IF it is a fraud, then they do a great disservice to people who are doing legitimate research in the energy business.

A few quacks can give a bad name to a whole barrel full of legitimate energy inventors. It is incredibly difficult to get funding when you claim to have come up with a new way of generating energy because people are prejudiced into believing that ALL such claims are perpetual motion hoaxters.

http://www.randi.org/encyclopedia/perpetual%20motion.html

I wouldn't worry.  If there really is something to it, there won't be any need to beg for money from strangers on the Internet.  Corporations, universities, and governments will be  happy to fund the research.  

I do think this hydrino thing has resurfaced again due to high energy costs, though, and I fully expect "free energy" scams to proliferate like bunnies as energy costs rise.  Instead of getting spam telling us we've inherited a Nigerian dictator's fortune, we'll be getting spam telling us we can get in on the ground floor of a company that will make OPEC obsolete.  :-P

Corporations, universities, and governments will be  happy to fund the research.

A wishful fantasy.
What do you mean?  We've already spent billions of dollars researching alternate energy.  Everything from ethanol to wind power to solar to nuclear fusion to, yes, diesel from algae.  The feds were even considering funding cold fusion research (though I think they eventually decided there was no there there).  

Don't tell me you're one of those who believe there's a huge conspiracy keeping free energy from the masses for the enrichment of big oil/the auto industry/a secret government cabal?

There is no cabal.
There is however,
a limit to how
"happy" they are
to spend money
on R&D:
http://www.nsf.gov/statistics/databrf/sdb99357.htm
I think the government, especially, will be spending more on R&D.  It's what societies facing diminishing returns do (as long as they can afford it).  The right wing is already talking about it.  Government funding of an Apollo program for energy.  A PR effort that would make energy researchers as glamorous as astronauts were in the '60s.  That's the "free market" solution.  
I think the government will be spending more on R&D.

The "government", if there is such a singular creature is a political animal. It does as those at the top dogmatically dictate:

Read here on Bush & benzene fracturing:
http://democrats.reform.house.gov/features/politics_and_science/example_oil_and_gas.htm

More:
http://www.csicop.org/doubtandabout/sciencewars/

http://www.usatoday.com/news/washington/2005-02-20-bush-science_x.htm

Bush is a lame duck.  He's history.  

If his science policies outlast him, however, I will be forced to conclude that we are further along Tainter's curve than I thought.

A society feeling the pinch of diminishing returns begins to engage in "scanning behavior."  People feel dissatisfied, and begin looking around for alternatives.  Foreign customs may become the vogue, new religions may arise, ideological strife intensifies, governments invest more on R&D.  

But once a society reaches the point where investments in further complexity no bring any return, scanning behavior ceases.  The government instead enforces strict behavioral controls, in hopes of increasing efficiency. And they can no longer afford R&D.  

Also, a lot of research is pork barrel. Remember that big field of photovoltaic panels that Reagan was so proud of? It was just a bailout of the electronics/silicon companies that were going through a crunch. There was no R+D component at all. Later it was disassembled.
Reagan, the guy who took the solar panels off the White House roof, is not a good example.  Many of our efforts to develop nuclear fission and other energy sources have been quite sincere, if so far rather fruitless.

I'm from the Big Island, in Hawaii.  Energy is mostly from oil there - all imported, and expensive.  Tourism is the biggest industry, so there's a lot of concern about the environment.  An oil spill at Waikiki would be devastating.  

So there has been a lot of interest in alternative energy.  Especially on the Big Island, which is the only island with active volcanos.  They were going to build geothermal plants there, and install an undersea cable to Honolulu, where most of the population lives.  

They did actually build a geothermal plant, and are still using it today.  It does work.  However, it proved to be much more expensive to build and maintain than they had hoped, and also more polluting.  They are not building any more, and are not planning to export electricity to other islands.  

There's also an ocean thermal plant, off the Kona shore.  It, too, works.  They also have side industries - lobster farms and such - that make use of the cold, nutrient rich water brought up from the ocean depths.  But it's still not really profitable, when you consider all the money the government has sunk into it.  It might be different once we're well past peak, but clearly, it's not going to provide the kind of energy oil does.