Question:  What are exciting technologies on the horizon?

Transcript: Well there are so many it’s hard to summarize all of them.  We will continue to see expanding impact of the Internet and communications technologies on our life.  That . . .  We haven’t begun to see the real impact.  You see it in the teenagers – things like social networking sites and others changing the way teenagers behave.  This is no longer just a web site.  It’s changing behavior.  It’s changing social patterns.  It’s changing their friends, their areas of interest – almost every way.  Mobility, absolutely a key technology.  Cell phones is one small substantiation of that.  I think education is gonna change dramatically.  I personally believe personalization – because we have too much information in this world, the information will get personalized for us. And then beyond that products will get personalized to each person’s needs and desires.  So in almost every aspect of our life we will start to see major change. The one thing to keep in mind is the best way to project change 25 years from now – say when today’s 15 year old is 40 years old – is to look back 100 years.  We will see more technological and lifestyle change in the next 25 years then we’ve seen in the last 100.  So to imagine 2040 or so, you have to say that world will be as different from today’s world as 100 years ago was from today.  Imagine before the Wright brothers and airplanes; before essentially lamps and lighting in most of the world; before telephones, and radios, and televisions.  So I can’t wait to see what will happen.

Recorded on: 9/26/07

Question: What are the promising environmental technologies?

Transcript: When it comes to oil replacement, we should talk about oil.  And then we can talk about coal.  The   . . .  There is only one feed stock that’s available in enough scale to replace oil, and that’s biomass.  So all our focus should be on the feed stock and getting a large number of miles driven per every acre of land.  Those are the fundamentals.  That means more gallons of fuel per acre of land and more efficiency in the cars that use them.  So both are important.  Both are technology problems.  And when it comes to that, there’s probably 20 good efforts on the way that I know of – a dozen that we funded ourselves – all using different technologies, different technical approaches, pathways, whatever you want to call them; but they all rely on eventually going to biomass feed stocks and producing some liquid fuel that replaces gasoline, whether it’s ethanol, or butanol, or some next generation fuel.  We’ve even looked at producing diesel and gasoline directly from biomass.

Recorded on: 9/26/07

Question:  Are environmentalism and development in the third world at odds?

Transcript:  I don’t believe so.  And whether it is or isn’t almost is irrelevant.  We don’t have a choice.  We can’t ask billions of people to live in poverty.  The issue is more a moral issue.  First we need to do something about carbon emissions.  But the people I’ve talked to have a valid moral basis.  In fact many senior members of the Indian government tell me they would love to participate in a cap and trade system if the basis for that cap and trade is decided and fair.  And their basis is every human being should have the same right to pollute our atmosphere.  On that basis you’ll get participation in a minute.  The problem is that doesn’t work from a climate change perspective. And so we have to then find some other tradeoff that works both for the developing world.  Let them use the energy they need to use to develop, and yet restrict the total amount of carbon on this planet.  I believe that is doable.  It will require compromises on all sides; but we will have to stick with this moral principle of people having somewhat equal rights to produce . . . to pollute the atmosphere.

Recorded on: 9/26/07

Question:  What are the environmental problems surrounding coal? 

Transcript: So conventional wisdom has had it that we have no cheaper source of electricity than coal, and in fact we have no reliable source.  And part of the reason we have that belief system is because environmentalists have generally pushed wind power and __________, which can be a small percentage – five, 10, 15, maybe even 20 percent of our electricity supply.  And that makes them huge markets.  But 10, 15, 20 percent of our supply is not a climate change solution.  There are great investment opportunities and we invest in them.  But we have to be clear: They won’t solve the climate change problem.  For that we need something that can have the kind of reliability and dependability coal has.  You can sign a 20 year contract for the utility and say something other than, “I’ll ship you power when the wind blows.”  It doesn’t quite work for utility.  There are newer technologies coming along that solve that problem.  Geothermal solves that problem.  You can deliver power when the utility needs it.  New kinds of technologies like solar thermal . . .  And Florida just announced the use of those technologies for a massive solar project in Florida.  Not considered a traditional solar strength state.  These technologies can have what’s called “dispatchable power”.  When the utility customers need power, you can supply it to the utility so they can supply it to their customers and not make excuses like, “It’s not sunny,” or, “The wind isn’t blowing.”  And that kind of utility great power – power I call “__________ power” – is absolutely key to cracking coal.  Not only that, it has to be cheap enough.   Fortunately the cost of coal based power has been going up.  Environmental regulations for criteria pollutants like sulfur dioxide and mercury have been getting more stringent.  And because of that, coal now costs quite a lot more to produce . . . coal-based power costs a lot more to produce than it did five years ago, or even two years ago.  That gives us an opportunity.  The coal industry is talking about next generation coal power plant technology called “IGCC”.  And IGCC with carbon sequestration is what they think is the solution – the so called “clean coal” solution.  That solution should be attempted.  We should try it.  My personal belief is solar thermal technologies and geothermal technologies will be cheaper than those technologies.  And because they will be cheaper, they’ll beat them in the marketplace, and we will find that we don’t need as much coal for power generation.  There are other good uses for coal, so I’m not against coal.  But it shouldn’t end up in our atmosphere. You know I believe, having watched technology development over the last three to five years, that today, the biggest problem is having people believe that we can replace oil with a cheaper alternative; that we can replace IGCC coal plants with a cheaper source of power that are more renewable . . . 100 percent renewable.  Having the world believe that is, I think, the biggest problem.  We still need to make more progress in technology, but I do believe it’s a mostly solved problem.

Recorded on: 9/26/07

Question:  Whose responsibility is it to fix the environment?

Transcript: You know our system doesn’t rely on individual responsibility.  It relies on individual interests.  Lots of venture capitalists, and startups, and entrepreneurs, and technologists, and university researchers have a lot to gain by breaking the mold here, so to speak.  Once you crack the problem, there is economic gain to be had, whether you are a professor at Howard or an entrepreneur in Texas.  And that’s where the responsibility in some sense lies – it’s to enable the system of experimentation, and success and failure for these entrepreneurs.  Big companies will do the same thing, and they should participate just as much as anybody else.  But I suspect they are less prone to innovation, especially in the energy business.  The responsibility, if there is any, lies with policymakers to make sure the environment allows these new ideas to emerge. Well not everybody is qualified to participate, but there are lots of people who can contribute to R&D and technical breakthroughs.  I believe today that is the key to progress.  And once we have those breakthroughs, then we need to wrap them with management and manage execution talent.  And those are all entrepreneurial opportunities pretty much for anybody who can contribute to those key skill sets that are required. 

Question: Will buying Prius instead of an SUV solve the problem?

Transcript: I believe environmentalists like to talk about that.  I don’t believe that is the key to solving this problem.  Clearly it helps if people are using less fuel.  Clearly it helps if they are using less energy; but I think technical breakthroughs will be the key to cracking the oil and coal problems.  Now we should spend some time on coal. 

Recorded on: 9/26/07

Question:  What will change energy policy?

Transcript: Well technology is absolutely the lynchpin, because without the technology people won’t believe anything else is possible.  If nothing else is possible people won’t attempt it.  But policy is absolutely key.  If we don’t have the right policies in Washington and we keep subsidizing oil like we do today, then we are unlikely to see a replacement.  So policy has to be set up to allow for both greener and cheaper fuels to enter the market without interference from the monopoly of oil.  And that’s absolutely key.  Beyond that, obviously we’ll need the business talents or execution skills to build lots of plants and scale this. Well there’s been very little movement because the oil companies have a lot to lose.  There is an existing group of stakeholders that started the corn ethanol business.  They have not looked forward enough, though I suspect most of them are now starting to look at moving into cellulosic technologies.  In fact many of the traditional interests I’ve talked to have a strong interest in these newer technologies we are developing.  But because they haven’t believed the technology is there, they haven’t taken the steps toward having the policy set up for that.  But let’s not be fooled.  The oil interests, especially the foreign oil interests, have a lot to lose if this happens.  Every four-dollar change in the price of oil is worth a trillion dollars in asset value to Saudi Arabia.  Do you think they’ll go down easily fighting?  Or will they fight the replacement of oil?  They will fight the replacement of oil. I think first we need to level the playing field.  We need to get rid of the subsidies and the monopolies that oil has – from all the breaks they get in R&D; to cheap royalties they get from the direct subsidies; better accounting rules; better depreciation credits; almost . . . the list is almost endless.  That has to end.  Or the newer fuels have to give . . . get the same entitlements to have a level playing field.  So that absolutely needs to happen.  Second, these fuels, because they are produced in such small quantities, need additional help getting started.  Now I don’t believe any technology should be subsidized for more than five to seven years.  And if it can’t make it competitively in the marketplace, then we shouldn’t be supporting it.  So I’m a big fan of the right policy, but not long term subsidies.  And I don’t think subsidies is what we need.

Question: Are subsidies going to help?

Transcript: First I am not a fan of subsidies long-term.  They should be short-term.  I think subsidies should be ___________ an industry can improve, they can scale to a large degree.  We have subsidies for solar.  We have subsidies for wind.  We had hundreds of billions of dollars of subsidies for nuclear.  We have subsidies for coal.  We have subsidies for oil.  So this is where the right policymakers have to make judgment calls about what, if any, subsidies should be given and for how long.  And frankly the less the better, but it’s a judgment call in that.

Recorded on: 9/26/07

Question:  Can technology fix the environment? 

Technology can’t fix the environment, but technology can give us the tools to make the fixing of the problem much easier.  Give you an idea.  If you produce a renewable product that is cheaper than oil, which is my goal, there will be no need for oil – at least not to the extent we can scale that.  My goal is to scale it to the point where the world uses no oil.  And definitely the U.S. produces enough oil replacement in the U.S. alone to not need any oil.  Now most people don’t believe that is possible.  They don’t believe that’s possible because they don’t believe in technology innovation.  I believe in technology innovation, and I believe green will be cheaper.  Green will be multi-sourced.  Green will be much more competitive than oil is.  And it will not only be greener, but most importantly it will be cheaper.  That will solve not only our problem here, but solve India, and China, and Africa’s problems too.

Recorded on: 9/26/07

Question: Who are you?

Transcript: Vinod Khosla, partner at Khosla Ventures. Well, I think I’m in the business of funding those great technological ideas that can cause breakthroughs in technology in all areas.  But we have a strong focus on energy and energy revolution. Not enough innovation has happened in the energy business.  The traditional oil companies don’t spend any money on real R&D in new areas.  They spend most of their time and money on getting more oil out of the ground and researching that.  And so I think that the lack of real talent, and creativity, and innovation in energy research – and that’s what we are trying to find – both at the early stage, and then taking them to commercialization. Well I started looking at the environmental movement in the ‘90s.  I’ve always considered myself a fairly concerned person about those issues.  But what I found in the ‘90s was most organizations who are working on small pieces of the solution . . . not really things that could change the fundamentals.  What does changing the fundamentals mean?  We have to wean ourselves off oil and we have to wean ourselves off coal.  If we do those two, we are 80 percent of the way where we need to be.  And so I then started to address those two big issues.  I really started to learn about it a long time ago.  I started dabbling in energy investing in 2001 or so, and then over time have picked up steam.

Recorded on: 9/26/07