LS9, Creator of Synthetic Microbes to Make Biofuel, Edges Toward Moment of Truth
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make the same UltraClean diesel that comes out of the California pilot facility, but in 200,000-gallon reactors. Operating at full tilt, this plant has potential to pump out 10 million gallons of diesel a year. If LS9 can achieve that kind of scale, it would be a critical step toward its goal of lowering the cost from about $100 a barrel of fuel to $50 a barrel.
“We are already competitive today with a $100 barrel of oil. For a young company, we’re pretty happy with that,” del Cardayre says. “We’ve been setting some aggressive milestones and making improvements in the productivity. We are on target to the ultimate target, $50 a barrel, without subsidy.”
The Okeechobee plant isn’t ready to do that work just yet. It needs retrofitting, and won’t be ready to start doing demonstration runs until the end of this year, del Cardayre says. But LS9 expects to be ready to start generating revenue from actual fuel produced in Florida next year.
“The real commercial volumes will come in 2012, 2013,” he says.
If LS9 can get its costs that low, and its volume of oil production that high, then suddenly this isn’t really a story about ideas and synthetic biology anymore. It’s more about a potentially big business, in creating renewable hydrocarbons for fuel, plastics, and industrial chemicals.
Partnerships are key to the LS9 strategy. The company thinks of the renewable fuel business as having four key components—feedstock or biomass material, technology, production, and sales and distribution, according to Greg Pal, LS9’s senior director of business development. The startup plans to find partners to supply feedstock. In the beginning, these will be farmers who grow sugar cane, although the company might switch to cellulosic material like switchgrass over time if it can be obtained more cheaply. “We’re feedstock agnostic,” Pal says.
On the other end of the spectrum, LS9 is finding partners to market and distribute the end products like fuel (Chevron), or consumer chemicals (Procter & Gamble). What LS9 wants to retain, its secret sauce, are the engineered microbes that convert the sugar into fuel—the core technology. And, even though this is an expensive proposition, it also wants to control the production of fuels, del Cardayre says.
He didn’t say how much capital this will take, and how many fermentation plants LS9 wants to build around the country. The idea is still obviously a long, long way from fundamentally disrupting the way transportation works in developed countries. The global market for energy and transportation is worth an estimated $7 trillion. If LS9’s big fermentation plant in Florida can prove that it remains as efficient at large scale as it is now at 1,000 liters—which would be a significant feat of engineering—it will still only provide a tiny portion of the supply for even the state of Florida’s diesel needs.
But that’s the plan, to get into production. LS9’s CEO, Bill Haywood, has loads of experience at oilmaker Tesoro in building up production facilities, getting them started, and running them efficiently. The company isn’t asking anybody to change the car they drive, the station they fill up at, or the fuel they put in their tank. To the consumer, the only major difference is that the fuel comes from a renewable source. There will probably be publicity stunts or displays of political theater, showing renewable fuel in jets or race cars, which can be good for raising money. LS9, like most biofuel companies, is also going to take advantage of government tax breaks and subsidies whenever and wherever it can. But the real proof of whether LS9 will make a difference, R&D chief del Cardayre says, will be when big customer orders start coming in.
“It’s when your big customer says ‘We like your material, and we’ll buy as much of it as you can make,'” del Cardayre says. “That’s when you know.”