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When it comes to navigating a way out of the nation's energy crisis, you have to wonder whether the fix is already in.

The government has picked the winner--even as senior policy makers issue bland pronouncements about finding new technologies to help break our energy dependence on foreign oil. Between now and 2012, biofuel subsidies will total more than $92 billion, according to a recent report conducted under the auspices of the Global Subsidiaries Initiative.

The timing is coincidental, but the report came out just as Senate and House leaders were weighing a plan which would leave renewable energy out of the next congressional energy bill.

I'm sure there's some larger logic to explain that omission. But it might have a little something to do with the political muscle of the farm interests, a powerful lobby that knows its way around the corridors of power.

The 2007 farm bill features strong support for biofuel subsidies--even with crude oil prices hovering over $90 a barrel.

I've read a number of expert studies questioning the environmental impact of biofuels--especially the production of corn ethanol. Yet few policy makers of any national significance are stepping forward to question whether our national bet on biofuels makes good sense. That hasn't stopped Washington and various state capitols from lavishing billions of dollars on agribusiness' pet project. Most of the $92 billion I mentioned earlier will go to ethanol production.

All this is giving the cynics a field day. Each dollar spent on biofuel subsidies is a dollar not getting invested in other, possibly cleaner technologies. But the only people squawking seem to be the folks involved from those particular fields. I'm not advocating dumping ethanol research and production, but the selling of biofuels as the all-American favorite has been a marketing tour de force. That doesn't necessarily mean it's smart decision-making.

SAN FRANCISCO--Synthetic Genomics is certainly teaching microbes some interesting tricks.

The company, which specializes in genetically manipulating microorganisms and creating new organisms to accomplish industrial tasks, has devised a fuel cell that can generate water or electricity from the stuff that goes down your drain, said founder J. Craig Venter at the Web 2.0 Summit in San Francisco.

"We have biological fuel cells driven by bacteria that take human wastewater and make drinking water or electricity out of it," he said. "We've been designing a number of organisms to try to replace traditional processes."

Synthetic Genomics is also tinkering on a microorganism that can produce a new type of jet fuel. The fuel is similar to ethanol and butanol but it won't absorb water, and thus it, potentially, will be more potent than ethanol or butanol. Venter admits he's not a big fan of ethanol, an alcohol distilled from plant matter that can be used for fuel.

"We've given up on ethanol. It is great for drinking, but it is not a good fuel," he said. "There are so many better compounds."

Synthetic Genomics also has a team that is optimizing algae as a feedstock for biofuels. The company has identified one species in which nearly half of the organism's mass is lipid. That's one greasy bug. Several companies, such as LiveFuels, are trying to come up with a way to produce large amounts of algae to be used as a feedstock for biodiesel. Some companies are using naturally occurring species of algae, while others are genetically optimizing algae.

A slew of companies--Synthetic Genomics, Fundamental Applied Biology and Gevo--have emerged in recent years to try and commercialize synthetic biology. The term refers to harnessing metabolic processes for industrial use. Microbes, after all, are just little chemical factories. They take in sugars, wood, milk and other substances and turn it into beer, cheese or ingredients for medicines. (The next time you open an expensive Burgundy, remember for a moment that it's just a big bottle of digestive remains of single-celled animals.)

Most of these companies are focused on coming up with ways to process existing biofuels or make new types of petroleum substitutes, preferably out of relatively worthless feedstocks like sewage, wastewater or wood chips. BP and Synthetic Genomics have also kicked off research to see if microorganisms found in oil fields can be exploited to get more oil out of the ground.

Some companies replicate the natural processes and aim not to use microorganisms at all. Others are manipulating the genetic code of these creatures and are making new ones.

"Within this century, people will sit down at their computers and design new plants to do a specific task," Venter said.

German auto giants Volkswagen and Daimler have taken minority shares in renewable-energy specialist Choren Industries, which has developed a process for turning leftover agricultural products and other biomass into liquid fuel.

Choren is currently building a beta plant in Freiberg, Germany, that will produce about 15,000 metric tons of fuel a year. That's enough to provide fuel for 15,000 drivers for an entire year. It then hopes to follow up with a production plant that can crank out 200,000 metric tons of fuel. Ten to fifteen of these plants, Choren estimates, could cut up to 3 million metric tons of carbon dioxide by 2020.

The companies said that Choren's fuel is compatible with diesel engines. However, it is not your standard biodiesel production. In biodiesel, vegetable oil or animal fat are cooked to remove the gummy glycerin. The resulting oil is then consumed as fuel.

Choren cooks biomass and turns it into a carbon- and hydrogen-heavy synthetic gas. This synthetic gas is then converted into a liquid via the Fischer-Tropsch process, which was invented several decades ago to convert coal into liquid fuel. South Africa used the coal-to-liquid process extensively because of trade bans during the apartheid era. So did Germany during World War II. With the process, Choren is looking beyond diesel to create other types of synthetic fuels.

CHIBA, Japan--Nissan is going to come out with more hybrid cars and completely electric vehicles in a few years.

But it's less excited about ethanol and biodiesel.

Technically speaking, designing an ethanol or biodiesel car is fairly straightforward, said Minoru Shinohara, senior vice president and general manager of the Technology Development Division at Nissan, during a meeting at the Ceatec show here this week.

The problem is the cost of the fuel. Both biodiesel and ethanol cost more than regular gas, when changes in mileage and other factors are calculated.

"The most important thing is availability of fuel," Shinohara said. In the future, he speculated, biofuel cars could account for 10 percent to 20 percent of all cars sold. It's a large percentage, but nowhere close to a majority.

There are also the political and societal questions, he added. Do you have to use cropland that might be better used in growing food? Do you have to cut down tropical forests?

It's the opposite with cars that run on electricity. The societal questions are easy. The tough part is coming up with a battery that is small enough and cheap enough to put into a car.

Electric cars probably won't be replacements for current petroleum cars. Batteries can't provide a range that gas-powered cars can. Instead, manufacturers will tout them as second cars or town cars designed for ordinary, short commutes. Getting consumers to understand, and act on, the town car concept is going to take a lot of marketing and work, Shinohara said.

"They (electric cars) are not a replacement for traditional vehicles," he said.

Nissan's electric plans are already under way. The company currently sells some hybrid vehicles that rely on components and technology from Toyota. It will come out with cars based on its own hybrid system in 2010. (Nissan got a good share of the buzz at last month's Frankfurt auto show with its electric-powered concept car, the Mixim.)

The first mass-produced electric car from Nissan will then likely follow in 2011 or 2012, Shinohara added. It will likely be a city car. He's a lot less excited about the concept about plug-in hybrids--again, it's the price/benefit equation.

The basis of these future hybrids and electrics will likely come from batteries from a joint venture formed earlier this year between Nissan and NEC.

Virent Energy Systems on Thursday said it has secured $21 million in financing to develop processes for converting biomass to gasoline and other liquid fuels.

The second-round investment was led by Stark Investments and Venture Investors with Series A investor Cargill Ventures also participating.

The company, which was spun off from the University of Wisconsin, has developed a proprietary catalyst that can convert the sugar in biomass to hydrocarbons.

Its fuel technology was originally developed for hydrogen, which the company continues to invest in. But this round of funding was driven primarily by interest in extending its existing process to liquid fuels, said Mary Blanchard, Virent Energy's director of marketing and strategy.

It intends to make gasoline, diesel and jet fuel. Its process can also be used to make industrial chemicals.

The funding will be used to commercialize the technology, which is now working in its labs, said Blanchard.

The biomass-to-hydrocarbons conversion is a low-temperature, low-pressure thermochemical process, she said. The company expects to have a pilot plant operating in three or four years and a full commercial operation in about five years.

Its initial feedstocks will be sugar cane or sweet sorghum but the company is also working on converting cellulosic sources.

NEW YORK--To hear money people talk about it, the numbers for investing in corn-based ethanol aren't looking as good as they did only a year ago.

Biofuels have been the top recipient of investment in a multi-year clean tech, or green tech, expansion.

But some indicators show that projects around corn-based ethanol may run into speed bumps, even though the long-term prospects for biofuels are positive, according to speakers at the Renewable Energy Finance Forum here on Wednesday.

For one thing, the price of corn is on the rise, as farmers look to capitalize on government incentives that favor domestic fuel production. About a year ago, corn was about 2 dollars a bushel but is now hovering near 4 dollars a bushel.

Ethanol can be made from a variety of plant-based "feedstocks," including grains like corn or sugar cane. Cellulosic ethanol, made from woody substances like wood chips or grasses, appears to be more financially attractive, experts said.

Studies have indicated that cellulosic ethanol creates lower greenhouse gas emissions than corn-based ethanol, which is roughly on par with gasoline.

Cellulosic ethanol is newer technology, and nearly all ethanol production in the U.S. comes from corn. But higher prices for corn mean higher prices for ethanol at the pumps, making it less cost-competitive with gasoline, says Morgan Stanley Managing Director Daniel More, who spoke on a panel on biofuels.

An investment hangover
In addition, there are concerns that the huge build-out in plant capacity will throw off some of the financing assumptions that underpin project finance deals.

The United States has already built almost 6 billion gallons' worth of manufacturing capacity to produce corn-based ethanol, and another 6 billion gallons of capacity are now being constructed. But an over-capacity of ethanol, where the supply exceeds the demand, could have a dampening effect on prices.

A year ago, Andrew de Pass, the head of sustainable developments investments at Citi Alternative Investments, was involved in engineering an investment in Northeast Biofuels, and they drank champagne just before the deal was signed.

"Today we're in hangover mode, and we're a lot more sober about our sector," de Pass said.

As a result, experts here said that some deal "restructurings" will likely occur and the industry will consolidate.

"There will be some issues in biofuels," said Kevin Walsh, managing director of renewable energy at GE Energy Financial Services.

GE Energy Financial Services stayed clear of the biofuels project over the past years because of exposure to corn commodity price fluctuations and potential changes in policy. However, Walsh said that GE is now looking at financing some projects around cellulosic ethanol.

The enthusiasm for biofuels, stemming from government policies aimed at energy independence, has led to a handful of public market offerings in the past year.

But a review of three of them--VeraSun Energy, Aventine Renewable Energy, and US BioEnergy--shows that their stock prices are down from their initial offerings, according to Morgan Stanley's More. Those declines occurred in an upward-moving stock market, he noted.

"The question for all of us is, in the face of a great stock market and great industry dynamics, what is going on?" he said. "The answer is that they are not as profitable as they were when they went public."

The demand for ethanol in the U.S. is strong, driven by a government mandate to replace MTBE as a gasoline additive. That means that ethanol could comprise 10 percent of transportation fuels by the end of the decade, said Michael Eckhart, the president of the American Council of Renewable Energy (ACORE), an industry coalition.

Cellulosic ethanol is anticipated to take up a larger chunk of ethanol production projections over the next 15 years. And government policies are expected to continue to favor biofuels.

But Eckhart said that projections for rapid biofuels uptake could be dampened without the infrastructure to distribute ethanol at the pumps.

"I'm worried we're going to see a real slow-down after 2010 if we don't get the infrastructure in place," Eckhart said.

MENLO PARK, Calif.--Carbon dioxide: It's the cause of global warming, and it could also become the cure.

Sandia National Laboratories is tinkering with ways to convert CO2 into liquid fuels or precursors to useful fuels, said Ron Stoltz, government relations manager for the lab, speaking here at a showcase for the 2007 California Clean Tech Open on Monday. At the event, organizations like Sandia, Lawrence Berkeley Lab and UC Davis showed off a few ideas percolating in their labs for alternative energy.

The idea is to heat carbon dioxide to about 1200 degrees Celsius with excess energy from nuclear power plants (or the excess heat from utility-scale solar power plants) and mix it with water or other substances. Some have proposed making hydrogen in this manner.

"You can make a lot of useful things out of CO2 and H2 or water," Stoltz said.

Making gas out of carbon dioxide is preferable to burying it underground, as many are proposing, he said, adding that Sandia knows a few things about burying poisonous substances. It oversees nuclear waste disposal.

Stoltz also said that the lab continues to work with LiveFuels and other start-ups on algae-based biodiesel. The difficulty is in getting the water out of the algae.

Like most alt fuels, developing algae fuels that can compete with ordinary gas or diesel economically won't be easy.

"It's hard to beat gas as an ideal liquid fuel," he said.

Another idea at the event: simplified daylight harvesting at UC Davis. The university has come up with a way to harvest sunlight to light offices. A lot of companies do this, but Davis has combined a harvesting system with dimmers and occupancy sensors so that the system efficiently spreads the light around to the offices where needed. In many of the sunlight systems, you don't get this level of fine-tuning. All of the offices get light, or none of them do. The amount of light fed to the building is controlled by moving the solar receptor, a disk, away from the sun.

CORONADO, Calif.--The car of the future will apparently have more in common with a kitchen appliance than a lawn mower.

"The future is going to be an automobile that looks like a two-ton Cuisinart," said Josh Wolfe, managing partner of Lux Capital, at the Future in Review conference Wednesday. Wolfe was part of a panel discussion entitled "The Future of Energy on the Nanoscale," in which panelists focused mostly on battery technologies and how those will evolve for cars and other devices.

The night before, researcher J. Craig Venter suggested that fuels derived from algae could provide a much more abundant source of energy than that black goo under the deserts of the Middle East. Venter has been analyzing samples of ocean water taken during a cruise of the Sargasso Sea, and he and his team think they can use gene-sequencing technology to create microbes that could provide a future source of fuel. "My goal is to replace the petrochemical industry by the next decade."

Wednesday's panelists steered clear of biology, preferring to work on finding new markets for their existing products. "The nanomaterials and nanoscience haven't hooked up with the market," said Keith Blakely, CEO of Nanodynamics, which is working on fuel cell technology*.

"Most important is the electrification of automobiles, this is the trend, more than biofuel or gas substitutes," Wolfe said.

The Future in Review agenda is filled with discussions on future energy sources and challenges, and more debates are sure to emerge on how best to reduce the world's dependence on oil and coal.

*UPDATED - Keith Blakely notes in the comments below that I misinterpreted the tense on his remarks, in that when the Future in Review conference first started, the market opportunities weren't there. But, as evidenced by the fact that companies like Nanodynamics exist, the situation has changed. Sorry, Keith.

The California Clean Tech Open kicked off its second competition with a sunny outlook at San Francisco's City Hall Tuesday night. In October the contest will award six fledgling green businesses with start-up starter kits worth $100,000 in cash, office space and professional services. Prize sponsors include AMD, Google, Lexus and Pacific Gas & Electric.

Last year 156 seedling companies entered the open, which is backed by nonprofit Acterra; twice as many contenders are anticipated for 2007. A new green building award joins five other categories: energy efficiency; renewables; smart power; transportation; and air, water and waste. Entries are due by the end of next month and finalists will be announced in July. Eighty-eight percent of last year's finalists surveyed remain in operation, and nine percent have raised funds independently.

Greenvolts of Berkeley, Calif., has come a long way since taking the renewable energy prize last year. The solar energy start-up counts $1.5 million in seed money and awards, an office in downtown San Francisco, a 2,500-square-foot factory, six patents pending, two contracts in the works with utilities and three exclusive licensing deals. CEO Bob Cart learned about the Clean Tech Open last June, threw together a "goofy prototype" in his garage and submitted his proposal in the nick of time for the deadline. Greenvolts' mirrored solar power system adjusts to the sun's movements and uses a tiny fraction of the material of most solar panels.

If the mantra for realtors is "location, location, location," maybe green entrepreneurs should chant "timing, timing, timing." The theme of early birds with big dreams getting attention and funds continued throughout the evening. But clean tech is also the most complicated business sector, said Raj Atluru, managing director of Draper Fisher Jurvetson.

"Unless you have a fundamentally disruptive technology, find another marketplace," he said. Atluru receives a glut of proposals related to solar power and biofuels but sees fresh opportunities for businesses that focus on green building materials, energy storage and using waste for energy. He called clean tech the most passionate and fourth-largest sector receiving venture capital investment. Draper Fisher Jurvetson logged more than 1,000 clean-tech business plans last year, up from only 50 in 2002.

Many at the launch event credited California's carbon-reduction and energy-efficiency laws for nourishing the clean-technology sector.

"We didn't set out to be climate martyrs; we set out to be climate pioneers," said Ralph Cavanagh, co-director of the National Resources Defense Council's energy program.

Brad Barton, the Department of Energy's first commercialization director for renewable energy, also applauded federal fuel-efficiency laws. But California Lieutenant Governor John Garamendi brought darker clouds into the otherwise radiant picture.

"Where's payday?" he asked, adding that the most innovative businesses can't do a whit about dwindling natural resources and rising oceans as long as the government makes fossil fuels the center of its energy policies. "The president very much reminds me of this horse," Garamendi told me. "No matter how hard I kicked it and how hard I whipped it, it wouldn't move."

Garamendi called for powerful companies to get political and said he favors carbon cap-and-trade laws such as those in the European Union. Because he was taking four flights in two days to attend this event, audience members suggested that Garamendi buy carbon credits to atone for the air travel.

Other green-technology business competitions include Ignite Clean Energy at MIT and the Cleantech Innovation Challenge at the University of Colorado at Boulder.