Thursday, March 08, 2007

Ethanol as a source of energy

Todd Sullivan over at SeekingAlpha has posted a very interesting analysis of ethanol as a source of energy. He quotes Vinod Khosla of Sun Microsystems and venture capital fame to the effect that ethanol has double the energy balance of gasoline and that looking at energy balance calculations is a waste of time anyway.

Sullivan lists and "debunks" what he refers to as myths about ethanol as follows:
1. Lack of production yields...I agree with Sullivan that once ethanol gets traction as a fuel that production yields will increase rapidly as investment in yield improvement takes place.

2. Not enough cropland...This one is patently absurd; the US government is paying a large number of farmers not to plant crops of any kind, and many crops are heavily subsidized (sugar, for one). The problem with agri-business is that there is far too much farm capacity, which is why international trade negotiations frequently revolve (and stall) around farm exports.

3. Food prices will go up...more nonsense. See 2 above for the agricultural capacity explanation.

4. Ethanol is more is now because production hasn't reached the levels where economies of scale kick in. Once ethanol is in wide use the price per gallon will at least be competitive with gasoline if not less.

Good food for thought...

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