Vinod Khosla and The Truth

One thing I noted during my previous debunking of Vinod Khosla’s claims was that he was very careless with information he presented as fact. I have seen numerous incorrect or grossly exaggerated claims in his presentations. Why should I care? As I have stated before, he is free to invest his money into whatever scheme he desires. That’s no skin off my nose. But he has aggressively lobbied the government to fund and support his schemes. And since I believe energy policy is too important to be influenced by false claims, I take exception.

Yesterday in my inbox I was presented with another example of Khosla making reckless claims. I have mentioned it in passing, but last week a study was released by Professor Mark Jacobson of Stanford in which he concluded that the environmental advantages of ethanol have been exaggerated:

Jacobson found that an E85 vehicle reduces atmospheric levels of two carcinogens, benzene and butadiene, but increases two others: formaldehyde and acetaldehyde.

As a result, cancer rates for E85 are likely to be similar to those for gasoline – or worse. Jacobson’s study, based on an intricate model, found that in certain parts of the country, E85 significantly increased ozone, the main ingredient of smog.

He maintains that mortality rates could rise 4 percent in the United States by 2020 if we make the switch to E85.

Mr. Khosla was recently asked about this. And he quickly threw out the sort of claim that I became all too familiar with during his promotion of California’s Proposition 87:

When Vinod Khosla – co-founder of Sun Microsystems, noted venture capitalist and ethanol champion – was giving a pep talk on ethanol, a student (one who, apparently, has yet to be pounded into intellectual submission) asked him if he had heard of Jacobson’s study.

Of course Khosla had heard of it! The study was funded by Exxon.

That is shameful. For the record, here was Jacobson’s reply when asked if Exxon had funded his research:

“Absolutely not,” he laughs. “I’ve taken no money from energy companies. My study was funded by NASA. For 18 years I’ve been studying pollutants in the air to understand the atmosphere better and try to find solutions to problems.”

Mr. Khosla can retract that statement, and he can apologize. And he should. But the damage is done. “Jacobson? Oh yeah, you mean that guy funded by Exxon.”As I saw during his Prop 87 campaigning, smearing opponents was an acceptable way of achieving his objectives.

Professor Jacobson also made a statement that sums up why I have so vigorously challenged Khosla on these issues:

“I’m interested in climate change and air pollution, and corn ethanol doesn’t help us with those problems,” he tells me. “We have some serious problems. If we start believing that we’re solving problems and we’re not, that’s a dangerous road to be on. In 15 years we’ll be sitting here looking back and wondering why we locked into ethanol when there are far better roads.”

Sadly, people will continue to accept Vinod Khosla’s ethanol claims. After all expertise in one field automatically implies expertise in other fields. Right?

32 thoughts on “Vinod Khosla and The Truth”

  1. Well, at least they finally defined gouging for us:

    “When refining profits are driving world-record profits, that means motorists are being gouged,” said Judy Dugan, research director of FTCR’s OilWatchdog.org project.

    Makes me wonder though whether this criteria is specific to the oil and gas industry. If Microsoft makes record profits (with much, much greater profit margins) is that gouging? Must be. If one of the members of the FTCR buys a house in California for $300,000 and sells it for $600,000, is that gouging? Sure it is. A 100% profit? Definitely gouging.

    I liked this one too:

    Most of ExxonMobil’s spending on renewables goes to a strings-attached research project at Stanford University that has given the school the nickname “Big Oil U.”

    So, because the FTCR called them Big Oil U in one of their “news releases”, the school has been given that nickname. Well, I give the FTCR the nickname of “clueless clowns.” From now on, when I refer to them I will say “The FTCR’s shoddy reporting has earned them the nickname Clueless Clowns.”

    Cheers, RR

  2. To put the XOM profits in perspective, the US Government took in $48.7 billion in taxes in ONE DAY on April 24. That is more than an entire year’s profits for XOM.

    Didn’t hear anything about gouging by the federal government.

  3. Apple Computer reported world-record profits of $770 million on $5,260 million in sales. That’s 14.6% profit margin compared to XOM’s measly profit of 10.6%.

    I paid $199 for a new i-Pod for my daughter’s birthday. According to the FTCR I’ve been gouged. (Why don’t i-Pod’s ever go on sale? How come they are the same price in brick and mortar stores as they are on the internet? Aren’t their laws against evil corporations like Apple telling retailers what they can charge for products?)

  4. You guys really have to quit comparing the oil industry profits to Microsoft, it’s wearing thin. It’s not really a relevant comparison because there is a competitive market in energy and for a few years Microsoft will remain a monopoly in their market. They only sold 244 copies of Vista in all of China so far and they are doing fire-sale pricing, but..

    If you want to pick something to make oil companies look good, pick Oracle. Enterprise databases are competitive with DB2, Sybase, Informix and Microsoft plus MySql in the market and SAP in the rest of the enterprise. It’s a better comparison with the oil industry.

    I was at Oracle OpenWorld in SF last fall with 41,000 other geeks. Elton John was the private house band for the appreciation party at the Cow Palace. They had 200+ shuttle buses (most charter size) in downtown San Francisco.

    Oracle profits rose 35% this year. If you want to justify oil profits and CEO behavior, Larry Ellison and Oracle can make anything look good. Oracle base price is $40k/cpu for enterprise edition plus 22%/year maintenance. If you are in the High Availability area, add another $25k for clustering, $10k for large table partitioning, etc. This is all per CPU licensing.

    Kinda makes an iPod or a barrel of oil look like a deal. 🙂

  5. Robert, just wanted to say, please keep doing what you’re doing. You’re doing a real service. Wen

  6. BTW Robert, I’ve asked this before, but what do you know about GreatPoint Energy, another of Khosla’s huge breakthrough companies in which they’ve invested 30+ million…

  7. You guys really have to quit comparing the oil industry profits to Microsoft, it’s wearing thin.

    The thing about Microsoft is that everyone knows exactly who they are and what products they make. Everyone uses them. So, while I agree in principle with your argument, the familiarity aspect is why I tend to use it. Plus, I am quite familiar with their profit margins.

    Cheers, Robert

  8. Your old friends at FTCR have jumped on the bandwagon:

    By the way, I have noted it before, but as someone pointed out to me via e-mail:

    These statements don’t deal with the science of the Stanford study. They certainly don’t reflect any knowledge of system limitations, the energy balance, or the environmental impacts of biofuels. Jacobson’s paper is available on the Web (I have a copy). The CARB reports are referenced in its cited literature.

    Although these [FTCR] folks may mean well, their CVs indicate that they have little knowledge of the technology or its potential effects.

    Lawyer
    Historian
    Political Science
    Sociology and Law
    Cultural Anthropology and Rhetoric
    Politics
    Fine Arts
    Philosopy and Communication Management
    Journalism
    Business and Marketing

  9. I’ve asked this before, but what do you know about GreatPoint Energy, another of Khosla’s huge breakthrough companies in which they’ve invested 30+ million…

    A lot of companies are investing into various versions of coal-gasification, which is what this appears to be. It is not clear what particular advantage they would have over others employing very similar processes. It’s certaily a viable business opportunity (although I wish we would move away from coal) but just not revolutionary.

    Cheers, Robert

  10. …Microsoft… Everyone uses them.
    Not even close.
    (The blip from last year is where Microsoft cut a deal with GoDaddy to move all the parked domains to IIS, mostly to fudge the Netcraft survey)

    What point are you trying to make about corporate capitalism anyway? I think Khosla has good intentions and picking on him for being uninformed in your area of expertise by making statements outside of your area of expertise isn’t exactly winning over the masses.

    As far as unbridled capitalism and gouging, saying Conoco or Exxon is better than Microsoft from a social standpoint is like saying heroin is better than crystal meth as a recreational drug.

    I don’t disagree with you at all on the problems that subsidies and VC funding of schemes-for-subsidies are causing in biofuels and these problems are going to be with us for a long time. Converting rail to electricity and promoting diesel consumer vehicles would have been a real and relatively short term goal to actually lower US oil imports.

    Khosla is on the right track with cheap Solar Thermal electrical generation. The biofuel area is dumb in the broad sense and it’s all shades of gray dumbness.

  11. What point are you trying to make about corporate capitalism anyway?

    Simple. That the oil industries profits are being singled our criticism and punative measures, when other industries have far higher profit margins are given a free pass. It is ridiculous to harp on an industry with a 10% profit margin while looking the other way on industries with profit margins of 2-3 times that. It is nothing but demagoguery.

    Just today, a new windfall profits tax measure was introduced:

    Senate Dems Denounce Oil Profits, Pump Price; Call For Profit Tax

    WASHINGTON (Dow Jones Commodities News via Comtex)
    The senators unveiled a bill that would establish a windfall-profits tax on energy companies, kicking in when the price of crude goes above $50 a barrel.

    The bill, authored by Sen. Robert Casey, D-Penn., would also repeal oil industry tax breaks authorized in the Energy Policy Act of 2005.

    Like an energy bill the House passed earlier this year, funds gained from repealing the tax incentive would go into a reserve fund. Casey said the fund would be used to help low-income Americans pay their transportation expenses.

    “Unfortunately, what’s been going up are big oil company profits,” Casey said at a press briefing in the Capitol. “Prices at the pump are going up. The other thing that’s going up are (home) fuel costs.”

    Additionally, the lawmakers slammed President George W. Bush for being too cozy with the oil industry and criticized OPEC for keeping supply off the market.

    Bush needs to file a World Trade Organization complaint against OPEC, said Sen. Bernie Sanders, a Vermont independent who backed the Democrats’ call for a drastic change in energy policy.

    That would help “allow oil to flow so prices can go down” for the American people, he said. “Since Bush has been in the White House, the price of gas at the pump has nearly doubled.”

    It is no surprise that the freshman members of Congress are pushing for aggressive, anti-oil industry energy policies. As lawmakers were on the campaign trail last year, pump prices were rising above $3 a gallon in parts of the country. Democrats seeking seats in Congress promised to push for new energy policies that would help lower gasoline and home-heating costs for consumers.

    Senators said the election results, which gave Democrats control of Congress, proved that Americans are yearning for new energy policies that focus more on renewable, domestic energy and less on fossil fuels.

    “Especially in rural America, there’s been a revolution going on and they’re sick and tired of these prices,” said Sen. Amy Klobuchar, D-Minn.

  12. Although these [FTCR] folks may mean well, their CVs indicate that they have little knowledge of the technology or its potential effects.

    It seems that the people who work for consumer watchdog and environmental groups tend to have educational backgrounds in sociology or philosophy and other areas with a glaring lack of math and science.

    Example: Tyson Slocum received his B.A. from the University of Texas at Austin and grew up in Rhode Island.

    Tyson may be a smart guy, he certainly knows how to use the media, but he probably got through college with taking maybe a couple of general science and math courses. He has never worked in the energy industry and couldn’t possibly understand the complexities of the business. Yet he is somehow an “expert”.

    Let’s look at the geniuses from Foundation for Taxpayer & Consumer Rights (FTCR):

    Harvey Rosenfield – MA in Foreign Service & JD

    Jamie Court – BA in History

    Doug Heller – BA in Political Science

    Pamela Pressley – BA in Sociology, JD

    Jerry Flanagan – BA in Social/Cultural Anthropology and in Rhetoric

    Carmen Balber – BA in Politics

    Kent McInnis – BA in Fine Art

    John Simpson – BA in Philosophy, MA in Communications

    Judy Dugan – Peace Corps volunteer/reporter, no education listed in bio

    Mark Reback – BA in Business/Marketing

    Just one guy with a degree in business, and he’s the office manager? At my university the varsity football team majored in philosophy, sociology, and communications. That should tell you something about the academic rigor of those degree programs.

  13. Simple. That the oil industries profits are being singled…

    I agree that forcibly cutting the price of gas has a negative effect and the consumer group positions aren’t very good environmental positions.
    “Cut Oil Company Profits, So I Can Buy Cheap Gas and Drive My SUV.. More” isn’t sound thinking environmentally.
    “Cut Oil Profits by Forcing Genuine Renewable Investment” would be a better position than attempting to justify the fossil fuel profits.

    If Conoco, Exxon or even Microsoft shaved off 0.1% profit into Wind and Solar Thermal there would be a substantial global improvement.

    I don’t imagine oil companies would lobby for and invest in a wind powerered railway. 🙂

  14. Here is an interesting quote from the ConocoPhillips “Conversation on Energy” meeting in Rochester, Minnesota last night. Bob Ridge had just explained the renewable diesel process then we get this:

    Afterward, two people with the Minnesota Soybean Growers Association — Sherry Lowe and Mike Youngerberg — added comments.

    “It’s the same chemical makeup as diesel,” Lowe said. “We’re not opposed to competition, but we are opposed to the subsidy.”

    So what they are saying is that COP’s renewable diesel is bad because it has exactly the same properties as regular diesel – so it shouldn’t get the subsidy. But by implication soy bean diesel is good because it has inferior properties therefore it should get the subsidy. I’m really confused.

  15. But by implication soy bean diesel is good because it has inferior properties therefore it should get the subsidy.
    Shows the mentality you nurture with all those subsidies, doesn’t it? I guess Americans only believe in the free market outside agriculture. Or any other local industry that may need help. Ever wondered why other nations are so reluctant to cooperate?

    It would be funny, if it weren’t so sad.

  16. I don’t understand how the soy bean farmers are hurt at all by this. They still get the $1 subsidy for biodiesel. ConocoPhillips is planning to use beef tallow as a feedstock, which shouldn’t hurt soy beans. Even IF they decided to turn soy beans into renewable diesel, wouldn’t that be a good thing for the soy bean farmers?

  17. Here is an interesting quote from the ConocoPhillips “Conversation on Energy” meeting in Rochester, Minnesota last night.

    Where did you find that? I would like to read that if it’s in a news article somewhere.

    Cheers, Robert

  18. From Mr. Youngerberg’s FAQ

    I found this gem:

    Q: The press has reported that for some alternative fuels it takes as much energy to process the fuel as the fuel contains. What is the energy balance of biodiesel?

    For every one unit of energy needed to produce biodiesel, 3.24 units of energy are gained. This is the best energy balance of any liquid fuel available.

    That seems pretty high.

  19. From kingofkaty’s link
    “Yes it creates emissions, and yet it is renewable. We are taking something that is a waste today and converting it to fuel,” he said. “Without the tax credit, it is not economical to pursue.”

    That is totally the point. An executive of a public corporation’s job is to maximize profits. The people that manage oil companies are just people, and I believe that they would be willing to do much more environmental work, but their hands are tied by the stakeholders. If the CEO of ConocoPhillips put any substantial effort into non-profitable renewables, the FTCR members mutual funds and pensions would dump Conoco stock at the first press release and the CEO would be looking for another line of work.

    The bright 12 year old in the above link would dump his COP and buy XOM if they were losing money on renewables like his question implied they should.

    The government biofuel subsidies are about special interest groups and not EROEI, but I’m not sure that forcing fossil fuel companies into investing in renewables would be poorly received by those companies. It releases the maximize profit obligation of the executive to the shareholders. Any other method would involve convincing shareholders that Peak Oil is real and the companies have to establish a long term plan for what to do when the oil runs out. The investment system cares about quarterly profits, not 40 year plans and they aren’t going to bite on that idea.

    The only problem is that there is no way to force oil companies across the industry into dumping cash into renewable energy systems without them passing the cost on to consumers, so the whole thought goes back to the gasoline tax versus renewable subsidy discussion.

    I think most people agree that a gas tax specifically for renewable investment would make sense. I don’t think many people agree with me that that money should go to projects based on real EROEI like wind, solar thermal and my 1/2 baked solar/geothermal scheme.

    While I’m busy promoting myself, my thoughts on electricity in agriculture and transportation.

  20. The crowd, many well-versed on energy issues, had a lot to ask him and other panelists. A biodiesel supporter asked how ConocoPhillips’ renewable diesel product, created with animal fats from Tyson Foods, is helpful when it creates the same emissions as diesel, and why it gets a $1 a gallon federal subsidy like biodiesel plants.

    I guess I don’t even understand what the biodiesel supporter is getting at. Are the emissions from burning it lower? Slightly, because biodiesel is partially oxygenated. That also means that the energy value is lower, which means you have to burn more. So, are the emissions lower on a BTU equivalance basis? I need to look into that.

    Sabrina Watkins, ConocoPhillips manager of advanced technology, said using the animal products allows the company to use its existing infrastructure to create a “blended product.”

    I met her a couple of weeks ago in Aberdeen. She asked me if I was interested in moving to Houston. No thanks.

    Cheers, Robert

  21. Note: Jacobson’s PDF Response to comments by ethanol industry, advocates, and consultants –
    E85 Study – http://www.stanford.edu/group/efmh/jacobson/E85ResptoComm.pdf

    I don’t have the air quality modeling expertise to determine the relative merits of his work, but it is a useful reference point regarding one potential outcome. To me the most important point is that existing models do not really have the predictive capability to determine what the effects will be. This is true for both health effects / air quality models like this, and for other Life Cycle Assessments (GREET and related models) that attempt to quantify greenhouse gas emissions or net energy or overall environmental effects. You’ve weighed in quite ably on GREET, but it’s worth another round, given recent MIT and U. Illinois-Chicago work that shows uncertainties involved in ethanol production, and especially EPA’s recent Final Rule for the Renewable Fuel Standard that uses GREET and some of their own models to try to quantify GHG benefits.

    Like you, I work in the petroleum industry and have been increasingly engaged in the biofuels arena for the last several years. I also have done a lot of (nonbiofuel) research through major universities and top shelf researchers. I get very annoyed at the implication that any oil research, peer reviewed or not, should be discounted without any serious consideration.

  22. “I don’t imagine oil companies would lobby for and invest in a wind powerered railway”…what difference does it make whether they would or wouldn’t? If a “wind powered railway” made economic sense, then it would be developed by railroad companies, railroad equipment suppliers, and wind power equipment suppliers.

    Oil companies do not have some sort of veto power over the activities of other busineses.

  23. If a “wind powered railway” made economic sense..

    That was the point I was trying to make. It doesn’t make economic sense, diesel locomotives do. Neither does biodiesel over petroleum diesel and in theory that is what government subsidies are adjusting. An oil company cutting their own market by replacing their product with wind would be insane from a business point of view. Rail recouping the investment of replacing diesel with the infrastructure for renewables has no possibility of financial feasibility with the current diesel price.

    Diesel is still too cheap to force rail over much less efficient trucking in many situations.

    That should be the role of government over public corporations. Renewable powered freight and public transit is socially/environmentally a good idea, but it isn’t feasible from the economic perspective. The only lobby group with a financial benefit would be wind turbine and solar/geothermal manufacturers.

    In a community sense and if there was a government that represented that community, renewable powered rail freight and public transit is in the peoples best interest and worth funding as a group. Using the offset diesel in passenger vehicles is much more efficient EROEI than biofuel schemes.

    This is the same in heavy equipment. It’s not feasible to convert agriculture to renewable electricity without government assistance.

    It would be very difficult to counter the lobbyists and have it happen, even if it’s the common sense right thing to do.

  24. rohar1, your comments are in bold

    If Conoco, Exxon or even Microsoft shaved off 0.1% profit into Wind and Solar Thermal there would be a substantial global improvement.

    I doubt it. One thing the wind option would provide would be lots of wrecked viewsheds.

    That should be the role of government over public corporations. Renewable powered freight and public transit is socially/environmentally a good idea, but it isn’t feasible from the economic perspective.

    Not if the renewable power source is more environmentally destructive then the non-renewable fuel it replaces. Which is the condition with most renewable power sources today.

    I think Khosla has good intentions and picking on him for being uninformed in your area of expertise by making statements outside of your area of expertise isn’t exactly winning over the masses.

    Good intentions have caused massive amounts environmental destruction. Good intentions do not make up for the pushing of non sustainable environmentally damaging technologies which is what Khosla is doing.

    You seem to think that money is the reason renewable technology is not taking off. After billions of dollars of subsidies, mandates, and research renewable technology is not taking off.

    The lack of sucess is related to basic laws of physics, chemistry, and engineering not lack of money.

    TJIT

  25. An oil company cutting their own market by replacing their product with wind would be insane from a business point of view.

    I’m not familiar with rail economics, but wind can certainly replace oil when it comes to cars. A $1000 share of a large wind turbine will power one plug-in hybrid (assuming 10k EV miles). A typical car today uses about 400 gallons (>$1000) to travel those same 10k miles. That’s $1000 once vs. $1000+ every year.

    -doggydogworld

  26. but wind can certainly replace oil…
    Diesel is $0.20-$0.35/kWh retail and where I am with coal, hydroelectic some wind generation, electricity is $0.09/kWh retail.

    I would think that wind versus diesel is close to equivalent in cost/kWh at retail prices.

    It’s a huge capital investment to convert diesel rail to electricity. I would think a hybrid retrofit to a diesel/electric locomotive would be possible. The kg/kW efficiency of rail is a lot higher than road vehicles and a boxcar full of zebra or even a few boxcars of lead acid batteries wouldn’t be that innefficient to haul around rather than building powerline infrastructure over long distances. If you can run a submarine on batteries charged by nuclear, you can run a train charged by wind. The power cars could be charged at fixed locations and swapped relatively easily with the ability to run the diesel gen for longer distances. Hydrogen or other other compressed gasses like NG, coal or biomass pyrolysis gas or biomethane in rail transport would make a lot more sense than trying to do it in passenger vehicles and a high pressure tank and generator would be another easy retrofit to diesel/electric and enable a lot longer distances than batteries. Renewable generated hydrogen is a long way off but would be much easier to implement on a train than in a car.

    Diesel in passenger vehicles makes sense. It’s safe to transport, the engines are more efficient, the infrastructure is there and the fuel is very high density.

    Trying to make biodiesel for those cars is dumb compared to moving rail utilized diesel to passenger vehicles and increasing public transportation. $4 gas will help, $10 gas will start to make this look like a good idea.

  27. The crowd, many well-versed on energy issues, had a lot to ask him and other panelists. A biodiesel supporter asked how ConocoPhillips’ renewable diesel product, created with animal fats from Tyson Foods, is helpful when it creates the same emissions as diesel, and why it gets a $1 a gallon federal subsidy like biodiesel plants.

    RR: I guess I don’t even understand what the biodiesel supporter is getting at. Are the emissions from burning it lower? Slightly, because biodiesel is partially oxygenated. That also means that the energy value is lower, which means you have to burn more. So, are the emissions lower on a BTU equivalance basis? I need to look into that.

    The emissions referred to include: A 2% biodiesel blend in Minnesota diesel fuel each year will curtail harmful tailpipe emissions. Annually it will:
    – Reduce poisonous carbon monoxide emissions by more than 800 thousand pounds.
    – Reduce ozone forming hydrocarbon emissions by almost 91 thousand pounds.
    – Reduce hazardous diesel particulate emissions by almost 70 thousand pounds.
    – Reduce acid-rain causing sulfur dioxide emissions by more than 70 thousand pounds.

    According to the EPA, diesel fuel exhaust contains harmful polycyclic organic matter (POM) that can affect the reproductive, developmental, immunological and endocrine (hormone) systems in humans and in wildlife.

    I guess they have a point, except that renewable diesel contains no sulfur and POMs. That leaves biodiesel (methyl esters) with an advantage in terms of CO, ozone and particulates. Well, at least particulates can be filtered out fairly easily. OTOH, I recall that biodiesel emissions are higher in NOx.

    That leaves biodiesel with a debatable emissions advantage. Add the superior cold weather properties of renewable diesel and the fact that it can be blended at any ratio with fossil diesel, and the better fuel is obvious.

  28. Read this month’s Sierra magazine. There is a transcript of a discussion with Khosla amont other energy luminaries. Khosla manages to hijack the discussion so that ethanol is seen as practically the cornerstone of any rational energy policy. He’s good, at least amongst the uninformed.

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