Controversial and high-profile greentech venture investor Vinod Khosla says the hype around — and government support for — batteries has distorted the green car market, leading to few investors focusing on innovation for the traditional internal combustion engine. Technology designed to make internal combustion engine vehicles more efficient can be implemented with much less cost (“hundreds of dollars” in some cases, said Khosla) compared to developing an all-electric vehicle. And innovative tweaks to the systems and components in gas and diesel powered cars can have a significant impact on fuel consumption and emissions, boosting mileage by as much as 30-50 percent, said Khosla. He made the comments at the Fortune Brainstorm Green conference on Tuesday. (Khosla will also be speaking at our Green:Net conference on April 29 in San Francisco).
Khosla explained that “market distortion” was a specific reference to the government support of lithium-ion battery maker A123Systems (s AONE), which won a $249 million grant from the Department of Energy last summer. Batteries are largely not economic compared to conventional vehicles at today’s fuel prices and won’t have an effect on “the Chindia” issue — the emerging markets in India and China — said Khosla.
When Khosla says few investors have focused on this space, of course, he isn’t including his firm Khosla Ventures. Through his fund, Khosla has invested in Transonic Combustion and EcoMotors, which are working on efficiency boosters for diesel engines (here’s 7 Startups Building Green Car Tech for a Pre-Electric World). Transonic Combustion has developed a fuel injection and software system for high-compression diesel engines that minimizes waste heat. EcoMotors has developed a diesel engine with stackable modules, where one of the engine modules can be shut off when it isn’t needed.
Of course, Khosla isn’t staying out of the battery game entirely. His firm has also invested in battery startups Sakti3 and Seeo because, as Khosla told us last summer, the “lithium-ion markets are here today. We’re investing because there are good markets.” Other battery investments haven’t fared so well and his portfolio company Firefly Energy, which made lead acid batteries, was shut down in March.