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Vinod Khosla

A veteran venture capitalist’s new energy.
March 12, 2007

For many years a partner at the blue-blooded venture capital firm of Kleiner Perkins ­Caufield and Byers, Vinod Khosla has been called the best venture capitalist in the world by both Forbes and Red ­Herring magazines. Certainly, he has succeeded more grandly and more reliably, and has failed less spectacu­larly, than any of his peers. In 2004, he founded Khosla Ventures, which advises entrepreneurs and invests in his latest area of interest: the clean energy technologies that might replace the burning of coal and oil.

Technology Review:Whence this newfound preoccu­pation with clean energy generation?

Vinod Khosla: I enjoy looking at hard, important problems that are still manageable.

Funding new energy technologies has been the work of governments and big businesses. Do you really think energy a good investment for VCs?

Not every energy project can be funded by venture capitalists; some have very long time lines and big budgets. But there are plenty of opportunities that are ­amenable to a venture approach.

TR: Why are you skeptical about efforts to make coal-based energy generation cleaner and more efficient?

VK: How fast do you think existing energy vendors will move to these clean coal technologies? Alternatives to coal and oil can get here much faster. That said, clean coal is one option for future power generation. We need reliable, predictable power; many people believe that coal can provide that. But concentrating solar power [CSP] is also a real option for large-scale, high-capacity, dispatchable power. Thermal underground storage of heat can be used for utility-grade power generation, too. If large-scale compressed-air energy storage [CAES] works, then wind power will become scalable. So I think there will be a horse race between clean coal with carbon sequestration, wind with CAES, and solar thermal power generation with storage. I think carbon capture and sequestration will be difficult, making clean coal more expensive than CSP. Today, I would put my money on CSP.

TR: What are the benefits of biofuels?

VK: Biodiesel is a good product, but it’s nonscalable unless it can be made from biomass instead of seed product. Ethanol is a good start, and it will transition quickly to cellulosic-based production. But I believe new fuels like butanol will come along. I would not be surprised to see biogasoline either, initially made from corn and later from biomass.

TR: When will solar cells, or photovoltaics, be sufficiently efficient to contribute significantly to the globe’s energy needs?

VK: Don’t equate solar with photovoltaic. I think CSP, leveraging the large investment in traditional, steam-based power generation, and using passive mirrors to concentrate heat, can get to 35 percent efficiency today at $500 per kilowatt. For photovoltaics to compete, we’ll need multijunction thin-film solar cells produced with cheap mass-production technologies, and efficiencies above 30 percent.

TR: Does building wind turbines using coal power vitiate their value as an alternative energy?

VK: Many technologies today have long payback periods before the energy invested in them is returned. If it takes so much coal power to produce the solar cell or wind turbine that we are not clean-energy positive for four or five years, is that really a problem? But technology is not static, and all the newer technologies will improve, and the payback period will get faster and faster. These kinds of arguments are generally advanced by proponents of traditional energy and economists who are not used to rapid improvements in technology.

TR: Does nuclear energy have a place in a clean-energy future? After all, France generates 75 percent of its power through nuclear energy.

VK: Nuclear could have a future. That said, I suspect we are unlikely to go to mostly nuclear power in the U.S., because the political and regulatory risks are too high and the time line to build plants is too long. What we really need is to build a big, high-­voltage DC power grid, and let nuclear, wind, solar photovoltaics, solar CSP, electricity from biomass and waste, and anything else innovators can think of get on the grid. We need to kick-start the alternatives and let the competitive ones prosper.

TR: Do you believe in the hydrogen economy that President Bush and others have promoted?

VK: Hydrogen makes no sense to me. There are forces that like any technology that is far enough away that they don’t have to make any real changes. We will want to reëvaluate hydrogen in 10 years, but it does not look like a winning option to me today.

TR: Apart from energy, you’ve also shown some interest in investing in new markets for microloans. Why?

VK: Microloans are the most effective tool in addressing poverty. I am not a big believer in the aid and development programs that big governments favor. But if entrepreneurs use microloans to make biomass an important feedstock, for instance, we will do more to address poverty than all the foreign aid from all the developed world. And biomass can be used to produce fuels, electricity, plastics, and much more

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