Saket Vora

Stanford University announced today a major new initiative to tackle the global problem of energy. This new research institute, the Precourt Institute for Energy, is fueled by $100 million in donated funds led by alumni Jay Precourt and the husband-and-wife team of Thomas Steyer and Kat Taylor.

I attended the event held in Memorial Auditorium, where President Hennessy opened with the formal announcement. At the Stanford Roundtable, held in the fall, Hennessy himself said that his dream is that one of the big solutions to the global energy problem will be pioneered at Stanford. Following his remarks, there was a panel discussion with guests John Doerr, a world renown venture capitalist with Kleiner Perkins Caulfield Byers, and Eric Schmidt, CEO of Google. Also on the panel was Jim Sweeney, director of the Precourt Institute on Energy Efficiency and professor in the Management Science & Engineering department, Sally Benson, director of the Global Climate & Energy Project at Stanford, and Jane Woodward, CEO of MAP and consulting professor to Stanford on energy courses. The panel was moderated by Lynn Orr, former GCEP Director and inaugural director of the new Precourt Institute for Energy.

Below are the notes I took during this event:

Hennessy’s remarks

• Three key motivations for addressing the global problem on energy: 1) reducing foreign dependence on energy 2) instability of pricing for current energy sources 3) global climate change being the seemingly insurmountable problem of our time
• Stanford has increased energy funding by 7x over the past few years – and it’s not enough.
• The Precourt Institute for Energy (PIE) will house a various of centers. The Precourt Institute for Energy Efficency will become the Precourt Center for Energy Efficiency. Also housed in the PIE will be the Global Climate & Project Project, and a new TomKat Center for Sustainable Energy, which will focus on renewable sources of energy.
• This problem is multidisciplinary – we need basic science, engineering, policy, and industry working together to solve this problem.

Lynn Orr’s remarks

• The initiative will involve 136 faculty across 21 departments.
• The new TomKat Center will focus on renewable energy – generation, smart electric grid, and energy storage.
• There will also be extensive policy analysis, markets, carbon pricing, etc.
• 6 to 8 new faculty appointments + 22 graduate fellowships for energy research + postdocs. All together some $30M a year in research funding.
• There will be an Energy Research Innovation Fund for $2M in seed funding.
• More energy related courses and degree programs will be introduced.

Panel Discussion

Eric Schmidt: At Google, it started with energy efficiency. I was surprised to hear the payback for a few million dollar in energy efficiency investments was just 18 months. That’s quick! My thought is: why isn’t everyone doing this? it’s like there are $100 bills lying on the floor. Google has a role to play in this discussion, and we created the Google Energy Plan of Clean Energy 2030 to outline our vision. We need to regulation to help keep energy usage constant in the years ahead, just as California has done successfully for a while now. This will reduce the need for the high capital costs that large new generation plants require.

Jim Sweeney: There are so many opportunities for saving energy. Our studies have shown that 30% of personal energy use can be reduced in places where the benefits are greater than the costs. But we need social skills to tackle this. We said 30 years ago that smoking is bad for you, but people still smoke today. It’s going to take a lot of programs working in parallel to effect this change. Management matters for leadership in corporations. We’ve got to get the prices right for carbon. We need to address the agency cost problem, where energy companies make decisions that benefit them at your or the planet’s expense, but say they are doing it for you. Eric has said there are $100 bills lying on the ground – I’d say that many of them are glued down, so we need to figure out the best ways to get them up.

Sally Benson: It’s important to realize that today, there is no shortage of energy resources. 30 years ago we thought that we were running out of everything, but not today, when you look at sunlight, wind, biomass, nuclear, and fossil fuels. The critical question is how do we extract what we need from them in an environmentally sound way. We need to fund research across the entire spectrum. Nano-materials for energy storage, new generation solar panels, smart electric grid, grid integration of renewables, carbon capture and sequestration, and even better ways of using coal. 50% of the electricity in the US currently comes from coal, and we won’t switch all them off immediately.

Jane Woodward: It’s tremendous how far we’ve come. Twenty years ago, there was just a small club of faculty here looking at the energy issue, but now there is over a hundred! I started a course on energy, and I was so worried about people enrolling that I hired a plane to fly around campus with a giant banner advertising the course. 35 of the 40 students on the first day came because they saw the banner. Now, there are hundreds of students showing up for courses. 20 years ago, it was the environmental issues that motivated students, and they came to energy from the backdoor. 10 years ago, it was the awareness of the connectedness of energy systems. Today, we’re finding a lot of it is that students are realizing that what higher calling is there than to tackle the biggest problem facing the planet today?

John Doerr: Look, it’s about economics. The Internet supports a trillion dollar economy with 1.2B users. The economy for energy is six trillion and has 4B users. This has the potential of being one of the greatest opportunities in history. At Kleiner Perkins, we focus on energy systems. And profitability. We see profitability as a sign of what is most probable to make it. What are the big components of the system? 6% of the domestic energy demand is fed by renewable energy sources, while 30% is bought. Al Gore (who joined as a partner at Kleiner Perkins on their green team) has a saying: in 2007, the United States borrowed over a billion dollars a day to buy Middle East oil that we then burn in this country, where we are left with the pollution and harm the planet. America is behind in this race, which is why this new initiative is so important. Kleiner just doesn’t look at American firms. We’ve made five investments in Germany because of the technical centers there. If you look at batteries, the Japanese are way ahead of us, we just import them. If you look at the top 30 firms in the solar/wind/battery technology, only 6 of them are US firms.

General Answers to Questions and My Own Comments

Transportation

A lot of  questions and discussion on transportation. Schmidt says we need to look at the whole picture. Plugin hybrids feature stellar fuel economy, but 50% of the electricity used to power plugin hybrids are coming from coal plants, so overall you’re not making a real impact. Benson says we’ve got to decarbonise the electric grid, which is actually a phrase that my prof for Grid Integration of Renewables uses a lot. Transportation systems are really challenging.

John Doerr says that batteries are the holy grail.

Though I think that Doerr is combing both batteries in the sense of using them for transportation purposes, but also in energy storage for the electricity grid to counter the intermittent nature of renewable sources like solar and wind. If you’ve got a legitimate way of solving this problem, you can write your own term sheet for Series A.

Sweeney said a few words about meeting the AB-32 standards. AB-32 is the California Global Warming Solutions Act of 2006, and there are certainly behavorial choices to be made, such as driving smaller cars with less horsepower. But he’s concerned with utilization, not simply what kind of vehicles are in use. How can we more effectively reduce vehicular miles driven? This leads to looking at restructuring how people live, and we’ve got to bring in the regional planners. We have a tax system with an influence on regional planning that affects where our living, commercial, and industry sectors are that directly affects vehicular miles driven. How do we align these interests?

It’s interesting that Stanford doesn’t have a program in transportation, isn’t it?

Last week, John Doerr spoke to Congress about the green economy and such. Towards the end, Lynn Orr asked John Doerr what he told them. Doerr told them six things:

1) Use economic stimulus package to build the smart grid.
2) Put a price on carbon. Doerr prefers a revenue-neutral carbon tax, but thinks that Congress will go with a cap and trade system.
3) Institute a natural renewable energy portfolio standard, a 20% target.
4) Utility regulation & incentives to get their interests aligned with the big picture.
5) Funding research in energy. Federal funding for energy in 2008 was less than $1B, and most of that went to federal labs.
6) And finally, do not overlook education. We need to support our students to go into science and engineering. We have a great system here in the U.S. – we bring the world’s brightest to our universities, train them, and then kick them out. We need to be stapling a green card to every diploma in science and engineering.

And if any of you think Doerr is approaching this problem from a purely profit making angle, I’d encourage you watch his alarming and restless TED talk about the global energy problem – a talk where he chokes and tears up wondering how he’s going to talk to his daughter in 20 years about what he did to make the world better for her.

I’m obviously excited about this new initiative. It’s a lot to digest at once. I was telling Joey that I’d love to have some of that money come my way and fund a 2nd Master’s degree in the field of energy.