Renewable Energy: Maintech, not Cleantech

1
Renewable Energy Maintech, not Cleantech
Vinod Khosla Khosla Ventures April 2009
2
all progress depends on the unreasonable man
George Bernard Shaw
3
A crisis is a terrible thing to waste.
Paul Romer
4
Problem Misunderstanding Technology
The telephone has too many shortcomings to be
seriously considered a means of communication
-Western Union Internal Memo, 1876
5
Excuse Missing Applications
There is no reason for any individuals to have a
computer in their home -Ken Olsen, President,
Chairman and Founder of DEC, 1977
6
Problem Understanding of Physics
Heavier-than-air flying machines are
impossible -Lord Kelvin, President, Royal
Society 1895
7
Problem Tunnel Vision
Airplanes are interesting toys but of no
military value -Marshall Ferdinand Foch,
Professor of Strategy, Ecole Superiure de
Guerre
8
Forecasting
8
9
It is the mark of an educated person to look for
precision only as far as the nature of the
subject allows. Aristotle
9

10
oil price forecasts (1985-2005)
Forecast
Actual
Actual
Forecast
Forecast
Forecast
Actual
Actual
Forecast
Forecast
Forecast
Actual
Actual
Actual
10
10
Data/Source World Oil Prices (current /
Barrel)- EIA Office of Integration Analysis and
Forecasting
11
gas price forecasts (1985-2005)
Actual
Actual
Forecast
Forecast
Forecast
Actual
Actual
Forecast
Forecast
Forecast
Forecast
Actual
Actual
Actual
11
11
Data/Source Natural Gas Wellhead Prices (current
/1000cf) - EIA Office of Integration Analysis
and Forecasting
12
coal price forecasts (1985-2005)
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Actual
Actual
Actual
Actual
Actual
Forecast
Actual
Actual
12
12
Data/Source Coal Prices to Elec. Generating
Plants (current /million btu) - EIA Office of
Integration Analysis and Forecasting
13
the US market for mobile subscribers
Actual
Forecast

• McKinsey for ATT (1980 gt 2000)

• 0.9M

• 109M

13
Source American Heritage Magazine -
http//www.americanheritage.com/articles/magazine/
it/2007/3/2007_3_8.shtml
14
yesterdays technology, tomorrows forecast

• The actual market

• 1980s phone

14
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

15
16
extrapolation of the past vs. inventing
the future
16
16

17
Redefining swans
18
black swan solutions ?
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
19
what if
20
Calera

• Cement that sequesters CO2, instead of emitting
  it!

more coal plants meant cleaner air cement was
carbon negative free
20
21
Kior biocrude replaces crude
Crude oil

• more driving meant less carbon
• a million year crude production cycle reduced to
  hours?

Refinery
Millions of Years
Biocrude
21
22
Transonic
2X efficient engines cutting world oil
consumption in half
22
22
22
23

• Battery Black Swan?
• probably the only battery worth working on
• for both cars wind/solar storage
• along with other Black Swans

24
relevant scale solutions for

• oil
• coal
• materials
• (efficiency of oil coal use)

24
25

• But how do we evaluate solutions?

26
relevant cost relevant scale relevant
adoption
27
the chindia test only scalable if competitive
unsubsidized
28
1990 Chindia 13 of CO2 emissions 2005
Chindia 23 of CO2 emissions 2030
Chindia 34 of CO2 emissions EIA
29
China and India together account for 79 percent
of the projected increase in world coal
consumption from 2005 to 2030 EIA
30

• Unsubsidized market competitiveness?

31
the scaling model brute force or exponential,
distributed
32
key criteria

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

33
cost and carbon trajectory
34
Cost trajectory
Undesirable (hydrogen fuel cell?)
Fossil Carbon Cost
Cost
Fossil Fuel Cost
Subsidy/Support Needed
Time
35
cost driving down the cost curve
Source The Carbon Productivity Challenge,
McKinsey Original from UC Berkely Energy
Resource Group, Navigant Consulting
36
cost not all technology curves are the same
Cheapest now does not mean cheapest
later! Trajectory Matters!
Coal
Wind
Solar PV
37
declining technology cost
Generations of Solar Photovoltaics
Crystalline Silicon
Amorphous Silicon
Thin-Film
Thin-Film Multi-Junction
37
38
but tech cost decline isnt enough
Total Cost
Total cost decline is based on relative
proportion of cost types
Construction Cost
Inputs (Feedstock/Land)
Technology Cost
39
Carbon trajectory
Undesirable (natural gas?)
Carbon Emissions Trajectory
Desired Goal (80 below fossil?)
Time
40
Scalability
41
ScalabilityLand is not (remotely) a constraint
3000 km
world electricity demand (18,000 TWh/y) can be
produced from 300 x 300 km² 0.23 of all
deserts distributed over 10 000 sites
41
Source Gerhard Knies, CSP 2008 Barcelona
42
area requirements to power the USA
(150 km)2 of Nevada covered with 15 efficient
solar cells could provide the USA with
electricity
½ as much land with 30 efficient turbines
Source J.A. Turner, Science 285 1999, p. 687.
43
the adoption risk financial, consumer
acceptance, market entry
44
adoption risk - 2,500 nano
Internal combustion engine or Hydrogen /
electric?
45
adoption risk U.S. mill closures
46
optionality
47
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
Mixalco Process
Mixed Higher Alcohol
Biomass
Pyrolisis
Biocrude
Methane
Microbial cultures
Ethanol/Butanol
Fermentation
Syngas
Catalytic Conversion
Gasification
Ethanol
Fischer-Tropspch catalysis
BTL Diesel
Waste
48
optionality hybrids or biofuels?
100
0
Fast (relative) battery tech development
of power from electric sources
of power from liquid fuel
Slow battery tech development
0
100
Time
49
capital formation
50
capital formation

• Short Innovation Cycles (3-5 years)
• Short investor return cycles
• Mitigate technical market risk cheaply
• Unsubsidized market competition

Private money will flow to ventures that return
investment in 3-5 year cycles!
51
carbon reduction capacity
52
carbon reduction capacity 10X increase in
carbon productivity!
Carbon Productivity Growth Required 5.6/yr
Less reduction now, but greater capacity to
respond in the future?
Carbon Productivity GDP / Emissions
World GDP Growth
World GDP Growth 3.1/yr
Emission decrease to 20GT CO2e by 2050 -2.4/yr
Source The Carbon Productivity Challenge,
McKinsey Original GDP projection from Global
Insight through 2037
53
carbon reduction capacity is key
Growth Offers the Greatest Carbon Reduction
Opportunity!
Growth stock
Replacement of old stock
Improvement of current stock
54
goalcost, carbon reduction capacity, carbon
scaling trajectory, capital formation, low
adoption risk, optionality
55

• But be wary of irrational ideas.

56
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 an industrious enough
  people that we can make it work with only one
  square per restroom visit,  except, of course, on
  those pesky occasions where 2 to 3 could be
  required.
• - Sheryl Crow

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

57
irrational ideas green bikinis

• Source - http//www.alternativeconsumer.com/2008/0
  7/29/eco-bikini-from-niksters/

58
irrational ideas eat kangaroos, not cows!
Farming kangaroos instead of sheep and cattle
could cut greenhouse gases produced by grazing
livestock
Source http//www.reuters.com/article/environmen
tNews/idUSSYD8867720080808
59
irrational ideas no flags, no footprint

• But a few days into the Euro 2008 football
  championships fans are being advised not to fly
  their flags - because they could damage the
  environment
• - The Guardian

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

60
irrational ideas Shells sustainable tar sands

• UK advertising authority Shell mislead public by
  claiming tar sands as sustainable source!

Source http//www.guardian.co.uk/environment/200
8/aug/13/corporatesocialresponsibility.fossilfuels
61
irrational ideas how to green books

• Source - http//www.amazon.com/Lazy-Environmentali
  st-Guide-Stylish-Living/dp/1584796022

62
irrational ideas zero-emission buses?

• 3-year Oakland pilot zero-emission hydrogen
  fuel cell buses
• diesel _at_ 1.61/mile vs. hydrogen _at_ 51.66/mile!

solutions must make economic sense!
62
Source ABC News - http//abclocal.go.com/kgo/stor
y?sectionnews/localid5984013
63
San Francisco Photovoltaics?
Mojave?
Or
64
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

Storage is the key for wind power
65
irrational ideas Zero Emission Buildings

• ... the new fashion?

66
irrational ideas palm-oil based biodiesel

• The European Union was recently shocked to learn
  that some of its imported biodiesel, derived from
  palm trees planted on rain-forest lands, was more
  than twice as bad for climate warming as
  petroleum diesel
• - David Tilman and Jason Hill

• Source - http//www.deseretnews.com/article/1,5143
  ,660207597,00.html?pg3

67
lets face the facts

• Prius vs. painting 1000 sq-ft of roof white
• Electric cars?

68
Electric Cars?
69

• and renewable electricity?
• stacking one risky transformation on another?

70
Shower or Not?

• Showering/Drinking (in North America) 100-250L
• Growing 1 KG of Wheat 1,000L
• Growing 1 KG of Beef 15,000L!

If you really want to save water, become a
vegetarian!
Source The Economist
71
TOOrational ideas the Exxon view?

• Discipline, Patience, Vision ? Green!

Source NY Times
72
no change bigotry vs. environmental
everything vs. pragmentalists
72
72

73
TOOrational ideas the Exxon view?

• Discipline, Patience, Vision ? Green!

Source NY Times
74
technology expands the Art of the Possible
todays unimaginable or tomorrows
conventional wisdom
75

• and remember.

76
New Technology Has A History ...
Source When Old Technologies Were New
In 1885, Yale students who were getting more
light than they relished chopped down an
electric pole erected at the corner of the
campus
77
Dotcom bubble but net traffic growth continued
Terabytes
Morgan Stanley High Technology Index
Source Andrew Odlyzko (University of Minnesota
Digital Technology Center) Morgan
Stanley Technology Index from Yahoo Finance
78
200yrs of Technology SpeculationTriumph of the
Optimists 101 Years of Global Investment returns

79
our renewable portfolio
80
Not Your Niche Markets Anymore!
The New Green Maintech not Cleantech
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)

• Generation - 250B - US
• Solar Thermal
• EGS
• Clean Coal
• New Nukes

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

80
81
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
82
Khosla Ventures Renewable Portfolio
Stion Ausra Infinia PVT
Nanostellar Codon
NanoH2O
AltaRock Great Point Energy
Solar
Wind
Tools
Geothermal
Water
Natural Gas
Draths Segetis Soladigm Calera
Seeo Kaai Soraa Lumenz Topanga GIV Gridshift
Coal
Plastics
Materials
Electrical Efficiency
Sakti3 Firefly Ramu
Efficiency
Building Materials
Oil
Mechanical Efficiency
Corn/ Sugar Fuels
Future Fuels
Cellulosic
PAX Streamline EcoMotors Transonic Tula Hybradrive
Cilion
Mascoma Range Coskata Lanza
Amyris LS9 Gevo KiOR
83
Together, our products will improve the way all
people live
83
84
Calera Corporation
Built on carbon negative cement
84
85
Living Homes
And prefabricated, environmentally friendly,
cheaper, LEEDS homes
85
86
Soladigm
Using electrochromatic windows
86
87
Amyris
LS9
Gevo
Kior
Mascoma
Range Fuels
Coskata
LanzaTech
Fueled from renewable sources
87
88
Ramu
EcoMotors
Transonic
Firefly
Seeo
Sakti3
Nanostellar
Tula Technologies
Hybradrive
With reduced fuel consumption and CO2 emissions
88
89
Topanga
Lit by high intensity, low power discharge
lighting
89
90
Ausra
Altarock
Infinia
Stion
PVT Solar
Using renewable electricity
90
91
Great Point Energy
Cooking with natural gas from clean coal biomass
91
92
Lumenz
Group IV
Soraa
Reading with LED lighting
92
93
Kaai
Watching HD laser TV
93
94
NanoH2O
Drinking desalinated water
94
95
Segetis
Safely using biobased plastics and chemicals
95
96
Draths
Biobased materials for your home
96
97
Pax Streamline
Staying comfortable with more efficient air
conditioning
97
98
Change every aspect of daily living
98
99
to predict the future, invent it!
Forecast 2015 New cheaper than fossil
technologies proven Forecast 2030 How will
oil compete?
100

• In my view for the United States, it is the
  greatest economic opportunity we've had since we
  mobilized for World War Two. If we do it right,
  it will produce job gains and income gains
  substantially greater than the 1990s.
• Bill Clinton on the green economy

100
Source Speech at U.S Conference of Mayors
Climate Protection Summit
101

• Challenge conventional solutions

102
The nine dots problem
Source Amory Lovins, RMI
103
Standard nine dots solution
Source Amory Lovins, RMI
104
Standard nine dots solution
Source Amory Lovins, RMI
105
Better use just three lines
Buthow about just one line?
Source Amory Lovins, RMI
106
Geographers Solution
Source Amory Lovins, RMI
107
Mechanical Engineers Solution
Source Amory Lovins, RMI
108
Origami Solution
Source Amory Lovins, RMI
109
Wide Line Solution
Source Amory Lovins, RMI
110
or get to work
vk_at_khoslaventures.com khoslaventures.com/resources
.html