Biofuel – The World’S Economic Future

It is amazing how technologies change human lives. With advanced technologies--everything is much more efficient and time-saving than ever before because of new so-called clean and smart innovations. Things like smart homes, smart lighting, smart building, and smartphones help boost higher living standard and productivity. Furthermore, innovation toward renewable energies helps reduce the impact toward global warming. However, these rapid changes in technologies also create huge stress on the environment like global warming and climate changes. Therefore, renewable energy becomes the main discussion for our topic, biofuels. Many start-up companies focus toward inventing green energy like biofuel, solar panel for electricity, and electric vehicle to reduce the emission of greenhouse gases. But really, how do we classify green and clean energies? Most importantly, what social responsibility do these so-called clean energy companies have?

The HBR article for this week helps us understand more about the biofuel industry through the story of Vinod Khosla and his venture capital company called Khosla Ventures. Most of the investments focus toward biofuel. He wanted to fundamentally change the way fuel is produced and consumed in the West, as well as in India and China. He saw the changes and the shift of high demand toward biofuel that sparked investment interest in many clean energy companies. By May 2008, Khosla Ventures had made more than 45 investments in cleantech companies. The firm was recognized by the National Venture Capital Association as the most active venture investing in energy start-ups. He conducts his own research every summer rather than having it done by Analysts. Khosla believed in forming his own view is more accurate than other analysts. He gathers insights and knowledge from reading books that are relevant to his field. He also called authors of those books to gather more extensive details and clarifications. He believes that many start-up firms in Silicon Valley failed because of high market risks. However, the clean energy company has a much larger market. He emphasized that cleantech company has a relatively lower risk at late stage financing compared to biotech, telecom, and semiconductor. Additional argument, political activism, government, subsidies, and regulations play an important role in the cleantech company success.

Businesses in the cleantech industry were estimated to generate $77. 3 billion in worldwide revenues in 2007, growing to a projected $254. 5 billion by 2017. In 2008, the largest sectors within the cleantech industry were biofuels, wind power, and solar power, each of which generated more than $20 billions of revenues. Investments in new energy technologies from venture capital, project finance, public markets, and research and development increased by 60% from $92. 6 billion in 2006 to $148. 4 billion in 2007. His firm’s cleantech portfolio included investments in biofuels, materials, plastics, water, tools, solar, engineered geothermal, natural gas, and electrical and mechanical efficiency. In early 2008, approximately 70% of Khosla Ventures’ investments were in the cleantech sector; the other investments were focused on high-tech, mobile, and Internet start-ups. There are 3 phases of his investment which are ethanol, Cellulosic Ethanol, and advanced fuels.

The biotech industry is a very big market. It will take a lot of trails and errors to get to a level of efficiency, so we need more time with research and development to make sure these biotech companies are not getting out of control. The reason is the process of creating biofuel is not easy or simple—some critics said that the conversion process releases greenhouse gases that may be a contribution to global warming. According to ABC news, researchers said that the process of producing ethanol from corn, soy, switchgrass released mass amounts of carbon into the air. In addition, converting a grassland into a cornfield releases carbon dioxide into the air. Princeton researchers found that the production of corn-based ethanol nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years. Similarly, biofuels made from switchgrass, if grown on land originally intended for corn, increase carbon emissions by 50 percent.

These new findings have tremendously raised concerns about the production of biofuel. The creation of biofuel meant to decrease the deletion rate of natural resources and reduce the impact on global warming. However, there are researches that show this may cause more harm than good. Khosla Ventures is also affected by these findings negatively because of their investments in biofuel companies. Researchers mentioned that for those committed to biofuel, there is hope, both sets of researchers said, in biofuel made from abandoned, depleted farmland and biomass waste, like unused parts of a corn plant.

There are many regulations and incentive programs in the United States that aim to promote biofuels; however, we need to focus on setting strict regulations especially on the conversion process of methanol. Biofuel itself is beneficial because it helps reduce carbon footprints; however, the process in the conversion of plants to biofuel may be harmful. Biofuel is only one of the many ways to reduce the impact on the environment; Other options are hybrid to fully electric vehicles that are growing rapidly through the help of advanced technologies. We may also seek alternative ways to reduce the need for using fuel and other natural resources. The reason is that we have depleted these natural resources at a higher rate than we should and eventually it will come to an end. Rather than creating solutions and products to solve this problem, we could just simply cut the need for driving like carpooling with others, take public transportations, and bike to work when necessary. Creating new products to solve problems is not the only way--A simple reduction and smart choices in everyday life are just as effective. What we learned in class is to look at things from many different perspectives. For instance, the public restroom discussion sparks a debate about gender preference restroom in public places. Who created the split restroom for males and females? Did that decision shape the way we think about public restroom? So when looking at cleantech companies, we must apply our critical thinking to look at different aspects of the business--whether these cleantech companies are helping the environment or are they creating more issues? .