October 8, 2009

Power Plays

Biofuel's New Crop

There has been a resurgence of investment interest in the U.S. biofuel industry focused on technologies that use algae to make fuel.

The appeal of algae is that it can potentially produce fuel without diverting food crops or large swathes of land. Ethanol derived from corn has been blamed by some for driving up food prices, while large-scale production of cellulosic ethanol would require cultivation of plants such as switchgrass that are grown only in small amounts now.

When exposed to light and carbon-dioxide, pools of algae produce lipids that can be refined into oil. The algae consumes the carbon-dioxide during the process, scoring a double hit for protecting the environment.

Drawn by that potential, Exxon Mobil Corp. in July announced it was investing $600 million in a partnership with Synthetic Genomics Inc. of La Jolla, Calif., to develop commercially viable biofuels from algae. That followed an announcement by Dow Chemical Co. in June that it was teaming up with Algenol Biofuels Inc. of Bonita Springs, Fla., to develop a $50 million, algae-to-fuel pilot-scale plant. Also in June, Solazyme Inc., of South San Francisco, Calif., said it raised $57 million in a Series C funding round aimed at bringing its algae-based biotechnology to commercialization.

The technologies used by these start-ups are similar but not the same.

Solazyme has developed a process for turning algae into oil for biofuels without sunlight. It was able to attract investors by demonstrating its product can meet fuel specifications for diesel and jet fuel without being blended with other petroleum products, says Harrison Dillon, president, chief technology officer and company cofounder. "We're the only microbial next-generation biofuel company that has road-tested in an engine an unblended fuel," he says.

Among the firms investing in Solazyme are Braemar Energy Ventures, Lightspeed Venture Partners, Vantage Point Venture Partners, The Roda Group, Harris & Harris Group Inc., and company Chairman Jerry Fiddler.

SunEco Energy, meanwhile, says the technology it uses to extract oil from algae doesn't involve genetic engineering, allowing to keep costs low. "We can be competitive at $20-a-barrel" for crude oil, says Hoyt Isom, chief information officer. The Chino, Calif., firm is shunning venture capital and raising money from high net-worth individuals instead for a plant it says will produce 14.6 million gallons of crude algae oil per year. SunEco also has signed a cooperation agreement with J.B. Hunt Transport Services Inc. that could result in the transportation company becoming a buyer of SunEco's fuel.

Joule Biotechnologies Inc., which just emerged from stealth mode, says it will produce its first ethanol from a pilot plant next year. The Cambridge, Mass.-based firm, backed by its founders and Flagship Ventures, aims to create transportation fuels and chemicals out of a synthetic organism similar to algae that reacts when exposed to sunlight and CO2. Joule's process can yield 20,000 gallons of ethanol per acre per year at a cost of around $50 a barrel, including existing subsidies, says Chief Executive Bill Sims.

Despite the funding influx, most algae-oil firms have a long way to go before attaining large-scale production of their product.

Emil Jacobs, vice president of research and development for Exxon Mobil Research & Engineering Co., says it could be five to 10 years before his company's partnership with Synthetic Genomics begins production from commercial-size test plants.

Leading the Charge

When Ford Motor Co. rolls out its electric vehicles next year it will need a charging network to support them, so the Detroit auto maker and a group of utilities applied for U.S. Department of Energy funding to build and test the necessary infrastructure.

In early August, Ford was awarded $30 million under a $400 million grant program set up to support the development of an electric-vehicle market through technology demonstration and education projects.

Ford and its partners, 15 utilities covering 55 million customers, proposed deploying as many as 740 vehicles in four different segments—small cars, small sport utility vehicles, small business vans and large vans—with the objective of assessing and building infrastructure for the vehicles and ensuring grid connectivity.

Ford is now working with the Department of Energy and its partners to determine the size and scope of the project based on the grant it was awarded.

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