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Vinod Khosla at Milken Institute: Part III

This will be the conclusion of Vinod Khosla’s (VK) recent lengthy interview at the Milken Institute 2009 Global Conference. The interview was conducted by Elizabeth Corcoran (EC) of Forbes and can be viewed here.

In Part I, VK discussed the role of government money, capital intensity of renewable projects, and some of his solar investments. In Part II, VK discussed butanol, cellulosic ethanol, nuclear power, and cap and trade. Here in Part III, VK discusses his beef with electric cars, has lots to say about Black Swans, discusses his problems with nuclear in more detail, talks about green jobs, sugarcane ethanol, and weighs in on indirect land use issues for biofuels.

EC (39:00): Let’s get to those electric cars. You don’t like the Prius.

VK: Let me be clear, and I am going to sneak in my Black Swan. I do drive a hybrid, but not a Prius. I drive a Lexus hybrid. Hybrids are an uneconomic way to reduce carbon dioxide. If you go to hybrids or electric cars, your cost of carbon reduction is about $100/ton. If you have 10 ways of reducing carbon at $50/ton, why would you spend $100? My beef is not with hybrids; we are investing in hybrid batteries; there is a good market and we can make money at it. But do I believe it’s going to solve the climate change problem? No. (RR: None of the things that have been discussed are going to significantly rein in carbon emissions.) Save yourself the five grand, and instead paint your roof white. You will save more carbon that way.

(RR: He cited this paper by Art Rosenfeld at Lawrence Berkeley Lab: “White Roofs Cool the World, Directly Offset CO2 and Delay Global Warming“).

EC (41:10): Shai Agassi – a long time entrepreneur in Silicon Valley – has a very different approach to batteries. Are you involved in the work he is doing? Does that only work in small countries?

VK: You know, Shai has a very intriguing start-up. (RR: EC interrupts to explain that Shai is developing stations where you can go and exchange batteries for electric cars; he owns the battery and you own the car. See more explanation here.) I mentioned earlier about diversity of opinion; I am glad he is trying it and I am cheering him on. If I can help him I will. It is important to try some of these experiments. He has a particularly clever way to do something that does have a shot at working.

I want to add my Black Swan theory here. Most of you have probably read the Black Swan, or heard about it. The financial crisis is a negative Black Swan. I am a true believer that technology provides positive Black Swans. (RR: VK explains the concept of the Black Swan. Here is a link to the book at Amazon, which I have read and found to be very good). We will redefine energy because of the Black Swans of technology.

(RR: VK then explains his problem with electric cars, and says lithium ion batteries are too expensive, are limited by electrochemistry, and will be for a long time. I would say that while VK seems to have a clear picture in his head on the issues with batteries, he suffers from a blind spot about similar limitations of cellulosic biomass. He then cites all of his investments into different areas, and concludes that sheer numbers mean something is going to work.)

VK: The chance that each approach will succeed is small. The chance that all of them will cumulatively fail is vanishingly small. Mark my words: Vanishingly small, and that’s why we will have unsubsidized market competitiveness with fossil fuels. And the fossil fuel guys won’t know what hit them. I don’t see how by 2030 oil can compete. That’s why I think by 2030 oil will go to $30, because it will be the alternative cost of marginal technologies.

(RR: I think he truly believes this. Yet it shows a failure to grasp issues of scale, biomass density, logistical challenges, and much more. If it were merely a numbers game, we could solve any technology problem by just throwing enough money at it. But there are fundamental issues here regarding biomass that will never – mark my words – never allow it to be produced for $30/bbl. Sugarcane ethanol, yes, can be produced for that in Brazil. But you will never turn cellulosic biomass into a liquid fuel, at scale, for $30/bbl – for the same kinds of fundamental limitations VK mentions for batteries.)

EC (47:40): So by 2030, what will be the primary fuel?

VK: I have a paper on my website that postulates about a technology race between biofuels and batteries. Whichever one makes the most rapid progress will get the larger percentage of the total passenger miles driven in the world.

EC (48:30): Does government risk factor in? There has been a cautionary tale in biodiesel, where there has been great interest, lots of money pumped in, and yet due in part to vagaries of how the environmentalists and government regulations have crashed into each other, you have got more than 100 biodiesel fuels (RR: Biodiesel plants, I presume?) around the country, none of which are producing fuel.

VK: You know, that’s true, but you also have bankrupt financial companies. Look, failure is the natural mechanism of capitalism. But you are right. There is government risk. But we fixed a lot of that last week when the Low-Carbon Fuel Standard passed. It will force the right decisions looking back.

EC (50:18): There have been many technologies – and Kleiner invested in many early on – where the technology, the marketplace, and the government were not in sync. And the technology dies.

VK: I think that’s the wrong way to look at it. Any start-up has risks. It has technology risks, market risks, it has financial risks. It has other risks; it has people risks and management risks. What you are doing as an active investor is balancing those risks. What we are tending to do is increase technology risk so we can reduce market risk. We will generally take on more market risks, have a bigger jump, and a larger probability of failing at the technology such that when we enter the market we have a larger competitive advantage.

EC (51:30): What are you hearing from the limited partners, the people who invest with you? Is there a tolerance for that sort of risk?

VK: Absolutely. My impression is venture capital has gone too far away from real technology risk. The limited partners are thirsting for more technology risk. The limited partners tell me that the earlier stage they can get in on the technology risk, the better they like it.

EC (53:25): I am going to open it up to questions in a minute, but one more question from me. Let’s go back to nuclear for a minute. Aren’t there Black Swans in the nuclear industry? (RR: I was thinking the same thing earlier; Black Swans only appear to have been considered by VK in very specific situations. A positive Black Swan is going to make some of his technologies successful, but he seems to discount any positive Black Swans from other sectors).

VK: There probably are. In fact, Bill Gates is funding one. The problem with nuclear, I think, is different. Because of the NRC it takes 20 years to build one. And I have to give them $100 million to approve every step of the process. The problem with nuclear is that the innovation cycle is very long. If I am building a nuclear plant, I think of something, 20 years later I build something and see how it performs. If I am building a solar thermal plant, six months later I change my manufacturing line. I can even do it half way through building a power plant.

EC (54:40): And if you are building an ethanol plant, two or three years later it’s ready.

VK: Yeah, though every six months people plan on changing the bug in their plant. Every six months you change the bug. Keep evolving it, improve the efficiency. The cycle of innovation – how long it takes – is a really important metric for judging how effective a technology will be in getting to market.

EC (55:20): OK, good. First question.

Q1 from audience (55:30): My question is on nuclear. You said you weren’t interested in building, but how about the services component, i.e., servicing the waste and so forth?

VK: I think it’s a limited investment opportunity. I don’t think it’s an explosive opportunity. (RR: I suppose that depends on whether critical mass is reached.)

Q2 (56:10): What about superconductivity?

VK: It’s an interesting area, I just haven’t seen the pace of innovation. Sometimes it’s self-fulfilling. If you are not interested, nobody funds it, then nothing happens. I would love to see a breakthrough in room temperature superconductivity. (RR: He then said Kleiner invested in a couple of companies in the late 80’s; he mentioned American Superconductor).

Q3 (57:20): With respect to cellulosic ethanol, this question of indirect land use that has ended up in the standards; do you think that will continue?

VK: It’s a fairly complex issue; the science is very uncertain. I think it is figured into the California Low Carbon Fuel Standard. The end result is a reasonable compromise. It’s also something that is fairly uncertain right now. I think the California Air Resources Board (CARB) came up with something that’s a reasonable answer on indirect land use impacts. The corn ethanol guys wanted to have zero. They didn’t get that, so they are now complaining in Washington. I think CARB could have phased it in more slowly because the numbers are so uncertain, so I would not agree 100% with CARB. But I would agree 90% with them.

Q4 (59:10): That’s corn. How about cellulosic?

VK: I think cellulosic should be measured the same way, but I think the impact will be fairly small, and over time it has the potential to be the biggest opportunity to sequester carbon in the soil. I don’t want to get into the details – there are papers on my website about this – but it is possible to change agronomy practices to raise biomass and sequester carbon at the same time. It is the annual crops, where you till up the soil ever year, that you have a problem. Perennial crops, and sugarcane is such a crop, you have a much better chance. Also, a lot of cellulosic crops can be grown without a lot of water and on marginal lands.

EC (60:20): So the amount of land we would need, if we were to truly replace gasoline, how much land would we need?

VK: Under optimistic scenarios we need zero land in this country to replace all of the gasoline in this country. (RR: He referred to this paper – Where Will Biomass Come From? – on his website for a detailed explanation). Look, this is really important. We can’t do linear extrapolation of the past. (RR: Because it doesn’t give the desired answer). If we do, we are sure to fail. We have to do things a new way. The best way to predict the future is to invent it, not extrapolate the past. (RR: Audience starts to applaud). And this is a fundamental difference.

Q5 (61:22): Is the lack of seed capital – especially in Europe – a bottleneck, and how do we reengineer this so that funds are available?

VK: Lack of seed investment in Europe may be a problem for the Europeans, but it’s an opportunity for us. Let me give you an example. I ran into a guy who was a senior director of research at Exxon, who had moved to Europe – Amsterdam – and was struggling with a new idea to make fuel from biomass. He wasn’t producing ethanol. He called me, and said “Nobody in Europe understands me. I have been looking for money for two years.” He had been begging and borrowing space at various labs and universities to do his research. He said that he thought we had it all wrong, that instead of turning biomass into ethanol you should turn it into crude oil. This is exactly the same thing nature does; all crude oil comes from biomass. He said the only problem with nature is that it takes millions of years. He said he could do it in minutes. Now that’s a seed idea. I would have guessed that there was less than a 10% chance that he was going to be able to pull this off. It didn’t take very much for me to write him a check, because if he is right it’s transformative. He moved to Houston and went to work.

I like to joke that I am the only Indian in-sourcing jobs. We have in-sourced three technology companies: One from New Zealand, one from Amsterdam, and one from Australia. The same thing happened with the solar thermal technology in Australia. We funded it and they moved to Palo Alto. Every news channel in Australia carried that story. What was the story? “Why isn’t Australia funding this?”

EC (64:40): Are you seeing more competition at the seed level from other venture capitalists?

VK: It’s starting to increase, but not that much. That’s why we love the seed opportunities. They are the most promising opportunities anywhere. (RR: He then mentioned that the company in Houston is KiOR, which I mentioned previously in Vinod Khosla Scoops Me. Incidentally, VK e-mailed me after I posted that essay and we exchanged several e-mails over KiOR and some of his other ventures.) Nobody wanted to invest in the Internet until the Netscape idea. After Netscape, everybody was interested.

EC (65:40): You have said that you like being a seed investor. Do you think there are enough investors at the 2nd and 3rd tier? These companies are going to need more than just you at that point.

VK: You don’t know for sure, but we see increasing interest. If you see one or two successful IPOs, the amount of money will increase dramatically. Wall Street bounces between fear and greed; we are in a fear cycle.

Q6 (66:40): What are those Ph.D. students looking into right now? In 2005, I did an informal survey at UC Berkeley. Nobody in the engineering department – graduate students or professors – were interested in energy. We did an informal survey in 2006 and suddenly more than 50% were interested in working in energy. That’s why I am very bullish with respect to the new crops of Ph.D. students coming out. It’s the number one choice. Number one used to be nanotechnology, genetics, computer science; it’s now material science, it’s chemical engineering, it’s all kinds of fundamental processes. What I have noticed is physics, chemistry, biology are becoming a lot more important, and that will drive transformation in energy over the next 20-25 years. (RR: I guess I was way ahead of my time since I studied biomass to energy in graduate school at Texas A&M in the early 90’s).

Q7 (68:00): I agree with your urgency about climate change, but it’s interesting to think about other countries, who already realize that we have already baked in about two degrees C in terms of the thermal momentum of the earth. Is there a technology opportunity in adaptation to climate change?

VK: I haven’t spent enough time on adaptation. It’s unfortunate that the people who have the least are the most impacted, like Bangladesh. But there is an interesting area that I have avoided, called geoengineering. I have just been asked to speak at a geoengineering conference, and I haven’t decided. It is a touchy subject; to engineer the climate of this planet. Some people think we have to do it, others think there will be too many unintended consequences. I subscribe to that view.

EC: We will take two more questions.

Q8 (70:22): Could you talk about job creation?

VK: Most of the studies say that job creation per dollar invested is higher for renewable technologies; higher than dollars invested in fossil fuel technologies. I don’t know why that is, but all of the data seem to indicate that this is in fact true.

Q9 (71:52): Do you think Brazil has a chance with sugar ethanol?

VK: Sugarcane ethanol, under the Low Carbon Fuel Standard, comes out looking reasonably good. But, having said that, I think sugar is too valuable a commodity to use. We will get to things other than sugarcane as our source of fuel. I suspect sugarcane will be more lasting than corn ethanol, but even that will be a passing phase. In the end, non-food technologies are likely to be the source of our fuels. Partly because the politics are right; more importantly because the science is right. I evaluate biofuels on one metric: How many miles can you drive per acre? With most food crops, you can get to 10,000 miles driven per acre. Cellulosic technology offers the opportunity to go 100,000 miles on an acre, and then land becomes a non-issue. (RR: Two words: Net energy). Now we promised to take one last question.

Q10 (73:30): A lot of these new technologies are going require someone to install all of this. Are there plans to look at human capital opportunties?

VK: There are clearly opportunities in services. We are not funding them because, partly because I am a techie nerd; I like the technology and everyone should do something they have fun at. But there are clearly opportunities, and others are doing it. Thank you all very much.

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May 4, 2009 - Posted by | batteries, biomass, Black Swan, cellulosic ethanol, electric cars, Nassim Nicholas Taleb, nuclear energy, Prius, Vinod Khosla

48 Comments

  1. Well, I admire VK’s confidence. I also wonder if (similar to the Peak Oilers) he has painted himself into a corner, and now is stuck. Even if ethanol looks like it will flop, he has too much invested (money and mentally) to face the truth.
    VK’s views on the oil market might be spot-on.
    $30 oil? Maybe. Demand will be soft in any event, and CNG car-owners claim they are getting NG at the equivalent of $1.00 a gallon or less.
    Batteries and NG appear cheaper than gasoline.
    I would say the future of the oil business is dimming before our eyes. One more price spike, and the world will pass the oil biz by, in search of cheaper and more reliable fuels/energy sources.
    Gasoline demand is falling in the USA, and some say it will fall continuously for decades. Not sure that owning a refinery in the USA is a good place to be right now.
    The “Oil Era” may be phasing out, but completely without the doom scenarios predicted by some. It is being ushered out with a whimper, not a bang.

    Comment by benny "centipede glut" cole | May 4, 2009

  2. Brenny Cole said….

    “Batteries and NG appear cheaper than gasoline.”

    ————————————–

    A gasoline powered vehicle that gets 25 mpg costs .08 cents a mile to to drive (fuel cost)with gas at $2.00 a gallon

    A CNG vehicle that gets 25 mpg (gas equivalent) costs .04 cents a mile to drive at present CNG prices.

    A battery electric vehicle at present utility rates costs about .02 cents a mile to drive.

    I agree with Mr Cole. Another gas price spike may have people “heading for the exits.” when it coms to gasoline.

    Since there are already less expensive alternatives to gasoline in the marketplace there need not be any “doomsday” scenario.

    John

    Comment by Anonymous | May 5, 2009

  3. John-
    Right, right, right. The doomer-porn scenarios simply assume we cannot respond to simple price signals.
    Human behavior is complicated, but remarkably consistent when it comes to the price signal. In general, the price signal works, and works well.
    Now, if some doomers want to say that human government will lead to another global war, then maybe they will have my ear. Nothing is more sad than man’s inhumanity to man.
    But oil? Fuhgetaboutit.
    We have many, many options, and some appear cheaper already.
    Maybe biofuels won’t work, but CNG and hybrids and PHEVs appear very credible.
    With the gas glut looking like it will be with us for decades, I would say it is game over for the PO Doom crowd.

    Comment by Benjamin | May 5, 2009

  4. Interesting that Khosla notes the big problem with nuclear energy — excessive government interference. But he does not recognize the potential low-cost Black Swan there — if government will just get out the way, all sorts of interesting birds are going to start flying, and not just in nuclear.

    I think my fellow commentators are being too optimistic about what it is going to take to develop real alternatives to petroleum for transportation fuel. There have been Compressed Natural Gas vehicles for half a century, most of the time with price & emissions benefits, and yet market penetration has been insignificant. Ever wondered how long it takes to fuel a CNG vehicle, and how careful the consumer has to be with high-pressure gas?

    At the end of the day, Khosla is right that advances is technology is the answer, will indeed be the answer. Only question is who else, besides the Chinese, will let technology blossom?

    Comment by Kinuachdrach | May 5, 2009

  5. Interesting that Khosla notes the big problem with nuclear energy — excessive government interference. But he does not recognize the potential low-cost Black Swan there — if government will just get out the way, all sorts of interesting birds are going to start flying, and not just in nuclear.

    I think my fellow commentators are being too optimistic about what it is going to take to develop real alternatives to petroleum for transportation fuel. There have been Compressed Natural Gas vehicles for half a century, most of the time with price & emissions benefits, and yet market penetration has been insignificant. Ever wondered how long it takes to fuel a CNG vehicle, and how careful the consumer has to be with high-pressure gas?

    At the end of the day, Khosla is right that advances is technology is the answer, will indeed be the answer. Only question is who else, besides the Chinese, will let technology blossom?

    Comment by Kinuachdrach | May 5, 2009

  6. rant/

    Bout the rest, I dunno, but Shai Agassi is selling crack. The notion that you will replace roughly 69.6 trillion Btus per day (of transportation fuel) via wind power is, frankly, bananas. And I don’t think anyone contests that coal–which would be the only feasible feedstock for his proposed system–is worse, in terms of carbon emissions, than oil. And applying Moore’s Law to the electric mile–or “emile”–is, well, irrationally exuberant, to say the least.

    And the rousing bit at the end of his vaunted talk of how the decision to end slavery in the 19th century spurred the Industrial Revolution reverses, completely, cause and effect–cause the Industrial Revolution started in the 17th century in England, not the 19th. The fact that he counts on his audience being so incredibly uneducated is more than just a tad insulting.

    /rant

    Comment by freude bud | May 5, 2009

  7. rant/

    Bout the rest, I dunno, but Shai Agassi is selling crack. The notion that you will replace roughly 69.6 trillion Btus per day (of transportation fuel) via wind power is, frankly, bananas. And I don’t think anyone contests that coal–which would be the only feasible feedstock for his proposed system–is worse, in terms of carbon emissions, than oil. And applying Moore’s Law to the electric mile–or “emile”–is, well, irrationally exuberant, to say the least.

    And the rousing bit at the end of his vaunted talk of how the decision to end slavery in the 19th century spurred the Industrial Revolution reverses, completely, cause and effect–cause the Industrial Revolution started in the 17th century in England, not the 19th. The fact that he counts on his audience being so incredibly uneducated is more than just a tad insulting.

    /rant

    Comment by freude bud | May 5, 2009

  8. rant/

    Bout the rest, I dunno, but Shai Agassi is selling crack. The notion that you will replace roughly 69.6 trillion Btus per day (of transportation fuel) via wind power is, frankly, bananas. And I don’t think anyone contests that coal–which would be the only feasible feedstock for his proposed system–is worse, in terms of carbon emissions, than oil. And applying Moore’s Law to the electric mile–or “emile”–is, well, irrationally exuberant, to say the least.

    And the rousing bit at the end of his vaunted talk of how the decision to end slavery in the 19th century spurred the Industrial Revolution reverses, completely, cause and effect–cause the Industrial Revolution started in the 17th century in England, not the 19th. The fact that he counts on his audience being so incredibly uneducated is more than just a tad insulting.

    /rant

    Comment by freude bud | May 5, 2009

  9. Kin is right, nuclear is expensive because we have chosen to make it expensive with excessive government regulation and reviews and made it more complicated than it needs to be. Sailors and submariners live and work in close proximity to nuclear reactors without any major problems.

    If government decided to use its power to stop environmentalists instead, we we would have less pollution and more electrical power! By protesting nuclear and newer coal plants, the oldest and dirtiest coal fired power are operated decades beyond their normal lifespans. By now we’d have Gen IV nuclear, certainly someone would be building a super-critical water reactor. Coal fired plants are already using supercritical steam to achieve higher efficiencies. Anti-nukes cost us a couple of decades or more in development.

    Comment by KingofKaty | May 5, 2009

  10. Kinu-
    I share you sentiments regarding gov’t interference in nuke power. I wish we would follow the French model, or at least get some mini-nukes up and running.
    But, at least in the USA, innovation is unstoppable. We have created an entire financial culture — the venture capitalists — devoted to financing innovation. Money is poured into any promising area, and smart poeple can get financing.
    A lot of money is wasted, but some pays off. The VC culture is bigger than ever.
    On a larger scale, I don’t think the feds are stopping GM from pursuing the Volt.
    I think the future is bright, thanks to engineers, scientists and VC guys, and smart larger companies.

    Comment by benny "centipede glut" cole | May 5, 2009

  11. Kinu-
    I share you sentiments regarding gov’t interference in nuke power. I wish we would follow the French model, or at least get some mini-nukes up and running.
    But, at least in the USA, innovation is unstoppable. We have created an entire financial culture — the venture capitalists — devoted to financing innovation. Money is poured into any promising area, and smart poeple can get financing.
    A lot of money is wasted, but some pays off. The VC culture is bigger than ever.
    On a larger scale, I don’t think the feds are stopping GM from pursuing the Volt.
    I think the future is bright, thanks to engineers, scientists and VC guys, and smart larger companies.

    Comment by benny "centipede glut" cole | May 5, 2009

  12. Nuclear power is expensive because failure is not an option.

    Comment by robert | May 5, 2009

  13. Nuclear power is expensive because failure is not an option.

    Comment by robert | May 5, 2009

  14. My thoughts on Nuclear . Unintented consequences

    http://gadgets.boingboing.net/2009/01/19/abandoned-nuclear-li.html

    No worries the US will pay

    http://www.bellona.org/english_import_area/international/russia/nuke-weapons/nonproliferation/28067

    Comment by takchess | May 5, 2009

  15. “Sailors and submariners live and work in close proximity to nuclear reactors without any major problems.”

    Well you are right about this King. I was the radiation safety officer back when we had our navy had nuke cruisers. While you would have expected my duties to result in the highest occupational exposure. Hhowever, it was officers who stood bridge watches that highest exposure. Everyone in Denver got more radiation than I did.

    However, King you are carrying lots of incorrect opinions. Nuke plants are well built and if they are well maintained (which they all now are in the US), they provide the lowest cost electricity. What caused some nuke plants to be very expensive while the almost identical plant (same design, same state, same union) were a bargain was mostly due to good management.

    The funny thing is that the world class operators of nuke plants are also world class operators of coal plants, wind farms, solar, and hydroelectric systems. If you are at a power plant, you may not want to disparage environmentalists. With the power plant is in the backyard of employees, they are very knowledgeable about protecting the environment. Of course many of these environmentalists are the kind that can tell you to the hour the start of hunting and fishing season not the kind that sit on the beltway complaining about the haze. For example,

    “the oldest and dirtiest coal fired power are operated decades beyond their normal lifespans”

    Well King what is the lifespan of a well maintained power plant? King it sounds like you are a sucker for fallacious city environmentalists. The higher the price of energy, the more taxes that can be collected. Well until the jobs go to China, India, and Brazil.

    The reason to build cheap gas plants to make expensive electricity is because investors can pass the cost on to the people of Texas, New York, and California.

    Comment by Kit P | May 5, 2009

  16. “Sailors and submariners live and work in close proximity to nuclear reactors without any major problems.”

    Well you are right about this King. I was the radiation safety officer back when we had our navy had nuke cruisers. While you would have expected my duties to result in the highest occupational exposure. Hhowever, it was officers who stood bridge watches that highest exposure. Everyone in Denver got more radiation than I did.

    However, King you are carrying lots of incorrect opinions. Nuke plants are well built and if they are well maintained (which they all now are in the US), they provide the lowest cost electricity. What caused some nuke plants to be very expensive while the almost identical plant (same design, same state, same union) were a bargain was mostly due to good management.

    The funny thing is that the world class operators of nuke plants are also world class operators of coal plants, wind farms, solar, and hydroelectric systems. If you are at a power plant, you may not want to disparage environmentalists. With the power plant is in the backyard of employees, they are very knowledgeable about protecting the environment. Of course many of these environmentalists are the kind that can tell you to the hour the start of hunting and fishing season not the kind that sit on the beltway complaining about the haze. For example,

    “the oldest and dirtiest coal fired power are operated decades beyond their normal lifespans”

    Well King what is the lifespan of a well maintained power plant? King it sounds like you are a sucker for fallacious city environmentalists. The higher the price of energy, the more taxes that can be collected. Well until the jobs go to China, India, and Brazil.

    The reason to build cheap gas plants to make expensive electricity is because investors can pass the cost on to the people of Texas, New York, and California.

    Comment by Kit P | May 5, 2009

  17. “Sailors and submariners live and work in close proximity to nuclear reactors without any major problems.”

    Well you are right about this King. I was the radiation safety officer back when we had our navy had nuke cruisers. While you would have expected my duties to result in the highest occupational exposure. Hhowever, it was officers who stood bridge watches that highest exposure. Everyone in Denver got more radiation than I did.

    However, King you are carrying lots of incorrect opinions. Nuke plants are well built and if they are well maintained (which they all now are in the US), they provide the lowest cost electricity. What caused some nuke plants to be very expensive while the almost identical plant (same design, same state, same union) were a bargain was mostly due to good management.

    The funny thing is that the world class operators of nuke plants are also world class operators of coal plants, wind farms, solar, and hydroelectric systems. If you are at a power plant, you may not want to disparage environmentalists. With the power plant is in the backyard of employees, they are very knowledgeable about protecting the environment. Of course many of these environmentalists are the kind that can tell you to the hour the start of hunting and fishing season not the kind that sit on the beltway complaining about the haze. For example,

    “the oldest and dirtiest coal fired power are operated decades beyond their normal lifespans”

    Well King what is the lifespan of a well maintained power plant? King it sounds like you are a sucker for fallacious city environmentalists. The higher the price of energy, the more taxes that can be collected. Well until the jobs go to China, India, and Brazil.

    The reason to build cheap gas plants to make expensive electricity is because investors can pass the cost on to the people of Texas, New York, and California.

    Comment by Kit P | May 5, 2009

  18. “Nuclear power is expensive because failure is not an option.”

    The cost of cleaning up TMI was less than the recent spill of from a TVA coal ash pond.

    When you consider that the reactor containment building must be cleanup at the end of plant life anyway, the cost of failure can be determined by the cost of buying more expensive power.

    Examining this cost, first we have a nuke plant on the Ohio River that was essentially complete but did not have a QA program. That plant was converted to coal. Therefore the cost of failure was the cost invested. The lesson learned is building nuke plants in coal country may not be economical if you screw it up. Duh!!

    A second example is a nuke on Long Island. It only operated at low power but still had to be decontaminated. This was a political failure. Since NY State leads the US in making electricity with oil particularly around NYC. A very expensive mistake made by the very rich hierarchy of NY and paid for by the working class.

    A third example was a nuke plant in California owned by a public utility. A washed up actress, Jane Fonda (maybe on an actress because she used her fathers name) lived on a big estate in S. California. She financed a political campaign to close the plant. The working people who were customers of SMUD paid the bill.

    The super rich families like the Gore, Kennedy, Como, and Fonda waste huge amounts of energy to support their lifestyle at the same time they oppose producing affordable energy.

    Comment by Kit P | May 6, 2009

  19. I’m not aware of a nuke plant in california that has been closed. We have two and Diablo canyon and san onofrio are still operating afaik.

    Comment by robert | May 6, 2009

  20. I’m not aware of a nuke plant in california that has been closed. We have two and Diablo canyon and san onofrio are still operating afaik.

    Comment by robert | May 6, 2009

  21. I’m not aware of a nuke plant in california that has been closed. We have two and Diablo canyon and san onofrio are still operating afaik.

    Comment by robert | May 6, 2009

  22. RR,

    If you are so inclined, I feel that a post on this giving your thoughts would be very interesting. I feel that the study was made with a conclusion in mind.

    http://www.autobloggreen.com/2009/05/05/50-gallons-per-mile-thats-the-water-cost-of-corn-based-ethan/

    Comment by takchess | May 6, 2009

  23. RR,

    If you are so inclined, I feel that a post on this giving your thoughts would be very interesting. I feel that the study was made with a conclusion in mind.

    http://www.autobloggreen.com/2009/05/05/50-gallons-per-mile-thats-the-water-cost-of-corn-based-ethan/

    Comment by takchess | May 6, 2009

  24. SMUD’s Rancho Seco was closed in 1989. IIRC it cost about $300 million to build in the 70s. Rancho Seco was almost the first nuke to be sold to a different company. It is much more economical when companies operate multiple nukes and can share the work force between units.

    There was also a test reactor at Valecitoes (sp?) and a small first generation nuke at Humboldt Bay. These plants served their purpose before closing.

    Comment by Kit P | May 6, 2009

  25. Interesting. I wasn’t a Californian back then. What’s a steam generator dryout? Maybe if it was running more than 38% of the time and didn’t have the third most serious nuclear accident, the voters wouldn’t have voted to shut it down. The 300 million is sunk costs.

    http://en.wikipedia.org/wiki/Rancho_Seco_Nuclear_Generating_Station

    Comment by robert | May 6, 2009

  26. Interesting. I wasn’t a Californian back then. What’s a steam generator dryout? Maybe if it was running more than 38% of the time and didn’t have the third most serious nuclear accident, the voters wouldn’t have voted to shut it down. The 300 million is sunk costs.

    http://en.wikipedia.org/wiki/Rancho_Seco_Nuclear_Generating_Station

    Comment by robert | May 6, 2009

  27. Interesting. I wasn’t a Californian back then. What’s a steam generator dryout? Maybe if it was running more than 38% of the time and didn’t have the third most serious nuclear accident, the voters wouldn’t have voted to shut it down. The 300 million is sunk costs.

    http://en.wikipedia.org/wiki/Rancho_Seco_Nuclear_Generating_Station

    Comment by robert | May 6, 2009

  28. “China National Offshore Oil Corp., the country’s biggest offshore petroleum explorer, and Datong Coal Mine Group Co. plan to invest 30 billion yuan ($4.4 billion) in a plant that will turn coal into gas and electricity.

    China National Offshore’s New Energy subsidiary, Datong Coal and the city government of Datong agreed on the joint project in the northern province of Shanxi at the end of last month, the parent of Hong Kong-listed Cnooc Ltd. said in a May 4 statement on its Web site.

    The companies will build a plant able to produce 4 billion cubic meters of gas a year and three power-generating units with a capacity of 300 megawatts each, China National Offshore said.”

    I’ll say it again. We have gas coming out of our rear ends. And we will for a long, long time.

    Comment by benny "centipede glut" cole | May 6, 2009

  29. “China National Offshore Oil Corp., the country’s biggest offshore petroleum explorer, and Datong Coal Mine Group Co. plan to invest 30 billion yuan ($4.4 billion) in a plant that will turn coal into gas and electricity.

    China National Offshore’s New Energy subsidiary, Datong Coal and the city government of Datong agreed on the joint project in the northern province of Shanxi at the end of last month, the parent of Hong Kong-listed Cnooc Ltd. said in a May 4 statement on its Web site.

    The companies will build a plant able to produce 4 billion cubic meters of gas a year and three power-generating units with a capacity of 300 megawatts each, China National Offshore said.”

    I’ll say it again. We have gas coming out of our rear ends. And we will for a long, long time.

    Comment by benny "centipede glut" cole | May 6, 2009

  30. Mr. Cole said:

    “I’ll say it again. We have gas coming out of our rear ends. And we will for a long, long time.”
    ——————————–

    Recently, Hyundai announced it’s intention to offer an LPG/electric hybrid

    Who ever heard of such a thing ?

    A natural gas/electric hybrid ?

    What’s the world coming to………????

    John

    Comment by Anonymous | May 6, 2009

  31. Mr. Cole said:

    “I’ll say it again. We have gas coming out of our rear ends. And we will for a long, long time.”
    ——————————–

    Recently, Hyundai announced it’s intention to offer an LPG/electric hybrid

    Who ever heard of such a thing ?

    A natural gas/electric hybrid ?

    What’s the world coming to………????

    John

    Comment by Anonymous | May 6, 2009

  32. Mr. Cole said:

    “I’ll say it again. We have gas coming out of our rear ends. And we will for a long, long time.”
    ——————————–

    Recently, Hyundai announced it’s intention to offer an LPG/electric hybrid

    Who ever heard of such a thing ?

    A natural gas/electric hybrid ?

    What’s the world coming to………????

    John

    Comment by Anonymous | May 6, 2009

  33. For those of you who have gas coming out your rear ends, may I suggest a beano.

    Comment by robert | May 6, 2009

  34. John-
    More power to them if they can sell it. The usual rap against NG-hybrids or LPG-hybrids is both the battery and gas tanks take up space. Not much left for people and luggage.
    I suspect if gasoline prices ever go up again, this will be one option. After all, one can put a luggage rack on the roof–how often do you ever carry luggage?
    Or, the LPG-hybrid is your town car, and if you go on vacation, you rent a suitable vehicle.
    My guess is that the daily commute car will go to 100 effective mpg in years ahead, if oil ever stays high.
    The problem is, oil always collapses, thus undermining conservation efforts. Since we have natural gas coming out of our rear ends for decades ahead, look for CNG vehicles to become widespread, even if oil just goes over $80 a barrel.
    Really, it is hard to see much of a future for oil.

    Comment by benny "centipede glut" cole | May 6, 2009

  35. “look for CNG vehicles to become widespread, even if oil just goes over $80 a barrel”

    Benny — sometimes you are very perceptive, sometimes not. The US had oil prices way over $80/Bbl a year ago at a time when gas was much less on a Btu basis — no great move to Compressed Natural Gas vehicles.

    Europe has paid the equivalent of more than $80/Bbl at the consumer level for decades — no great move to CNG.

    Johns Hopkins Univ was doing terrific work on CNG vehicles over a decade ago. Seen any of them in your neighborhood?

    Yes, CNG works, and works well. But there are a ton of difficult issues. If you make the vehicle dual fuel (gasoline & CNG), it suffers from poor range on CNG. You can solve that by making the vehicle dedicated CNG, but no-one will buy them unless there first is a refueling network. And the time to refuel is another hurdle.

    With so much invested in liquid transportation fuel infrastructure, we are not going to get widespread CNG without political leadership. And we are not going to get political leadership from the current Political Class.

    Comment by Kinuachdrach | May 7, 2009

  36. “look for CNG vehicles to become widespread, even if oil just goes over $80 a barrel”

    Benny — sometimes you are very perceptive, sometimes not. The US had oil prices way over $80/Bbl a year ago at a time when gas was much less on a Btu basis — no great move to Compressed Natural Gas vehicles.

    Europe has paid the equivalent of more than $80/Bbl at the consumer level for decades — no great move to CNG.

    Johns Hopkins Univ was doing terrific work on CNG vehicles over a decade ago. Seen any of them in your neighborhood?

    Yes, CNG works, and works well. But there are a ton of difficult issues. If you make the vehicle dual fuel (gasoline & CNG), it suffers from poor range on CNG. You can solve that by making the vehicle dedicated CNG, but no-one will buy them unless there first is a refueling network. And the time to refuel is another hurdle.

    With so much invested in liquid transportation fuel infrastructure, we are not going to get widespread CNG without political leadership. And we are not going to get political leadership from the current Political Class.

    Comment by Kinuachdrach | May 7, 2009

  37. “The cost of cleaning up TMI was less than the recent spill of from a TVA coal ash pond.”

    There was a news article about EPA regulating coal ash as a hazardous waste. I know of one biomass power plant that has to dispose of ash as hazardous waste.

    “What’s a steam generator dryout?”

    This happens when the steam generators boil dry and redundant emergency core cooing systems are used to remove decay heat from the core. The interesting thing about the ‘third most serious nuclear accident’ is that no one was hurt and there was no environmental impact. The same can be said of TMI where there was fuel damage. The reason of course is the large concrete containment building.

    The reliability and safety of nuke plants is lost on folks like Robert. His solar panels do not work most of the time and he pretends he does not have a refrigerator to reduce food borne pathogens.

    Comment by Kit P | May 7, 2009

  38. So who’s the guy who think we are preoccupied with loss of coolent accidents which never happen. Except at TMI and rancho seco. Both these cases, the operators turned off the pumps. He think we should spend the money to train the operators better. So they’ll know when the indicator lights are lying to them presumeably.

    My solar panels are almost as reliable as rancho seco. Except I know when I’m not going to get any power from them. Maybe the future is nuclear baseline power and solar peakers.

    The safety of nuclear power isn’t lost on me. Their cost had me put solar panels on my roof to save money. The navy stopped making nuclear powered cruisers because they are too expensive.

    Comment by robert | May 7, 2009

  39. So who’s the guy who think we are preoccupied with loss of coolent accidents which never happen. Except at TMI and rancho seco. Both these cases, the operators turned off the pumps. He think we should spend the money to train the operators better. So they’ll know when the indicator lights are lying to them presumeably.

    My solar panels are almost as reliable as rancho seco. Except I know when I’m not going to get any power from them. Maybe the future is nuclear baseline power and solar peakers.

    The safety of nuclear power isn’t lost on me. Their cost had me put solar panels on my roof to save money. The navy stopped making nuclear powered cruisers because they are too expensive.

    Comment by robert | May 7, 2009

  40. Kinu-

    Well, given my marital track record, when you say I am not perceptive….I might have to agree with you.
    Yes, there are CNG busses in my neighborhood. And fleet vehicles. So there has been some adoption already. I admit few one-offs.
    When last I was in Thailand, I saw many CNG trucks, perhaps 10 percent of those on the highway. I am told they use CNG taxis in Bangkok.

    Okay, sometimes I get carried away with my ideas. Still, it looks like a very long term lush supply picture for NG. Oil? Hard to tell. As you say, politics trumps geology.

    S, I expect more and more fleet vehicles to migrate to CNG, followed by one-offs.

    Comment by Benjamin | May 7, 2009

  41. “My solar panels are almost as reliable as rancho seco.”

    Robert is comparing a poorly maintained nuke plant to a new PV systems. Not a very fair comparison to the PV systems. The last summer that Rancho Seco was on line, the plant kept rolling blackout from occurring. Today, the 104 US nukes have a 90+% capacity factor. The lesson is learned is to properly maintain your equipment.

    “Their cost had me put solar panels on my roof to save money.”

    Roger, you are only saving money if you ignore that your system cost $40K and has a 39 year payback period. Not very good so a system that deteriorates with time and is failure prone. The reason Roger has expensive electric rates is because his utility depends on NG generation and poorly managed. One of the few utilities in the US that failed to provide reliable service.

    Comment by Kit P | May 7, 2009

  42. “My solar panels are almost as reliable as rancho seco.”

    Robert is comparing a poorly maintained nuke plant to a new PV systems. Not a very fair comparison to the PV systems. The last summer that Rancho Seco was on line, the plant kept rolling blackout from occurring. Today, the 104 US nukes have a 90+% capacity factor. The lesson is learned is to properly maintain your equipment.

    “Their cost had me put solar panels on my roof to save money.”

    Roger, you are only saving money if you ignore that your system cost $40K and has a 39 year payback period. Not very good so a system that deteriorates with time and is failure prone. The reason Roger has expensive electric rates is because his utility depends on NG generation and poorly managed. One of the few utilities in the US that failed to provide reliable service.

    Comment by Kit P | May 7, 2009

  43. “My solar panels are almost as reliable as rancho seco.”

    Robert is comparing a poorly maintained nuke plant to a new PV systems. Not a very fair comparison to the PV systems. The last summer that Rancho Seco was on line, the plant kept rolling blackout from occurring. Today, the 104 US nukes have a 90+% capacity factor. The lesson is learned is to properly maintain your equipment.

    “Their cost had me put solar panels on my roof to save money.”

    Roger, you are only saving money if you ignore that your system cost $40K and has a 39 year payback period. Not very good so a system that deteriorates with time and is failure prone. The reason Roger has expensive electric rates is because his utility depends on NG generation and poorly managed. One of the few utilities in the US that failed to provide reliable service.

    Comment by Kit P | May 7, 2009

  44. Robert,

    I’ve looked at Khosla’s analysis of the cost of electric vehicles, and the hybrid premium.

    His analysis is as wrongheaded as anything ethanol-related you might point to. For instance, he assumes that you have to write off the additional capital costs in only 5 years. Given that an EV or hybrid is likely to be used for 20 years or more, he’s overstating the costs by a factor of 2 (not more, because you do have to take into account time value of money).

    This is an important thing: EVs and PHEV (especially) are competitive with $2.50 gasoline, even before you factor in external benefits like CO2, security of supply, trade deficits, peak oil, etc.

    Comment by Nick G | May 8, 2009

  45. The “Black swan” meme is getting bent out of shape. If you can anticipate an event, it is by definition not a “black swan” but a simple risk factor.

    On this topic, the consequences of exponential growth in consumption are forseeable. Those “decades of natural gas” are going to vanish like morning mist.

    Comment by Anonymous | May 10, 2009

  46. The “Black swan” meme is getting bent out of shape. If you can anticipate an event, it is by definition not a “black swan” but a simple risk factor.

    On this topic, the consequences of exponential growth in consumption are forseeable. Those “decades of natural gas” are going to vanish like morning mist.

    Comment by Anonymous | May 10, 2009

  47. Nearly all Japanese taxis are CNG and there is (obviously) a massive infrastructure in place with refueling stations in most cities. Expect this to rise as Japan’s use of gasoline continues to go down.

    The world’s second largest economy has had a gasoline firewall for decades now and this is only being enhanced by more nuclear power, committments by the car companies to PHEV/HEV/BEV, and continual advancements in simple technology, such as electric bicycles.

    Now, obviously many, if not most, North Americans would scoff at the idea of an electric bicycle. But, over 300,000 of them were sold last year in Japan. They are now offering so much power and range that you have to have a simple 50CC scooter license to buy one. This will only increase as the country urbanizes more and there is an increasing realization on the part of the public that gas guzzling cars are become less desireable when you can meet a great deal of your transportation needs by combining electric bicycles with mass transit.

    I expect Europe to follow suit and America to be kicking and screaming towards a slower, gentler society. Arguments abound regarding markets and distance, but we should not forget just how many millions live in urban settings.

    Lastly, speaking of Japan, their micro cars are continually showing improvements in fuel efficiency, safety and comfort. Our ten-year old Daihatsu stills purrs along at 50-60 mph, getting over 40 mpg. The new models—55 mpg and rising. All for the whopping price of $15,000.

    When the combination of one of these with an electric bicycle becomes a reality for more millions of people, I wonder what the concomitant effect would be on oil imports?

    Comment by stuck in shizuoka | May 11, 2009

  48. I have an electric bicycle. When I was in Japan I went to that famous department store in Tokyo (forgot the name of it) to take a look at their offerrings. I think they are perfect for commutes of five to fifteen miles. Less than five miles and you can pedal and more than 15 miles and you’ll run out of charge.

    Japan charges more for gas than we do but I forget how much. Like 500 yen per gallon not that they have gallons.

    Comment by robert | May 13, 2009


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