Energy3.

0
onthecusp oronthebrink

Weareatthecuspofthe3rd EraofEnergy
Dawn ofModernMan PreHistory ~1759 Energy1.0
EnergySources Work Global Economy Population Transportation Building Technology Governance Wood,Fire Man,Livestock Agricultural ? ~800M Foot,Horse,Sail Mud,Wood,Stone Manual Tribal Monarchy

ModernEra 1760 1944 Energy2.0

Hydrocarbons Motors&Engines Trade 800M 2,400M Auto,Rail,Boats Skyscrapers Mechanical Democracy Communism Printing Press MassManufacturing $100B $3T

ContemporaryEra 1944 Present ? Energy3.0

Renewables (?) Gasturbines,Diesel,Electric Motors Globalization 2,400M 7,000M Planetary capacity + Planes Sustainable Informationalization Free Market&State Capitalism Proliferation Customization $3T $60T

Media Manufacturing Global EconomicOutput

Written Craftsman <$1USD $100B

7InvestmentThesesforInvestingin Energy3.0
Energy=Life Energysourcesareessentiallycommoditybased
Newsourcesmustbeenergeticallyandeconomicallymoreefficientthanoldenergysourcesthereby enablingeconomicgrowth Commoditybasedmarketsdefinetheenergylandscape Clearatlowestpossiblemarketrate Costbasedcompetition innovationisnotacompetitiveadvantage Commoditieshaveperfectsubstitutability

Regulatoryengagementisnotanoption
Awareness Deepunderstanding Influencer

Maturemarkets alleconomicprofitwassqueezedoutlongago.Regulatedmarketsensure cheap,persistentpowertoallsociety Sustainabilityiscurrentlyanidealbutwilleventuallybecomeasurvivalenvelope Informationcontentofenergyisincreasing moredata,moreintelligenceandmoredecisions available EnergyEfficiency Untilnewenergysourcesemerge,themosteconomicenergystrategiesare energyefficiency

WhenWorldsCollide: Energyvs.Technology
Energy
PrimeDirective MarketStructure Inputs CompetitiveAdvantage CorporateCulture ProductLifeCycles GeographicSpanofinfluence SpeedtoMarket CoreCompetencies Management CompetitiveEnvironment SalesCycle PricingPower ConsumerBehavior EconomicMargin CapitalEquipmentLifecycle StatusQuo RegulatedMonopoly Commodities homogenous Cost RegulatoryProtection Compliance Generational Provincial Decades Regulatory "Maintainrulesoverallelse." Conservative Nonexistent Years Low consumeriscostsensitive LowEngagement Zero Decades

Technology
ChangetheWorld Rangefromperfectcompetitiontooligopolistic IntellectualProperty pursuitoftheunique Innovation Creative,innovative,experimental Months Global Months Entrepreneurial "Breaktheoldrules,and makenewones." Risktaking Hypercompetitive Weeks High Innovationisrewardedwithoutsized profits HighEngagement Highmovingtolower Years

TheOldGuardisGood

1. Withoutfurtherreform,spendingonfossilfuelconsumptionsubsidiesis settoreach$660billionin2020,or0.7%ofglobalGDP 2. 2010levels:$409billionforfossilfuelsverses$66billionforrenewables

CapitalInvestmentneededtoMeet 2035ProjectedEnergyNeeds
$20,000 $18,000

$16,000 Power $16,900 $14,000

$12,000 2010USDBillion $10,000 Oil $10,000 NaturalGas $9,500 $6,000

$8,000

$4,000

$2,000 Coal $1,100 $ BioFuels $300

CapitalInvestmentneededtoMeet 2035ProjectedEnergyNeeds
$12,000 $9,802 $8,700 $8,000 $6,745 67% $6,000 49% $4,000 26% $2,000 $2,185 $1,859 $1,034 $0 $1,000 $570 $300 40% $5,239 60% 86% 81% 91% 94% 97% 98% 99% 99% 80% 120% $10,000 100%

20% $66 0%

Source:WorldEnergyOutlook2011USDBillions

VentureCapitalsGoal:
(relatedtoenergyinvesting)

PrimeDirective:ReturntoPartners
1. Identify,fundandbringtomarketcompaniesthat aredevelopingnewfuelsourcesthataremore economicalthatcurrentsources(coal,oiland naturalgas)ornuclear 2. Identify,fundandbringtomarketcompaniesthat aredeployingnewtechnologiesthatpermitcost savingsinenergybillswhilemaintaining(or enhancing)customerexperience 3. Savetheworldbyaccomplishing1and2(sinceno oneelseisdoingit.)

FollowtheEnergyFlows

FollowtheEnergyFlows
(keepingitsimple)

Resource Extraction Delivery

Newandbetter resourceforenergy Cheapermethodof extractionofold resources Abilitytoextend currentresources Moreefficientways toidentifyandlocate resources

Resource Transformation Delivery

Moreefficientways todeliverenergyto users Newresourcesthat eliminatetheneed fordeliveryof energy SmartGrid Moreefficient energymarkets(real timepricing)

EnergyUsage

Moreefficient Moreefficientways waysto transport resourcesto transformation location Eliminatethe needfor intermediate totransformresource intoenergy Newresourcesthat eliminatetheneed fordeliveryofenergy Energyresourcesthat aresustainableor lesscarbonemissive

Moreefficientwaystouse energy Catalogueenergyusesand reviewfornew,betterwaysto accomplishthesamegoals Newresourcesthateliminate theneedfordeliveryofenergy SmartGrid Moreefficientenergymarkets (realtimepricing) IntersectionofITandEnergy industry

transformation Moreefficientenergy ofresource markets(adjustthe businessmodel)

InvestmentPhilosophyforEnergy3.0
Incrementalism or"BlackSwan"approach?
Theloomingtwinchallengesofclimatechangeandenergy productionaretoobigtobetackledbyknownsolutionsand timehonoredtraditions.Incrementalremediesarefinefor incrementalproblems,buttheyareinsufficientfor monumental,potentiallylifealteringthreats,whichneedtobe approachedwithadisruptivemindset.Thereare5billion peoplecovetingtheenergyrichlifestylescurrentlyenjoyedby 500millionpeople,mostlyinthedevelopedworld.Incremental technologyprogresswillnotsatisfythiscraving.Weneednon linearjumpsintechnologies TechnologicalBlackSwans!We caninventthesefuturetechnologies.
Source:BlackSwansThesisofEnergyTransformationbyVinod Khosla

2EndsoftheSpectrumof InvestmentPhilosophyforEnergy3.0
Edison Incrementalist Tesla BlackSwan

Phonograph IncandescentLighting StockTicker MotionPictures StorageBatteries(EVs)

ACGenerator ACMotor ACPolyphase Distribution System ETC

Geniusisonepercentinspiration,ninety ninepercentperspiration.

Moneydoesnotrepresentsuchavalueasmenhaveplaced uponit.Allmymoneyhasbeeninvestedintoexperiments withwhichIhavemadenewdiscoveriesenablingmankind tohavealittleeasierlife.

Edisons&TeslasPortfolios
(IftheywereVCstoday)
Low BigdataMeetsEnergy(EMS,etc) EnergyMgtSystems BuildingMaterials BloomBoxes LEDLightingthatREALLYworks LightingNetworking EfficientEnergyGeneration EnergyStorage MoreEfficientElectricMotors LightweightAutoBodies MoreEfficientCombustionEngines AlternativeVehicles(PEHV,etc) HighlyEfficientTransistors OrderofMagnitudeEfficientHVAC

PolicyandRegulatoryInfluence

MassiveBuildingRetrofit RobustCyberSecurity(Incl.ICS)

Q1
DistributedPV CarbonCapture

Q2

UtilityScalePV UtilityScaleWind

BioFuels UtilityScaleTidalPower

High +

Q3

ZeroNetEnergyBuildings SmartGridTechnology RegulatoryBodyEnergyEfficiencyPrograms Low Conservative&Incremental

Thorium Fusion

Q4

High + "BlackSwan"FundamentallyAltersIndustryEconomics

RiskinessofInvestment(asmeasuredbyprobabilityoffailure)

DemandSideEnergyInvesting

DeliveryofPower PricingofPower UsageofPower

EnergyEfficiencyGWh ProjectedSavings 20102030(WesternRegion US)

90,000

79,936GWh
80,000

70,000 Pump/Motors 10,070 60,000

Other WaterHeating BuildingShell Appliances Refrigeration

GWh
50,000

45,152GWh
40,000 Pump/Motors 6,237 Consumer Electronics 8,324 HVAC 7,868

Consumer Electronics 16,222

HVAC 16,685

Pump/Motors ConsumerElectronics HVAC Lighting

30,000

20,000

10,000

2,470GWh
0
Lighting1,748

Lighting 17,772

Lighting 27,089

2010

2020

2030

Source:EPRI,AssessmentofAchievablePotentialfromEnergyEfficiencyandDemandResponseProgramsintheU.S.(20102030),ChrisMontao

FundamentalTechnologiesforDemandSide
100% Pump/Motors 14%
Consumer Electronics6% WaterHeating2% BuildingShell2% WaterHeating2% BuildingShell3%

90%

Appliances4% Refrigeration3% Pump/Motors 14%

Appliances4% Refrigeration4% Pump/Motors 13%

80%

HVAC 9% 70% Consumer Electronics 18% Consumer Electronics 20%

60%

50%

HVAC 17%

40%

HVAC 21%

Lighting 71% Lighting 39%

30%

20%

Lighting 34%

10%

0% 2010 2020 2030

Source:EPRI,AssessmentofAchievablePotentialfromEnergyEfficiencyandDemandResponseProgramsintheU.S.(20102030),ChrisMontao

EnergyEfficiencyGWh CAGR 20102020(WesternRegion US)

120%

100%

Refrigeration PredictedCAGR20102020 RealisticEnergySaved(KWh) 80%

Appliances

WaterHeating

60%

ConsumerElectronics

BuildingShell

40% HVAC 20% Pump/Motors

Investable Opportunity

Lighting 0% DemandSideTechnology
Source:EPRI,AssessmentofAchievablePotentialfromEnergyEfficiencyandDemandResponseProgramsintheU.S.(20102030),ChrisMontao

WorkingmoreEfficiently,notHarder

8 Applicationsof energyefficiency deliver43%ofestimated $3.7Trillioninresource savingsby2030

Source:McKinsey&Co.,MobilizingforaResourceRevolution

CustomerEnergyIntelligence
HighValueSoftware Applications CustomerEngagementfromROI CustomerDriven(lowregulatory) Communications DirectChannel IntuitivetoUnderstand CustomerEnergyPlant Data/ITSystems

CustomerEnergyIntelligence
PredictiveAnalytics&Modeling InterfacetoAccountingSystem PowerQualityManagement ERP Storage FaultDetectionandAlerting ContinuousCommissioning ControlSystemInterface OptimizationAlgorithms OutageManagement Compliance&Assurance

AssetManagement

EnergyMonitoring

DemandResponse

ApplicationLayer

BuildingEnergyManagement

BuildingEnergyAutomation

BuildingEnergyPerformance

SystemsLayer

Servers

Database

Internet

Transactions

Modeling

Control Systems

LocalAreaNetwork Communications BroadbandWWAN

RFMesh OtherProtocoltobeNamed

HomeAreaNetwork(HAN) 3G/4GCellular

EnergyPlant

MicroGrid

Distributed Generation

Control Systems

Sensors

Transformers

Meters

CyberSecurity

CarbonReporting

EnergyReporting

Diagnostics

FaultPrediction

Loadlimiting

Microgrid

CustomerEnergyIntelligence
PredictiveAnalytics&Modeling InterfacetoAccountingSystem PowerQualityManagement ERP Storage FaultDetectionandAlerting ContinuousCommissioning ControlSystemInterface OptimizationAlgorithms OutageManagement Compliance&Assurance

AssetManagement

EnergyMonitoring

DemandResponse

ApplicationLayer

BuildingEnergyManagement

BuildingEnergyAutomation

BuildingEnergyPerformance

SystemsLayer

Servers

Database

Internet

Transactions

Modeling

Control Systems

LocalAreaNetwork Communications BroadbandWWAN

RFMesh OtherProtocoltobeNamed

HomeAreaNetwork(HAN) 3G/4GCellular

EnergyPlant

MicroGrid

Distributed Generation

Control Systems

Sensors

Transformers

Meters

CyberSecurity

CarbonReporting

EnergyReporting

Diagnostics

FaultPrediction

Loadlimiting

Microgrid

ProfiledFirms:CustomerEnergyIntelligence
Company BigProblem Solved Market Opportunity Last Round Customer Competitors PaidIn Capital

SCIenergy

Buildingenergy management solution

Massive

Industrial, commercial, building owners (Intel)

BuildingIQ,Serious Energy,Cimetrics, FirstFuel Software

$37.6M

BuildingIQ

Buildingenergy management solution

Massive

Seed (currently fundraising or undisclosed round)

Industrial, commercial, building owners

BuildingIQ,Serious Energy,Cimetrics, FirstFuel Software

$?(undisclosed)

OPower

Energy customer engagement

Large

Residential, Commercial

eMeter,GridPoint, KEMA,Silver SpringNetworks, Tendril

$66.5M

C3

Large, geographically diverse enterprise energy management

Lage

PG&E

AMEE,Brighter Planet,CloudApps, ENXSuite,EPS $111.9M Corporation,Hara, LocusTechnologies, Noveda Technologies, Verisae

ProfiledFirms:EnablingEfficientTechnologies
Sector Company BigProblem Solved Market Opportunity Last Round Customer Competitors Adura Technologies, DigitalLumens, Enlighted, Lumenergy DigitalLumens, NovaLED AZZURRO Semiconductor ,iWatt EVOElectric, KLDEnergy Technologies, PermMotor, Remy PaidIn Capital

Lighting

Redwood Systems

Lighting controls

Large

AtSite, EdCampus

$22.5M

Lighting

Xicato

LEDlightingfor todaysneeds Power usedin ICs

Large

A?

Multiple luminaire vendors Fujitsu

Unannounced

Electronics Energy

SuVolta

Large

B?

$62.1M

Electric Motors

CompactPower Efficient ElectricMotors Motors

Massive

Rieju (MIUS electric scooter)

$13.8M

FreeMarketsAbhoranEconomicVacuum: UnaddressedOpportunities
Sector CyberSecurity BigProblemSolved CyberSecurity forPowersystemsand controlsisvery differentthanIT.Asthe SmartGrid conntcts IT/Comm infrastructuretotheGrid,therewillbe significantgapsinthecybersecurity of theinfrastructureanditscontrols.There areanumberofcomplexitiesthat makesthisaparticularlydifficultmarket toattack. Oneofthelargestapplications of energyusageintheworld.As urbanizationcontinuesthiswillonly increase.Therearescantoriginal approachesthathavebeenvalidatedby 3rd partytesting. LLNLhasaFusioneffortunderwaythat theyclaimisdesignedtodeliver $0.05/KWhby2030.This couldchange everything. Market Opportunity ElectricGrid,EMS, OilRefineries, ChemicalIndustry, Waterutilities Entrants? EMC/RSA Alion WizNucleus Invensys Bentley DevonWay AlertEnterprise

GameChanging HVAC

Allbuildingsacross theglobe.

unknown

Fusion

None.

Appendices&AdditionalSlides

Megatrend:Urbanization

GlobalBuildingStock20102020

Source:PikeResearch

GlobalBuildingStock20102020
(byRegion)

Source:PikeResearch

Resources&References
Sources Websites(forReports,etc) ThoughtLeaders