Now, let’s remember it’s election time in Ontario, so you have to take comments from a political leader running for re-election with a grain of salt. That said, Premier Dalton McGuinty said today that his government has been in discussions with Canadian train manufacturer Bombardier about creating an “Ontario-developed and built hydrogen-powered commuter train” for the province. “Ontario Liberals think Ontarians can — and should — lead the development of hydrogen alternatives for the world,” McGuinty told a crowd on a stop in Thunder Bay, where Bombardier currently makes GO Transit commuter train cars. The comment was absent of detail, but it certainly raised a few curious eyebrows in the crowd.

As intriguing as the hydrogen train or “hydrail” concept sounds, Ontario wouldn’t be the first jurisdiction to pursue it. A European consortium called The Hydrogen Train concluded a feasibility study last year that looked at demonstrating the first hydrogen-powered train in Europe on a Danish railway. The goal of the project is to launch the first train by 2010. Bombardier has been approached, along with its competitors, and did show interest. In fact, back in 2001-2002 Bombardier applied for European Union funding as part of a project to develop a hydrogen-powered “Green Train.” The funding, however, was never granted.

In Japan, there has also been activity. Earlier this year, East Japan Railway started trialling its own hydrogen train. It hopes to be transporting commuters with such a machine within the next 20 years. In the U.S., North Carolina has shown interest in creating its own hydrogen railway system, while a company called Vehicle Projects LLC has been designing these next-generation trains as part of a collaboration with the U.S. military. There’s even an international hydrail conference that’s entering its fourth year with a meeting in Spain in June 2008.

One of the most compelling arguments for adopting hydrogen trains rapidly is that a vast hydrogen distribution network will not have to be built anywhere near the scale that it will have to be built for hydrogen cars. The decreased mobility of a train as compared to a car will be an advantage in delivering hydrogen to just a few key refueling points along the rail line. Trains don’t drive off-road or in complicated city streets and alleys like cars do, so this is an inherent advantage of hydrail.

Now, a common criticism whenever anybody talks of a hydrogen economy relates to the source of the hydrogen. Is it coming from a fossil fuel and therefore dirty at the source, or does it come from an electrolysis process powered by emission-free electricity, whether that be nuclear or renewables? If one considers the train link between Toronto and Montreal one can immediately see the opportunities. The trains run fairly close to two major nuclear plants, where hydrogen could be produced using surplus baseload power overnight. There’s also the potential of setting up offshore wind farms in Lake Ontario (at least two have already been proposed) that could generate hydrogen when the wind power isn’t needed. What’s interesting with this is that we could use the train system as a way to lay the first building blocks to a much larger hydrogen infrastructure down the road — literally.

Over the past two years I’ve been more critical of the hydrogen and fuel cell markets, perhaps turned off by the marketing and hype we saw in the late 1990s up to about 2002. But we have to remember that fuel cells and hydrogen are not tied at the hip. We can have a hydrogen economy without fuel cells and we can have fuel cells run on non-hydrogen fuels. What’s increasingly clear, and I appreciate this after a recent call with some hydrogen experts, is that we need to start producing large amounts of this clean-burning gas to get economies of scale and to lower the cost of the fuel itself. Once that happens, the market can take care of itself. Trains (like buses) could be part of this crucial first step, and in this sense, it’s definitely something worth talking about in Ontario.

Choo-choo.

Attention all developers of technologies for producing next-generation biofuels, particularly cellulosic ethanol: Canada may invest up to $200 million in your plant, as long as it’s based on Canadian soil and can turn local biomass into renewable fuel.

As promised back in March, the federal government here launched its NextGen Biofuels Fund yesterday, making $500 million available to companies looking to build large-scale demonstration production plants based on technologies that are beyond pre-commercial pilot phase. The aim is to kickstart the market for biofuels that are based on cellulosic biomass materials, rather than starchy food crops such as corn and wheat.

Cleantech.com is calling it the largest pool of capital in the world so far that’s dedicated strictly to biofuel projects.

It’s a progressive move, and — well, gotta give credit where credit is due — it’s a wise move from a Conservative government that has taken a beating recently on its negative stance towards Kyoto.

With oil dancing above $80 a barrel the timing of this fund couldn’t be better. While criticized for being costly and experimental, cellulosic ethanol is seen as the ideal transition away from corn-based ethanol because it can use cheaper “waste” materials that don’t compete with food markets, or dedicated crops like switchgrass that can be grown on marginal lands and don’t require much — if any — watering or fertilizaton. The trick is to get scale, and this is where the new fund comes into play.

Vicky Sharpe, CEO of Sustainable Development Technology Canada, the government-created body that will manage the fund, says applications are already being accepted and that the goal is to turn Canada into a jurisdiction for both next-gen biofuel production and, ideally, innovation. SDTC will cover up to 40 per cent of any accepted project, capped at $200 million, but the money is more investment than handout. That’s because the money is expected to be paid back over 10 years from the cashflow of a plant once it becomes operational.

This is the second fund managed by SDTC. The first, the $550 million SD Tech Fund, has been around for a few years and broadly supports late-stage development and pre-commercial demonstration of clean technologies. The goal with this SD fund is to bridge the funding gap that often exists before angels and VCs take interest in a company. The amounts invested are in smaller chunks, and only go to consortia that can contribute two-thirds of project costs.

For the new biofuels fund, all forms of biomass are being considered, including municipal solid waste, forest debris and agricultural residue. In Canada, companies such as Iogen, SunOpta, Lignol and Greenfield Ethanol are all targeting the space and expected to apply for funding, though SDTC made clear that foreign companies can also apply.

Measured on a per-capita basis, this is a huge whack of money for a country like Canada — and, as observers told me yesterday — it will go a long way in making the country competitive on the international biofuels scene.

A clean-coal project that Saskatchewan’s provincial power utility, SaskPower, has been promoting for several years has been shelved because of what its proponents claimed was a lack of government support. Seems the province had to move ahead with a decision on its future energy needs, so it opted to build a natural gas plant instead of waiting for the clean-coal option to move forward.

For all the talk and hype about clean coal, this is a prime example of the risks and high costs associated with such a project, and the fact that government — while they make good speeches about the potential of “clean coal” — aren’t prepared to put their money behind it. Nor should they, necessarily. The project in question was to be a 300-megawatt pulverized coal plant using the oxyfuel process to remove the carbon dioxide from the plant’s emission stream. The original cost estimate was $1.5 billion, which quickly expanded to $3.8 billion — and I believe that excludes the sequestration portion of the design (i.e. it’s just the separation and capture of CO2).

Allen Wright, CEO of the Coal Association of Canada, immediately pinned blame on the government. “Someone has to pay the bills on these things,” he said during an interview with a local newspaper. “To take something from the developmental stage to the commercial stage requires support.”

More support for the fossil-fuel industry, eh? If the coal industry is so eager to keep itself alive, perhaps it should front the money and not expect ratepayer to do it? I find these stories amusing, considering it is backers of the coal industry that always complain about incentives that go toward renewables, such as the premium paid for wind-power projects or the 42-cent per kilowatt-hour premium that the Ontario government pays for solar projects. This whining, this double-standard, shouldn’t go unnoticed.

For $3.8 billion you could do a lot with renewables — you could even build transmission lines from Saskatchewan to Manitoba to tap more hydroelectric power. It would could also go a long way in promoting the acceptance of hydrogen as an energy carrier (i.e. storage) for the grid. Even more amusing is that the coal industry, like the nuclear welfare system, is established — it’s merely looking to transition toward a new way of using the fuel. Solar, wind, hydrogen, etc… don’t have that incumbent market position from which to leverage. They actually need the help to counter-balance the massive influence of the fossil-fuel giants.

It’s with great delight that I see a lot of these large projects go nowhere. First, it deflates some of the hype and injects reality into the energy debate. Second, it reminds us that these technologies are not silver bullets, nor should they be too heavily relied on to solve our climate-change issues.

Here’s a thought: Dr. David Mills, founder of Khosla Ventures-backed Ausra Inc., believes Saskatchewan would probably be the only decent in place in Canada to build a solar-thermal power plant based on his company’s technology. It wouldn’t be as good as California, mind you, but Saskachewan has many of the right conditions to make a solar-thermal plant competitive — particularly if your competition is a $3.8 billion clean coal project, or even a natural gas plant for that matter. Perhaps SaskPower should inquire — at least ask Ausra to crunch some numbers. This is a project that could easily move forward, purely on the tab of private investors, and could be built on the 300 MW scale required by SaskPower (Ausra says it can scale up to 2,000 MW and plans to). Just as important, it could be built quickly, well within the province’s timeline of 2010/2012.

If Saskatchewan really wants to make a name for itself, that’s the way I would go. At the very least, I’d ask a few questions.

We knew that Khosla Ventures and Kleiner Perkins Caufield & Byers were major backers of Ausra Inc., the Palo Alto, Calif.-based developer of solar-thermal power generation systems. But the company will disclose Monday, along with the launch of its Web site, that Khosla and Kleiner Perkins have invested more than $40 million in Ausra’s first round of financing, giving the two VCs roughly half ownership in the company. On top of that, both Vinod Khosla and Ray Lane sit on Ausra’s board, indicating the two VCs are quite intent on guiding the young company toward success.

Ausra, founded by Dr. David Mills (who has spent the past three decades in Australia), got its big break last summer. It’s a great story, really. After years of trying to attract serious interest in his technology in Australia, Mills says he was getting ready to throw in the towel and retire. Then, last fall, he got an offer to go meet Vinod Khosla, followed by the folks at Kleiner Perkins, in October. “We clicked really well,” recalls Mills. By February, Ausra got its first funding and by March the company relocated its headquarters to California and started hiring like crazy. Since relocating, Ausra’s workforce has ballooned from six to nearly 70, and hiring continues. “It’s probably the most exciting time in my career,” Mills, 60, told me in an interview. “Better late than never.”

Ausra aims to offer an emission-free replacement to coal-fired electricity in the United States (California, Texas, Florida, etc..), China and other suitable geographies. Rather than using solar PV, the company uses its own low-cost solar concentrating technology to create steam from water that generates electricity after it passes through high-efficiency turbines. “We are currently building a 30 MW power plant, and are in the process of scaling up to 2,000 MW over the next three years — enough power for two million homes,” the company states in a new job listing on Craigslist.

Mills says the timing is perfect. “There are far more coal plants being cancelled these days than are being ordered, and the interest in our technology exactly coincides with this downturn in coal markets,” he says, adding that his solar-thermal systems are quite competitive with coal, and the economics are expected to improve. “The whole picture is now changing very, very rapidly. You’ll be seeing 10 cents per kilowatt-hour bandied around here, but that will drop very rapidly over the next few years.”

Mills cited many fascinating figures and details about what Ausra is working on, including plans for heat storage, but I’m going to reserve those tidbits for a larger profile I’m working on — so stay tuned.

Associated Press has finally caught on to this story. Nothing new, but a good overview of the potential and skepticism. More interesting is a post by CNET’s Michael Kanellos, who I imagine after much pestering managed to get EEStor co-founder and CEO Richard Weir on the phone for a very brief interview (way to go, Michael — Weir hasn’t returned my calls since I interviewed him back in January). Weir told Kanellos that commercial production of EEStor’s energy storage unit will be on or before mid-year 2008.

I’m not as concerned about the delays as much as what I’m hearing from some folks in the know. One high-profile VC who’s not invested in EEStor (at least I don’t think he is) told me he’s heard the technology doesn’t work as originally described. Now, this could mean two things: one, that it is a dud, or two, that it’s still a good technology but not the kind of earth-shattering, paradigm-shifting storage technology we’ve come to expect from EEStor.

Again, we can all speculate ’til the cows come home… it doesn’t change the fact that this is a waiting game and, well, we’ll just have to wait. High risk, high reward, as John Doerr says.

NOTE: I must laugh at the people who have reserved every kind of domain name related to EEStor. The real company, of course, has registered eestor.us — a site that has never been active as far as I can tell. I laugh because EEStor is such a lame name, and there’s a high likelihood that when the company is ready to go public with a Web site it will probably come with a name change, meaning all those domain squatters hoping to make a quick buck will have wasted their money. Kleiners did it with Ion America, which had its name changed to Bloom Energy. You can bet they’re already thinking up something cool and catchy to replace the awkward EEStor.