When it comes to power, density is the key. Energy density. The reason that solar power, wind power, and ethanol are so expensive is that they are derived from very diffuse energy sources. It takes a lot of energy collectors such as solar cells, wind turbines, or corn stalks covering many square miles of land to produce the same amount of power that traditional coal, natural gas, or nuclear plants can on just a few acres.

Each of these alternative energy sources is based on mature technology. Agriculture and fermentation have their roots in prehistory, windmills date back at least to 65 B.C., the photovoltaic effect was discovered in 1839. Yet nowhere in the world are these technologies serving as primary energy sources without significant government subsidies. While incremental improvements can be expected, what is needed for them to become viable is an order of magnitude increase in productivity. As old and as well-researched as the technologies are, such improvements are possible but unlikely. As significant future energy sources these technologies are dead ends, which is why the government, and not the private sector, is funding them.

Industry is more than willing to risk research dollars on technologies that show real promise, but it is not willing to flush shareholder money down a rat hole. Politicians, however, operate from different incentives. When a crisis, real or imagined, makes headlines, they want voters to see them doing “something” about it, and they must move quickly because election cycles and constituent attention spans are short. Funding long-term research in promising technologies is not sufficient to meet politicians’ needs. Solar panels, wind turbines, and ethanol refineries are all current technology, and can be erected quickly with fanfare and photo-ops. By the time these alternative power sources prove to be financial and, possibly, environmental busts, the politicians will have been reelected and voters’ attention will have shifted to the next crisis.

Another benefit of subsidizing “shovel ready” solutions is that existing technologies have existing supporters who can provide campaign funds. Such supporters, however, constitute a well-financed “status quo” that will make government funding, once started, difficult to end. For example, even though corn-based ethanol has driven up food and fuel prices, increased auto emissions, raised atmospheric carbon dioxide concentrations (by causing additional acreage to be tilled), and possibly resulted in net energy losses, the government is still subsidizing the industry and still requiring that the fuel be added to gasoline.

Wind energy, for its part, has been “just a few years away” from being economically competitive with conventional power for at least the last 25 years, and this will not change any time soon. The Energy Information Agency predicts that in 2016 wind power will still be 49% to 77% more expensive than electricity from either coal or natural gas. Furthermore, because wind turbines work only when the wind blows, wind farms cannot replace conventional plants. Backup power from conventional sources, usually gas turbines, must be ready to come on line the moment the wind fails. Despite these fundamental problems, subsidies continue to flow thanks to an entrenched lobby.

By contrast, consider the significant oil industry investments in researching biofuels made from algae. Unlike ethanol, biofuels are chemically similar to fuel made from petroleum and, like petroleum-based fuels, have a significantly higher energy content than does ethanol. Biofuels can also be handled by current fuel distribution systems and can be burned in today’s vehicles.

Algae can be grown in brackish water on desert land and, with today’s technology, can produce over 2,000 gallons of fuel per acre each year. This compares favorably with the approximately 250 gallons of ethanol that can be produced from an acre of corn – a ratio of 8 to 1. Accounting for the differences in BTU content, the ratio jumps to over 12 to 1. It may even be possible to boost productivity to 100,000 gallons per acre per year, raising algae’s potential to over 600 times that of corn-based ethanol!

Biofuels are carbon neutral because the carbon dioxide released when they are burned is first extracted from the atmosphere by the algae. Unlike burning petroleum-based fuels, then, burning biofuels will not result in a net increase in atmospheric CO 2 levels.

With algae’s vast potential, it is easy to understand why private industry is interested, and why no government subsidies are needed to encourage investment. Moreover, if algae-based fuels do not prove viable, the companies now researching them will have no “status quo” problems with ending their investments and shifting scarce resources to more promising technologies – where “promise” is measured in density.

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This piece originally appeared in The Freeman (January/February 2010). Mr. Fulmer is co-author (with Robert Bradley) of Energy: The Master Resource (Kendall/Hunt, 2004).