PALO ALTO, Calif. — Silicon Valley has emerged from the year-2000 technology bust with a new mission: finding clean-energy technologies that will free the U.S. from its reliance on imported oil and rid the atmosphere of emissions that may be warming the planet.
The devotion of some of the nation’s top scientific minds and many billions of dollars in venture funding to such important yet elusive goals is raising optimism that solutions will be found in time to prevent an international or environmental calamity potentially caused by the growing use of fossil fuels.
Under the Silicon Valley microscopes is an array of potential solutions, from cars powered by cleaner and domestically derived fuels such as hydrogen, ethanol, electricity and solar power, to potentially revolutionary film coatings made of nanostructured materials that could enable homes and offices to inexpensively generate much of their own heat and electricity from the sun’s rays.
Making any of these widely discussed options commercially viable will require breakthroughs in intricate technologies that Silicon Valley is uniquely capable of supplying.
The enticements for engineers and scientists working here in university laboratories, corporate research parks and backyard garages are plentiful: Whoever invents the technology that replaces the gasoline-driven car or coal-fired power plant will not only be a national hero but most likely also become one of the world’s next billionaires.
“A lot of people are working on it,” said Brian Cheung, a Stanford University engineering graduate student who helped design a solar-powered car that relies on computer chips and batteries to store far more solar energy than once was thought possible. Like many young technicians devoting themselves to the task, he is confident that alternatives to gas-powered cars are just around the corner.
Basking in California’s bright, sunny climate, it is not hard to imagine the possibilities. The state already is leading the nation in mandating the use of alternative fuels and renewable technologies. Recently, it enacted far-reaching legislation requiring massive cuts in carbon-dioxide emissions from cars and power plants within 15 years — apparently relying on hope that new technologies will make that possible without imposing painful conservation measures on drivers and consumers.
“Now the people who brought you Silicon Valley are also stepping into energy,” said Daniel Yergin, chairman of Cambridge Energy Research Associates. He attributes the “great bubbling” of creative research and investment in alternative energy to high oil prices, which hit a record of $77 a barrel last summer. Rapidly escalating energy prices since 2002 have prompted the interest of entrepreneurs as much as they have exasperated consumers.
“They are stimulating the most widespread drive for technological innovation this sector has ever seen,” Mr. Yergin said.
Technicians and scientists are trying not only to find wholesale alternatives to conventional cars and power plants but also to make existing fuels and technologies more efficient and productive.
A major oil find nearly four miles under the Gulf of Mexico by Chevron in September was made possible by digital technologies once only dreamed of — “an extraordinary technological achievement,” Mr. Yergin said.
Renewable fuels such as wind and solar energy have “captured the public’s imagination” and have developed into a $40 billion global market driven by governmental mandates for their use in Europe and the United States, he said. But the biggest change from earlier efforts on alternative energies, he said, is the “rising funding and fervor that are going into innovation.”
Funding spigot gushes
Venture-capital investment in Silicon Valley reached $1.7 billion in the first three quarters of the past year — five times what it was two years earlier. Financiers there believe they can use the same kind of focused funding efforts that created the information and biotechnology industries to revolutionize the energy field.
Everyone from the federal government to wealthy individuals are getting in on the act. President Bush and Democrats in Congress appear to be in a bidding war to see who will shower the most funding on alternative energy. And “angel investors” have emerged in the private sector to nurture small companies that are too speculative to obtain bank loans and too young to attract conventional venture capital.
“Biofuels” has become the new buzzword. But while lawmakers in Washington have focused much of their efforts on funding ethanol derived from corn, where supplies are limited and compete with critical food needs, the “holy grail” in Silicon Valley is the search for a breakthrough in cellulosic ethanol, which is made from potentially limitless supplies of crop waste or specially designed energy crops, Mr. Yergin said.
“Some of the most intriguing possibilities will come from applying biology and genetic engineering” to create the crops for making ethanol and then convert the crops and other waste into fuel, he said.
Vinod Khosla, a prominent Silicon Valley venture capitalist, is betting that breakthroughs in bioengineering of corn and other crops will enable the United States one day to produce all the ethanol it needs to fuel its cars on 50 million acres of farmland — little more than the amount of acreage that the government pays farmers to set aside and not cultivate each year to prop up farm prices.
“For the first time, the best minds in this country are working on this problem,” he said, noting that more than half the engineering professors at the University of California at Berkeley and Massachusetts Institute of Technology are working on finding alternative energies.
“Innovation is what we need to solve this problem.”
While some entrepreneurial efforts are bound to fail, Mr. Yergin said, others will succeed and could end up transforming business and society the way the information-technology revolution did.
“Expect dramatic results” if activity remains as feverish as it is, Mr. Yergin said.
For Silicon Valley companies and residents, the call for action has provided a new sense of purpose, replacing the drive that fueled the Internet boom, which spectacularly fizzled out. Thanks largely to alternative-energy startups in the region last year, there was an increase of 33,000 technology jobs and a 6.5 percent jump in household incomes — the first such growth since 2001.
On the cutting edge
Stepping into the forefront of alternative-energy technologies are Silicon Valley companies such as Tesla Motors, which has developed high-performance electric cars using powerful lithium-ion batteries. Elon Musk, chairman of Tesla, was a co-founder of Paypal during the Internet rage and has been the biggest investor in the company. Sergey Brin, co-founder of Google, also is listed among its major investors.
Also on the forefront is Nanosolar, which is using thin films made of nanostructured materials to convert and store solar energy in what many believe could be a breakthrough replacement for cumbersome photovoltaic cells that would revolutionize the solar industry. The company said the founders of Google and other successful technology companies have been angel investors in the enterprise.
“We’ve reinvented ourselves,” said Russell Hancock, chief executive of Joint Venture: Silicon Valley Network. The business and community association recently sponsored a conference on green technology with former Vice President Al Gore as the keynote speaker.
Politicians of all stripes are jumping on the bandwagon, with many pinning their hopes on technological breakthroughs to alleviate otherwise painful adjustments from high oil and gas prices and mandatory emissions reductions that are being contemplated in capitals from Sacramento to Washington.
“Our nation is now on the threshold of dramatic breakthroughs in clean energy technology,” Mr. Bush said in a recent radio address identifying alternative energy as an area ripe for bipartisan cooperation. Mr. Bush has set a goal of reducing the nation’s gasoline use by 20 percent in the next decade through increased conservation and reliance on alternative fuel — a goal many Democrats endorse.
Mr. Bush said he was “optimistic” about a breakthrough because, on a recent visit to a DuPont research facility in Delaware, “scientists told me that they are close to making the use of cellulosic ethanol a reality.”
Mr. Khosla said success could be achieved with minimal assistance from the government. With scientists and engineers working at full tilt, Congress need pass only three focused measures. One would require automakers to produce a large number of “flex-fuel” cars that can be driven using gasoline, ethanol or electricity in the next decade. The second would require 10 percent of gas stations to offer ethanol fuels.
And to ensure that Saudi Arabia and other oil producers cannot undercut the viability of the ethanol industry by suddenly slashing oil prices to $25 a barrel, Congress should provide a price floor to ethanol producers through subsidies that are phased out as oil prices rise, he said. Ethanol already enjoys an estimated $5 billion to $7 billion a year in subsidies from federal and state governments.
But the obstacles to success remain formidable. Though alternative energies such as wind and solar have been thriving with oil prices hovering between $50 and $60 a barrel, they will have to prove to be commercially viable if oil drops back to $30 and not just fade, as they did during previous oil busts, said Toby Jackson of CarbonFree, a British energy think tank.
Also, the combination of fear over spiraling energy costs and concerns about global warming may cause an “investment overshoot” that could end in a bust like the dot-com boom, he said.
Though large- and small-scale wind-power projects are “coming tantalizingly close to critical mass,” solar-power technologies still have a long way to go, and investors could get burned, he said.
The widespread use of both wind and solar energy depends on developing better energy-storage systems, he said. And although biofuels currently are the rage for replacing gasoline, they are likely to become problems in themselves because of shortfalls in supply sources and adverse environmental effects, he said.
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