The United States risks missing the business opportunity posed by moving to low-carbon energy, two prominent business leaders argued in an editorial aimed at policy makers.
General Electric CEO Jeffrey Immelt and venture capitalist John Doerr of Kleiner Perkins Caufield & Byers, published an editorial in The Washington Post Monday to warn that the U.S. is lagging China is developing clean-energy technologies.
John Doerr, investor at Kleiner Perkins Caufield & Byers.
(Credit: Martin LaMonica/CNET)"We are clearly not in the lead today. That position is held by China, which understands the importance of controlling its energy future. China's commitment to developing clean energy technologies and markets is breathtaking," they wrote.
A giant conglomerate, GE is deeply involved in the energy industry and is one of the top global suppliers of wind turbines. One of Silicon Valley's top venture capital companies, Kleiner Perkins has been aggressively pursuing green technology, having invested $680 million in 48 upstarts.
But Doerr and Immelt run through a number of statistics to demonstrate that the U.S. is so far a bit player in the global marketplace for solar, wind, advanced batteries, and fuel efficiency.
The U.S. continues to produce innovative companies in the Internet but they argue that policies in energy, a highly regulated field, stifle innovation and U.S. competitiveness: "Our government's energy and climate policies are our principal obstacle to success," they said.
Both Immelt and Doerr are economic advisers to President Obama and executives from both companies regularly have testified on energy and climate policies for Congressional committees.
At a high level, the position of these companies--and many others--is that developing low-carbon products and services will serve both economic and environmental goals: low-carbon technologies, such as efficient lighting or solar, can revitalize American industry and curb greenhouse gases.
In the editorial, Doerr and Immelt said U.S. policies should indicate that the U.S. values "low-carbon energy."
They offered five policy prescriptions: put a price on carbon and cap emissions; regulate utilities with incentives for efficiency and renewable energy; strengthen efficiency standards for cars, buildings, and appliances; establish more federal funding for research, development, and deployment of energy technologies; and create new trade agreements to promote the export of U.S. products.
Crux of the issue
Doerr and Immelt's piece strikes at the heart of the energy and environment policy debate in the U.S. There are a number of technologies that can displace fossil fuel use right now and new technologies, such as plug-in electric vehicles, hold more promise.
But proposals to encourage deployment of these technologies at scale has met resistance from entrenched interests and some lawmakers. Among the concerns are that climate and clean-energy policies will significantly raise energy prices for consumers and hurt U.S. industry compete globally.
GE CEO Jeffrey Immelt.
(Credit: Martin LaMonica/CNET)Still, work continues on energy and climate policy in Washington even though much of the media attention is on the health care debate.
The House narrowly passed an energy and climate bill that would mandate more renewable energy from utilities and establish a cap-and-trade system for regulating greenhouse gas emissions from large polluters. The Senate is devising its version of the bill and could vote on it in the fall.
Some environmental groups, notably Greenpeace, have criticized the House's climate and energy bill for giving big businesses such as utilities too much leeway in meeting the cap on carbon emissions, which will be phased in on over the next decade.
People in green technology business, in general, favor the bill because it establishes a system for pricing carbon emissions and has other policies to invest in energy-related infrastructure, such the electricity grid technologies and battery manufacturing.
SAN FRANCISCO--In an interview with John Heilemann at the Web 2.0 Summit here today, Kleiner-Perkins VC John Doerr, formerly a Hilary Clinton supporter, relayed the technology advice he would have for President-elect Obama.
As Heilemann noted, Obama has announced that he will look at appointing a chief technology officer to the United States. He asked Doerr about that, and unsurprisingly, Doerr thought it was a "great idea, long overdue."
John Doerr at Web 2.0 Summit
(Credit: CNET Networks / Josh Lowensohn)And who would be a good choice for the job? Doerr recommended, "Bill Joy. Or if not Bill Joy, then inventor Danny Hillis." Doerr said he would miss Bill Joy from the Kleiner-Perkins team, but he seemed willing to make the sacrifice.
Doerr said the top three things this new CTO should focus on are energy, green technology, and "more basic research."
"The most important thing," Doerr said, that Obama needs to do is, "kick-start a huge amount of innovation and research in energy."
"We invest less than a billion dollars a year in energy, compared to $32 billion in health care." About energy, he said, "It's the challenge for the generation, it's the scourge of the economy."
Of course, a very big part of technology advancement is education. So, Doerr said, "I would create a specific program to double the number of engineers we graduate in the U.S. from 30,000 a year to 60,000." India, he said, graduates 300,000 engineers a year.
Also, regarding foreign students educated in the U.S., we should, "staple a green card to the diploma of anybody who graduates with a degree in the physical sciences in the U.S."
Finally, he'd like to see DARPA restored to pure research, and move its focus off of "mission-based" projects.
Doerr also relayed 11 things entrepreneurs need to do in this economy. It was the same list he gave at a Venture Beat conference last month, with this addition: Cut once. Cut deeper than you think you need to, but only do it once.
See below for video, split into two segments, of Doerr's appearance (courtesy of TechWeb):
Video: Doerr on energy, R&D, a federal CTO, and more.
Video: Doerr on start-ups and the economy
Kleiner, Perkins, Caufield & Byers is forming a "Green Growth" fund for green-tech start-ups looking to scale up their operations.
Kleiner Perkins investor John Doerr looks for late-stage Green Growth fund.
(Credit: Martin LaMonica/CNET Networks)PEWeek reported on Thursday that the fund will be over $400 million and have input from Kleiner Perkins partner Al Gore.
The idea behind a late-stage funds such as this is to give up-and-coming companies the money to ramp up, rather than develop their core technology.
This late-stage funding is particularly important in the energy business because companies require a large amount of capital to test their technology at commercial scale.
Google.org, the philanthropic arm of Google, has also chosen to invest this sort of capital as part of its energy initiative to avoid what is called the Valley of Death--the transitional terrain that start-ups face when shifting from technology development to commercialization.
Kleiner Perkins partner John Doerr last week gave the keynote speech at the MIT Energy Conference where he said that green tech needed much more investment.
Doerr said that although there were pockets of green tech where too much money is chasing too few good deals, the amount of money going into energy is far too little to address climate change.
Kleiner's first green-tech fund was closed in 2006.
CAMBRIDGE, Mass.--Famed venture capitalist John Doerr is conflicted. He says pace of innovation in green technologies, breathtaking in the past five years, is far from fast enough to address the scale of the world's energy problems.
Doerr was the keynote speaker at the MIT Energy Conference here Saturday. He alternated between expressing wonder at the progress in addressing global warming and discouragement at the overall state of affairs.
Kleiner Perkins investor John Doerr sees a 'green tech' boom whose scale is falling short.
(Credit: Martin LaMonica/CNET Networks)The theme of the conference is "scale," as in finding the right technologies and policies to address burgeoning global energy demand without polluting the planet to the point of dangerous greenhouse gas levels.
Doerr is a partner at Silicon Valley venture capital icon Kleiner Perkins Caufield & Byers, where he has invested in Google, Amazon.com, Sun Microsystems, and several other successful technology companies.
Thousands of people have seen a video of a talk Doerr gave at the TED (Technology, Entertainment, and Design) conference last year, in which he broke down crying, telling the story of how, after seeing the movie Inconvenient Truth, his teenage daughter angrily told him to fix the global-warming problem because his generation caused it.
Two years ago, Kleiner Perkins announced the creation of its first green-tech investment fund, and Doerr has become a high-profile investor and policy advocate in the field.
Altogether, the company has invested more than a half million dollars in 30 green-tech ventures, many of which Doerr touted during his talk.
Fisker Automotive, founded by a former Aston Martin and BMW sports car designer, will have a four-door plug-in hybrid electric vehicle out next year. Another investment, Amyris Biotechnologies, is using synthetic-biology engineering to create low-cost malaria drugs and synthetic biofuels that mimic the characteristics of hydrocarbons.
Doerr also successfully lobbied to pass the California Global Warming Solutions Act of 2006, which seeks to reduce greenhouse gas emissions by 25 percent by 2020.
"So what's happened in the couple of years since my daughter yelled at me? We've invested a lot, we've lobbied a lot, and I've learned a lot. Think about it: who would have thought that a designer of gas guzzler vehicles would make a 100-mile-per-gallon plug-in hybrid?" he said in reference to Fisker Automotive.
But despite all the accomplishments of these innovative companies, he struck a downbeat tone on both technology and policy. After listing some of the technologies being generated by Kleiner Perkins-backed companies, he said:
"To the point of scale, who would of thought that all of that is not going to be enough? To get solutions that scale, we are going to have to find answers that are economic for all people everywhere. We are going have to use policy to harness innovation to make sure the right thing to do is the profitable thing to do, so that it becomes the probable thing to happen. There's more money that flows through markets in a day than all the word's governments in a year...
The energy market is $6 trillion. I like to say it's the mother of all markets. Compared to that Internet, which is a big deal, this is much bigger, much more exciting. But the challenge is much larger. Going green--solving that problem will be largest transformation on the planet."
Doerr said the entire planet needs to "reindustrialize" to adopt less-polluting forms of energy.
Many people have called for the equivalent of an Apollo Project or Manhattan Project in the United States to solve the energy challenge. But Doerr said that those, which were multibillion-dollar, single-government agency projects, "fail miserably to convey the size of the challenge."
To underscore how little is being done at the federal level, he said government funding in U.S. research and development on renewable energy was less than $1 billion last year, while oil giant Exxon makes $1.1 billion in revenue a day.
The $5 million in federal research for geothermal power is "so low, it's almost criminal," he said.
He predicted that the three leading presidential candidates will address climate change regulation far more aggressively than the current Bush administration, which has opposed mandates and sought to stay outside United Nations-led climate talks.
Despite Doerr's concern for inadequate action on clean energy, he touched on the question of an investment bubble in green tech. Overall, he said there isn't a bubble, but he does see some problems.
"There's too much money chasing too few good ventures, despite the size of this problem," Doerr said.
Venture capitalists have poured billions of dollars into the sector, making it one of the fastest-growing areas of investment, though it still garners fewer venture capital investments than biotech and information technology. That rapid capital influx, along with the challenges of large capital demands and regulatory complexity in energy, have caused concern that investment has been too aggressive.
In response to a question, he said the venture capital industry will not change to fund more capital-intensive energy projects. And he noted that returns in venture funds have been getting worse.
But he predicted that returns for green-tech investments will be good, once more recently funded start-ups go public in 2009.
Echoing the comments about a "global-warming bubble" made earlier this week by investor and tech luminary Bob Metcalfe, Doerr said "booms," or large investment waves, are generally good for the economy.
"I think that we're at the beginning of a green-tech boom. I can assure you we don't have an overinvestment to deal with the scale of the problem."
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