It's safe to say that Vinod Khosla has his fingers on some fairly important pulses. As a founder of Sun Microsystems in 1980, Khosla has arguably helped to shape the IT industry as we know it today. More recently, however, Khosla has also given backing to a wide variety of green technologies and initiatives. He is well known for his advocacy of ethanol as a solution to the energy crisis.

He has invested heavily, through his venture capital firm Khosla Ventures, in green IT companies. And in 2006, he was a major supporter of California's proposition 87, which would have taxed oil producers to fund research into alternative energy.

Khosla and I spoke last month about his efforts to promote green business.

Matthew Wheeland: How can green IT benefit entrepreneurs, investors and the environment?

Vinod Khosla: Well, data centres are getting to be huge consumers of power, and in the home, PCs are starting to be material consumers of power. Using less power is good for lower energy costs; it's good for higher lifetime for equipment, less power consumption means less heat, and longer lifetimes, and higher reliability. So, it saves money; it saves life, and it saves the environment. Those are all good things.

So when I buy a computer today, I try to see if there is an EPEAT-rated computer that meets my needs. Some companies, such ase Dell and HP, have started to do these ratings. They're sort of like a LEED rating for computers. In the data centre, there's massive opportunities to reduce costs for both energy and for space, air conditioning, and costs by reducing the power consumption.

Now, there's many, many ways to do that. One could reduce power consumption by just utilising the computers more. Most CPUs are used, maybe, 10, 20 per cent of the time. If you can double utilisation, you have half the number of compute rs, and so you have much better asset utilisation, and less carbon emis sions, and less energy use per unit of computing. That's very attractive. So, increasing utilisation is good all around and good for everybody.

You can also design better servers and computers, and that's good for energy costs. I've heard speculation that the lifetime energy costs of a computer is starting to be similar or maybe even larger than the cost of the computer. That's pretty telling. So, there's lots of different options.

At a talk during VMWorld, one thing you said that really caught my attention is that first and foremost, any green IT solutions will have to save money or they just won't catch on. Do you think it's been sufficiently proven that energy efficiency in IT can save money, and that it is now a worthwhile investment?

I don't think you can make a blanket statement that you can prove it in every circumstance, but there are many, many situations in which it's become very clear that it can save money. Many of the companies that started to do energy audits and carbon audits to try and figure out what they were doing, started with the intention of being greener but found that it was cheaper, and that's a very encouraging trend.

It should be. Energy's a big source of emissions, and if you use less energy, you have much less emissions, but you also have much lower energy costs. That seems to make sense.

And what else is needed, whether on the technological advancement side or on the policy side, that would really push green IT into the limelight?

I think we need a little bit of everything. I don't think there's a magic solution. We need to design more efficient computers. That's a big deal. We also need them - when they're not computing - to not use all the power. That has benefits both in reliability in lifetime, and reduced need for air conditioning, as well as lower energy.

So, green IT isn't any one thing; it's a lot of different things, and they'll all have to come together, and each situation's a little bit different.

What tech companies or technologies - both ones you did and didn't invest in - are most exciting to you or show the most promise right now?

First, we're investing in everything exciting we see, and there's a really wide range of exciting companies, both renewable fuels, renewable power generation replace electricity, new materials, and just plain old efficiency plays. So, in almost all sectors, there's exciting stuff going on. It's very hard to point to one or two.

Let's talk just briefly about the clean tech side. You were one of the major supporters of California's Proposition 87 last year, which was intended to fund clean energy research. The proposition lost by a pretty small margin as I recall, but do you think the political climate here or across the country has warmed up to the idea more in the last 12 months?

Well, there's no question people are finally taking this seriously. People in the past haven't taken green seriously, and part of the reason is green is this nice-to-do thing, and we know how well people do.

It's a little bit like staying healthy, exercising, losing weight, not eating high fat diets. All that has changed. Green has gone from something nice to do, to a crisis and an opportunity. Crisis in we have real issues we need to address. It's almost like going from yeah, you want to stay healthy, to having a heart attack and now - yeah, we really need to change our diet.

It's gone to a crisis that calls for immediate action, but equally importan tly, it's starting to have real opportunities. We talked a little bit about cost reduction opportunities. I think in the end, going more green would be a significant economic benefit, and the only way we will get mass adoption is if it is a significant economic benefit.

And as far as this crisis versus opportunity, it seems to me that at least on the consumer side, there's more of this crisis mentality than there is the opportunity mentality. What do you think it's going to take to wake up the business world - whether it's the majority of businesses or the majority of businesses' customers - to the fact that this is an opportunity more than it is a crisis?

Well, I think both things need to happen. Part of the reason - well, there is a crisis, so I'm glad that's being communicated very well, and the environmental organisations have been very aggressive about that, very effective in communicating the message. Now, to an extent, they've also cried wolf a few too many times, and so for middle America, they lose credibility, but now there's enough external evidence that this is a crisis, and so people are starting to take the environmental groups seriously, but they've also pushed technologies that don't make sense.

So, environmentalists would say, "Let's go to all solar power, even if it costs $0.50 a kilowatt hour instead of $0.05 a kilowatt hour that it costs today to produce power with coal." Those kinds of initiatives, which are pushed irrespective of their economics actually set the movement back.

And so, my focus is make the economics of green work, and then adoption will be rapid and quick. I believe that will happen, and I think that's where we'll be headed. We'll have fuels cheaper than oil - renewable fuels cheaper than oil. We'll have power generation that's cheaper than coal, at least if you include all the costs of coal to accounting of the cost of coal.

And we'll make efficiency initiatives, because you get a rate of return on your investment in efficiency, and that's what I'm hoping we'll get to.

And I'm gonna ask about those predictions again, but earlier this year - I think it was in January in an interview with Reuters, you predicted that Wall Street would wake up, maybe this year or soon, to the risks of co ntinuing to invest in coal. Do you think that the TXU buyout from earlier this year fits into that prediction?

Absolutely. I mean, it's the first example of, "It's a lot easier to accept it than fight it." And not because it's the right thing to do; it's because it's the most economic thing to do. The risk of investment in - I'll call them dirty technologies, is getting so high.

You don't know what legislation would be. How do you make a 50 year investment in an asset saying it's economics, not knowing what the economics are going to be? So you just stay away from those kinds of dirty investments.

If carbon ends up at $60, $80 a ton, and each ton of coal produces three tons of carbon dioxide, you're now talking about coal costing a few hundred dollars a ton effectively. That's a big problem. So what do you do as an investor? You decide not to make the investment, because there's too much risk.

Great. So, I guess I would like to ask what your predictions are. Do you have anything that you'd like to share about where you think we'll be in 18 months, whether in policy, in technology, or - you know, 18 months from now is three months after the next president takes office. What do you think it'll be like?

I think - well, 18 months, I would say two years from now we will believe that there are real and reasonable alternatives to oil. That we will have to take our time scaling, but the technologies will be there, and they will be cheaper than oil, even if you make long term forecasts that have the cost of oil decline to $40 or $50 a barrel.

I have no question, two years from now we will not be debating whether we have an alternative to oil. That's dramatic reduction in carbon - 50, 80 per cent reduction in carbon emissions per mile driven, and that are cheaper per mile driven.

Same thing in electric power, I think we would prove that some of the newer technologies are very, very cost effective. I think wind has already made a stake, but wind is considered a toy, because it's so variable. We'll start to see solutions to the variability of wind, like compressed air storage or other energy storage.

We will also see alternatives like solar terminal technologies that provide reliable power the way the utility would like to contract for power, and be cost effective and close enough to the price of coal there once - one extra puller in the trajectory which say, "Hey, these can be cheaper than coal".

Matthew Wheeland is the managing editor of Greener World Media. This interview originally appeared at Greenbiz.com and as a podcast on GreenBiz Radio.