Electric Bills and Oil Spills

The Silicon Valley Leadership Group and Google co-hosted a morning program this week entitled “Electric Bills and Oil Spills-Will California Continue to Be a Clean Energy Leader?” With more than 400 people in attendance, the question certainly seemed to be a timely and important one.

The panelists represented a nice cross-section of industry and government, including venture capitalist, Vinod Khosla; Google’s Energy Czar, Bill Weihl (love that title!); Air Resources Board Chairwoman, Mary Nichols; and Pacific Gas and Electric’s (PG&E) Vice President of Regulatory Affairs, Tom Bottorff.

Among the interesting questions and answers were the following:

Is the U.S. falling behind China in the clean tech race? Khosla’s response was that there is ample room for innovation in both countries. China is doing an excellent job at creating clean energy markets and the “real” question in Khosla’s opinion is, “when will we do the same for the U.S.?” If we were to view climate change as one risk among many, others like flooding or terrorism, Khosla believes we can readily conclude that it should be managed more aggressively.

Is AB 32 (the Global Warming Solutions Act) a threat to the State’s economy? All of the speakers were very much opposed to Proposition 23 and any suspension of AB 32 (as is Applied Materials). Khosla noted that 20 years ago Michael Porter of Harvard Business School postulated that well crafted regulations can actually stimulate innovation and AB 32 is an example of that. Bottorff of PG&E cited California’s Million Solar Roofs initiative, the Net Metering scheme and Renewable Portfolio Standard of 20% by 2020 as action-forcing laws that have usefully moved the utility industry towards clean energy. In Nichol’s view the Air Resources Board is intent on creating a pragmatic cap and trade program and not a dramatic one, e.g., industries threatened by AB 32, such as the cement industry, may be eligible to receive allowances that will make retooling their equipment possible.

Is California going to continue to be a clean energy leader? That will not be the case if Prop 23 passes and kills the markets promised by AB 32, in the view of Khosla and Weihl. Khosla suggested that California still has the “pole position” in the race and the next 10 or 20 great companies could be nurtured here, but the market conditions and supporting policies have to be right. In Khosla’s own venture portfolio, he is working with companies that are aiming high, at disruptive technology, e.g., an 80% reduction in lighting energy usage, a 75% reduction in the energy consumed by air conditioning. Weihl expressed the view that more R&D dollars should go to academic institutions, where the projects tend to be far-reaching and less incremental in nature. We need some “homerun swings” according to Khosla. The panelists agreed that we need to be more concerned about reaching AB 32’s 2050 targets rather than the interim 2020 goals.

Is there a place for nuclear in our clean energy future? Bottorff pointed out that California’s two current nuclear plants are a clean and essential part of our base load. The issue with nuclear, according to Khosla, is that it is too expensive without subsidies. The most recent nuclear plants to come on line in the U.S. produce energy at $7000/kilowatt, far more than solar and other technologies. Renewable energy could certainly benefit from the kind of federal subsidies that nuclear power has traditionally enjoyed.

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