SAUSALITO, Calif. -- Computer companies initially made everything they needed – chips, software, chassis, cooling systems. Gradually, the business went horizontal: some made chips, others went into software and others just concentrated on equipment. The same is going to happen in biofuels, Neal Gutterson, CEO of Mendel Biotechnology told me during a break at the GoingGreen conference taking place in Sausalito. Right now, a lot of biofuel startups are growing their own feedstocks, genetically optimizing microbes for their feedstocks into oil, harvesting oil, and even refining it. You can't be an expert at everything. Thus, the biotechnologists who know how to optimize bacteria will likely get out of the feedstock and refining part of the business as time goes on. It's something to watch out for. This, admittedly, also suits Mendel's plans. The company specializes in optimizing feedstocks like grasses for fuel consumption. In a sense, the company is the farm of the 21st Century, specializing in raising inedible grasses for industrial use. (Great name too. Just think if they every merged with Gregor Technologies.) The company right now concentrates on making feedstock for the liquid biofuels for transportation but will soon move into the market for making fuel for stationary biogas digesters and biofuel pellet stoves. How come they didn't start with stationary biofuel furnaces? Approximately 20,000 biofuel burners get sold in Europe a year. It's because the stationary applications didn't look as appealing a few years ago as they do now, he explained. Coal and natural gas cost less than it does now and there was tremendous buzz around biofuels. I also asked him whether modern farmers like Mendel need to adjust their crops to suit the microbes or whether the microbe breeders have to adjust the genetic code of their bugs to suit the feedstock. There will likely be some variation in feedstocks to suit different breeds of bugs, but most of the genetic experimentation will take place in the microbes. It's easier to concoct new generations of genetically distinct microbes.

SAUSALITO, Calif. -- Solar companies aren't the only ones raking in the millions. Coskata, a company that wants to transform trash and old cellulosic vegetable matter into ethanol, is a few weeks away from closing a third round of funding, said CEO Bill Roe at the GoingGreen conference taking place here. He didn't say how large the round would be, but big would be a good guess. Ethanol plants that can produce 100 million gallons a year are, in fuel industry terms, commercial demonstration plants and they cost tens of millions. Coskata is currently building a demonstration plant in Pennsylvania (a $25 million construction job.) The company hopes it is operational by next March or April, Coe said. Full-scale production plants cost even more. Some cellulosic ethanol companies have already raised $100 million in grants and VC funds. No one is yet producing cellulosic ethanol in large, commercial quantities. Over the next few decades, fuel companies will have to build hundreds of biofuel refineries, he said. It is going to be one monstrous construction job. In March, the company announced a second round of $19.5 million in funding. General Motors is an investor. (GM also has invested in Mascoma, another cellulosic ethanol maker.) Coskata makes fuel by combining biological processes (i.e., using bacteria) and thermochemical processes. In that regard, it is similar to ZeaChem, which combines chemical and biological processes. Many other companies follow either a chemical or biological path. Interesting side note: Coe said that producing a gallon of corn ethanol takes about three to five gallons. Coskata only needs a little less than a gallon of water. Coskata's process, however, releases water when it dries plant matter. Thus, the company will likely become a negative water user, producing more than it uses, he said.

Microbes have been enlisted to make cheese, alcohol, medicine and fuel. Genomatica is exploiting them to make industrial chemicals. The San Diego-based company, which for years sold molecular modeling software, has devised a way to feed raw glucose to genetically-enhanced microbes and get a chemical substance out the other end that is a precursor to BDO, an industrial substance used in Spandex, air bags, bumpers, etc. "Three billion pounds of BDO are sold a year," said Christopher Gann, CEO of the company. The biologically produced BDO is chemically identical to regular BDO, but it costs far less to produce and far less energy gets consumed in the manufacturing process, he added. Making regular BDO involves cooking up several different chemical intermediates at high temperatures. Biological BDO requires genetically enhanced microbes (E. coli by the way) and an environment that allows them to grow and breed. The reaction takes place at normal air pressures and requires only slightly higher-than-normal room temperatures. Even if oil falls to $50 a barrel, he says Genomatica can be competitive with traditional BDO. Gann added that Genomatica has identified seven other chemicals as potential markets. He wouldn't tell me what they are, but said if it's a molecule that has nitrogen, oxygen, carbon, or hydrogen and no metals like sodium, the company might be able to devise a bug to make it. The company first finds a chemical to replicate biologically, and then concocts a genetic pathway in a microbe to make it. Industrial microbiology began to gain momentum a few years ago. Historically, microbiologists concentrated on food or pharmaceuticals. Exploiting bugs for other purposes, though, makes a lot of sense. For one thing, you don't have to worry about FDA testing. The metabolic process is also quite complex, allowing a company to build complex molecules comparatively quickly and with little energy. There are a whole slew of companies (Mascoma, Amyris) out there trying to harness the power of microbes to make ethanol, synthetic petroleum, butanol, biodiesel or other fuels. At the University of College Dublin, scientists are going to spin out a company in which microbes make biodegradable plastic. Others interesting companies include Cambrios (industrial chemicals) and Microgy (microbes for turning manure into fuel.) Genomatica is particularly interesting in what it is not doing. First, it doesn't break down plant matter into sugar with microbes. It just feeds them sugar. That takes a major task off of the company's plate. Second, it isn't aiming for fuel. It is looking only at industrial chemicals, which is a broad, and often under served, market. Third, it is skipping synthetic biology. Some companies are coming up with interesting metabolic pathways and then reproducing that pathway synthetically in the lab. It's biology without the critters. Amyris specializes in this. While there are advantages to this process, it also adds a layer of complexity. We shall see which method works best as the years go on. But here's something to watch out for. Genomatica won't make and sell chemical intermediates. Instead, it will license the process. Licensing allows a company to avoid building plants and massive sales units. However, large companies are often reluctant to license. In the chip industry, the rule of thumb is that you can't license your product until you win a huge, multimillion dollar verdict in court. Then everyone will stop copying you. Pharma companies will license, but it's a bit of an exception. Gann said that chemical companies with experience in biotech will likely be amenable to licensing. By the end of next year, Genomatica – which has received money from Draper, FIsher Jurvetson and Mohr Davidow Ventures – hopes to have a prototyping lab and some licensing deals. Gann will also speak this week at Going Green, a green conference taking place in the Bay Area.

BrightSource Energy is one of the more interesting and successful solar startups of the last few years, and we’ve covered them extensively at Greentech Media.  (They’re actually the revived Luz, a pioneering Israeli solar thermal company, but it was the recent VC funding and support that helped get them back on track.)

• The company is one of our top ten startups.

• We’ve covered BrightSource’s brilliant success in winning a huge PG&E contract.

• We’ve covered the company’s recent $115 million VC funding round.

• And here’s a link to news of BrightSource’s opening of a Solar Energy Development Center in Israel, an operational solar field that will lets the company test equipment and materials as well as construction and operating methods.

BrightSource is a solar thermal company that uses a heliostat field/power tower architecture (as opposed to a parabolic trough or Stirling engine design). Like any solar thermal technology driving a steam turbine they need direct uninterrupted sunshine preferably at altitude, access to water, and access to transmission lines. Charles Ricker, BrightSource’s Senior VP spoke at the Palo Alto Research Center (PARC) last Wednesday night at an SVPVS event and provided some facts and figures about the firm:

• Their smaller heliostat mirrors made from flat, white glass, by virtue of their size, requires just a 6â€? diameter pipe driven into the ground as a mount, rather than lots of concrete and steel.

• They anticipate an uptime of about 350 days per year.

• Historically, mirror loss from the elements is less than 0.3 percent.

• It takes eight acres to produce 1MW.

• Concentration is 500 suns.

• They have about 30 FT employees in their Oakland, Calif. offices and about 80 FT employees at their Luz II subsidiary in Israel.

• Vantage Point Venture Partners “dramatically increased their ownership share in the recent C round.â€?

Mr. Ricker then went on to witheringly describe how the U.S.’s lack of a cohesive energy policy effectively defines our energy policy. The Reality of the Current U.S. Energy Policy, According to Mr. Ricker Every day:

• We buy 20 million barrels of oil

• We borrow $2 billion from competitive countries (e.g., China)

• We pay $2 billion to unfriendly countries (e.g., Russia)

• We consume everything we’ve bought

This results in our:

• Owing $2 billion we don’t know how to repay

• Incurring $10 million of additional recurring interest

Every year we borrow $750 billion to buy oil, which is:

• Equivalent to 1.5 times the U.S. military budget

• Equivalent to 1.5 times the annual cost of Social Security

• Equivalent to 2 times the annual cost of medicine

All the RNC chants of “Drill Baby Drill� won’t change that reality. We need more renewables online and we need a lot more companies like BrightSource.