that is already going on though. all major energy companies are currently working on that. trust me, they all want to be the first one to develop a cheaper energy source, because if they do they will make tons of money.
money is an excellent motivational tool, and it always has been. when people are rewarded for their successes that is when the most innovation takes place
i just disagree that the government should take money away from everyone else and throw it into some sort of developmental program. the government has no idea about energy sources, which ones are viable or not. not to mention the fact that they already tried this with ethanol and threw tons of government subsidized money (which we paid for) into it and it failed miserably despite that money.
i simply think that you should leave companies alone. people are always looking for the newest and the best. the success that they will experience if a new energy source is found while be monumental.
this motivation is enough, no government interference is necessary, especially because they would be essentially "picking" the entity which they wanted to offer support to for developing this energy. it would be far more effective to simply let everyone on their own in a traditional capitalist economy work on it.
but this is just my opinion. i like to stay with whats tried and true. capitalism worked in this country for years, and is what allows the brightest and best minds in this country to rise to the top.
also, as an aside, look for gas hydrates to be one of these new alternative fuel sources. check it out on google if interested, pretty good stuff