Khosla talks about the importance of technology in weaning the US off oil but notes that policy change is more important.
Question: What will change energy policy?
Vinod Khosla: Well technology is absolutely the lynchpin, because without the technology people won’t believe anything else is possible. If nothing else is possible people won’t attempt it. But policy is absolutely key. If we don’t have the right policies in Washington and we keep subsidizing oil like we do today, then we are unlikely to see a replacement. So policy has to be set up to allow for both greener and cheaper fuels to enter the market without interference from the monopoly of oil. And that’s absolutely key. Beyond that, obviously we’ll need the business talents or execution skills to build lots of plants and scale this.Well there’s been very little movement because the oil companies have a lot to lose. There is an existing group of stakeholders that started the corn ethanol business. They have not looked forward enough, though I suspect most of them are now starting to look at moving into cellulosic technologies. In fact many of the traditional interests I’ve talked to have a strong interest in these newer technologies we are developing. But because they haven’t believed the technology is there, they haven’t taken the steps toward having the policy set up for that. But let’s not be fooled. The oil interests, especially the foreign oil interests, have a lot to lose if this happens. Every four-dollar change in the price of oil is worth a trillion dollars in asset value to Saudi Arabia. Do you think they’ll go down easily fighting? Or will they fight the replacement of oil? They will fight the replacement of oil.I think first we need to level the playing field. We need to get rid of the subsidies and the monopolies that oil has – from all the breaks they get in R&D; to cheap royalties they get from the direct subsidies; better accounting rules; better depreciation credits; almost . . . the list is almost endless. That has to end. Or the newer fuels have to give . . . get the same entitlements to have a level playing field. So that absolutely needs to happen. Second, these fuels, because they are produced in such small quantities, need additional help getting started. Now I don’t believe any technology should be subsidized for more than five to seven years. And if it can’t make it competitively in the marketplace, then we shouldn’t be supporting it. So I’m a big fan of the right policy, but not long term subsidies. And I don’t think subsidies is what we need.
Question: Are subsidies going to help?
Vinod Khosla: First I am not a fan of subsidies long-term. They should be short-term. I think subsidies should be ___________ an industry can improve, they can scale to a large degree. We have subsidies for solar. We have subsidies for wind. We had hundreds of billions of dollars of subsidies for nuclear. We have subsidies for coal. We have subsidies for oil. So this is where the right policymakers have to make judgment calls about what, if any, subsidies should be given and for how long. And frankly the less the better, but it’s a judgment call in that.
Recorded on: September 26, 2007.