Take the creativity of countless startups, the heft of a big corporation, $200 million in prize money, savvy venture capitalists, the power of digital media and the wisdom of crowds.

Put them together and you have the ingredients of GE’s Ecomagination Challenge, a promising way to speed innovation towards a smart grid, clean energy and eco-friendly homes, buildings and cars.

Promising…because we won’t see results for a while.

Unveiled with fanfare by GE chief Jeff Immelt in Silicon Valley in July, the Ecomagination Challenge has generated more than 3,000 entries and 60,000 comments and votes. This week, GE will announce the top vote-getters and next month it will announce the winners, which are selected by a panel of expert judges.

GE and its four venture capital partners–Emerald Technology Ventures, Foundation Capital, KPCB and Rockport Capital Partners–have said they will invest $200 million into the most promising startups and ideas. Grants could range from $100,000, to further research a new idea, up to significant equity investments in existing startups, which would also get marketing and manufacturing support from GE. GE already has significant investments in clean tech companies like A123 Systems, which makes batteries, and Southwest Windpower, which makes small-scale wind turbines. This is an effort to find more.

How’s it going? Some of the ideas seem, to put in kindly, long shots. An electric generator powered by garlic? (See it on video here.) Rotating houses? A “Wind Turbine Electricity Generation Without the Wind.” What’s next: solar panels that don’t need sunshine?

Amidst the thousands of entries, several caught my attention, and the attention of voters:

Julie and Scott Brusaw

One is Solar Roadways, the  brainchild of a mom-and-pop couple in Idaho. Scott Brusaw is an electrical engineer, a former sergeant in the Marine Corps and a former Boy Scout scoutmaster, and his wife Julie Brusaw is a marriage and family counselor. They want to make roads out of solar panels, protected by a material similar to that used in the “black boxes” in airplanes. LEDs could be added to light up roads at night, and heating elements could be installed to melt snow, all powered by the sun. They’re even talking about putting sensors in the roads to warn drivers if animals are crossing. The Brusaws got a contract from the Federal Highway Administration to build a prototype in 2009, and he was invited to give an entertaining TEDx talk last spring in Sacramento.

Interesting, too, is Welectricity, which is described as “a social network that promotes household energy efficiency through behavioral nudges.” Think Facebook meets your utility bill. Electricity users could set up profiles, and their bills would be graphed and compared to one another. (You could send a boastful tweet when your bill is lower than your neighbors!) The idea comes from Herbert Samuel, an energy consultant from the Caribbean island of St. Vincent.

I was also struck by an entry called From Net Zero to Waste Zero which uses a combination of solar PV, wind and geothermal energy to design a low-cost house that lives off renewable power. (That’s an image of the house, above.) The idea comes from Sam Qin, a Canadian entrepreneur who coordinated the design of a zero net-energy house for the Canadian government during the 2008 Beijing Olympics.

Whether any of this is truly new–and, more important, scalable–is very much an open question. If we lived in a perfectly efficient economy, where any entrepreneurs could get a hearing at venture capital firms, and the best ideas would get funded, we wouldn’t need a competition like this. But we don’t, and that’s why new models for innovation–like the automotive X-Prize--are worth trying. If nothing else, GE’s challenge has spurred a lot of online conversation and positive buzz for GE.

When it comes to energy, GE is all about big: big coal plants, big nuclear plants, big wind towers. So why would the $183-billion a year industrial conglomerate bother to invest a small amount of money—just a few million dollars – in a small company that makes wind turbines so small they can be erected in your backyard?

Perhaps because, under the right circumstances, homeowners can make their own wind-generated, low-carbon, electricity for less than it costs to buy power from their local utility. This could turn small wind into a big deal.

Southwest Windpower, the company backed by GE, has made quite a few of those small turbines–more than 140,000 since the company was started back in 1987. The company manufacturers the wind turbines in Flagstaff, Arizona, and in a 50-50 venture with a Chinese partner in Ningbo, China. Revenues were about $24 million last year.

I met Frank Greco, Southwest Windpower’s CEO, last month at the GE research center in Niskayuna, N.Y., where GE Capital was showcasing some of its venture investments. GE invested in Southwest Windpower early this year, along with Altira, Rockport Capital Partners, NGP Energy Technology Partners, and Chevron Technology Ventures, Chevron’s venture capital arm. Collectively, they invested $10 million.

Greco told me he is grateful for the infusion of cash–particularly since it comes at a momentwhen raising money is very, very hard–but he is even more pleased about getting access to GE’s technology and relationships. “They’re already working with us on a blade coating,” Greco says. “There’s a natural synergy between the two companies.” Besides, he added, “GE owns billions of dollars of commercial real estate. There’s tremendous potential for commercial deployment where it makes sense.”

Two factors are now driving Southwest Windpower’s growth–generous government subsidies for small wind and a product called the Skystream (above and below, in various settings) that the company introduced three years ago that ties to the electricity grid.

Before then, most small wind turbines were sold for use off the grid. “The market was remote homes, telecommunications sites, offshore oil platforms, even sailboats—for charging batteries,” Greco says. “We’ve done pilot programs as far away as the Maldive Islands.”

Now the uses are much more varied. Wind turbines can be found in backyards, beside small businesses that buy one to attract attention and in parking lots where they are used to power lighting that’s on all night. More than 100 elementary and middle schools in Kyoto, Japan, installed Southwest turbines to teach their students about wind energy.

The economics of a backyard turbine look something like this: Fully installed and operational, a 2.4 kW Skystream costs about $12,000 to $15,000. Buyers get a 30% federal investment tax credit as well as state tax credits or rebates that, in some places, bring the after-tax cost down to as little as $5,000 or $6,000. (More than 20 states offer some subsidies.) In  places where there are high winds and high electricity prices, that’s a bargain.

“In some cases, the payback is less than five years,” Greco says.”In places where the utility rates are low and the wind resource is low, the payback can be 10 years or more.”

Designing small wind turbines is not simple. “The challenge for small wind is that it needs to be productive in relatively low wind environments, where most people live, and on a relatively short tower, about 30 to 45 feet,” Greco said. “Plus the turbine is living in an environment where people live. So you have aesthetics and noise emissions that you have to be very aware of.”

What’s not clear to me is how the costs of generating electricity from small wind turbines compares to the cost of building large wind towers or solar thermal power plants. Wouldn’t the utility-scale plants be more efficient, even after the costs of transmission lines are taken into account?

Then again, take a look at the small wind turbines below. They’re awfully attractive. You can justify them as kinetic sculptures, with a little electricity thrown in.

By a Maryland church

By a Utah restaurant

By a McDonald's in Fortaleza, Brazil

And here’s a video explaining how the Skystream works.

Let me state my bias upfront: I’m am admirer of GE and its chief executive, Jeff Immelt, and the company’s ecomagination initiative. GE and Wal-Mart are, as I have written, the most influential companies in America, and it’s great that they are serious about becoming more sustainable, and working with their customers and suppliers to do so as well.

But I can’t help but be struck by the extent to which GE’s clean-energy businesses depend on federal and state tax and regulatory policy, along with grants and loans from the government. Wind energy, solar energy, nuclear power, cleaner coal, smart-grid initiatives, energy-efficient appliances, compact fluorescent light bulbs—all of these either benefit from current policy, get stimulus money or Department of Energy grants, or stand to benefit if the climate-change legislation strongly supported by GE is enacted into law, or all of the above.

This is fairly obvious, admittedly, to anyone paying attention to the energy and climate debate, but it was brought home to me vividly last week, at a GE Ecomagination Forum that focused on GE Capital’s venture investments in clean tech startups. You can read more about GE’s venture business in this column I wrote for fortune.com, called GE Brings Good Things to Startups, and in an interview and podcast with Kevin Skillern, the managing director of venture capital for GE Energy Financial Services, which are available at Greenbiz.com. Since 2006, GE’s venture fund has smartly  invested about $160 million in 20 startups in such businesses as wind and solar power, batteries, energy-efficiency, smart grid and fossil fuels.

Of GE’s portfolio companies, the star performer and recipient of GE’s biggest investment – about $69 million – is a company called A123 Systems that makes advanced lithium ion batteries and appears to have a very promising future. A123 makes batteries for the transportation, utility and consumer markets, for such customers as Daimler, Chrysler, Volvo, Better Place/Renault, Black & Decker, AES and Procter & Gamble’s Duracell unit.  Investors alongside GE, which is A123’s biggest shareholder. include Sequioa Capital, ConocoPhillips, AES, Motorola and P&G. Google founders Larry Page and Sergey Brin drive electric cars powered by A123 batteries, as does Tom Hanks. Not a bad list of endorsements.

Here’s the thing, though. A123 has been given more than $600 million in grants, loans or tax credits  by the federal and state government to build a new plant in Michigan. They include a $249 million grant from the DOE‘s Electric Drive Vehicle Battery and Component Manufacturing Initiative, another  $100 million in refundable tax credits from the state, and $27.5 million more from the U.S. Advanced Battery Consortium. Separately, Nissan, an A123 customers, got a $1.6 billion loan to retool a factory to make electric cars and batteries. The climate bill will provide another boost to electric cars. And, according to the company:

A123 was born out of the research labs of the Massachusetts Institute of Technology and was funded initially with a $100,000 grant from the U.S. Department of Energy in 2001.

In other words, the taxpayer investment in A123 probably exceeds GE’s by a hefty margin.

Southwest Windpower, another GE portfolio company, also benefits greatly from government subsidies, as its CEO, Frank Greco, explained last week. Southwest is the

A Skystream turbine

world’s leading producer of  small-scale wind turbines, which it manufactures at factories in Flagstaff, Arizona, and in a joint venture in China. It’s got leading-edge technology and lots of growth potential. Southwest’s  grid-connected Skystream 2.7 turbine can generate power at rates comparable to what some homeowners and businesses pay for retail electricity–after you factor in a federal tax credit and, in California and some other states, generous, state rebates. In fact, the subsidies can bring the $15,000 or so cost of a turbine down to about $5,000, in a best-case scenario–best case, that is, for the owner of the turbine, the company and its investors, including GE.

The story is much the same for Soliant Energy, another company showcased by GE: Very promising technology, impressive management, heavy reliance on government policy.

I asked  Skillern, who manages GE’s  venture investments in energy, whether he was worried that the portfolio carried too much political risk. What if, unlikely as it seems, a free-market administration came to power in Washington? He acknowledged the issue but said he thought all of the companies could survive and even thrive without government backing, but that the government support would speed up deployment of their technologies.

In any event, the tax dollars backing GE’s venture portfolio may turn out to be well spent. If A123, Southwest Windpower and Soliant all do well, they will create thousands of “green jobs” and help the world deal with the climate crisis–thereby delivering benefits to all of us. That’s the logic behind the government support. What’s more, we all pay the hidden costs of burning fossil fuels, as my friend Matt Wald reported this morning in the New York Times:

Burning fossil fuels costs the United States about $120 billion a year in health costs, mostly because of thousands of premature deaths from air pollution, the National Academy of Sciences reported in a study issued Monday.

Goodness knows that the oil and gas industries get massive government subsidies as well.

None of this began with the Obama administration, it must be said. The Bush crew, remember, rescued Wall Street and bailed out GM and Chrysler. Increasingly, we’re seeing the government is trying to manage not just the broad economy, but industries and companies as well. Health care, in some form or another, may be next. How this experiment in industrial policy will turn out is anybody’s guess.

But it’s no wonder corporate CEOs, including GE’s Immelt, find themselves spending so much time these days in Washington.