The Biofuel Business Is Going Horizontal

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.