The potential for clean-tech innovation is so great you might be wise to expect the unexpected. What about an energy glut?

This was the prediction of venture capitalist Vinod Khosla during a panel discussion Tuesday (first from left; mustache now removed). The event at Google's Silicon Valley campus was held to discuss the implications of California's Proposition 23, an attempt to rollback the state's ambitious climate legislation.

But Khosla stole the show with his outlook for the clean-tech innovation and energy use. "In 10 to 15 years, we will be shutting down (power) plants" because of an excess of electricity in this country, Khosla said. There is an "infinite" opportunity for technological innovation.

Such an upbeat outlook is no surprise from a man whose venture firm, Khosla Ventures, is an active cleantech investor. Khosla said his firm is backing companies that hope to cut energy use in lighting and data center server racks by 80 percent.

He is equally upbeat about prospects for the United States over China -- not always the prevailing wisdom these days. "I won't say China is winning the cleantech race," he says. "But they are clearly paying a lot more attention to the race."

Here are several other observations from the panel:

*Asked if there was an advantage to creating companies in Silicon Valley rather than China, Khosla was emphatic. "No question about it." The people are here. The markets are here.

*Nuclear power no longer has an advantage over renewables, he added. There hasn't been a nuclear plant build in recent years that can beat $7,000 a kilowatt. That makes wind and solar (in some parts of the world) competitive, he says.

*Proposition 23 is a threat because it will kill the clean-energy markets that California's A.B. 32 created. Both Khosla and Google Green Energy Czar William Wiehl concur on this point. Proposition 23, which will go to the ballot in November, would suspend A.B. 32 until the state's unemployment rate drops to 5.5 percent or less for four consecutive quarters. Texas oil companies Valero and Tesoro back the measure. A.B. 32 sets reporting guidelines for polluters, establishes a statewide limit for carbon, and guides emissions back to 1990 levels by 2020.

*A.B. 32 has helped create 500,000 cleantech jobs in California, Wiehl says.

*Google, adds Wiehl, has made strides with energy efficiency. The company builds its own data centers and servers. As a result, data center energy use is half of what it would be if the company followed industry-standard best practices, he said.

*As to the next Google -- "There is no doubt in my mind we will see 10 of these" in cleantech, says Khosla. "Today, California has the pole position to win that race."

Tags: biofuels, china, electricity, google, green energy, khosla, khosla ventures, solar, storage, u.s.