Biofuels: The Wild West of Today, As a New Industry Takes Shape

9/11/08Follow @xconomy

There was a sense of urgency in the air yesterday in Vancouver, B.C., about biofuels. It’s no surprise, with gas at $4 a gallon, that some smart people have gotten motivated to come up with alternatives. So I hopped in a rented 2008 Toyota Yaris (estimated 36 highway mpg) and joined about 450 people at the Biotechnology Industry Organization’s Pacific Rim Summit on Industrial Biotechnology and Bioenergy, at the Westin Bayshore.

As a relatively new observer to this scene, it felt like one of those confusing moments in history where there are certainly big opportunities, but only a handful of people who can clearly see what they are and how to capture them. Seattle-based Targeted Growth was one of the few companies I heard from that said it had a product ready for commercialization—a genetically modified camelina seed to produce biodiesel in high yields. One panelist summed up the state of the industry pretty well:

“I’ve been working in this industry for 15 to 20 years, and the level of interest 10 years ago was zero when we had $10 per barrel oil,” said Tim Eggeman, founder of Lakewood, CO-based Zeachem, a cellulosic ethanol company. “After 9/11, as energy prices were going up, there was a lot of talk, talk, talk. It’s only now getting to the point where people are putting real money into the industry. It’s kind of like the Wild West of the 1800s. Now’s the time to find your partners.”

There were plenty of eye-opening charts, and lots of statistics to absorb about the opportunities. Among the more memorable:

—In British Columbia alone, an area equal to the size of Denmark and Portugal is full of dead and dying trees that have been infested with the mountain pine beetle, creating an enormous supply of potential raw material for cellulosic ethanol. That was the word from Jack Saddler, a professor of forest products biotechnology at the University of British Columbia, during the lunch plenary session. “We have some of the cheapest biomass available anywhere,” he said.

—An estimated 1 billion acres of agricultural land has been abandoned around the world, which means there doesn’t need to be a conflict between using land for fuel or for food, according to Chris Somerville, director of the Energy Biosciences Institute at the University of California, Berkeley. “That’s prime land for our purposes,” he said during a plenary session.

—The U.S. Energy Independence and Security Act of 2007 calls for production of 36 billion gallons of renewable fuel by 2022, with 16 billion of those gallons coming from cellulosic biofuel derived from “renewable biomass,” said C. Scott Miller, a Los Angeles-based consultant with Price Biostock. “Where are the billions of tons of biomass to supply that going to come from?” he asked. One of the simpler sources could come from hurricane debris in the southeastern U.S., or from thinning federal forest lands, an idea sure to stir up a debate with environmentalists. Other speakers talked at length about the benefits of miscanthus or sorghum as energy crops, but this idea is clearly still a long way from becoming reality.

One final note: Industrial biotech isn’t monolithic, and it’s not all grand visions of turning the hydrocarbon economy into a biofuel economy. During lunch, I learned about one practical idea in the works from Andrew Haughian of Vancouver-based Pangaea Ventures. He’s excited about Switch Materials, a Vancouver company that spun out of Simon Fraser University to develop smart windows for office buildings. The windows have organic compounds that are transparent in low-light conditions, and turn darker when stimulated with solar energy, sort of like Transitions lenses on eyeglasses. The product shouldn’t cost much more than regular windows, but could save office buildings a bundle on air-conditioning, especially in places like the southern U.S. “We think the price will be within what it takes to get mass adoption of smart windows,” he says.

I couldn’t stay for the whole conference, but my sense is that people are still struggling hard to form a new industry that has major challenges in terms of technology, logistics, and the need to raise huge amounts of capital. One quote from Winston Churchill, paraphrased by consultant Don O’Connor, stuck with me as good advice when trying to cut through all the fog about biofuels: “Never has so much been written, by so many, who know so little.” Hopefully in a few more years, we’ll know a lot more.

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