Khosla: biofuels tech can compete with oil today

| June 08, 2011

For Vinod Khosla, people who don’t take risks will be taking the largest risk and exposing themselves in the end. The founder of Khosla Ventures, Khosla knows what it means to take on risk. His list of investments into renewable energy companies includes several leading biorefinery companies, Amyris, Gevo, LS9 and Coskata. His investment firm was the lead investor on most of those projects. Khosla spoke about taking risks and other topics pertaining to the renewable energy sector, specifically biofuels, during a presentation at the 2011 Brazilian Ethanol Summit in Sao Paulo earlier this week.

The main area for risk taking, he believes, is in research and development of renewable energy, of which, he also believes has already paid off. “I believe that today, biofuels technology already exists to compete with the next source of oil for the oil companies,” he said, especially in relation to those oil and gas companies looking for oil in the oil sands or through deepwater offshore drilling. From Khosla’s perspective, a barrel of oil produced from oil in the sands or deepwater offshore sites will cost roughly $70/barrel, while renewable oil from biofuels technology made today will cost roughly $80-$90/ barrel. But, by 2015, that same renewable oil will be made for only $60/barrel. And those numbers are extremely important, he said.

For biofuels to reach their full potential, he noted, those biofuels have to compete first economically and then sustainably. And that shouldn’t be a problem given that the situation, like that of Brazil’s where the country has optimized itself for sugarcane production, will change. The optimization instead will happen for biomass in the form of a number of different energy crops ranging from miscanthus to energy cane to eucalyptus.

While ethanol will still see a huge opportunity to add to the global fuel supply, hydrocarbons show the most potential, along with renewable chemicals that can replace petrochemicals. And, if one thinks that a stronger presence of renewables is all implausible, he would point to ten years ago, when he said, no one was talking about ethanol (in Brazil). Also he said, “Eight years ago I could not talk to anybody in India about cell phones because those were only for the rich,” but he said, today there are no land lines left.

“To look at what 2021 will be like, we have to look back 10 years to see how much change has happened,” adding that because of the role of renewable fuels, “in 2021 we will be talking about a completely different set of things.”

Khosla spoke during a presentation that also featured several prominent members of the oil majors. Phil New, president of BP said during his talk that “between 2020 and 2030 biofuels should account for 40 percent of world energy supply, and oil companies are preparing to meet the demand.” The Vice President of Shell’s alternative energy division, Mark Gainsborough added that “biofuels is not a threat to the oil industry, but a natural extension of the use of liquid fuels,” and, that Shell has invested nearly $1.5 billion in R&D, most of which went into biofuels.