Kleiner Perkins VC: Solar a $50 billion market in 2011

>> John Denniston: Last year for the first time, worldwide the solar PV industry for the first time surpassed the global market size of the online advertising industry. Google and all the other companies that get great press coverage, the solar market had surpassed that for the first time last year. This is now north of a fifty billion dollar industry. Same can be said for wind, significant growth over the past ten years, certainly over the past five years, even with the falloff in activity in 2010 due to economic and credit market conditions. Well, a lot of people say, well, of course, I would expect solar and wind to take off; they're subsidized. Well, yes, they are subsidized, but I think it's very important to place that into context. It turns out that the energy industry worldwide is perhaps the most subsidized industry in the world, and it is true that the lion's share of those subsidies now and over the course of time have gone to the fossil fuel industry. And so yes, renewables and biofuels are subsidized -- no question about it. In my view, the most important reason for the success of clean tech now and going forward isn't the subsidy; it's the innovation. Let me again come back to solar and wind. They are success stories. Over the past twenty years, solar PV has costed down ninety-five percent. And what you can see from this graph is both unsubsidized basis in the red and subsidized basis in the blue are approaching grid parity. And in fact, today, 2011, in some geographies are at grid parity. In Italy, in some parts of California, in the coming twelve, twenty-four, thirty-six months, we'll be at grid parity in other geographies due to innovation and economies of scale. Countries like Spain and Japan, states like New York, New Jersey, Florida, Arizona, Texas, we are coming into grid parity in solar PV, and at that point, this already very large industry will be poised for a very significant takeoff. Similar story once again in wind. Wind has cost down ninety-five percent over the past thirty years. This slide takes us back to 1982. Let's do a close-up of it. From 1993 to current, similar story, where wind on both a subsidized and unsubsidized basis, here's the key message -- is becoming very, very cheap, less than five cents per kilowatt hour. You know, a lot of industry observers say, well, that's fine, but actually the headline news is the shale gas revolution. And natural gas is so cheap that that is the headline story now and going forward. Well, let's examine that. If you look today at the forward curve for natural gas prices going out any number of years, the forward curve will tell you natural gas is expected to be between four and six dollars for MMBtu. Let's choose the midpoint -- five dollars. What LCOE, levelized cost of electricity, does five dollar gas imply? The green line shows you -- roughly four cents a kilowatt hour; basically on par with wind, with PCT today. And we have line of sight on further cost down and wind due to further innovation and further cost down to the point where in the coming eighteen, twenty-four months, there is a very good chance that wind is the cheapest power source in the world, cheaper than five dollar gas.

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