Vinod Khosla: a pioneer investor in the CleanTech market

Credit: James Duncan Davidson/O'Reilly Media, Inc.

Many think that resource-efficient and clean technology is the future of industry. It is too early to say how such technology is going to replace some of today’s most profitable industry. However, CleanTech’s potential is more and more highly regarded by investors. Among them, Vinod Khosla is a pioneer. Now at the head of his own venture capital business, he leads the way in the field of CleanTech investment.

Vinod Khosla graduated from the Indian Institute of Technology with a bachelor’s degree in electrical engineering. His passion for technology led him to the USA where he got a master’s degree in biomedical engineering from Carnegie-Mellon University and a MBA from Stanford University later on.

When he created Sun Microsystems in 1982 with some associates, Vinod Khosla had already founded a business in India and one  another in the Silicon Valley. His experience helped to make Sun Microsystems a significant player in the development of open systems and open source software. The business was to become reknowned in the computing industry.

Indian-born Vinod Khosla personifies success for business managers that have grown up in developing countries. Top-class education and remarkable business achievements allowed him to build his reputation as a world class manager and investor. After he had made Sun Microsystems famous throughout the world, Vinod Khosla focused on his investments.

Even before he joined the CleanTech sector, Vinod Khosla was a brilliant and inspired investor. When he was working at Kleiner Perkins Caufield&Byers, his name became associated with exceptional discoveries in technology as early on he made an investment in fiber optic network companies Cerent and Siara Systems. Both companies were later sold, making Vinod Khosla more than $15 billion. In the late 1990’s, after scoring substantial profits in internet technology, he became interested in the CleanTech industry.

           

He was still working for the venture capital firm Kleiner when he became familiar with the biofuel industry and made his first steps on the CleanTech market. When opening his own venture capital business, Vinod Khosla invested several million dollars in biofuel and eco-friendly technology start-ups. He experienced a few setbacks but his firm made its way. Former British Prime Minister, Tony Blair joined the business as a senior adviser and Khosla Venture became a frequent business partner for investors such as Bill Gates.

For the last ten years, Vinod Koshla has been actively investing in the CleanTech industry. He had a part in revealing some of the most talented businesses and most promising technologies. Throughout his career, Vinod Koshla has illustrated how profitable CleanTech is and contributed to make it a credible new industry and target for investors. He has been a source of inspiration for businesses as well as for investors. The next few decades will tell if the work he has achieved in the last 10 years has also initiated a long lasting trend on financial markets.

World Bank calls an international response to global warming

In November 2012, the World Bank released a report calling for tackling the issue of global warming. Pointing out the risks of a 4°C temperature rise on Earth, this report is a significant step towards a wider mobilization.

The reality of global warming has been debated about a long time before political leaders around the world finally agreed on a consensus. Doubt about what is now recognised as one of the biggest danger of our century is no longer an option. The World Bank made a strong statement in this regard by releasing an alarming report. This document is entitled “Turn Down the Heat: Why a 4°C Warmer World Must be Avoided” and highlights the shape of the world to come if global warming is not controlled in the present years. Needless to say, the World Bank’s conclusions are gloomy. The 4°C temperature increase could very well be reached by 2100, and such an option would shattered most opportunity for global development

A further step in the recognition of global warming

“Turn Down the Heat” was realized by Climate Analytics and the Potsdam Institute for Climate Impact Research on the behalf of the World Bank. Its President, Jim Yong Kim, commented on the report’s release, saying his hope was that “this report shocks us into action”. Such a statement illustrates how seriously global warming is considered at the top of the world economic governance.  

The report is making a simple point. Considering the past and present trends of global warming, there is a 20 per cent chance that the Earth’s temperature will rise by 4 degrees Celsius (7.2 degree Fahrenheit) by 2100. These conclusions are echoing those of many researchers on the subject. For instance, they match the findings of Pricewaterhouse Coopers which stated in a previous report that limiting global warming below 4°C would require quadrupling the rate of decarbonisation.

The World Bank’s recent report includes a collection of the most up to date scientific data about climate. It confirms the risks that were pointed out by the World Development Report on climate change in 2010. “Turn Down the Heat” was released before the Intergovernmental Panel on Climate Change (IPCC) issued his own report about climate change for year 2013/2014. There is no doubt however that both of these publications will draw similar conclusions.

It is a significant symbol for world governance that an institution such as the World Bank publishes a report like Turn Down the Heat. It strands for an official acknowledgement of the emergency regarding the stake of global warming. With such a report, the World Bank simply calls countries in the world to act against climate change for their own safety.

A “doomsday scenario”

Calling to action is probably a weak word for what the World Bank aimed at triggering with this report. This document shows what Jim Yong Kim himself called a “doomsday scenario”. “Turn Down the Heat” makes a list of the different issues that would be induced by such a rise in the world’s temperature. All of them are of course a source of concern for the environment, but some of them in particular are a direct threat for human life.

Concerning water for instance, the report anticipates harder drought in Southern Europe, Africa, Southern America as well as Australia. Northern Europe, Northern America and Siberia on the contrary would be subject to wetter weather conditions. Overall water distribution on will suffer from greater geographical disparity. Such a phenomenon is expected to have a massive impact on some of the biggest human settlement and richest ecosystem on Earth. For example, the World Bank mentions the Ganges’ flow will increase by 40% because of a 4°C temperature increase whereas the Mississippi’s and the Amazon’s could decrease by 40 to 80%

The water issue also has significant consequences over food supplies worldwide. The World Bank provides a reminder of the fourth report by IPCC stating that global food production might increase along with the Earth’s temperature rising between 1 and 3°C. But the production is expected to drop in case of higher temperature rise. “Turn Down  the Heat” confirms the plausibility of this scenario, explaining that “drought-affected areas would increase from 15.4% of global cropland today, to around 44% by 2100”. Besides, salinity of aquifers might increase in some areas due to sea-level rise on coastal lands.

According to the World Bank’s report, the issues that Humanity would have to face on the Earth which temperature has raised by 4°C would simply be too huge to handle. Drought, starvation and poverty could no longer be controlled. The aftermath of this is crucial since it would most likely result in conflicts and wars and shatter decades of struggle for development in the world. “A 4°C warmer world can, and must be avoided,” said Jim Yong Kim. Along with him, developing countries already seriously anticipate the risk since global warming puts them in the first line.

Towards collaboration between developed and developing countries?

The aftermath of a 4°C rise of the Earth’s temperature would hit developing countries most badly. “Turn Down the Heat” emphasizes on the unequal impacts of such a temperature rise. South Asia, the Middle East, northern and eastern Africa are quoted among the most vulnerable areas to the adverse consequences of uncontrolled global warming. Those who have less are also those who have the most to lose in this regard and the World Bank expressed his deepest concern that climate change might destroys years of efforts and developing the poorest countries in the world.

Even though global warming was first triggered by most developed countries, the emergency is now so important that the World Bank wish developing countries to get involved in climate change policies. Any isolate attempt would undoubtedly fail to control global warming. “Only early, cooperative, international actions can make that happen” concludes the report.

Countries’ perception of global warming’s stake is changing slowly around the world. Both developed and developing countries now knows that this industry-induced worldwide catastrophe might destroy their attempt to reach satisfying levels of development. “Turn Down the Heat” is an alarming report issued by the World Bank. It also is a further step toward a better tackling the issue of global warming. The World Bank has sent a message: neither countries nor companies around the world should underestimate their responsibility in this phenomenon. And all economic actors have their part to play for solving it. Let us hope this message will be heard. Our future on Earth depends on it.

The Worldwatch Institute’s perception of degrowth

What if degrowth could be part of a broader sustainable model of development? Such an idea is taken very seriously by researchers of the Worldwatch Institute. They have indeed recently published their annual report about the State of the World and promote “selective degrowth” as a promising tool to be use by sustainable development policy in developed countries.

Directed by Robert Engelman, the Worldwatch Institute has been recognized as a scientific reference within its forty years of existence. It has indeed become a major analysis provider for development-related subject. Each year, Worldwatch release a report with the purpose of summing up the State of the World regarding the most urging global issues. Year 2012’s edition is subtitled Moving Toward a Sustainable Prosperity and introduces original thoughts on how sustainable development could be pursued in developed countries.

The report was co-directed by Erik Assadourian, one Worldwatch senior fellow. In one of the articles that composes the report, Assadourian makes an interesting point by describing the benefits economic degrowth could bring to the world and developed countries. The author here starts with a simple assessment: Humanity’s global footprint is estimated to 1,5 Earths. In order to reach a sustainable state, worldwide economy has to be reduced “by at least a third”. Considering that “one third of humanity still needs to considerably increase its consumption to achieve a decent quality of life”, Assadourian asserts that a selective degrowth – which would target “overconsumming societies” – would enhance global equity.

As for developed countries which are mainly concerned by such a policy, Assadourian claims degrowth could solve numbers of societal problem induced by the obsession of consumption. From debts to obesity, numbers of health and social issues could be solved through what Assadourian calls “the intentional contraction of overly inflated economies”. Worldwatch’s analysis about growth makes sense in many ways. It is a shame however that the Institute does not illustrate more about how degrowth could fit in developed societies.

What about work for instance in a society which is aiming to selective growth? In developed countries, work remains an essential part of societies’ foundation. It remains crucial as social cement. Assadourian mentions the reduction of the average working time as a corollary to degrowth. Such a goal could indeed be achieved through “job sharing”, “longer parental leaves and vacation times”. But are these options really sufficient to give every individual a function in a society which is aiming toward producing less? Through the scope of degrowth, sustainable development looks even more like a sociological matter.

Data centres: Major IT companies make a step towards greater transparency

Our favorite IT companies are slowly revealing information about their data centres. Facebook and Google have indeed released some pictures and information about the facilities they store their users’ data in. A couple of journalists were also allowed in for a visit. Companies seem willing to be more transparent about data centres but those facilities remain much too crucial to be completely open. Here is why.

Wired magazines’ journalists must have been delighted to visit Google’s data centres in Lenoir, North Carolina. This rural city is indeed the home of what used to be one of the most secret data centres. During the month of October 2012, Google had been willing to display a good deal of transparency and therefore organized an exceptional tour inside its facilities. Photos and interviews were released in the press for the enjoyment of the IT geek community all around the world.

It might be surprising at first to see how protective Google is of its data centres. Most of them are filled with personal information and the company is not the first one to open the way to visitors through such installations. In 2011, Facebook had already made some light about its own facilities. The giant of social networking indeed organized tours in its very first data centre set in Prineville Oregon. Such an event had two goals at that time: first to make some buzz about the launch of the Open Compute project and second to make a step toward greater transparency and weaken returning accusations of opacity. Throwing doors open on a $210 million facility is however not a common thing for the industry. The late relaxing of major IT companies’ secret policy is indeed surprising.

For a long time, data centres indeed remained top-secret and fueled the media fantasy that IT companies hid much more than servers in those data centres. Eventually, the street view visit of the Lenoir data centre shows that Google hides nothing but some of the most efficient computers in the world. However, it is not difficult to understand why the company was – and still is – reluctant to give detail about those facilities: they are the most strategic part of Google’s activity. The extreme density of its infrastructure is what allows the company to handle billions of search queries every day and to offer free storage services to millions of Gmail, YouTube and Blogger users every day!

Any intrusion, any breakdown is very likely to compromise IT companies’ abilities to offer a product of unparalleled quality. What would be the point of Google if its search engine wasn’t comprehensive and instantaneous? Who would use Facebook anymore if the network’s capacity wasn’t important enough to greet the profiles of entire circles of friends? Even though IT champions now feel secure enough to share a bit more their strategic infrastructure with their community, data centres will remain some of the best kept industrial facilities – crucial completive advantages depend on it –.

Will the future of solar industry be written in Chinese?

According to a recent report published by an American research center, the market of photovoltaic technology will be highly concentrated by year 2015. Most of its offer will besides be China-based and many of today’s competitors will somehow disappear. Such a scenario is not without recalling of what is already happening worldwide on the photovoltaic market nowadays.

In Europe as well as in the U.S., solar companies have all been put in dire straits by Chinese competitors because of the price war that has been raging on the photovoltaic market for almost ten years now. China’s conquests on this market are overwhelming and not very likely to stop. Some researchers who studied it recently indeed concluded that seven out of nine leading solar module manufacturers will be based in China by 2015.

According to GreenTechMedia Research, the inclination for concentration on the solar market is such that many of today’s actors will probably go bankrupt or be bought by 2015. Solar industry in developed country is especially threatened since GTM explains that half of those manufacturers are based in Europe, the U.S. and Canada. Facing low-priced products from China, most of those producers will disappear and give way to a highly concentrated market.

Even though China has already started to shake Northern America and Europe’s solar manufacturers, GTM point out that Chinese industry is probably not as competitive as first thought. According to the report, many companies in the solar industry in China indeed depend on government help. Beside, their production is quite low compared to other actors on the market. For GTM researchers, such companies are already dead but they don’t know it. Those “solar zombies” are thus very likely to disappear along with most of the eastern world’s solar industry.

At the moment, global demand for solar energy production is estimated to be set between 30 and 50 GW. Production capacity on the other hand is believed to have reached 100 GW according to the Financial Times. On this saturated market, the struggle can now only be harder between companies that will have to fight to maintain profitability. It is still early to say if GTM scenario will happen, but the market has already started to resemble it a lot.

In China for instance, the Financial Times reported that two solar cells manufacturers were on the verge of bankruptcy and only maintain afloat through local governments bailouts. Such events have occured in the region of Xinyu and Wuxi and sound a lot like what GTM foresaw when writing its report. As for American and European companies, they struggle to be competitive and will have to be tremendously imaginative to escape the fate they seemed doomed to.