Here’s a link to our story that ran in yesterday’s Mercury News about how Silicon Valley is turning to the challenge of finding alternative energy sources. The headline omits the more sobering subtitle carried in the print version: “…but sector offers little home-run potential and new ideas are still few and far between.”

We mentioned a few technologies that may lead to breakthroughs — at least in the five- to ten-year time frame that profit-hungry Silicon Valley has traditionally focused on. (There are other, futuristic solutions, like the ones we mention here.) More likely are a host of innovations that make smaller steps forward. We didn’t have enough space to treat the companies pursuing these smaller moves, including San Jose’s Power Integrations, which makes power supply components more efficient.

Efficiency improvements will make the most difference in dealing with the high cost of energy — both in dollar terms and environmentally. Efficiency improvements are unlikely to mean big profits for investors, but they’re good for regular consumers. Intel, for example, has developed more demanding standards for power supply efficiency on devices supplied by Intel chips — which passes on small savings to customers. Here’s the eye-opening analysis of Noah Horowitz, a senior scientist in San Francisco with the Natural Resources Defense Council, which worked with Intel to come up with the standards:

I firmly believe that Silicon Valley can do a lot…we can reduce the power consumption by 10 to 25% in devices ranging from computers, portable audio devices like I-pods, to television cable and TiVo set top boxes….As power generation is the single largest source of global warming creating carbon dioxide, anything we can do reduce power consumption cost effectively is a winner for both the environment and consumers.

…set top boxes remain on 24 hours per day drawing 10 to 30W of power even if the consumer physically pushed the off button. These things never really turn off or go to sleep. To put this in perspective, the newer boxes that incorporate dual tuners and internal recording devices a la TiVo, use roughly 200 kWh/yr. As several homes now have 2 or 3 set top boxes in their home, the annual energy consumption of these set top boxes alone can easily exceed that of a new home refrigerator.

…NRDC research shows that by simply incorporating more efficient internal AC to DC power supplies in these boxes and having these boxes shift to a low power mode after extended periods of inactivity, that we could save 4.5 billion kWh/yr by 2008. (In other words have the device go to sleep like your monitor or computer can.) This amount of electricity savings is equal to removing 3 million tons of carbon dioxide, a major climate change pollutant, from the air. Stated another way, this CO2 savings is equivalent to taking 450,000 cars off the road.

True, the VC industry hasn’t been very interested in energy until now, partly because of the lack of a poster-child for success, as we discussed here. Venture firms like Sevin Rosen Funds invested in Capstone Turbine, a microturbine company, that went public in 2000, but subsequently slumped — and has swallowed over $300 million in financing.

The point is, there’s hope. Rich Hilt, a partner at Palo Alto’s Arare Ventures wrote into today say he’s forming a fund to focus on “sustainable energy,” because it’s the most favorable climate for alternative energy sources he’s seen in 30 years in the energy business. That’s great news, because once Silicon Valley puts its brains — and money, and savvy — to work, good things can happen.