The "correct" approach is not to publicly fund this kind of stuff but to provide incentives for energy producers to do what you call "researching how to put themselves out of business". On the surface that sounds insane, but when you think about it - it isn't so crazy.
An established energy company with lots of resources is in a FAR better position to establish itself as a "next generation" energy provider, seeing the potential to establish itself as a market leader and capturing market share of alternative energy markets early-on. While I'd normally say that the incentives/motivation for this way of thinking should come from the free market (things like it getting too expensive to tap new oil supplies, getting too expensive/risky to operate in the areas of the world where oil supplies are, etc.), the insatiable appetite of America for energy demands SOME kind of catylist for getting us off of fossil-fuel energy and onto alternative sources. Unfortunately if we wait for free market pressures to get to the point that it will change the behavior of very large, slow corporations, it'll be too late and more damage will be done long-term both economically, environmentally and socially.
As such, I'm not opposed to SOME sort of governmental role in trying to create incentives for A.E. research and development. I think most large energy companies will eventually realize that the future is in A.E. and start meaningfully pursuing it, but something needs to be done to make this happen sooner rather than later or it'll be "more of the same old crap" for years, if not decades. The stakes are too high.
Nuclear power MIGHT have a role to play (in the short to intermediate-term) although the prospect of building more nuclear power plants in a terrorist-laden world with no viable long-term solution to deal with the waste products is a very tough sell.
If only we could produce gererators on a massive scale!
