The biggest alternative energy investor in Silicon Valley, Vinod Khosla, says cellulosic ethanol and utility-grade solar power are set for a rapid increase in production, whereas coal will lose ground.
"I would say that the technical risk in biofuels is no different than semiconductors and the market risk is also somewhat similar," Khosla said at the Reuters Biofuels Summit.
Khosla founded Khosla Partners, which has invested in over 25 renewable energy ventures. Khosla has been behind successful technology companies such as Sun Microsystems and compares investing in renewable technologies to computer start-up investing.
"Remember, last year (cellulosic ethanol) was six to 10 years (away). Now people talk about four to six years. And my bet is (that) by the end of this year, they will talk about two to three years," Khosla says in a Reuters release. "So we are maybe making two years of progress every year."
He sees ethanol fuels on the rise globally as importation barriers fall in Europe and North America, and he says tariffs may be "on their way out."
The 2008 presidential elections could provide extra political attention for biofuels, and a Supreme Court decision may classify carbon dioxide emissions as a pollutant, helping ethanol because ethanol blends have much lower carbon dioxide emissions.
2006 was the strongest year on record for alternative energy investing from venture capitalists, more than doubling 2005's total.