Insights into Clean Energy from Venture Capital Legend Kleiner Perkins

I drove to Menlo Park the other day to interview Ray Lane, Managing Partner of the celebrated venture capital firm Kleiner, Perkins, Caufield & Byers. The purpose: content for my next book in which I address the question: What, pragmatically, are we facing – technologically, economically, and politically -- in terms of the migration to renewables? I couldn’t even imagine a person closer to the action than Ray – a man of incredible accomplishment, whose legendary VC group has participated in a great many of the technology successes of the past few decades – the household names like Google and Amazon – and now the front-runners in clean energy and electric transportation: Ausra (solar thermal), Fisker (plug-in hybrid EVs), and dozens of others.

When I first met Ray at the Detroit Auto Show about a year ago, I knew instantly that he’d make a terrific person to speak on the subject of bringing investment capital to cleantech, and this interview was no disappointment. He’s a man of certainty, passion, and conviction -- and all this comes through so clearly in the interview. 

I knew going in that Ray is bitterly dissatisfied with the US failure to take a leading role in this space. In fact, that’s what impressed me so deeply about his presentation in Detroit. After two solid days of listening to the self-serving platitudes from everyone from the Governor of Michigan to senior executives of Ford and Toyota, Lane came out swinging. He hadn’t been on the stage more than 30 seconds before pointing out the difference between talking about commitment and actually doing something to bring some sort of meaning to it. Who doesn’t find this "call-em-like-you-see-em" approach refreshing?

The part I found most interesting about the talk was Ray’s viewpoint on the role of government in all this. "Certain new technologies will need subsidies, but then those subsidies need to go away. Even our (fuel cell-based electrical generator) Bloom Box doesn’t work financially right this minute if customers don’t get an incentive to buy it. But obviously, when this or any other business in this arena reaches scale, their products need to be profitable on their own."

"That makes a great deal of sense to me. But while we’re on the subject of subsidies," I asked, "I’m sure you’re aware that we subsidize oil to the tune of 12 times what we give renewables. You’re the capital formation guy, but doesn’t artificially inexpensive oil make the environment for investment in renewables very difficult? And if so, why on Earth are we doing that? If there is any sincerity at all in our quest for clean energy, what’s up with this?

We talked for a few minutes as I clarified what I meant. I quickly reviewed different types of benefits that we taxpayers are bestowing on the most profitable industry on the planet:

• Construction bonds at low interest rates or tax-free
• Research-and-development programs at low or no cost
• Assuming the legal risks of exploration and development in a company’s stead
• Below-cost loans with lenient repayment conditions
• Income tax breaks, especially featuring obscure provisions in tax laws designed to receive little congressional oversight when they expire
• Sales tax breaks – taxes on petroleum products are lower than average sales tax rates for other goods
• Giving money to international financial institutions (the U.S. has given tens of billions of dollars to the World Bank and U.S. Export-Import Bank to encourage oil production internationally, according to Friends of the Earth)
• The U.S. Strategic Petroleum Reserve
• Construction and protection of the nation’s highway system
• Relaxing the amount of royalties to be paid – apparently, we get about 40% of revenues from oil on public land vs. 60% – 65% in most other countries

Here was the only moment in the hour and change we spent together that Ray really seemed exasperated. "Republican senators keep voting for these subsidies," he said. "I don’t get it myself. And I’m a Republican. In fact, I may be the only Republican in the building," he smiled, waving his hand, indicating the entire Kleiner Perkins complex. This really does have to stop. They needed the subsidies 80 years ago, but they don’t now.

I have to say that I took a certain perverse pleasure in this brief instant in time: I had presented a question that even Ray Lane couldn’t answer.

- Craig Shields is editor of 2GreenEnergy.com, and author of Renewable Energy – Facts and Fantasies (published by Clean Energy Press, 2010)