Venture Capitalist Vinod Khosla on Renewable Energy, 2009

8/14/2019 Venture Capitalist Vinod Khosla on Renewable Energy, 2009

1/110


2/110

all progress depends on the

unreasonable man

George Bernard Shaw


3/110

A crisis is a terrible thing to

waste.

Paul Romer


4/110


5/110

There is no reason for anyThere is no reason for anyindividuals to have a computerindividuals to have a computerin their home in their home

-Ken Olsen, President, Chairman and-Ken Olsen, President, Chairman andFounder of DEC, 1977Founder of DEC, 1977

E x c u

s e : M i

s s i n g

A p p l i

c a t i o n s


6/110

Heavier-than-air flyingHeavier-than-air flyingmachines are impossible machines are impossible

-Lord Kelvin, President, Royal Society 1895-Lord Kelvin, President, Royal Society 1895

P r o b

l e m : U

n d e r s t a n

d i n g o

f

P h y s

i c s


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Airplanes are interesting toysAirplanes are interesting toysbut of no military value but of no military value

-Marshall Ferdinand Foch,-Marshall Ferdinand Foch,Professor of Strategy,Professor of Strategy,Ecole Superiure de GuerreEcole Superiure de Guerre

P r o b l e

m : T u n

n e l

V i s i o n


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8

Forecasting


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9

It is the mark of an educatedperson to look for precision only

as far as the nature of thesubject allows.

Aristotle


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1010

oil price forecasts (1985-2005)

15

20

25

30

35

40

45

50

1 9 8 5

1 9 9 0

1 9 9 5

2 0 0 0

Data/Source: World Oil Prices (current $ / Barrel)- EIA Office of Integration Analysis and Forecasting

Forecast

Forecast

Forecast

Forecast

Forecast

Forecast

Forecast

Actual

Actual

Actual Actual

Actual

Actual

Actual

10-yrForecast

Error

5-yr

ForecastError


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1111

gas price forecasts (1985-2005)

1

2

3

4

5

6

7

8

1 9 8 5

1 9 9 0

1 9 9 5

2 0 0 0

Data/Source: Natural Gas Wellhead Prices (current $ /1000cf) - EIA Office of Integration Analysis and Forecasting

Forecast

Forecast

Forecast

Forecast

Forecast

Forecast

Forecast

ActualActual

Actual Actual

ActualActual

Actual

10-yrForecast

Error

5-yr

ForecastError


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1212

coal price forecasts (1985-2005)

1

1.5

2

2.5

3

1 9 8 5

1 9 9 0

1 9 9 5

2 0 0 0

Data/Source: Coal Prices to Elec. Generating Plants (current $ /million btu) - EIA Office of Integration Analysis and Forecasting

Actual

Actual

Actual

Actual

ActualActual

Actual

Forecast

Forecast

Forecast

Forecast Forecast

Forecast

Forecast

10-yrForecast

Error

5-yr

ForecastError


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13

the US market for mobile subscribers

McKinsey for AT&T(1980 => 2000)

Actual

109M

Forecast

0.9M

Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it/2007/3/2007_3_8.shtml


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14

yesterdays technology, tomorrows forecast

1980s phone The actual market


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15

quantitative modeling flaws

Models with given inputs are precise but inaccurate

low standard deviation, but with high standard error

input the measurable, ignore the immeasurable Black Swans

obscured embedded assumptions

Food price controversy

World Bank study 75% of price rise due to biofuels

USDA notes only 3% of total price change


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Redefining swans


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black swan solutions ?

Technology shocks are classic BlackSwans!

Strategy: More at bats; shots ongoal

Source: Nassim Nicholas Taleb author of The Black Swan

rarity, extreme impact, and retrospective

(though not prospective) predictability


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what if


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20

Cement that sequesters CO2, instead of emitting it!

Calera

more coal plants meant cleaner air

cement was carbon negative & free


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222222

Transonic

2X efficient engines cutting world oil consumption in half


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Battery Black Swan?

probably the only battery worth working on

for both cars & wind/solar storagealong with other Black Swans


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24

relevant scale solutions for

oil

coal

materials

(efficiency of oil & coal use)


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But how do we evaluate solutions?


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relevant cost relevant scale

relevant adoption


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the chindia testonly scalable if competitive unsubsidized


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1990: Chindia 13% of CO2

emissions

2005: Chindia 23% of CO 2 emissions

2030: Chindia 34% of CO 2 emissions

EIA


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China and India togetheraccount for 79 percent of theprojected increase in world coal

consumption from 2005 to2030

EIA


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Unsubsidized market competitiveness?


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the scaling modelbrute force or exponential, distributed


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key criteria

Trajectory: What is or What Can Be

Cost Trajectory

Scalability Trajectory

Adoption Risk

Capital Formation Optionality

Carbon Reduction Capacity


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cost and carbon trajectory


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Cost trajectory:

Undesirable (hydrogen fuel cell?)

Subsidy/Support Needed

C o s

t

Fossil Fuel Cost

Fossil + Carbon Cost

Time


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cost: driving down the cost curve

Source: The Carbon Productivity Challenge, McKinsey Original from UC Berkely Energy Resource Group, Navigant Consulting


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2010 2015 2020 2025 2030 2035

C o s t

( N o r m a

l i z e d

)

2010 2015 2020 2025 2030 2035

C o s t

( N o r m a

l i z e d

)

2010 2015 2020 2025 2030 2035

C o s t

( N o r m a

l i z e d

)

cost: not all technology curves are the same

2010 2015 2020 2025 2030 2035

C o s t

( N o r m a

l i z e d

)Cheapest now does not meanCheapest now does not mean

cheapest later!cheapest later!

Trajectory Matters!Trajectory Matters! Solar PV

WindCoal


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37

declining technology cost

Crystalline Silicon

Amorphous Silicon

Thin-Film

Thin-Film Multi-Junction

Generations of Solar Photovoltaics


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but tech cost decline isnt enough

2010 2015 2020 2025 2030 2035 2040

C o s t

( N o r m a

l i z e d

)

Construction CostInputs (Feedstock/Land)

Technology Cost

Total Cost

Total cost decline is based on relativeTotal cost decline is based on relativeproportion of cost typesproportion of cost types


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Carbon trajectory:

Undesirable (natural gas?)

C a r

b o n

E m

i s s i o n s

T r a j e c

t o r y

Desired Goal(80% below fossil?)

Time


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41

Scalability: Land is not (remotely) a constraint

world electricity demand

(18,000 TWh/y)

can be produced from

300 x 300 km

=0.23% of all deserts

distributed over 10 000 sites

3000 km

Source: Gerhard Knies, CSP 2008


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area requirements to power the USA

(150 km) 2 of Nevada coveredwith 15% efficientsolar cells couldprovide the USAwith electricity

Source: J.A. Turner, Science 285 1999, p. 687.

as much landwith 30% efficientturbines


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the adoption riskfinancial, consumer acceptance, market entry

d ti i k $2 500


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adoption risk - $2,500 nano

Internal combustion engineInternal combustion engineor or

Hydrogen / electric?Hydrogen / electric?

d ti i k U S ill l


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adoption risk: U.S. mill closures


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optionality

optionality: biofuels feedstocks & pathways


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Pyrolisis

optionality: biofuels feedstocks & pathways

MixalcoProcess

GlycerinNaturalOils BioDiesel (FAME or FAEE)

Methanol/Ethanol

GasificationSyngas

Fermentation Ethanol/Butanol

BTL Diesel

Mixed HigherAlcohol

MethaneMicrobialcultures

Dimethylfuran

Gasoline, Diesel,Hydrocarbons

Ethanol, Butanol,Renewable PetroleumFermDiesel

Sugars/Starch

Fermentation

BiogasolineETG via catalysis

Biomass

Cellulose/Hemicellulose

Acid or EnzymeHydrolysis

SaccharificationEthanol

Algae + Sunlight CO2

CellMass

Hydrocracking

WasteFischer-Tropspch

catalysis

BioDiesel (FAME or FAEE)

Catalytic Conversion

ButanolDiesel

Transesterification

Catalysis and Aqueous phase Reforming

Fermentation

Catalytic Conversion Ethanol

Biocrude


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capital formation


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Short Innovation Cycles (3-5 years)

Short investor return cycles

Mitigate technical & market risk cheaply

Unsubsidized market competition

Private money will flow toPrivate money will flow to

ventures that return investment inventures that return investment in3-5 year cycles!3-5 year cycles!

capital formation


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carbon reduction capacity


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0

1

2

3

4

5

6

7

8

9

10

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

I n d e x

( 2 0 0 8 =

1 )

Carbon Productivity Growth Required =5.6%/yr

World GDP Growth =3.1%/yr

Source: The Carbon Productivity Challenge, McKinsey Original GDP projection from Global Insight through 2037

Less reduction now, butLess reduction now, butgreater capacity togreater capacity torespond in the future?respond in the future?

C a r

b o n

P r o d u c t

i v i t y =

G D P /

E m

i s s i o n s

W o r

l d G D P G r o w t h

0

1

2

3

4

5

6

7

8

9

10

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

I n d e x

( 2 0 0 8 =

1 )

Emission decrease to 20GT CO 2e by 2050= -2.4%/yr

carbon reduction capacity: 10X increase in carbon productivity!


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0.3

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2008 2013 2018 2023 2028

I n d e x

( 2 0 0 8 =

1 )

Growth Offers the Greatest Carbon Reduction Opportunity !

carbon reduction capacity is key

Improvement of current stockReplacement of old stock

Growth stock


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goal:cost, carbon reduction capacity, carbon &scaling trajectory, capital formation, lowadoption risk, & optionality


55/110

But be wary of irrational ideas.


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irrational ideas: toilet paper

I propose a limitation be put on how many sqares[sic] of toilet paper can be used in any one sitting.Now, I don't want to rob any law-abiding American of

his or her God-given rights, but I think we are anindustrious enough people that we can make it workwith only one square per restroom visit, except, of course, on those pesky occasions where 2 to 3 couldbe required.

- Sheryl Crow

Source - http://blogs.usatoday.com/ondeadline/2007/04/singer_turned_a.html


57/110

irrational ideas: green bikinis

Source - http://www.alternativeconsumer.com/2008/07/29/eco-bikini-from-niksters/

l d


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irrational ideas: eat kangaroos, not cows!

Source http://www.reuters.com/article/environmentNews/idUSSYD8867720080808

Farming kangaroos instead of sheepand cattle could cut greenhousegases produced by grazing livestock

i i l id fl f


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irrational ideas: no flags, no footprint

Source - http://www.guardian.co.uk/world/2008/jun/10/germany.euro2008

But a few days into the Euro 2008 footballchampionships fans are being advised not tofly their flags - because they could damagethe environment

- The Guardian

i i l id h ll bl d


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irrational ideas: Shells sustainable tar sands

Source http://www.guardian.co.uk/environment/2008/aug/13/corporatesocialresponsibility.fossilfuels

UK advertising authority: Shell mislead public byclaiming tar sands as sustainable source!

i i l id h b k


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irrational ideas: how to green books

Source - http://www.amazon.com/Lazy-Environmentalist-Guide-Stylish-Living/dp/1584796022


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S F i Ph t lt i ?


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Or

San Francisco Photovoltaics?

Mojave?


64/110

Irrational ideas: scalable wind

Good: Wind turbine shows declining costs over time

but

Technical: Betz limit (59.6%) Scalability: good sites declining Adoption Risk: Systems for distributed sources

StorageStorage is the key for wind poweris the key for wind power

i ti l id Z E i i B ildi


65/110

irrational ideas: Zero Emission Buildings

... the new fashion?

i ti l id l il b d bi di l


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irrational ideas: palm-oil based biodiesel

The European Union was recently shocked tolearn that some of its imported biodiesel, derivedfrom palm trees planted on rain-forest lands, was

more than twice as bad for climate warming aspetroleum diesel

- David Tilman and Jason Hill

Source - http://www.deseretnews.com/article/1,5143,660207597,00.html?pg=3


67/110

lets face the facts

Prius: vs. painting 1000 sq-ft of roof white

Electric cars?


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Electric Cars?


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and renewable electricity?

stacking one risky transformation on another?

Sh N ?


70/110

Showering/Drinking (in North America): 100-250L

Growing 1 KG of Wheat: 1,000L

Growing 1 KG of Beef: 15,000L!

Shower or Not?

If you really want to save water,become a vegetarian!

Source: The Economist


71/110


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7272

no change bigotry vs.

environmental everything vs. pragmentalists

TOOrational ideas: the Exxon view?


73/110

TOOrational ideas: the Exxon view ?

Source NY Times

Discipline, Patience, Vision Green!


74/110

technology expands the Art of thePossible

todays unimaginable or tomorrows conventional wisdom


75/110

and remember.

New Technology Has A History


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0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

C o n n e c

t i o n s

i n L o n

d o n

90 93 95 99

Source: When Old Technologies Were New

In 1885, Yale students who were getting more lightthan they relished chopped down an electric pole

erected at the corner of the campus

New Technology Has A History ...

Dotcom bubble but net traffic growth continued


77/110

0

200

400

600

800

1000

1200

1400

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

150

250

350

450

550

650

750

850

950

1050Internet TrafficMorgan Stanley High Technology Index

Dotcom bubble but net traffic growth continued

T e r a

b y t e s

M o r g a n

S t a n

l e y H

i g h

T e c

h n o

l o g y

I n d e x

Source: Andrew Odlyzko (University of Minnesota Digital Technology Center)Morgan Stanley Technology Index from Yahoo Finance

200yrs of Technology Speculation


78/110

Triumph of the Optimists: 101 Years of Global Investment returns


79/110

our renewable portfolio

Not Your Niche Markets Anymore!


80/110

Not Your Niche Markets Anymore!

Corn Ethanol

Biodiesel

Solar PV

Wind

Geothermal

The Markets You Think Of The New Green: Maintech not Cleantech

Engines ($200B)

Lighting ($80B - US)

Appliances ($10sB+ )

Batteries + Flow Cells($50B+)

Gasoline ($500B+) Diesel ($500B+)

Jet Fuel ($100B+)

Cement ($100B+)

Water ($500B+)

Glass ($40B)

Home Building (!!!)

BioPlastics ($10sB+)

Generation - $250B - US

Solar Thermal EGS

Clean Coal

New Nukes80

Sequestration d

S o l a

r

S o l a

r

Khosla Ventures Renewable


81/110

CellulosicEthanol

S u g a r F e e d

s t o c k s

S t a r c h F

e e d s t o c k s

ToolsSolar

NaturalGas

MechanicalEfficiency

ElectricalEfficiency

CellulosicFutureFuels

Plastics

Water

Materials

SequestrationToolsEPC

W a s t e W a t e r W a t e r D e s a l i n a t i o n

PVCPlasticizers

PolyurethanePolyethylene

GlassCement

D i s t r i b

u t e d

U t i l i t y

S c a l e

Coal

EfficiencyOil

HomesEngines

AppliancesPumps

LightingBatteries

Motors

E n g i n e

e r e d G e o

t h e r m a

l

W i n d S

t o r a g e

S y n t h e

t i c N a t

u r a l G a s

Corn/Sugar Fuels

Wind

BuildingMaterials

Geothermal

ButanolCellul. Diesel

Cellul. GasolineCellul. Jet Fuel

Portfolio

NanostellarStionAusra

Khosla Ventures Renewable


82/110

MascomaRange

CoskataLanza

Cilion

ToolsSolar

NaturalGas

MechanicalEfficiency

ElectricalEfficiency

CellulosicFutureFuels

Plastics

Water

Materials

Codon

NanoH2O

DrathsSegetis

SoladigmCalera

InfiniaPVT

Coal

EfficiencyOil

PAX StreamlineEcoMotorsTransonic

TulaHybradrive

Seeo Kaai

SoraaLumenzTopanga

GIVGridshift

A l t a R o c

k

G r e a

t P o i n

t E n e r g y

Corn/Sugar Fuels

Wind

BuildingMaterials

Geothermal

Amyris LS9

GevoKiOR

Portfolio

Sakti3FireflyRamu


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Together, our products will improve the way all people live


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85

Living Homes

And prefabricated, environmentally friendly, cheaper, LEEDS homes


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86

Soladigm

Using electrochromatic windows


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87

Amyris

LS9

Gevo

Kior

Mascoma

Range Fuels

Coskata

LanzaTech

Fueled from renewable sources


88/110

88

Ramu

EcoMotors

TransonicFirefly

Seeo

Sakti3

Nanostellar

Tula Technologies

With reduced fuel consumption and CO 2 emissions

Hybradrive


89/110

89

Topanga

Lit by high intensity, low power discharge lighting


90/110

90

Ausra

Altarock

InfiniaStion

PVT Solar

Using renewable electricity


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91

Great Point Energy

Cooking with natural gas from clean coal & biomass


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93

Kaai

Watching HD laser TV


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94

NanoH2O

Drinking desalinated water


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Segetis

Safely using biobased plastics and chemicals


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Pax Streamline

Staying comfortable with more efficient air conditioning


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Change every aspect of daily living


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to predict the future, invent it!Forecast 2015:

New cheaper than fossil technologies proven

Forecast 2030 :

How will oil compete?


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100

In my view for the United States, it is thegreatest economic opportunity we've had sincewe mobilized for World War Two. If we do it

right, it will produce job gains and income gainssubstantially greater than the 1990s.

Bill Clinton on the green economy

Source: Speech at U.S Conference of Mayors Climate Protection SummitSource: Speech at U.S Conference of Mayors Climate Protection Summit


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Challenge conventional solutions

The nine dots problem


102/110

The nine dots problem

Source: Amory Lovins, RMI

Standard nine dots solution


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Standard nine dots solution



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Better: use just three lines


105/110

Better: use just three lines

Buthow about just one line?


Geographers Solution


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g p


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Origami Solution


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Wide Line Solution


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110/110

or get to work

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Venture Capitalist Vinod Khosla on Renewable Energy, 2009

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Transcript of Venture Capitalist Vinod Khosla on Renewable Energy, 2009