Newsmaker: Silicon Valley's Mr. Green

Vinod Khosla is a man on a mission. And this time, it's more than just making lots of money.

The venture capitalist, who helped to co-found Sun Microsystems and who also became a partner at investment heavyweight Kleiner Perkins Caufield & Byers, went out on his own in 2004 with Khosla Ventures.

Rather than stick to his comfort zone in Internet computing, Khosla has turned his eye to clean technology, investing in start-ups involved in solar electric technology, batteries, ethanol and coal gasification.

In addition to making his money work for him, Khosla is trying to shape the dialogue and direction of energy policy in California and at the federal level.

He has become a vocal advocate of ethanol over other transportation fuels, attracting criticism along the way. His view is that ethanol is the most realistic replacement for gasoline in the U.S., if manufacturers build new "flex-fuel" cars that can run gasoline or ethanol. That's something already happening on a large scale in Brazil, for instance.

Khosla argues that ethanol also gives the country more independence from foreign fuel providers, since it can be produced in the U.S. Naturally, that's attracted the attention of politicians.

On Thursday, Khosla spoke to CNET News.com about the buzz around clean technology at the Cleantech Venture Forum in New York City.

Q: When I heard in 2004 that you were interested in clean technology, I tried to interview you, but you weren't ready to talk. What drew you to the area, and why are talking now?

Vinod Khosla: First, I do care about the environment, but I was also looking at how you get large payback. Essentially, all the environment stuff in the past was based on the idea that you should get a subsidy, or you should do it because it's good to do. It's great to do good stuff--it feels great. But you can't do anything at scale until it meets a "return on investment" objective for Wall Street.

Listen up

Silicon Valley's Mr. Green Venture capitalist Vinod Khosla spoke to CNET News.com about the clean-tech sector and his desire to shape the national dialogue on energy policy.

Download mp3 (4.34MB)

So part of my public speaking is this whole notion that we have to get Wall Street interested, because the investment opportunities exist. Many of these (companies) stand side by side with any Silicon Valley venture, and they have a matching rate of return. You can make as much money here. In fact, I would say you could probably make a little bit more here (in clean tech) because there's not as much competition.

I'm encouraging competition because I think there should be more experiments tried. Just like Internet start-ups, there's so many experiments. With chip start-ups, there's so many experiments. We should do that in clean tech, too. And the big ones will be really big, too. These are huge markets, generally, on an economic basis. I'm not a big believer in subsidies and these types of things. Sometimes, to get started, (subsidies are OK). My view is that everything should be market-competitive in five years or less and not be subsidized.

Looking at clean tech, do you think we'll have the same explosion in technology development and adoption that we've had in the computer industry over the past 20 years?
Khosla: Absolutely. I was at the Clinton Global Initiative--that's the other conference I was speaking at this morning--and (Virgin Group Chairman) Richard Branson announced that 100 percent of all the profits from all their airlines and all their train operations over the next 10 years, which is expected to be about $3 billion, will go into clean tech. That's an amazing, amazing story.

Is there interest? Yes. Are these economically viable? Yes. Will people lose money? Absolutely. It happens in Silicon Valley every day. I do believe the profile will look as good as or better than the traditional Silicon Valley semiconductor or Internet start-up. If you do a sector-by-sector analysis, I'm saying this sector should stack up on rates of return.

Is it stacking up yet or it should in coming years?
Khosla: "Yet" is a hard thing, because it's just starting. The typical maturation of a Silicon Valley start-up is four or five years, so we'll know by 2010.

You're obviously interested in economic return, and you say you care about the environment. Getting to this Oil Drum discussion (where Khosla responded to critics of his ethanol advocacy), in your response you put a lot of value on reducing greenhouse gas emissions and the environmental effects. Are people ready to put a value on that, even before there's a carbon tax?
Khosla: What I'm saying is--first, there is a carbon tax in California now. It is the law (a mandate to cut greenhouse gas emissions, equal to 25 percent by 2020). People don't know it is a carbon tax, but it is a carbon tax, and that is a great thing. I'm a big fan of that.

But the fact is, with or without carbon taxes, this has a great rate of return. All I'm saying is with a carbon tax, more projects will qualify.

More Newsmakers

[Blito]

"Even worst ethanol plant has about a 90 percent reduction in petroleum"

People are saying that we dont have enough crop in the world to fuel ethonol and it will cut into food but I hear that there are efforts to grow non-food type stuff for it too that are possibly genetically enhanced for it. There is a ton of stuff being talked about.

Plus, fuel cells are the future. Electric and Hydrogen is becoming more of a reality.

Also don't forget that you can create hydrogen fuel in a solar powered fueling station from water. No energy plant needed.

[markapp]

ethanol worst possible fuel on several reasons

Grain ethanol is one of the worst possible fuels we could use for several reasons.
1. cost at best we get 1 gallon ethanol from 1 bushel corn=3 dollar a gallon whosale cost not even adding the cost of processing the corn or distilling the ethanol.
2. competition with food using grain as an ethanol source has pushed the price of corn from 2 dollars a bushel to 3 dollars a bushel over the year from 3/06 to 3/07. Theis has not yet shown in the price of groceries since they use price hedging forward contracts to produce our food but in the near future expect soaring prices for any grain based products including soda pop breads corn chips etc. The 1/2 again price increase will contribute greatly to starvation in poverty stricken parts of the world who had trouble buying enough food before taking the price to 1/2 again or possibly double in the near future.
3. green fuel hardly. to produce a gallon of grain ethanol requires about 70% of the btu's it can produce when burnt. Guess what we burn to produce it? Natural gas or coal so we pollute even more with ethanol than just burning the petroleum. By the time you add the internal combustion engines involved in planting pumping water and harvesting and drying the corn you are really deep in the negative column.
4. Efficiency even the ford manual admits that at best e-85 will provide about 70% as many miles per gallon as petroleum in the flex fuel vehicles so it's true value is 70% of petroleum yet it's production cost is about twice the petroleum at 3 dollar a bushel corn.
Our current most valuable fuel reserves are coal The best current technology is coal slurry firs with stack scrubbers. We would be wise to focus local short trip vehicles to electric supplied by very large coal burning generators located at the reserves or mines.

[rrapier]

Silly Question?

Regarding the energy balance issue, it was Mr. Khosla who was claiming that it is twice as efficient to produce ethanol as to produce gasoline. When he was shown to be incorrect on this point by me and others, suddenly it becomes a silly question. Coincidence?

I agree with him that petroleum reduction is important. But the energy balance issue is also important. If you take 1 BTU of natural gas to make 1 BTU of ethanol, you have displaced petroleum. But you would have displaced the same amount of petroleum had you merely used the natural gas directly as a transportation fuel, and you wouldnt have paid a bunch of subsidies to do so, nor would you have eroded your topsoil in the process. So, no, energy balance is not a silly question. It is a key question.

Cheers,

Robert Rapier
<a class="jive-link-external" href="http://i-r-squared.blogspot.com" target="_newWindow">http://i-r-squared.blogspot.com</a>

[rrapier]

I Should Also Mention...

That I am the source of the articles at The Oil Drum, mentioned in this story. There are a number of essays there, including one by Mr. Khosla, that can be viewed at:

<a class="jive-link-external" href="http://www.theoildrum.com/tag/Vinod%20Khosla" target="_newWindow">http://www.theoildrum.com/tag/Vinod%20Khosla</a>

My objectives in these essays were to remove the hype element, rebut the mythology, and have some serious discussions on the science involved.

Cheers,

Robert Rapier

[Blito]

Hirearchy resource list

I agree, the energy balance question is vital to the discussion because a perpetual machine can't be created, just perpetuity for the whole system using many resources for their respective outlets. Basically what can run what most efficiently. That's what is so great about renewable energy is that it is a perpetual machine if used on the whole correctly. The plant can use less petroleum in but if the car can run natural gas and cause less pollution plus not use petroleum then why use natural gas to make the ethanol and just put it in the car? Because it might also be better to use both as it's easier to grow ethanol then mine for natural gas as with ethanol you can create non-food supercrops etc probably and natural gas is just one thing.

I think it should be placed in a hierarchy of renewable resources hardest to easiest:
Natural Gas - Hardest to mine and extract (less of it)
Ethanol  Easier to grow and more of it same BTU use as natural gas though
Wind  Powerful and plentiful probably best option when all else fails or for middle ground
Solar. Weakest energy but extremely easy to use, smallest foot print, and dependable less impact on environment.
Fuel cell tech. Very easy and cheap to create using other top resources properly (Hydrogen can be created from water with a local filling station).
I think Fuel cell is the best option overall.

An article in the Audubon society magazine states that Wind power makes up about 1 percent of US energy and they are pushing to become maybe 20 percent in the next 10 years. It's a matter of placing them properly so they don't hit birds and bats which seems to work out.