By PUI-WING TAM

Silicon Valley is trying to become a hub for clean technology—companies that specialize in alternative energy or energy-efficient products. Helping to lead the shift are local venture capitalists such as Vinod Khosla.

The 55-year-old, who co-founded Sun Microsystems Inc. and was a partner at venture-capital firm Kleiner Perkins Caufield & Byers, now runs his own firm investing in clean-tech companies. Investor Vinod Khosla in October 2008. Mr. Khosla is helping to lead a Silicon Valley shift toward clean tech.

Last September, Mr. Khosla announced that his firm, Khosla Ventures, had raised two new funds that totaled more than $1 billion, giving him ammunition to nurture clean-technology start-ups. In a recent conversation at his offices on Sand Hill Road in Menlo Park—widely known as venturecapital row—Mr. Khosla discussed the competition to be the nation’s clean-tech center, how Silicon Valley stacks up in that race, and what green products he uses himself.

WSJ: Is Silicon Valley really emerging as the nation’s clean-tech center?

Mr. Khosla: Definitely what Silicon Valley is doing is emerging as a leader in this new area, whether you call it clean tech or green tech. The reason is very simple: Silicon Valley is really an innovation center and is the area for innovation shifts.

WSJ: What factors are converging to make Silicon Valley a clean-tech hub?

Mr. Khosla: It’s a lot of different things. It’s an ecosystem and a culture. If you get an opportunity, there’s people around here who are willing to support you. Investors like ourselves will take radical risks. We’ll invest in projects that our consultants tell us have a 90% chance of failure. There’s also a real willingness in the Valley for things to fail. [People have] big, hairy, audacious goals. And it’s OK to fail. In most parts of the world, people are afraid to fail. The willingness to fail gives us the ability to succeed.

WSJ: What places are giving Silicon Valley a run for its money in becoming a clean-tech center?

Mr. Khosla: Clean tech is widely dispersed, more so than information technology or [the] mobile orInternet [industries].

First Solar (a publicly listed thin-film solar maker headquartered in Tempe, Ariz.) is obviously not here.But I would say much of the interesting innovation [in solar] is happening in Silicon Valley.

We do have a company in New Zealand of all places, producing biofuels. These unusual intersections happen.

I’d say biofuels (companies that derive fuels from biological materials such as corn and sugarcane) is least concentrated [in Silicon Valley]. Solar is relatively focused around the silicon skill set, which happens to be in the Valley. I think you’ll see a lot of battery innovation in the Valley.

WSJ: How much of a role can venture capitalists play in clean tech? Few venture capitalists know the science behind energy, for instance.

Mr. Khosla: I haven’t heard the critics but in that case, the VCs will lose their money. Why are critics worried about it?

WSJ: Is clean tech a sustainable industry for Silicon Valley? The companies haven’t delivered big returns in public offerings or acquisitions.

Mr. Khosla: Nobody was talking about clean tech in 2006. So we’re three years into a 10-year cycle and people start asking dumb questions like liquidating the [clean-tech start-ups]. More of our clean-tech companies are closer to IPO than our Internet and chip companies are.

WSJ: Do you use clean technology in your own life?

Mr. Khosla: Yes and no. My view of clean is that … everything has to make economic sense. That’s one of the problems with electric cars. They’re just not economic. Do I drive a hybrid? Yeah, but I drive it because a Lexus hybrid is a pretty neat car. Do I put solar panels on my roof? No. Why? Because the economics of solar don’t work. I won’t do irrational things just to be green. We do green a disservice when we subsidize it so uneconomic technologies come into the market.

Write to Pui-Wing Tam at pui-wing.tam@wsj.com