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There is a bright spot here, however, because investors and governments have clearly recognized the need to build a renewable fuel infrastructure at the local level. If these initiatives prove successful, we would expect consumer demand to assume its rightful role as market driver.
One of the reasons we're sanguine about the future of alternative fuels is that the ethanol experience has taught us some good lessons. Indeed, we've proved to be very agile in shifting our focus to sources of fuel that will help overcome the commodity and transportation issues that have hampered the growth of the industry to this point.
Literally billions of investment dollars are going into R&D for cellulosic ethanol from all manner of cheaply--even freely--available sources that do not compete with our food and animal feed industries; these approaches also help solve real problems, such as landfill crowding, forest fire dangers, and the sequestration of emissions, like carbon dioxide, that cause global warming. Many of these technologies can and are being adapted to fit in with our existing ethanol infrastructure so that current facilities will not need to be scrapped in order for the industry to produce the next generation of renewable fuels.
The new possibilities don't stop with raw materials. Demand-side drivers are also at work. A number of investors are focusing on alternate sources of vehicular power. The evolution of battery technology--from lead acid to nickel cadmium to nickel-metal hydride--has recently received a boost from lateral advances in nanotechnology that will enable advancements in hybrid vehicles. Combining the energy storage capabilities of these new batteries with hybrid engines that efficiently burn alternative fuels will help the fresh fleets of energy-efficient hybrids and electric cars that are poised to hit the road simply get out of neutral.
As we work our way back in the wake of our early stumbles in alternative energy, it's clear that this market will be guided--in much the same way as health care--by significant regulation and public policy initiatives. It's essential, therefore, that sustainable technology investors and government officials continue to find ways to work closely together to achieve common goals.
With policy makers in Washington increasingly looking to sustainable technology as a way of addressing climate change and energy security concerns, it seems that now is the right time to increase the influx of public monies into early-stage sustainable technology research, which is already under way at a host of private companies.
As always, the debate will be about whether the government is funding basic sustainable technology research or pre-annointing industry winners. However, in working with policy makers, we are encouraged by a number of forward-thinking initiatives that recognize the need for a host of alternative solutions to our fuel, energy, and environmental needs; we also expect that our leading universities and national laboratories will play a significant part in the development of new technologies as a partner with industry.
Despite the stumbles and incorrect assumptions that have hampered renewable fuel production in the United States, we believe that we can escape our current energy trap, head toward meaningful energy self sufficiency, and enhance our country's national, financial, and environmental security in meaningful ways.
Michael Butler is chairman and CEO of Seattle-based Cascadia Capital, a national investment bank serving middle-market companies in sustainable technology. Randy Shefman is an associate specializing in new energy markets at Hogan & Hartson in Denver.