Renewable Energy: an investment perspective

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Renewable Energy an investment perspective
Vinod Khosla Khosla Ventures Sep 2008
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all progress depends on the unreasonable man
George Bernard Shaw
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It is the mark of an educated person to look for
precision only as far as the nature of the
subject allows. Aristotle
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oil price forecasts (1985-2005)
Forecast
Actual
Actual
Forecast
Forecast
Forecast
Actual
Actual
Forecast
Forecast
Forecast
Actual
Actual
Actual
Data/Source World Oil Prices (current /
Barrel)- EIA Office of Integration Analysis and
Forecasting
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the US market for mobile subscribers
Source
Actual
Forecasts

• Fortune (1984 gt 1989)
• McKinsey for ATT (1980 gt 2000)
• Herschel Shosteck
• (1994 gt 2004)

• 3.5M
• 109M
• 182M

• 1M
• 0.9M
• 60-90M

The same mistakes are repeated again and again!
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Source American Heritage Magazine -
http//www.americanheritage.com/articles/magazine/
it/2007/3/2007_3_8.shtml
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yesterdays technology, tomorrows forecast

• The actual market

• 1980s phone

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agenda

• The Innovation Handbook
• Key Criteria
• Technology Portfolio

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relevant cost relevant scale relevant
adoption
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the chindia test only scalable if competitive
unsubsidized
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the scaling model brute force or exponential,
distributed
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the adoption risk financial, consumer
acceptance, market entry
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relevant scale solutions for

• oil
• coal
• materials
• efficiency

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relevant scale solutions

• electric cars need battery Black Swan
• biodiesel no trajectory benefit algae as hope
• food ethanol trajectory enabler low land
  efficien.
• wind photovoltaics storage is enabler
• geothermal need engineered geothermal

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relevant scale solutions

• 80 lower carbon for a billion cars!
• base load power competition for coal
• storage or equivalent for peak power capacity
• declining cost with scale technologies
• better automobiles power devices for fast
  improving carbon efficiency of GDP growth

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Khosla Ventures rules of investing

• Attack manageable but material problems
• Technology that achieves unsubsidized
  competitiveness
• Technology that scales - if it isnt cheaper it
  doesnt scale
• Manageable startup costs short innovation
  cycles
• Declining cost with scale trajectory matters

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technology expands the Art of the Possible
to predict the future, invent it!
todays unimaginable is tomorrows
conventional wisdom
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black swan solutions ?

• Black Swans events are
• Outliers outside realm of traditional
  expectations
• Material make significant, game-changing impact
• Justifiable not predicted, but justified on
  ex-post basis

Technology shocks are classic Black
Swans! Strategy More at bats shots on goal

• rarity, extreme impact, and retrospective
  (though not prospective) predictability

Source Nassim Nicholas Taleb, author of The
Black Swan
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what if

• more coal plants meant cleaner air
• more driving meant less carbon
• cement was carbon negative free
• a million year crude production cycle reduced to
  hours?
• engines were twice as efficient cutting world
  oil consumption in half

We are working on these imagining the future!
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agenda

• The Innovation Handbook
• Key Criteria
• Technology Portfolio

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key criteria

• Trajectory What is or What Can Be
• Cost Trajectory
• Scalability Trajectory
• Adoption Risk
• Capital Formation
• Optionality

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cost new technologies require time
Undesirable (hydrogen fuel cell?)
Fossil Carbon Cost
Cost
Fossil Fuel Cost
Subsidy/Support Needed
Ideal (Cellulosic biofuels?)
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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cost not all technology curves are the same
Cheapest now does not mean cheapest
later! Trajectory Matters!
Coal
Wind
Solar PV
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declining technology cost
Generations of Solar Photovoltaics
Silicon Crystal
Amorphous Silicon
Thin-Film
Thin-Film Multi-Junction
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but tech cost decline isnt enough
Total Cost
Total cost decline is based on relative
proportion of cost types Should we focus on
low cost low efficiency cells or high efficiency?
Construction Cost
Inputs (Feedstock/Land)
Technology Cost
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scalability shortfalls

• Geothermal, Wind
• not enough availability, dispatchability
• Electric Cars
• limited by battery cost trajectory
• Classic Biodiesel
• limited room for optimization low land
  efficiency

Scale differentiates a niche solution from a
material one!
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example wind

• Good
• Wind turbine shows declining costs over time
• but
• Technical Betz limit (59.6)
• Scalability good sites declining
• Systems for distributed sources
• Cost increasing cost with scale

Storage is the key for wind power
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example electric cars

• Good
• Batteries on slow declining costs
• but
• Technical limits Lithium Ion Chemistry limits
• Scalability penetrate 500-800m cars of the next
  billion cars on this planet? Meet Chindia cost?

Need a Black Swan technology
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example natural gas automobiles

• Good
• Moderate CO2 reductions
• but
• Commodity price variability supply risk
• Mature technology with fossil carbon limits
• No capacity building towards 80 reduction

Pickens plan is a dead end street
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adoption risk - 2,500 nano
ICE or hydrogen? the Chindia test on relevance
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adoption risk U.S. mill closures
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capital formation

• Short Innovation Cycles (3-5 years)
• Not fusion Not nuclear Not CCS
• Mitigate technical AND/OR market risk quickly and
  cheaply
• (technical) - solar thermal
• (market) corn ethanol
• Investor returns at each stage of technology
  development
• Unsubsidized market competition 7-10 years

Private money will flow to ventures that return
investment in 3-5 year cycles!
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capital formation a pathway for cellulosic
biofuels
???
New Liquid Fuels
Energy Crop Agronomy
Butanol
Each stepping stone must be justifiable on its
own economic merits to attract capital!
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optionality biofuels feedstocks pathways
Glycerin
Natural Oils
Transesterification
BioDiesel (FAME or FAEE)
Methanol/Ethanol
Ethanol, Butanol, Renewable Petroleum FermDiesel
Fermentation
ETG via catalysis
Biogasoline
Sugars/ Starch
Dimethylfuran
Catalytic Conversion
Gasoline, Diesel, Hydrocarbons
Catalysis and Aqueous phase Reforming
Algae
Sunlight CO2
Cell Mass
BioDiesel (FAME or FAEE)
Hydrocracking
Ethanol
Cellulose/ Hemicellulose
Acid or Enzyme Hydrolysis
Fermentation
Saccharification
Butanol
Diesel
Increasing Technological Difficulty
Mixalco Process
Mixed Higher Alcohol
Biomass
Microbial cultures
Methane
Ethanol/Butanol
Fermentation
Feedstock Supply Volume
Gasification
Syngas
Catalytic Conversion
Ethanol
Fischer-Tropspch catalysis
BTL Diesel
Waste
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optionality hybrids or biofuels?
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0
of power from electric sources
of power from liquid fuel
0
100
Time
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goalcost, carbon scaling trajectory, capital
formation, low adoption risk, optionality
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agenda

• The Innovation Handbook
• Key Criteria
• Technology Portfolio

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not your niche markets anymore!
The New Green
The Markets You Think Of

• Corn Ethanol
• Biodiesel
• Solar PV
• Wind
• Geothermal

• Cement (100B)
• Water (500B)
• Glass (40B)
• Home Building (!!!)
• BioPlastics (10sB)

• Engines (200B)
• Lighting (80B - US)
• Appliances (10sB)
• Batteries Flow Cells (50B)

• Power Generation (250B US)
• Solar Thermal
• EGS
• Clean Coal
• New Nukes

• Gasoline (500B)
• Diesel (500B)
• Jet Fuel (100B)

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our renewable portfolio
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Khosla Ventures Renewable Portfolio
Sequestration Tools EPC
Distributed Solar Utility Scale Solar
Engineered Geothermal Wind Storage Synthetic
Natural Gas
Waste Water Water Desalination
Solar
Wind
Tools
Geothermal
Water
PVC Plasticizers Polyurethane Polyethylene Glass
Cement
Natural Gas
Coal
Plastics
Materials
Electrical Efficiency
Lighting Batteries Motors
Efficiency
Building Materials
Oil
Mechanical Efficiency
Corn/ Sugar Fuels
Future Fuels
Cellulosic
Homes Engines Appliances Pumps
Sugar Feedstocks Starch Feedstocks
Butanol Cellul. Diesel Cellul. Gasoline Cellul.
Jet Fuel
Cellulosic Ethanol
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Khosla Ventures Renewable Portfolio
Stion Ausra Infinia PVT
Nanostellar Codon Praj
Quos NanoH2o
AltaRock Great Point Energy
Solar
Wind
Tools
Geothermal
Water
Natural Gas
Draths Segetis Soladigm Calera
Coal
Seeo Kaai Soraa Lumenz Topanga GIV
Plastics
Materials
Electrical Efficiency
Ramu Sakti3 Firefly
Efficiency
Building Materials
Oil
Mechanical Efficiency
Corn/ Sugar Fuels
Future Fuels
Cellulosic
PAX Streamline LivingHomes EcoMotors Transonic Tul
a
Cilion Ethos
Mascoma Range Coskata Lanza
Amyris LS9 Gevo KiOR
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Altarock engineered geothermal
Drilling for heat instead of oil and then
creating reservoirs
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Ausra CLFR
5MWt CLFR collector 100 x 1000
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Stion Dominant Position in PV
High
High Efficiency Si
Stion
Crystalline Si
EFFICIENCY
CdTe / CIGS
Amorphous Si
Low
Low
High
PRODUCTION COST
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PVT Solar
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Bluegas catalytic gasification
One Catalyst Three Reactions Gasification
C H2O ? CO H2 Water Gas Shift CO H2O
? H2 CO2 Methanation CO 3 H2 ? CH4
(Methane) H2O
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Pax Streamline

• Biomimicry Innovation inspired by nature
• Computational fluid dynamics of natural
  geometries
• Initial applications HVAC, Wind Turbines

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prototype designs
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Living Homes

• prefabricated, environmentally friendly,
  cheaper, LEEDS homes

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EcoMotors I N T E R N A T I O N A LTM
an engine family
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EcoMotors I N T E R N A T I O N A LTM
100 MPG!
City 77 MPG Hwy 105 MPG
Vehicle Actions F.E Impact 11

City 69 MPG Hwy 94 MPG
Diesel vs. Gas F.E Impact 43

City 48 MPG Hwy 66 MPG
OPOC Dual Mode F.E Impact 42

City 34 MPG Hwy 46 MPG
OPOC Engine F.E Impact 39

City 24 MPG Hwy 33 MPG
2008 Chevy Cobalt 4 door LS sedan
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Transonic

• Gasoline engines at high compression ratios
• New injector technology is multi-fuel capable
• Precision ignition timing
• 50-100 mileage improvement
• Near term goal 100mpg diesel Prius

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ECU co-processors for car cylinder control
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Solid Electrolyte Battery

Cu Current Collector
Porous Graphite Anode Composite
Solid Li Anode
Porous Separator
Solid Separator
Porous Cathode Composite
Non-porous Cathode Composite
Al Current Collector
Al Current Collector
flammable liquid electrolyte
No liquid electrolyte, no flammables
Conventional Li Ion 175 Wh/kg
Li Metal Polymer 300 Wh/kg
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computation based thin film battery design
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3D battery technology
foam plates 80-90 utilization
Traditional 30-40 utilization

• 2-3X energy density of current lead-acid
  batteries

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Kaai blue laser for high density HD-DVD
Toshiba HD-DVD Player
UCSB Blue Laser Diode Chip
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Soraa green laser diodes complete RGB!
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electrodeless HID lamps

• Electrodeless long life
• 150-200 lumens/watt
• More options for plasma and salt material

Light
RF Coupling
RF Amplifier/Oscillator
Bulb
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pilot plant
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Gasifier
Fermenter
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waste gas to fuel
Carbon monoxide gas
LanzaTech Process
Steel mill waste gas

Ethanol Butanol fuels
OR

Biomass syngas
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Synthetic Biology
Fermentation Diesel
Synthetic Biology Fermentation DieselX
Anti-Malarial
Gene 3
Gene 1
Gene 4
Gene 2
Gene 1
Custom-Built Microbe
Source of genes
Artimisinin
Recombinant Small Molecule Bio-Synthetic Pathway
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hydrocarbon biosynthesisnatures energy storage
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Metabolic Engineering
Biomass Hydrolysate
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X
X
X
X
X
X
X
BUTANOL
Classical and genetic techniques are used to
improve butanol tolerance.
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biocrude replaces crude
Refinery
Crude oil
Biocrude
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Kior Millions of years ? Minutes!
Biomass
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Catalytic Cracking (BCC in minutes)
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Thermal Cracking (Pyrolysis- seconds)
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Oxygen(wt)
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Geo Thermal Conversion
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(Million of years)
5
0
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
TAN (mgKOH/g)
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Calera

• Cement that sequesters CO2, instead of emitting
  it!

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Calera-centric power plant
Clean Air
Electricity
Coal/NG
Cement
Water
Clean water
Air
CO2, NOx, SOx, PM Control
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Draths bio-based aromatics
Novel intermediates
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hieroglyphic writings
A specimen of an Egyptian language writing
A version of graphic representation of Top 12
DOE platform chemicals from glucose
ca. 530 B.C.
ca. 2000 A.D.
letters ? syllables ? words ? poems
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renewable chemicals
Renewable
New Industrial Bioproducts
Feedstocks
(crops forestry)
Bioplastics
Carbohydrates
Specialty polymers
Starch
Sucrose
Surfactants
Cellulose/Wood
Adhesives
Coalescent solvents
Triglycerides
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electrochromic windows
Foggy Day
Sunny Day
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EC most efficient glazing technology
Exterior
Interior
Solar Radiation
Heat Light
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levelized cost of electricity
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Together, our products will improve the way all
people live
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Built on carbon negative cement
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And prefabricated, environmentally friendly,
cheaper, LEEDS homes
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Using electrochromic windows
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Fueled from renewable sources
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With reduced fuel consumption and CO2 emissions
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Lit by high intensity, low power discharge
lighting
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Using renewable electricity
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Cooking with natural gas from clean coal and
biomass
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Reading with LED lighting
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Nano H20
Drinking desalinated water
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Kaai
Watching HD Laser TV
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Segetis
Safely using biobased plastics and chemicals
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Draths
Nylon for carpets
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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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It is not because things are difficult that we
do not dare, it is because we do not dare that
they are difficult.- Seneca Try and fail,
but don't fail to try.- Stephen
KaggwaCourage is doing what you're afraid to
do. There can be no courage unless you're
scared.- Eddie RickenbackerOnly those who
dare fail greatly can achieve greatly.- Robert
F. KennedyYou will face many defeats in your
life, but never let yourself be defeated.- Maya
Angelou
The willingness to fail gives us the freedom to
succeed
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ready for replacement/remake

• Oil based Transportation
• Traditional Coal-based Power
• Internal Combustion Engine
• Incandescent Light Bulbs
• Portland Cement
• Energy Intensive Desalination
• Batteries
• Nuclear Waste
• Non-biodegradable Plastics
• Tar Sand extraction

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promising new areas of research

• Thermoelectrics
• Multi-junction solar cell photosynthetic PV
• Waste heat systems
• Microwave catalysis, depolymerization
• Batteries
• Algae, cynobacteria,
• Flow cell storage
• High altitude wind, engineered geothermal
• More efficient cooling

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