Martenson Interviews Khosla Ventures: The US Is Massively Underfunding The Innovations Critical To Its Energy Future

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Khosla Ventures: The US is Massively Underfunding the Innovations Critical to Its Energy Future

"The age of cheap oil is over," agrees Andrew Chung, partner at Khosla Ventures, arguably the most knowledgeable venture capital firm spearheading next-generation energy projects.

While perhaps more optimistic than Chris on the odds that the world can transition off fossil energy sources without experiencing some duration of lower overall energy output, Andrew is clear to point out that large and near-term capital investments are essential for such a smooth transition.

The size and scale of the investments necessary to evolve and replace our existing (and increasingly outdated) power infrastructure are enormous, and too big for private companies alone to address the issue on an acceptable timeline.

And as of now, the U.S. is decidedly NOT treating the matter with the urgency it deserves. Of the total U.S. budget, the Department of Energy receives only 8%; and only 0.1% of the total budget is directed to the alternative technologies we hope will one day replace our fossil-based sources. By contrast, China alone is dedicating $800 billion over the next ten years to help support the development and commercialization of alternative technologies and cleantech.

In the coming decades, the efficient and effective use of energy is going to be a real determinant between winners and loser across the global landscape. Affordable, sustainable energy will increasingly determine the prosperity of world powers -- and America is at a growing relative disadvantage until it starts talking honestly with itself about the un-sustainability of its current energy policies and prioritizing its resources (both monetary and human) accordingly.

Despite these concerns, Andrew and Khosla have a lot of optimism for the impact new technological innovations will have in addressing the energy challenge -- a number of which are discussed in this interview. And they encourage companies, capital and workers to enter the sector, as demand for expertise and solutions will be high for a very long time. And the future price of NOT investing ourselves wholeheartedly at this time is unacceptably dear.

On the End of the Age of "Cheap Oil"

I think that the scarcity of oil -- hitting Peak Oil -- and the increasing cost of being able to extract and discover new oil deposits is making it more and more costly. And importantly, the demand for energy and oil is going up dramatically with a lot of the emerging countries like China and India just exploding in demand as the countries develop into more urban economies.


If you look at the demand for electricity and energy in China, that has gone up tenfold over a period of about 15-20 years. India has gone up about fivefold, whereas the U.S. has only doubled in that period of time. So you can see that with these emerging economies being very aggressive in their domestic growth, the demand for oil and the demand for electricity is just going to go up dramatically and that is going to make the cost of oil at a minimum, stable, if not going up over time.

On the Obsolescence of the U.S. Energy Grid

We are looking at an energy infrastructure that is 40-50 years old. If you have ever been to an actual power plant or looked at the inside of a transformer substation, it is a spaghetti of wires that was designed in an era where we don’t have the computing capability and the circuitry and so forth that we have today.


So a lot of the initiatives right now are really around making the software on the backside much more up to date. The sensing capability, like the smart grid and smart meters that you would have at your home, and then adding additional infrastructure like storage capability that did not exist in a cost-effective form 10 or 15 years ago -- or even, frankly, two years ago.  So, there is a lot of opportunity over time to upgrade that infrastructure in a massive way to make more efficient use of the energy generation that we have right now. 

On the New Energy Arms Race

It is going to be difficult for the market to solve the problem alone without government intervention and capital dollars, just because of the massive scale of the problem. If you look at manufacturing, whether it is solar panels, or producing biofuel, manufacturing LEDs -- these are all large manufacturing businesses that if you want to even scratch the surface on the amount of energy that we need, fuel that we need, it requires substantial, substantial investments.


When you are talking about the scales that you need to reach in order to make a real difference, again sources of capital can really help here  I think the government needs to really help support and foster these types of technologies so that promising entrepreneurs and promising startups don’t get lost in a private capital-unfriendly environment today. China, as you mentioned, is really trying to lead the way here, in a very aggressive way.They already are number one today in terms of the amount of capital that they are committing to alternative energy sources, electricity production, and fuels production. In their most recent announcement on their next five-year plan, they are essentially pledging $80 billion every year for the next ten years to help support the development and commercialization of alternative technologies and cleantech.  That is a massive number: $800 billion that is being committed over a period of a decade to do this.


If you look back at what we were doing in Washington just several years ago with the stimulus package, there was a lot of excitement and strain and stress about putting several tens of $billions into the stimulus package for various types of renewable energy, energy infrastructure improvement. Today, some of that money has gone out, some of it may not get fully deployed.  Then, with a lot of negativity in the press today, a lot of the folks in Washington are actually pulling back a bit in terms of their support of the clean technology ecosystem. So, if you think about us putting the brakes on a relatively modest level of investment in clean technology and you compare that to what China is doing and other countries are doing (there are a number of countries in Europe, for example, that are investing a significant amount per capita in clean technology), it just puts us at a disadvantage relative to the long-term viability of scaling up alternative technologies in the U.S.

Click the play button below to listen to Chris' interview with Andrew Chung of Khosla Ventures (runtime 44m:45s).

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Gully Foyle's picture


Funny. I've been house hunting and came across this,

"Marcellus Shale & Utica Shale below"  the land already has two gas leases.

Does anyone know if you have a gas lease and convert your truck to natural gas, if your fillups are covered by the lease? What if you decide to run a natural gas generator is that covered?

My problem with previous leases is they may have sold the mineral rights. But with big acreage that may not be an issue.


Urban Roman's picture

You can fill up the truck from your water faucet.

Unfortunately, you'll have to drive the truck somewhere and BUY water.

Gully Foyle's picture

Urban Roman

I see someone drank the koolaid regarding Fracing.

Why not just spend the cash on a reverse osmosis water filtration system.

Our well water, when I was growing up, smelled and tasted of Sulphur. Eventually a water softener was installed.

Later I learned about the Sulphur water spas people paid thousands of dollars to use. Sulphur baths and Sulphur water to drink.

Ones man's poison is anothers Botox.

i-dog's picture

Quit with the bold, fuckwit. You're neither important nor interesting.

Gully Foyle's picture


AWW, someones mommy didn't give him his breaky huggles today.

i-dog's picture

oh, hardy-har ... you're not even funny!

AustriAnnie's picture

"Why not just spend the cash on...."?

Because it isn't their cash to spend dammit.  The "cash" comes from working families and is money those families cannot spend on food, is money they cannot save for their retirement.

We always get back to the question of "how should the government spend other people's money".  

Its Not Yours to Give.

Gully Foyle's picture


How is the government involved with installing a water filtration system on private land?

If I own the land, and I choose to have a gas well, and I choose to pay olut of my pocket for the filtration, where does government enter the picture?

AustriAnnie's picture

Apologies.  Didn't read your post clearly.  I thought you were advocating the need for this on a large scale as a gov't funded style project.

My mistake.  I'm reading a thread full of ppl arguing for spending on diff projects from gov't source, so I had that in mind already when I read your post.


Blindweb's picture

"Why not just spend the cash on a reverse osmosis water filtration system."


Lol.  So pollute the water supply to get natural gas.  Then burn the natural gas making water filtering systems.  Krugman would be proud, along with infinite motion machine inventors

Gully Foyle's picture


That was a bit complicated for a strawman.

The original point was regarding private property and an individual choice to purchase a water filtration system.

And other than some hyperventilating documentaries on fracing, a process in use since the 40's, there really is no evidence regarding pollution.

New Film About Fracking Seeks to Counter Environmental Fearmongering

The husband-wife filmmaking team of Ann McElhinney and Phelim McAleer announced Monday that they have raised $162,000 from more than 2,300 supporters for their documentary FrackNation, which “highlights the misinformation and biased opinions about fracking that are being represented in the media,” according to a press release.

The film “looks at the process of fracking for natural gas, demolishing much of the scaremongering surrounding the process and featuring the millions whose lives have been positively transformed by this emerging industry,” said the release.

zkay's picture

Assinine reply. Not all of the chemicals they use to frack are removed by reverse osmosis, physical filters like sand or activated charcoal, or anything else. Benzene being one of them. Infact, several of the chemicals used will EAT THROUGH your filter. What the companies that frack are doing now is either paying people off after settling out of court and having them sign an NDA, or building cisterns and trucking water in for the people affected. How long can that go on, if the area that is being fracked just keeps getting bigger and bigger, hot shot?

Gully Foyle's picture


Prove what you say or shut the fuck up.

In person you would never have the balls to make that statement, especially unverified.

Next prove that fracking isn't just fearmongering. You gonna use ONLY Gasland as your source?

Now go suck a gang of homeless dicks while the real people have a discussion.

But that doesn't mean water contamination can't happen, particularly through surface spills. That's why many companies - and also some health departments, such as the Wheeling-Ohio County Health Department - are helping local residents test their water both before and after drilling and fracking occurs.

"There has been nothing yet as a result of drilling activity that has adversely affected the environment or public health," Wheeling-Ohio County Health Department Administrator Howard Gamble said. "We do do water testing, but we have not yet seen anything different from either pre- or post-testing results."

An official with the West Virginia Department of Environmental Protection confirmed the state has seen no cases of water contamination from fracking.

Wetzel County has been the region's most drilled county over the past few years. Health Department Administrator Dorothy Lockett also confirmed there have been no public health issues there from drilling.

Marshall County Health Administrator Ronda Francis said her main concern is the long-term effect of drilling on the county.

"There is a question that after they drill, how long would it take for that material to work its way into the water supply? Is it six months? Three years?" she said. "Also, what's a safe distance to be away from a drilling rig because of air pollution? The problem right now is that we just don't know."

Along with testing water, Gamble said he stays in contact with area hospitals and the Ohio County Emergency Management Agency on increases in workplace accidents or any other public health issues that could be traced to drilling, such as sicknesses being reported by those living near drill sites. No negative findings have been reported, he said.

"The only way I see this affecting public health ... is that with the increased traffic on the roadways, particularly with large trucks, there is more opportunity for accidents," he said. "But that is a reach for public health."

Wheeling Jesuit University biology professor Ben Stout agrees with Gamble that transportation is an issue during the drilling boom, but Stout's concern comes from some of the chemicals that are being moved on area highways, mainly contained in drilling wastewater.

The New York Times and Its Anti-Fracking Cargo Cult

'Some say' the Times' reporters should have paid attention in 8th grade Earth Science class.

But here’s the key point: it does not matter whether the injected fluid is industrial waste, fracking fluid or mother’s milk.

The fluid used in fracking is 99% water. You would have to run a lab analysis to determine the trace chemicals in the other 1%. Any seismic effect, if true, would happen because of the introduction of a large quantity of fluid – of any type – into an existing fault.

Horizontal oil and gas wells are a whole ‘nother kettle of fish from deep injection wells.

Horizontal wells drilled for production into a shale zone are stimulated by fracturing to help the impermeable rock give up the gas or oil inside. A frac job on a new well is a limited process lasting a day or a few days at most. The volumes pumped into the well are not intended to stay downhole as in injection wells, but are intended to flow back out.

Like deep injection wells, horizontal production wells are separated from drinking water supplies by thousands of feet of rock. Wells are designed with protection of shallow water sources a key consideration.

George Carlin
“We’re so self-important. Everybody’s going to save something now. “Save the trees, save the bees, save the whales, save those snails.” And the greatest arrogance of all: save the planet. Save the planet, we don’t even know how to take care of ourselves yet. I’m tired of this shit. I’m tired of f-ing Earth Day. I’m tired of these self-righteous environmentalists, these white, bourgeois liberals who think the only thing wrong with this country is that there aren’t enough bicycle paths. People trying to make the world safe for Volvos. Besides, environmentalists don’t give a shit about the planet. Not in the abstract they don’t. You know what they’re interested in? A clean place to live. Their own habitat. They’re worried that some day in the future they might be personally inconvenienced. Narrow, unenlightened self-interest doesn’t impress me.

devo's picture

I looked into this myself, and from what I understand you own the land above ground but not anything underground, unless you get a specific lease for it. This is why telecoms can run power lines under your property yet still own them. Now, I am not 100% positive as my research was only cursory.

I also looked into land that had gold on it. From what I gathered, you are entitled to any natural resources on the land, so long as you own and register the lease. Again, not positive. I'd call the local NR branch and ask them. It likely varies state to state.

I know ZH is bearish on natural gas. It's true, there is excess supply driving prices down, but I'm not sure that is true globally. For every recession there is expension somewhere. Corporations aren't stupid--I expect a lot of NG exports over the rest of the year to drive down that supply. Also, conversion vehicles are in their infancy. NG in transportation is only like 20% of it's use, but it's growing rapidly. So, while there is short-term downward pressure, I don't think it lasts. Add to it the Bernake's printing and I like NG. Of course, I could be wrong, but I'm usually not! (e.g. hopefully you guys shorted AMZN and Apollo Group last earnings season).

Gully Foyle's picture


You can freely pan for Gold on the stream which runs through your property. I'm always surprised more people aren't out panning. At todays prices a few weekends really build up.

You also own mineral rights to your land unless you specifically signed them away.

Sometimes the Gas lease will have the owner sign away the mineral rights. That's the problem with buying a home that already has wells.

But many smart owners will keep the mineral rights.

If you buy a new Ford 150 you can have the natgas option. I've also read it runs around 2k to refit your truck. The Ford forums have discussions.

Here is a link to Natural Gas fueling stations around the country.

devo's picture

You can freely pan for Gold on the stream which runs through your property.

Doesn't this vary State to State, though? And does it matter how the land is zoned? Also, if it's a designated "wild & scenic river", does that change things?

snblitz's picture

In California very few people own the mineral rights to their property.  And if you find gold the government takes 50%.   I happen to own the mineral rights in my California property.

OpenThePodBayDoorHAL's picture

There's talk of laws banning natgas exports. The idea is to keep prices low in the US rather than subject to large global demand.

sun tzu's picture

That's also a good way to kill production and jobs

Race Car Driver's picture

Bah... energy. MIC, bitchez.

Meremortal's picture

Oh yes, China is moving ahead with clean tech. And in about 10 years, they will match our clean tech from the 1960's.

I'm impressed.


AustriAnnie's picture

+1 for questioning the value of Chinese spending on cleantech.

Is it not possible that China's spending on cleantech is going to the friends and family of THEIR government, much like U.S. federal contracts do?

"Who spends more" is not how you measure productivity.  

Spending is consumption of resources.  Consumption of resources is not productivity.

Good gawd, have we not learned that already?!

AnAnonymous's picture

they will match our clean tech from the 1960's.


US citizen finest clean tech from the 1960's is the outsourcing of polluting activities (it works both sides, it helps cleaning the exporter's environment while polluting the importer's environment)

So yes, maybe, the Chinese will match the US citizen finest clean tech from the 1960's.

As long as US citizenism progresses in China, many things grow possible.

TheFourthStooge-ing's picture


As long as US citizenism progresses in China, many things grow possible.

As long as you are the biggest advocate of US citizenism in China, it is assured to progress there rapidly.

With you singing its praises, US citizenism is unstoppable.


Future Tense's picture

Martensen wrote a good article a few weeks ago on precious metals manipulation. The following interview and article do an excellent job following up on the major themese:

LetThemEatRand's picture

So long as we continue to ignore the true price of oil which should but does not include the cost of endless military adventurism and being the world police, not to mention the costs that we will face as a species to clean up the environmental damage on day (assuming we can), there will be no change.  John Galt owns Shell Oil, and he's busy at the moment.

narnia's picture

Both sides of the energy story are being gamed- demand and supply.  We need a new involuntary energy infrastructure as much as we need a new involuntarily determined generation of it.  

I'd say the gaming in how energy is used is just as problematic as gaming the price of a particular form.

sun tzu's picture

You constantly spout your stupidity with each post. You're so fucking dumb your mother should be jailed and beaten to death for not flushing your ass into the sewer when she shit you out. Rand was against corporate cronyism and your stupid posts should that you have the reading comprehension and IQ of a piece of dogshit.

LetThemEatRand's picture

Very convincing argument asshole.   If Rand's vision were given effect, the people you claim are corrupting government would run things with no middle man.  I realize that Rand is appealing for those who are not deep thinkers, but perhaps one day you'll understand.

Milestones's picture

Didn't you mean "appalling"?              Milestones          

MeBizarro's picture

Irony of people who advocate blindly advocate Rand and no gov't is that they don't see that someone steps in their nonsense utopia and assumes power.

You constantly insult people on here directly yet add almost nothing of substance to the comments. 

vast-dom's picture

$800B over 10 years create new energy tech vs. trillions of QE to save failed banking system. Which would you chose?

LetThemEatRand's picture

The former would benefit The People.  The latter benefitted the oligarchs.  Wonder why they went with the latter?

sun tzu's picture

How much has Solyndra benefitted the people? On the other hand, it did benefit those few people who donated to 0bozo's campaign fund.

LetThemEatRand's picture

For God's sake, is Solyndra all you've got?  One company that fucked up and couldn't make it work with some government loans because assholes like you refuse to buy solar panels?   What about nuclear power?  Did that benefit a few people?

Freddie's picture

There was FAR more than Solyndra.  Go look it up.  Let the free market handle it.  The free market works if it is allowed to work.

LetThemEatRand's picture

There's lots of stuff that says you're wrong.  There is FAR more stuff against you.  Are you convinced?  No?  Then maybe you should delete your earlier post which said exactly that.

ffart's picture

Why do we have to choose one or the other? Get your fingers outta my wallet.

tony bonn's picture

yes, the solution to the problem is obamaenergy....

btw - oil is NOT a fossil fuel. there are no fossil fuels. they are abiotic.

nick howdy's picture

...and how long does it take for the earth to produce this abiotic oil?

bank guy in Brussels's picture

Many Russian scientists are convinced oil is abiotic as well ... 'peak oil' is because we are running out of easy-to-get oil near the surface.

The Russians focus on drilling deeper, and that is their technological focus ... and when they drill deeper, they find oil.

But Russians don't jump in to the polemic battle on oil, because

(1) Most of the rest of the world is being duped by propaganda shaped by the CIA's Google Inc. search engine, which mostly navigates everyone toward the CIA's Wikipedia, so why play in that sandbox, and

(2) The Russians profit very nicely from expensive oil, thank you very much, and it really doesn't hurt them, if the rest of the world believes the oil is running out.

Meanwhile, the Germans here are madly cutting deals with Russia for the oil.

Uncle Remus's picture

we are running out of easy-to-get oil near the surface

aka "cheap" energy.

DaveyJones's picture

for some reason this "abiotic oil" is causing a lot of false flags, wars and market disruption

drilling deeper (and offshore and other hard to find places) is just as much evidence of peak as anything else

Freddie's picture

It is being done daily 24x7 around the globe.  The planet is a big place. 

I am getting tired of seeing Mrs. 2012's banner ads here every second on ZH.  She sickens me and I don't need ZH that badly.  

LetThemEatRand's picture

Freddie, do you live under the earth?  In a basement perhaps?

Death and Gravity's picture

Right. And the Earth is hollow.

i-dog's picture

Is it really? Wow...another bubble!

You must be, like, a geologist, or something....

smiler03's picture

i-dog - You clearly have no comprehension of sarcasm.

It's not only the Earth that is hollow, the moon is too. It is an alien spaceship. David Icke said so.

For i-dog, /sarc