John Denniston: Kleiner Perkins Caufield & Byers

John Denniston talks with THE GREEN ECONOMY about the future of clean technologies, how the US may be loosing our future to China, and what we should do about it.

Is cleantech catching on?

It’s doing much more than catching on. World-class entrepreneurs are sprinting into the greentech sector from all walks of life: large companies, small companies, academia and public service.

What’s the green tech opportunity?

Taken together, the energy and transportation industries are the world’s largest, roughly $6 trillion annually. Beyond energy and transportation, entrepreneurs are seizing opportunities to improve an enormous range of industrial processes. Simply put, the greentech opportunity is to substitute sustainable green technologies and products for the incumbent brown sources and methods.

The high cost of renewable energy sources, relative to the incumbent fossil fuel and nuclear competition, is a challenge to the more rapid adoption of clean power.

Why does green still cost more? Primarily because it’s still so new, meaning innovators have only just begun to work on cost-reducing breakthroughs, and production volumes are still so low that providers have yet to benefit from economies of scale. In other words, these cost-down and scale-up phenomena are still in their infancy in the renewable energy industries. In contrast, most fossil fuel plants were constructed many years ago, have already achieved the benefits of cost reductions, and are now fully amortized, meaning their owners no longer need to pass on these costs to ratepayers.

Just the same, the greentech set of industries have made enormous progress in just the past few years. For example, the solar industry was very small only 5 or 6 years ago. This year, the global solar market will exceed $50 billion in size, which will surpass the size of the global online advertising market. The wind market this year will also exceed $50 billion worldwide. And the advanced battery and electric transportation markets are now poised for growth.

Read the magazine with this interview as well as articles on CEDA, The new technology revolution, more interviews, links to whitepapers and more.

Why is CEDA needed?

CEDA directly addresses a central challenge to the faster adoption of breakthrough greentech solutions: the longstanding unavailability of loans for breakthrough technologies, now aggravated by our financial crisis. For many segments of our economy, including greentech, the credit markets are fundamentally broken. Renewable energy projects and factories for breakthrough greentech products have historically been financed with a combination of equity and debt. However, the financial crisis has severely weakened the debt markets, and debt is now generally scarce, and in many cases, nonexistent.

CEDA enables clean energy loans, and in so doing, promises to provide not only strong environmental leadership, but also will help boost our struggling economy and international competitiveness.

If America fails to establish a strong greentech leadership position, I fear our future prosperity is at risk, and here I speak from personal experience. As I’ve traveled on business to Asia and Europe, I’ve watched other governments strive, and often succeed, in emulating in the renewable energy sector the technology innovation that has been a hallmark of the U.S. economy. Determined public policy has given overseas entrepreneurs advantages, including financial incentives and large investments in research and education.

Here’s an example: just about five years ago, China’s central government decided that renewable energy was mission-critical to its future, and aggressively rolled out ambitious policies and huge investments to support it. It granted subsidies, free land, and cash for research and development. China’s state-owned banks are now bankrolling green exports, a brilliant means of deploying its foreign exchange reserves as a competitive weapon at a time when the rest of the world is short of cash. Just last weekend, the Chinese government announced a $5 billion to ONE if its solar companies. The Chinese government is also finding ways to provide low-cost loans to companies in other greentech sectors, including wind and advanced lighting.

The results of these policy innovations have been stunning. In the blink of an eye, China has built an industry basically from scratch to become the world’s largest solar producer. Three years ago, China held merely 2% of the solar panel market; today, that share has skyrocketed to nearly 50%. During the same 3 year period, U.S. market share has gone in the opposite direction, plunging from 43% to16 %. Nor has China’s progress been limited to solar power; it is also the world’s #1 wind producer, and an emerging leader in the advanced battery sector, among others.

Simply put, America is trailing in the race to build renewable energy industries – the very industries that offer us our best hope of job creation and a rising standard of living. The news is sobering: Only four U.S. companies appear among the international lists of the top-ten firms producing solar modules, wind turbines and advanced batteries. That’s four out of the top thirty companies in those crucial industries, a paltry 13% market share, and a far cry from the dominant position American companies enjoyed during the information technology revolution.

If we fail to reverse this equation, we’ll forfeit our hope of achieving energy security. In that case, future Americans will still be dependent on foreign energy imports—the only difference is they’ll be importing innovative green technologies instead of crude oil.

As much as we’ve already fallen behind, however, I’m convinced there’s still time for the United States to catch up, and once again lead a global technological revolution. In my view, if adopted, CEDA will be a key catalyst for our country’s success.