Technology innovation and VC investment tends to come in stages.
In the biofuels realm, 2006/2007 was the corn- and food-based ethanol stage. That has not worked out too well for VC investors or corn-farmers who dabbled in ethanol factories. It has been a boon for bankruptcy lawyers, though. Corn or soybeans or food in general as a fuel feedstock plays into all sorts of issues such as fuel versus food, subsidy and tariff conflicts, the sheer commodity-nature of foodstuffs, and the vagaries of weather. According to Joshua Kagan of GTM Research, the U.S. already appropriates 30% of its corn supply to displace about 6% of its gasoline consumption. That's clearly not sustainable.
The years 2007/2008 were the cellulosic biofuels phase. That's somewhat in remission, with occasional VC outbreaks.
And 2008 to the present has been the era of algae biofuels.
Last summer saw a surge of investment in algae-based biofuel technologies. Synthetic Genomics alone received $300 million from Exxon. Using a variety of approaches, Sapphire, Aurora, Solazyme and Amyris all received significant funding to go after the elusive trick of coaxing biofuels from algae. Greentech Media has reported extensively on the technology, economics and financing in this sector:
- Algae Biodiesel: It's $33 a Gallon
- Algae Startup #57: Is Heat the Key to Success in Algae Fuel
- Exxon's $300M Investment in Synthetic Genomics
- VC Investment in Biofuels
- The Elephant in the Room: Algenol
- Open Ponds vs Closed Bioreactors
We've covered at length the variety of technologies, tactics and life forms that are being brought to bear on this immense challenge.
The algae hype-machine has quieted down somewhat as scientists, technologists, and business people have started working on the problem and apparently locked the marcom folks in the broom closet (except maybe for the strange case of Amyris and their IPO filing).
Despite the deluge of press releases still received at Greentech Media's editorial desk insisting that algal biofuels are imminent, the fact remains that no company has yet figured out how to produce algal biofuels consistently, at scale and at pump parity. It's possible, and I personally believe it's achievable -- but it could take a lot longer and cost a lot more than anticipated.
Joshua Kagan of Greentech Media Research reports on Third and Fourth Generation Biofuels and provides some analysis in the still-nascent field.
Here are some of the key points covered in the report:
--A number of important technologies that produce "drop-in" fuels with the same chemical characteristics of petroleum are on the brink of commercialization.
--"Third-generation" algae biofuels and "fourth-generation" biofuels, created using petroleum-like hydroprocessing, advanced biochemistry, or revolutionary processes like Joule’s "solar-to-fuel" method, defy any other category of biofuels. The opportunities that "advanced biofuels" present are greatly misunderstood by both policymakers and financiers. While corn, sugar, and cellulosic ethanol and biodiesel are what most people think about when they hear the term "biofuel," none of these fuels are suitable candidates to ever wean society off of its addiction to oil.
--Given that 2 billion people in "Chindia" are currently undergoing their own industrial revolutions, combined with global population increases of 80M per year and increases in standards of living for non-OECD populations, we forecast global petroleum consumption to more than offset gains in corporate mileage efficiency and electrification of a portion of the transportation fleet. Combined with the fact that supplies of easily accessible "light sweet" crude are declining and oil prices are back above $70/bbl, the national security, environmental, and economic consequences of global dependence upon petroleum as a primary energy source is again at the forefront of policy discussions.
--We conclude that by 2022, biofuels will account for almost 8% of global oil volumes used for transportation, representing a multi-hundred-billion-dollar market.
A recent Bloomberg article by Kambiz Foroohar discusses Solazyme, Sapphire, Synthetic Genomics and quotes our gloriously curmudgeonly friend John Benemann, a biofuels consultant, as saying, “I don’t know of an oil company that is quaking in their boots worried about algae.”
And Vinod Khosla of Khosla Ventures, who chases black swans in battery, carbon capture, and solar technologies and places a lot of small bets on wild greentech ideas, was quoted as saying, “We looked at two dozen algae business plans and have not found one that was a viable plan.”
Khosla has been wrong before and John Benneman could be overly pessimistic on algae commercialization, despite his NREL credentials.
Let's hope so.