Khosla: Crazy clean-tech ideas yield breakthroughs

This post was updated at 8:30 a.m. PDT with additional material from Khosla's speech on Wednesday and photo from the event.

CAMBRIDGE, Mass.--Famed investor Vinod Khosla is one of the clean-tech industry's most vocal cheerleaders. But most of today's clean technologies fall short of his 1-billion-car test.

"If it doesn't scale, it doesn't matter," says Khosla. "Most of what we talk about today--hybrid, biodiesel, ethanol, solar photovoltaics, geothermal--I believe are irrelevant to the scale of the problem" of climate change.

Khosla delivered the keynote speech at the EmTech08 conference (formerly called the Emerging Technology Conference) at the Massachusetts Institute of Technology on Wednesday, where he talked about energy, policy, and investment.

On Monday, he spoke to MIT student energy fellows covering many of the same topics.

On the whole, Khosla is highly optimistic about the potential for technology to address climate change and other environmental problems. He challenges people to imagine cars and cement factories that actually remove, rather than add, carbon dioxide from the air.

But he views climate change as a global problem that requires an overhaul to today's energy infrastructure. That means displacing oil and coal in a world where consumers from Asia and other fast-growing regions will be adopting a more energy-intensive lifestyle similar to that in the West.

"We will ship a billion cars on this planet in the next 15 years or so. Unless a low-carbon technology gets into 80 percent of those 1 billion cars and over time causes an 80 percent reduction of carbon per mile driven, it's not going to be a solution. Everything else is just a toy," he said Monday.

He places wind and solar photovoltaics in the "toy" category because, without storage, they will remain a small fraction of electricity production, only 5 percent to 15 percent.

That's because, without a breakthrough in storage technology, solar and wind power cannot replace "baseload" electricity during peak times because of their intermittent nature.

"What is needed is something that replaces baseload coal technology. Unless technology does that, it's not competitive," he said on Wednesday.

Electric cars, another darling of "greenies," are also unlikely to reduce greenhouse gas concentrations dramatically because of cost, putting those products outside the reach of consumers in India or China--what he calls the "Chindia" price.

"The current batteries industries are not likely to lead to scalable hybridization of cars," he said.

Khosla said he supports development of electric cars and has invested in battery companies and other related technologies. He expects both biofuels and electric car variants to compete in coming years.

"There's no reason that cars shouldn't have both hybrid technologies and flex-fuel capability (to run ethanol or gasoline). I'm hoping to see competition."

Eye on algae
To reach technology breakthroughs, Khosla contends that entrepreneurs need as many "at bats" or "shots on goal" as possible, focusing on the most scalable solutions.

Khosla Ventures has invested in more than 40 clean-tech companies. They include firms working on next-generation synthetic fuels and cellulosic ethanol as well as solar thermal, building materials, lighting, water, and energy efficiency.

When the wave of recently formed clean-tech firms are viewed as a whole, major change in the incumbent fossil fuel energy industry can happen.

"There are many such things going on that are radical, implausible--each individually (is) somewhat implausible, on the aggregate (it is) highly plausible that one plan will work. That's the key to the solution," he said.

Khosla, who has been investing in small companies for decades, noted that many of the forecasts for technology adoption, such as cell phones, are way off because forecasters underestimate the pace of technology change. "Today's unimaginable is tomorrow's conventional wisdom," he said.

One of the other areas in biofuels where he is optimistic is algae, which advocates say has the potential to grow without competing for agricultural land. Khosla is scheduled to deliver the keynote talk at the 2008 Algae Biomass Summit in October. He has not yet invested in an algae fuel company because he has yet to see a competitive technology, he said.

People should call these "main tech" firms, rather than green tech or clean tech, because they are working in mainstream industries, according to Khosla. "These are mainstream markets. By staying on the fringes of clean, you're not going to make a difference," he said.

Khosla's views on the potential to displace oil and coal as the world's primary energy sources draw a sharp contrast to BP's chief scientist, Steven Koonin, who also spoke to MIT energy fellows on Monday.

Koonin forecasts that fossil fuels will provide 80 percent of the world's energy in 30 years, unless there is some dramatic change.

No fan of Pickens Plan
In the area of policy, Khosla said that government policies should subsidize new energy industries for a short period of time, on the order of seven years.

His call for an 80 percent reduction in greenhouse gases in the coming decades is more aggressive than most U.S. politicians who support climate change regulations, but in line with what many scientists recommend.

On Wednesday, he advocated a renewable portfolio standard--a policy, now in place in many states, that would mandate that utilities get a certain percentage of their power generation from renewable sources.

"That is sufficient to get all this innovation going," he said. "I think Washington is slowly going in the right direction."

Because he thinks energy policy should focus on the economy's overall capacity to reduce carbon emissions, he had no good words to say about the Pickens Plan, put forth by billionaire oil mogul and wind farm developer T. Boone Pickens.

Pickens says the U.S. should boost wind energy from less than 1 percent of electricity generation to 20 percent in 10 years with a massive build-out of wind farms in the middle of the country and transmission lines to other regions. He also advocates a switch to natural gas cars; he has invested in a number of natural gas companies.

"The Pickens Plan is a dead-end street. We shouldn't be wasting our time on it," Khosla said. "If a 20 percent reduction in carbon is sufficient for society, then we should embrace it."

On one point, however, he agrees with Pickens: the need for beefed-up transmission lines to transport power from wind farms or solar power plants.

"If you want renewable power, the single most important thing to do is a high-voltage power grid," he said.