Will Biofuels Become Mainstream?

Biofuels are the siren song of the greentech industry.

Cheap, plentiful biofuels could ameliorate a host of global problems: carbon emissions, trade imbalances, agricultural employment in the middle of the country and emerging nations.

And there is no doubting the demand. The world consumes the equivalent of 1.06 cubic miles of oil globally a year, according to Hew Crane, Ed Kinderman and Ripu Malhotra from SRI International. That’s close to 1.1 trillion gallons a year, or more than enough to fill 1,500 sports stadiums. Peak oil, according to many, is expected to occur in the next decade or two, leading to lower output, higher prices and a golden opportunity for ethanol, biodiesel and biobutanol.

The biotech cluster around the University of California Santa Cruz could emerge as the Saudi Arabia of synthetic fuels.

The problem is the cheap and plentiful part. Many current biofuels are expensive and rely on food crops grown on valuable arable land. 30 percent of the U.S. corn crop goes toward corn ethanol, which only marginally reduces greenhouse gases. Subsidies are mandatory.

Algae and cellulosic fuel companies claim they can get around this problem. An algae farm can produce approximately 5,000 gallons of fuel per acre a year, far higher than the few hundred gallons that can be harvested from soy or corn. Algae can also be grown indoors, on the marginal strips of land that line freeways or even in big balloons filled with sewage, some claim. The problem? Only a little algae fuel has been made.

The high costs and high risks of the industry are already apparent. While investors flocked to alternative fuels in 2007 and 2008, the subsequent swoon in oil prices has sucked a good portion of the life out of the industry. To survive, biofuel companies now claim they will concentrate on green chemicals, aircraft fuel or even oils for the food industry for the meantime.

Electric cars-once obscure and impractical-have captured the imagination of car makers and consumers alike. Simple improvements in efficiency could also put a dent in fuel consumption.

Nonetheless, a trillion gallons is an almost unfathomable opportunity and efficiency and electric cars can only partially soak up some of that consumption.

So what will it take to get biofuels flowing to the mainstream?