in producing these crops than is produced by them. In other words, an energy audit would reveal, perhaps, that there would be more calories expended in growing miscanthus than in the ethanol produced. The economic costs are distorted by the hidden subsidies in growing many crops.
A California-based company called Ceres had developed biofuel crops which are tolerant to increased drought, heat, and salinity, all of which phenomena are to be expected with climate change in future. What is more, the by-product of producing ethanol was animal feed. As is well known, countries like India export a substantial amount of animal feed to industrial countries. According to Khosla, just 6 percent of India's agricultural waste would supply the country's petrol needs if converted to ethanol.
The final consideration was the impact on the environment, which he believed was a win-win situation, since the crops would both sequester carbon and the fuel would reduce the greenhouse gas emissions. However, this, when also related to land use, is where Khosla's vision may not apply to developing countries, while it may make good sense in the US and Europe. The fact is that any conversion of land to produce ethanol, particularly if it is with crops like miscanthus which require fertile soil, could only be at the cost of food and fuel wood. In any poor country, there is a social dimension: you cannot switch from producing crops for the public good to those which benefit only the minority of car-owners or industries.
He noted that the best "biomass belt" was around the equator, which put developing countries at the top of the potential list. Better than high-input crops like miscanthus, there is the wonder crop jatropha, which can be profitably grown on arid zones in India: its fruit yields a biofuel. A technologist from India's major cement company told this writer at the Delhi Summit that the company was already experimenting with this crop as a source of biofuel for its energy-intensive production process, which could yield multiple benefits.
Khosla, in the time-honored fashion of an indefatigable champion of a cause, asked a seemingly heretical question, at the end of his address. What would happen if around a third of the current world population – 2 billion people – ran cars with ethanol? That would seem a recipe for catastrophe because it would amount to a massive diversion of land to a form of anti-social transport and deprive people of food and other necessities when the world knows that public transport is the way to go! However, VCs always look to the business proposition implicit in any such denouement. At an average output of 15 tons of biomass per acre, 1 billion acres would replace all the world's oil. The US by itself has an area twice as large and, with increasing productivity (and presumably the use of genetically modified crops), the yield would increase, requiring less acreage.
Any takers?
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** Darryl D’Monte is the founder-president of the International Federation of Environmental Journalists. He is also the chairperson of the Forum of Environmental Journalists of India (FEJI) and a syndicated columnist and freelance writer. He has published two books: “Temples or Tombs? Industry versus Environment: Three Controversies”, Center for Science & Environment, New Delhi, 1985 and “Ripping the Fabric: The Decline of Mumbai and its Mills,” Oxford University Press, New Delhi, 2002. He was previously the resident editor of the “Indian Express” (1979-1981) and of the “Times of India” (1988-1994) in Mumbai. Your emails will be forwarded to him by contacting the editor at: ScienceTech@islam-online.net.
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