V. Khosla

1. Breaking the Climate Deadlock
the future of clean power generation
Vinod Khosla
Khosla Ventures
Nov 2008
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2. Where Does Electricity Come From?

3. “China and India together
account for 79 percent of the
projected increase in world coal
consumption from 2005 to
2030”
EIA
3

4. “At the end of 2005, China had an estimated
299 gigawatts of coal-fired capacity in
operation. To meet the demand for electricity
that is expected to accompany its rapid
economic growth, an additional 735 gigawatts
of coal-fired capacity (net of retirements) is
projected to be brought on line in China by
2030 ”
EIA
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5. Key Issues
› Electricity : ~40% of man-made CO2
› Coal: largest culprit
› Action needed for 80% reduction by 2050
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6. What Can Solar Do?
› Solar: near zero-emissions power!
› 1% of world’s desert: meet all power demand
› US: 100 x 100 mile area in Nevada
› India: less than 1% of land area
› Europe: Less than 3% of Morocco’s land
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7. Scalability: solar
Wind
waves
SOLAR
Gas
OTEC
Oil
BIO
HYDRO
World
energy
Uranium
use
COAL
R. Perez et al.
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Source: Gerhard Knies, CSP 2008 Barcelona

8. Global Solar Irradiance Map
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Source: Ecole des Mines de Paris / Armines 2006

9. What Must Solar Achieve to Succeed?
› Cost less than fossil fuels
› ($0.10-0.12KWh in 2007 dollars)
› “Dispatchable” generation
› Storage key for intermittent sources
› Reliability and uptime equiv. to fossil fuels
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10. carbon: irrational policies
Germany: 57% world PV US: 7% world PV
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Source: Creating a U.S. Market for Solar Energy, by Rhone Resch, President of the Solar Energy Industries Association.

11. carbon: irrational policies
› Solar PV installations in the Bay Area
›Moscone Center vs. San Jose; 20% improvement in isolation!
› Cost of Moscone center PV: $6,222 per KW
› At $0.12KWh, 2.2% return on investment (below inflation!)
› Warner-Lieberman bill
› giving credits away to today’s inefficient technologies!
› Zero-Emission Buildings
› UK estimate (40% higher home building cost)
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12. carbon: California solar roofs program
› California Million Solar Roofs Program
› $3.3 billion
› Goal: 3,000 MW by 2017
solutions should make a
› California generation capacity (2003) ≈ 61 GW
material impact!
› Best case-scenario – less than 5% of CA capacity!
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13. Solar Power: PV
› Advantage: distributed power-generation
› Ideal where peak demand = max solar radiation
› Scaling: no storage, no base-load power
› SEIA: Grid parity by 2015 (US)
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14. Solar Power: Solar Thermal
› Advantage: Base-load power
› thermal storage is key
› Low technical risk, low adoption risk
› California operations since the 1980’s
› Primary risk: Cost per KW of installed capacity
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15. Solar Thermal Power: 1914

16. Illustrative Solar Thermal Plant
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17. Storage For Time-shifting
To Storage
Plant Output
From
Direct Solar Storage From
Direct Solar Storage
Direct Solar
6 AM 9 AM 12 PM 3 PM 6 PM 9 PM
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Time of Day

18. solar thermal: day / night power
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Source: John O’Donnell

19. thermal storage is cheap
Heat/Air/Hydro
Electricity
› Flywheel ≈ $4000/kWh › Molten Salt ≈ $45/kWh
› VRB batt ≈ $350-600/kWh › Concrete ≈ $25-45KWh
increased cost of power lower cost of power
› CAES, Pumped Hydro
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Source: NREL for heat storage (2007), Dr. Doerte Laing, DLR (2008), VRB battery costs from company and Appalachian Power, CAISO estimate
for Flywheel costs (Beacon Power)

20. thermal energy storage
› Commercial Available Today
› Steam Accumulator
› molten salt storage based on nitrate salts
› In Testing
› Solid medium sensible heat storage - concrete storage
› Latent heat - PCM storage
› Combined storage system (concrete/PCM) for
water/steam fluid
› Improved molten salt storage concepts
› Solid media storage for Solar Tower with Air Receiver
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Source: Doerte Laing , German Aerospace center

21. Policy Needs: Short-Term
› Expansion of technology-neutral RPS’
› More economic than feed-in tariffs
› Stabilization incentive standards
› Low-cost capital availability
› Cost of capital is key determinant of cost
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22. Policy Needs: Med-Term
› Carbon pricing framework
› Investment in transmission infrastructure
› Focus on regional power transmissions (i.e - DESERTEC)
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23. Scalability:Land is not (remotely) a constraint
3000 km
world electricity demand
(18,000 TWh/y)
can be produced from
300 x 300 km²
More than 90% of world pp could be served =0.23% of all deserts
by clean power from deserts (DESERTEC.org) ! distributed over “10 000” sites
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Source: Gerhard Knies, CSP 2008 Barcelona

24. 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
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Source: J.A. Turner, Science 285 1999, p. 687.

25. the right
: HVDC
encouraging innovation
<
<
<
<
Hydro
Geothermal
Wind
Solar
Biomass
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26. DESERTEC concept for EU-MENA
10,000 GW from solar!
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Source: Gerhard Knies, Taipei e-parl. + WFC 2008-03-1/2

27. price of power – 2011 and 2013
Carbon Tax
200 O&M Charge (Fixed & Variable)
Solar Peaking Pricing Energy Charge
Capital Charge
150
$/MWh
100
Solar Baseload Pricing
50
0
Gas Peaker Nuclear IGCC CCGT Coal Ausra CLFR Ausra 60%
24% (w/storage)
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Source: Ausra. All prices are estimated as of April 2008, in 2008$; Carbon tax of $30 is assumed. Ausra CLFR 24% price is as of
2011, and 60% w/storage is in 2013

28. PuG power requirements
Coal Coal Natural Solar Solar Engineered
(PC) IGCC+CCS Nuclear Gas Wind (PV) (CSP) Geothermal
Scalability High CO2 Med** High Low* Low* High High
Storage
High Low High High Low* Low* High High
Reliability
Price Med Med Low-Med Low High High High High
Stability
Carbon Price Low Low High Med High High High High
CSP and EGS meet Utility Needs!
Benefits
Dispatchable Yes Yes Yes** Yes No No Yes Yes
Power
Adoption Ease High Low High** High Low Med High High
Technology Low High Med Low High High Med High
Risk Low Low
*Wind and Solar PV are severely disadvantaged due to the lack of storage – power is available when generated, not when needed, stopping them from serving as base-load power
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generators
** Nuclear energy is “always on”, generating electricity even when it is not needed (and when prices are negative, such as the middle of night). High decommissioning costs and a lack of
effective waste-disposal are both significant factors in limiting its scalability

29. key criteria
› Trajectory: “What is” or “What Can Be”
› Cost Trajectory
› Scalability Trajectory
› Carbon Trajectory
› Adoption Risk
› Capital Formation
› Optionality
› Carbon Reduction Capacity
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30. Cost trajectory:
Undesirable (hydrogen fuel cell?)
Fossil + Carbon Cost
Cost
Fossil Fuel Cost
Subsidy/Support Needed
Ideal (Cellulosic biofuels?)
Time
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31. Carbon trajectory:
Carbon Emissions Trajectory
Undesirable (natural gas?)
Fossil Fuels
Minimum Target
Ideal (Cellulosic biofuels?)
Time
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32. cost: driving down the cost curve
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Source: “The Carbon Productivity Challenge”, McKinsey – Original from UC Berkely Energy Resource Group, Navigant Consulting

33. cost: not all technology curves are the same
Cost (Normalized)
Cheapest now Wind not mean
does Coal
cheapest later!
Trajectory Matters!
Solar PV
2010 2015 2020 2025 2030 2035
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34. declining technology cost…
Generations of Solar Photovoltaics…
Crystalline Silicon
Amorphous Silicon
Thin-Film
Thin-Film Multi-Junction
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35. but tech cost decline isn’t enough…
Total Cost
Cost (Normalized)
Total cost decline is based on relative
proportion of cost “types”…
Construction Cost
Inputs (Feedstock/Land)
Technology Cost
2010 2015 2020 2025 2030 2035 2040
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36. adoption risk - $2,500 nano
… ICE or hydrogen?
…the Chindia test on relevance
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37. capital formation
› Short Innovation Cycles (3-5 years)
› Not “fusion”; Not “nuclear”; Not CCS
› Mitigate technical AND/OR market risk quickly and cheaply
Private money will flow to
› (technical) - solar thermal
› (market) – corn ethanol
ventures that return investment in
› Investor returns-5 year cycles!
3 at each stage of technology development
› Unsubsidized market competition: 7-10 years
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38. capital formation: pathway for solar thermal
› 2008: Proof of concept mitigating technology risk
› Costs at $0.16 per KWh
› 2010: Deployment as peaking power (vs. natural gas)
› Costs at $0.12-$0.16 KWh
› Less with low cost loans
› Ongoing tech optimization & storage
› 2013-15: Deployment as base-load (vs. coal)
› Costs at $0.10-$0.12Kwh including storage
› Adoption risk: PUG power, cost
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Note: All costs in 2006 $

39. optionality: hybrids or biofuels?
100%
0%
% of power from electric sources
% of power from liquid fuel
0%
100%
Tata Nano vs. Honda Hybrid (India)
Time
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2010: >100X the volume?

40. carbon reduction capacity is key
Growth Offers the Greatest Carbon Reduction Opportunity!
1.9
1.7
1.5
Index (2008 = 1)
1.3
1.1
0.9
0.7
Growth stock
0.5
Replacement of old stock
Improvement of current stock
0.3
2008 2013 2018 2023 2028
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41. carbon reduction capacity: 10X increase in carbon productivity!
10
9
Carbon Productivity = GDP / Emissions
8
Carbon Productivity Growth Required = 5.6%/yr
7
Less reduction now, but
World GDP Growth
greater capacity to
6
Index (2008 = 1)
respond in the future?
5
4
World GDP Growth = 3.1%/yr
3
2
Emission decrease to 20GT CO2e by 2050 = -2.4%/yr
1
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
2005
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Source: “The Carbon Productivity Challenge”, McKinsey – Original GDP projection from Global Insight through 2037

42. goal:
cost, carbon & scaling trajectory, capital
formation, low adoption risk, & optionality
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43. …or get to work
vk@khoslaventures.com
khoslaventures.com/resources.html
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