vinod khosla 2.25.09
DESCRIPTION
Vinod Khosla\'s talk on the power of technology to revolutionize the alternative fuels industryTRANSCRIPT
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Renewable Energy:Maintech, not Cleantech
Vinod KhoslaKhosla VenturesFeb 2009
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“all progress depends on the unreasonable man”
George Bernard Shaw
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“A crisis is a terrible thing to waste.”
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““The ‘telephone’ has too The ‘telephone’ has too many shortcomings to be many shortcomings to be seriously considered a means seriously considered a means of communication”of communication”
-Western Union Internal Memo, -Western Union Internal Memo, 18761876
Prob
lem
: Misu
nder
stan
ding
Tech
nolo
gy
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““There is no reason for any There is no reason for any individuals to have a computer individuals to have a computer in their home”in their home”
-Ken Olsen, President, Chairman and -Ken Olsen, President, Chairman and Founder of DEC, 1977Founder of DEC, 1977
Excu
se: M
issin
g
Applic
atio
ns
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““Heavier-than-air flying Heavier-than-air flying machines are impossible”machines are impossible”
-Lord Kelvin, President, Royal Society 1895-Lord Kelvin, President, Royal Society 1895
Prob
lem
: Und
erst
andi
ng o
f
Phys
ics
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"Everything that can be "Everything that can be invented has been invented."invented has been invented."
-Charles H. Duell, Commissioner, U.S. -Charles H. Duell, Commissioner, U.S. Office of Patents, 1899Office of Patents, 1899
Prob
lem
:
Under
estim
atin
g pe
ople
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“It is the mark of an educated person to look for precision only
as far as the nature of the subject allows.”
Aristotle
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99
oil price forecasts (1985-2005)
15
20
25
30
35
40
45
50
19851990
19952000
Data/Source: World Oil Prices (current $ / Barrel)- EIA Office of Integration Analysis and Forecasting
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Actual
Actual
Actual Actual
Actual
Actual
Actual
10-yr Forecast
Error
5-yr Forecast
Error
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1010
gas price forecasts (1985-2005)
1
2
3
4
5
6
7
8
19851990
19952000
Data/Source: Natural Gas Wellhead Prices (current $ /1000cf) - EIA Office of Integration Analysis and Forecasting
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
ActualActual
Actual Actual
ActualActual
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10-yr Forecast
Error
5-yr Forecast
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1111
coal price forecasts (1985-2005)
1
1.5
2
2.5
3
19851990
19952000
Data/Source: Coal Prices to Elec. Generating Plants (current $ /million btu) - EIA Office of Integration Analysis and Forecasting
Actual
Actual
Actual
Actual
ActualActual
Actual
Forecast
Forecast
Forecast
Forecast Forecast
Forecast
Forecast
10-yr Forecast
Error
5-yr Forecast
Error
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the US market for mobile subscribers
› Fortune (1984 => 1989)
› McKinsey for AT&T (1980 => 2000)
› Herschel Shosteck (1994 => 2004)
Source Actual
› 3.5M
› 109M
› 182M
The same mistakes are
repeated again and again!
Forecasts
› 1M
› 0.9M
› 60-90M
Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it/2007/3/2007_3_8.shtml
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yesterday’s technology, tomorrow’s forecast
› 1980’s phone › The actual market
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quantitative modeling flaws
› Models with given inputs are precise but inaccurate
› low “standard deviation”, but with high “standard error”
› input the measurable, ignore the immeasurable Black Swan’s
› obscured embedded assumptions
› Food price controversy
› World Bank study 75% of price rise due to biofuels
› USDA notes only 3% of total price change
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“extrapolation of the past”
vs.
“inventing the future”
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…”relevant scale” solutions for
… oil
… coal
… materials
… (efficiency of oil & coal use)
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1990: Chindia ≈ 13% of CO2 emissions
2005: Chindia ≈ 23% of CO2 emissions
2030: Chindia ≈ 34% of CO2 emissions
EIA
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“China and India together account for 79 percent of the
projected increase in world coal consumption from 2005 to
2030”
EIA
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…”relevant cost” …”relevant scale” …”relevant adoption”
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…the chindia testonly scalable if competitive unsubsidized
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…the scaling modelbrute force or exponential, distributed…
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…the adoption riskfinancial, consumer acceptance, market entry
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But how do we evaluate solutions…?
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key criteria
› Trajectory: “What is” or “What Can Be”
› Scalability Trajectory
› Cost Trajectory
› Adoption Risk
› Capital Formation
› Optionality
› Carbon Reduction Capacity
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…cost and carbon trajectory
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Cost trajectory:
Undesirable (hydrogen fuel cell?)
Subsidy/Support Needed
Cost
Fossil Fuel Cost
Fossil + Carbon Cost
Time
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cost: driving down the cost curve
Source: “The Carbon Productivity Challenge”, McKinsey – Original from UC Berkely Energy Resource Group, Navigant Consulting
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2010 2015 2020 2025 2030 2035
Cost
(Nor
mal
ized
)
2010 2015 2020 2025 2030 2035
Cost
(Nor
mal
ized
)
2010 2015 2020 2025 2030 2035
Cost
(Nor
mal
ized
)cost: not all technology curves are the same
2010 2015 2020 2025 2030 2035
Cost
(Nor
mal
ized
)
Cheapest now does not mean Cheapest now does not mean cheapest later!cheapest later!
Trajectory Matters!Trajectory Matters!Solar PV
WindCoal
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declining technology cost…
Crystalline Silicon
Amorphous Silicon
Thin-Film
Thin-Film Multi-Junction
Generations of Solar Photovoltaics…
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but tech cost decline isn’t enough…
2010 2015 2020 2025 2030 2035 2040
Cost
(Nor
mal
ized
)
Construction CostInputs (Feedstock/Land)
Technology Cost
Total Cost
Total cost decline is based on relative Total cost decline is based on relative proportion of cost “types”…proportion of cost “types”…
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Carbon trajectory:
Undesirable (natural gas?)
Carb
on E
mis
sion
s Tr
ajec
tory
Desired Goal(80% below fossil?)
Time
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…the adoption riskfinancial, consumer acceptance, market entry
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adoption risk - $2,500 nano
Internal combustion engineInternal combustion engine or or
Hydrogen / electric?Hydrogen / electric?
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adoption risk: U.S. mill closures
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…optionality
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Pyrolisis
optionality: biofuels feedstocks & pathways …
Mixalco Process
GlycerinNatural Oils
BioDiesel (FAME or FAEE)
Methanol/Ethanol
Gasification
Syngas
Fermentation Ethanol/Butanol
BTL Diesel
Mixed Higher Alcohol
MethaneMicrobial cultures
Dimethylfuran
Gasoline, Diesel, Hydrocarbons
Ethanol, Butanol, Renewable Petroleum FermDiesel
Sugars/
Starch
Fermentation
Biogasoline
ETG via catalysis
Biomass
Cellulose/ Hemicellulo
se
Acid or Enzyme Hydrolysis
Saccharification
Ethanol
Algae
+ Sunlight – CO2
Cell Mass
Hydrocracking
Waste
Fischer-Tropspch catalysis
BioDiesel (FAME or FAEE)
Catalytic Conversion
ButanolDiese
l
Transesterification
Catalysis and Aqueous phase Reforming
Fermentation
Catalytic Conversion
Ethanol
Biocrude
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optionality: hybrids or biofuels?
Time
% o
f p
ow
er
from
liq
uid
fu
el
% o
f p
ow
er
from
ele
ctr
ic s
ou
rces0%
0%
100%
100%
Fast (relative) battery tech development
Slow battery tech development
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…capital formation
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› Short Innovation Cycles (3-5 years)
› Short investor return cycles
› Mitigate technical & market risk cheaply
› Unsubsidized market competition
Private money will flow to Private money will flow to ventures that return investment ventures that return investment
in 3-5 year cycles!in 3-5 year cycles!
capital formation
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…carbon reduction capacity
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0
1
2
3
4
5
6
7
8
9
10
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Inde
x (2
008
= 1)
Carbon Productivity Growth Required = 5.6%/yr
World GDP Growth = 3.1%/yr
Source: “The Carbon Productivity Challenge”, McKinsey – Original GDP projection from Global Insight through 2037
Less reduction now, but Less reduction now, but greater capacity to greater capacity to
respond in the future?respond in the future?
Carb
on P
rodu
ctivi
ty =
GD
P / E
mis
sion
sW
orld
GD
P G
row
th
0
1
2
3
4
5
6
7
8
9
10
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Inde
x (2
008
= 1)
Emission decrease to 20GT CO2e by 2050 = -2.4%/yr
carbon reduction capacity: 10X increase in carbon productivity!
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0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2008 2013 2018 2023 2028
Inde
x (2
008
= 1)
Growth Offers the Greatest Carbon Reduction Opportunity!
carbon reduction capacity is key
Improvement of current stockReplacement of old stock
Growth stock
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goal:cost, carbon reduction capacity, carbon & scaling trajectory, capital formation, low adoption risk, & optionality
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But be vary of irrational ideas….
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irrational ideas: toilet paper
I propose a limitation be put on how many sqares [sic] of toilet paper can be used in any one sitting. Now, I don't want to rob any law-abiding American of his or her God-given rights, but I think we are an industrious enough people that we can make it work with only one square per restroom visit, except, of course, on those pesky occasions where 2 to 3 could be required.
- Sheryl Crow
• Source - http://blogs.usatoday.com/ondeadline/2007/04/singer_turned_a.html
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irrational ideas: “green bikinis”
• Source - http://www.alternativeconsumer.com/2008/07/29/eco-bikini-from-niksters/
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irrational ideas: eat kangaroos, not cows!
Source – http://www.reuters.com/article/environmentNews/idUSSYD8867720080808
“SYDNEY (Reuters) - Farming kangaroos instead of sheep and cattle in Australia could cut by almost a quarter the greenhouse gases produced by grazing livestock, which account for 11 percent of the nation's annual emissions, said a new study.”
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irrational ideas: “no flags, no footprint”
• Source - http://www.guardian.co.uk/world/2008/jun/10/germany.euro2008
“But a few days into the Euro 2008 football championships fans are being advised not to fly their flags - because they could damage the environment… Austria's automobile club, the OAMTC, says attaching two flags to a car leads to an increased petrol consumption of "up to half a litre a kilometre on motorways and rural stretches".”
- The Guardian
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irrational ideas: Shell’s “sustainable” tar sands
Source – http://www.guardian.co.uk/environment/2008/aug/13/corporatesocialresponsibility.fossilfuels
• UK advertising authority: Shell mislead public by claiming tar sands as “sustainable” source!
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irrational ideas: “how to green” books
• Source - http://www.amazon.com/Lazy-Environmentalist-Guide-Stylish-Living/dp/1584796022
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irrational ideas: zero-emission buses?
3-year Oakland pilot : zero-emission hydrogen fuel cell buses
diesel @ $1.61/mile vs. hydrogen @ $51.66/mile!
Source: ABC News - http://abclocal.go.com/kgo/story?section=news/local&id=5984013
solutions must make solutions must make economic sense!economic sense!
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irrational ideas: Zero Emission Buildings
... the new fashion?
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…”lets face the facts”… Prius: vs. painting 1000 sq-ft of roof white
… Wind & PV: unscalable solutions without storage!
… “Classic” Biodiesel: a technological dead-end!
… CCS Coal: “FutureGen” or “Nevergen”?
… Hydrogen powered cars: a bridge to nonsense?
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5454
“no change bigotry” vs.
“environmental everything” vs.
pragmentalists
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irrational ideas: the “Exxon view”?
Source – NY Times
• Discipline, Patience, Vision ≠ Green!
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…technology expands the “Art of the Possible”
…today’s “unimaginable” or tomorrow’s “conventional wisdom”
…the power of ideas driven by entrepreneurial energy
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“Black Swans” and forecasting
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“black swan” solutions ?
Technology shocks are classic “Black Swans”!
Strategy: More “at bats”; “shots on goal”
Source: Nassim Nicholas Taleb, author of “The Black Swan”
“rarity, extreme impact, and retrospective
(though not prospective) predictability”
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“what if…”
› “more coal plants meant cleaner air”
› “more driving meant less carbon”
› “cement was carbon negative & free”
› “a million year crude production cycle reduced to hours?”
› “engines were twice as efficient cutting world oil
consumption in half”
We are working on these & imagining the future!
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› Cement that sequesters CO2, instead of emitting it!
Calera
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Biocrude
Crude oil Refinery
Kior: “biocrude” replaces crude
Millions of Years
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Kior: Millions of years Minutes!
0
5
10
15
20
25
30
35
40
45
50
0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 90,0
TAN (mgKOH/g)
Oxy
gen
(wt
%)
Biomass
Thermal Cracking (Pyrolysis- seconds)
Geo Thermal Conversion
(Million of years)
Catalytic Cracking (BCC in minutes)
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636363
Transonic
› Gasoline engines at high compression ratios › New injector technology is multi-fuel capable › Precision ignition timing › 50-100% mileage improvement
› Near term goal: 100mpg diesel “Prius”
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Soraa/Kaai/Lumenz: lasers and lighting
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…prefabricated, environmentally friendly, cheaper, LEEDS homes
Living Homes
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“what if…”
› fusion happened at low temperatures”
› “nuclear plants produced no waste”
› “batteries were 10-100X better”
› “plant chlorophyll solar cells produced electricity or fuels”
› “algae could excrete its oil production”
Others have proposed these!
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not your niche markets anymore!
• Corn Ethanol
• Biodiesel
• Solar PV
• Wind
• Geothermal
The Markets You Think OfThe New Green
• Engines ($200B)
• Lighting ($80B - US)
• Appliances ($10’sB+)
• Batteries + Flow Cells ($50B+)
• Gasoline ($500B+)
• Diesel ($500B+)
• Jet Fuel ($100B+)
• Cement ($100B+)
• Water ($500B+)
• Glass ($40B)
• Home Building (!!!)
• BioPlastics ($10’sB+)
Generation - $250B - US
• Solar Thermal
• EGS
• Clean Coal
• New Nukes
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…our renewable portfolio
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CellulosicEthanol
Sugar Feedstocks
Starch Feedstocks
ToolsSolar
NaturalGas
MechanicalEfficiency
ElectricalEfficiency
CellulosicFuture Fuels
Plastics
Water
Materials
Sequestration
ToolsEPC
Waste Water
Water Desalination
PVC Plasticizers
PolyurethanePolyethylene
GlassCement
Dis
trib
ute
d S
ola
r
Uti
lity
Sca
le S
ola
r
Coal
EfficiencyOil
HomesEngines
AppliancesPumps
LightingBatteriesMotors
Engineere
d
Geotherm
al
Win
d Sto
rage
Synth
etic N
atura
l Gas
Corn/Sugar Fuels
Wind
BuildingMaterials
Geothermal
ButanolCellul. Diesel
Cellul. GasolineCellul. Jet Fuel
Khosla Ventures Renewable Portfolio
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MascomaRange
CoskataLanza
Cilion
ToolsSolar
NaturalGas
MechanicalEfficiency
ElectricalEfficiency
CellulosicFuture Fuels
Plastics
Water
Materials
NanostellarCodon
NanoH2O
DrathsSegetis
SoladigmCalera
StionAusraInfiniaPVT
Coal
EfficiencyOil
PAX StreamlineEcoMotorsTransonic
TulaHybradrive
Seeo Kaai
Soraa LumenzTopanga
GIVGridshift
AltaRock
Great
Poin
t Ener
gy
Corn/Sugar Fuels
Wind
BuildingMaterials
Geothermal
Amyris LS9
GevoKiOR
Khosla Ventures Renewable Portfolio
Sakti3FireflyRamu
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Together, our products will improve the way all people live
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Calera Corporation
Built on carbon negative cement
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Living Homes
And prefabricated, environmentally friendly, cheaper, LEEDS homes
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Soladigm
Using electrochromatic windows
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Amyris
LS9
Gevo
Kior
Mascoma
Range Fuels
Coskata
LanzaTech
Fueled from renewable sources
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Ramu
EcoMotors
Transonic
Firefly
Seeo
Sakti3
Nanostellar
Tula Technologies
With reduced fuel consumption and CO2 emissions
Hybradrive
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Topanga
Lit by high intensity, low power discharge lighting
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Ausra
Altarock
Infinia
Stion
PVT Solar
Using renewable electricity
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Great Point Energy
Cooking with natural gas from clean coal & biomass
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Group IV
Lumenz
Reading with LED lighting
Soraa
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Kaai
Watching HD laser TV
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NanoH2O
Drinking desalinated water
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Segetis
Safely using biobased plastics and chemicals
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Draths
Biobased materials for your home
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Pax Streamline
Staying comfortable with more efficient air conditioning
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Change every aspect of daily living
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to predict the future, invent it!
Forecast 2015: New “cheaper than fossil” technologies proven
Forecast 2030 : How will oil compete?
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Biofuels Case Study
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the biofuels Rationale: trajectory
› “What is” or “What Can Be”
› “Chindia” solutions
› Multiple improvement pathways
› Rapid innovation cycles
› Avoid “dead-end” (vegetable biodiesel, natural gas)
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› We propose› Facility-level individual certification
› “LEEDS” like goodness rating
› Tradable CLAW certificates
› C – CARBON relative to gasoline
› L –net LAND use impact
› A – AIR quality impact
› W – WATER use relative to gasoline
CLAW: doing biofuels right
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US land: Little land use next 10 years
› Reality of Land Use› Economics means lowest cost sources used first (waste)
› Source: DOE 1.3B dry tons with “modest changes in land use”
› Source: Winter cover crops: no marginal land usage
› Sources: GMO, better worldwide yields, marginal or unused lands…
› Propagating the ILUC Myth: › ignore range of crops, practices, economic signals, value of optionality
› The “best science” is not good enough to use
› Lack of zero ILUC model: absence of proof is not proof of absence
Land use will be immaterial Land use will be immaterial through the current RFS standard!through the current RFS standard!
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• Short rotation: winter cover crops
• Long rotation: 10x10 year energy/row crops
• Polyculture, perennial long rotation (Jackson, Tillman)
• 2.5b hectares of rainfed agriculture suitable land
• Underutilized pasture land
• Improved agricultural land
• Multicrop forestry
• Africa: low input agriculture?
• ….. future inventions, optimizations, discoveries
…better agronomic practices?
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energy crops: Sorghum
25 tons/acre (Prof. Holtzapple- Texas A&M)
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the perennial advantage
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PreviouslySwitchgrass
Previously Fallow
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Where Will Biomass Come From?
Demand - 2030
1,363M tons
- 150 billion gallons at 110 gal/acre
Waste
136M tons equiv.
- 15 billion gallons of production
Winter Cover Crops
735M tons
- (158.5M acres at 4.6 tons/acre)
Forest Excess Waste
158M tons
Dedicated Crop Land
334M tons
- 13.6M acres at 24 t/acre- 27.3M acres at 12 t/acre
=
Scenario 1:
• 2030 Assumptions (Production):– 50% of annual crop land for winter cover crops and 70% of forest excess waste used– Yields of 110 gallons per acre– No recovery of degraded land is modeled; note 15.5M acres (or 70%) of land used for corn
ethanol will be reclaimed in this scenario
• 2030 Assumptions (Demand):– 2030 AOE projections for US reduced by 20% to reflect CAFE / Energy Bill– Ethanol mileage discount of 15% – 90% of fleet is FFV
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9898
Companies
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pilot plant
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› Ethanol for under $1.00 a gallon
Coskata
Modular Design of Large RO Membrane Plants
• Ashkelon SWRO Plant, Israel– 40,000 membrane modules
• Perth SWRO Plant, Australia– 18,000 membrane modules
• Fiber glass composite• Operated at >1000 psi• Up to 8 modules (40” long
each) per vessel• Multiple suppliers worldwide
Pressure Vessels
Membrane Banks
Membrane Plant
Membrane Modules
Biomass to SyngasSeparation and recovery
of Ethanol
Biofermentation of syngas to ethanol
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Steel mill waste gas
Biomass syngas
Ethanol & Butanol fuelsOR +
LanzaTech Process
waste gas to fuel
Carbon monoxide gas
+
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separation
Milling
Enzymes
Nutrients
Fermentation
Gasoline Blend stock
Chemical Precursor
Feed Products
FeedstockGevo
Biocatalyst
DieselChemical Products
Materials
Retrofit of ethanol plants
Proprietary Bio-processing
Future: Any bio-based sugar
source
Create market options
Start with
JetFuel
Iso-Octane
Proprietary Chemical processing
Diesel Blend stock
gevogevoAdvancing the New Era of Renewables Regional Fuel and Chemical Biorefinery
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Synthetic Biology
Recombinant Small Molecule Bio-Synthetic Pathway
Gene 4Gene 2Gene 1
Gene 3Gene 1
Artimisinin
Source of genes Custom-Built Microbe
Fermentation DieselSynthetic Biology = Fermentation DieselXAnti-Malarial
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Metabolic modeling+
Synthetic biology
Renewable Feedstock
LS9 Designer Biofuels & Chemicals
X
X
X
X
X
X
X
X
>90% Energetic Yield From Feedstock
Hydrocarbons
Hydrocarbon BiosynthesisNature’s Energy Storage
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Biocrude
Crude oil Refinery
Kior: “biocrude” replaces crude
Millions of Years
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Kior: Millions of years Minutes!
0
5
10
15
20
25
30
35
40
45
50
0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 90,0
TAN (mgKOH/g)
Oxy
gen
(wt
%)
Biomass
Thermal Cracking (Pyrolysis- seconds)
Geo Thermal Conversion
(Million of years)
Catalytic Cracking (BCC in minutes)
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biomass, geopolitics, and poverty
Biomass & Biomass & Poverty BeltPoverty Belt
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the “salve” for Africa?
› Carbon Price ($100’s billion per year?)
› Biomass based Energy ($500 billion a year?)
› Opportunities for “resource poor” (Solar & Biomass?)
› vs. Aid, Debt Forgiveness, Trade Treaties …
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are biofuels root cause of deforestation?
• Source: Brazilian deforestation from Mongabay – citing Brazilian national Institute of Space Research
What is the real, marginal What is the real, marginal impact of biofuels? impact of biofuels?
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a pound of steak or a gallon of ethanol?
• Source: Mongabay.com
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livestock – the numbers
Source: “The Climate Healers”, Saliesh Rao
What is the real culprit in land use What is the real culprit in land use increase?increase?
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trajectory: biodiesel vs. ethanol vs. cellulosic Diesel
“Classic” Biodiesel
Carbon reduction - 2008
80%
Carbon reduction – 2012
80%
Scalability (2030Gallons/acre)
600-900
Sustainability (2030) Poor
Unsubsidized 10 yr market
competitiveness
Poor (@ $45 oil price)
Ethanol
20-30%
80%
2500 (cellulosic)
High
Good (@ $45 oil price)
Cellulosic Diesel
Not Available
80%
2500 (cellulosic)
High
Good (@ $45 oil price)