Biofuels are Back

I’ve been surprised over the past few weeks by the pace of biofuel development. These aren’t breakthroughs that are likely to produce obvious winners in the next few months, but the time line keeps pulling in. There’s a lot of skepticism about this technology, but there was also skepticism for every major tech development of the last three or four decades.

If you were at the Agora Financial Investment Symposium in Vancouver, you may have heard Juan Enriquez announce that Exxon Mobil had given Synthetic Genomics Inc. (SGI) $300 million to work on producing biofuels using algae. SGI is run by Craig Venter, the man who broke the human genome. Exxon is not a company known for wasting money on environmental gestures. The energy company wants and expects that Venter will find a way, using genomics and algae, to produce raw materials for its refineries.

The startup Solazyme, which I’ve written about before, just picked up an additional $57 million in its quest for algal oil. Solazyme is targeting not only fuels, but also oils for cosmetics and the food industry. Solazyme is concentrating on using sugars, instead of sunlight. The company uses biomass and industrial byproducts, including cellulosic materials and waste glycerol, to feed their algae. As a result, they can grow algae in dark tanks, which has obvious advantages.

Then there is the wild card, Joule Biotechnologies. Little is known about this company except that the photosynthetic microorganism it uses to produce energy is not algae. Some are reporting that they are harnessing bacteria, but that is not yet certain. Currently, however, the company claims it can produce fuels competitively when subsidies are factored in. I don’t believe you can or should count on subsidies, but the core technology may be improved to the point that it is honestly profitable…

Fortunes will be made in this space, and we intend to have a piece.

The Daily Reckoning