Over at TAP, Rachel Stern has a great sit-down with energy security advocate Gal Luft over the "flex-fuel solution." According to Luft, a strong advocate for clean-tech both in terms of policy and commerce, the government needs to lean hard on manufacturers to ensure they are creating lines of cars that can use alternative fuels like ethanol, methanol and butanol in addition to gasoline. Luft favors this approach because the technology is already extant, and could guard against future gas shocks and gradually diversify the US energy portfolio. Though enabling cars to flex fuel has an additional cost of about $100 per vehicle, he frames it as a matter of competitiveness--a useful thing to remember as GM (they of the Hummer) posts its worst-ever quarterly loss. Excerpts:

Gal Luft: Flex fuel allows drivers to use any combination of gasoline and alcohol. Now, alcohol fuel is ethanol, methanol, butanol, and many other various alcohols out there. All of these alcohols can be met at various rations based on your discretion to power the car without any compromise. The reason why we think that this is a very important part of the solution to our oil dependency is because today, petroleum is the only source of energy in the transportation sector. So it's basically a monopoly. We're trying to use fuel choice to break the monopoly by introducing competition.

... If you look at the cars that GM and Ford are making in Brazil, for example, almost all the cars are flex-fuel. American automakers have already said that they'd be willing to make 50 percent of vehicles flex-fuel by 2012. Which is good. We want to make this into a law. We want this to be codified. I think that no industry likes to be told what to do, but considering that the cost is pretty low, and considering that the technology is mature, I think that this is something they can live with.

... Well, when you give people choice, it doesn't mean that you force them to exercise that choice. If you have a flex-fuel car, you can use gasoline. But this is what we view as an insurance policy against future supply disruptions or against geological problems later. We want to make sure that the transportation sector is fully diversified and there is healthy and free competition in this sector in such a way that we gradually collapse the price of oil and break the oil cartel.

In addition--and perhaps as a precursor--to support from individual consumers and private enterprise, Luft says the government must back the effort to take flex fuels to scale. With such a mandate, which could take the form of new automobile standards a la CAFE, or a subsidy for the company that runs off the first 100,000 of these suckers, 

you basically incentivize the entire supply chain, because within three years there will be 50 million new cars on the road that are flex-fuel cars. At that point, it makes sense for gas station owners to retrofit their pumps. And then the supply chain will begin to follow. So it's sort of like you gotta deliver the chicken in order for it to lay an egg. Otherwise, you're going to be waiting for the egg forever.

I think this will be tougher than it sounds, but it does underscore the areas where we can be soundly investing American dollars with a real outcomes-based approach, rather than continuing to believe in pump dreams.

--Dayo Olopade