Big Energy Collaborations Seen to Jump-Start Emerging Biofuels Technologies

11/19/09Follow @bvbigelow

As startups developing next-generation biofuels emerge in San Diego, Boston, and elsewhere, a business model for rapidly expanding to commercial-scale operations already can be found in the biotech industry, experts said yesterday. The premise of presentations organized by Biocom, San Diego’s life sciences industry group, is that collaborations being formed between biofuel startups and big energy are comparable to the partnerships formed between biotech startups and big pharmaceutical companies.

Biofuels development partnerships will be crucial to meeting renewable fuel standards that the federal government set in the Energy Independence and Security Act of 2007. Wain Fishburn, a founding partner of the Cooley Godward law firm’s San Diego office, said the standards require the U.S. biofuels industry to increase its production fourfold—from 9 billion gallons in 2008 to 36 billion gallons in 2022. Fishburn, who introduced the speakers at the Biocom event, said the ability to meet the federal goal depends on a variety of factors, including the ability to lower the cost of biofuels to be competitive with petroleum-based crude, and the scalability of feedstock, production facilities, distribution, and related infrastructure.

But what it really comes down to, as Verenium (NASDAQ: VRNM) executive William Baum told the audience, is capital.

Baum, who became Cambridge, MA-based Verenium’s executive vice president of business development in 2007 (following the 2006 merger of San Diego’s Diversa and Cambridge’s Celunol) said the need for capital was the theme he heard “over and over again” during a recent meeting that focused on the biofuels industry. “We’ve got hundreds of biofuel companies that are trying to get to the next stage. If you don’t have a big brother with deep pockets, like a BP, Exxon, Shell, or a Chevron, it’s going to be very difficult.”

A number of partnerships already have been established between biofuels startups and major energy conglomerates, Fishburn noted. He listed the following collaborations:

—BP, the London-based global energy conglomerate, has formed two strategic partnerships with Verenium, which has been developing technology to produce cellulosic ethanol using proprietary microbes to accelerate the breakdown of non-edible, high-cellulose plant material into ethanol. Baum described the first collaboration, announced in August 2008, as a technology joint venture for IP. (BP agreed to put up $90 million to develop “low-cost, environmentally sound cellulosic ethanol production facilities in the United States.”) Through a second deal announced nine months ago, BP agreed to provide an additional $45 million and to form a … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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