Biofuels took a step away from the limelight in 2010, replaced by the buzz surrounding electric vehicles. But there were still a variety of policy decisions, and economic milestones that made the sector interesting in 2010.
It’s no secret that the corn ethanol industry is an unsustainable business — economically and environmentally — but yet the industry’s tax credits and import tariffs were once again extended. At the same time cellulosic ethanol, yet again, didn’t meet the EPA’s projections for the biofuel mandate. At the same time, next-gen biofuel firm Amyris debuted on the public markets, and didn’t fare too shabbily. Here’s 2010 in biofuels:
1. Cellulosic ethanol, stalled, again. The Environmental Protection Agency had to once again scale back its biofuel mandates, partly because the EPA found in its final rulemaking that cellulosic ethanol companies in the U.S. would not be able to produce the projected amount. Originally the mandate called for 100 million gallons of cellulosic ethanol to be produced in 2010, but companies have produced basically none. For 2011 the EPA projects that five companies — Range Fuels, DuPont Danisco, Fiberight, KL Energy, and KiOR — will only be able to produce 6 million cellulosic ethanol-equivalent gallons.
2. Will cellulosic ethanol grow in 2012? At the same time that the EPA scaled back the 2011 cellulosic ethanol projects, the fed group said that in 2012 it thought many more companies, including 20 plants, could produce potentially 300 million gallons of cellulosic ethanol in 2012. Is the EPA being misled, yet again, by too-eager, too-ambitious companies? I guess we’ll see in another two years. Remember the EPA did keep beleaguered, infamous Cello Energy in its 2010 cellulosic projections up until quite recently … after it went bankrupt.
3. Waste to biofuel. Is the answer to making biofuels sustainable, trash? I saw an emergence of interest in waste-to-energy operations in 2010. Massive trash company Waste Management invested in cellulosic ethanol startup Enerkem, which gasifies various forms of waste — everything from old telephone poles to mixed municipal garbage — then turns it into syngas and then various fuels. The tiny city of Kristianstad, Sweden has remade itself around extracting biogas from waste, then using that biogas for municipal vehicles. One of the few companies that will produce cellulosic ethanol to meet the EPA mandate is Fiberight, which has a process for separating waste streams and producing biofuels.
4. Biofuel IPOs, not so bad. Given the biofuel market has taken a backseat to EVs, I was surprised by the moderate success of at least one biofuel IPO in 2010. Synthetic biology biofuel company Amyris debuted on the NASDAQ in late September, and though it priced below expectations at $16 per share, its shares jumped to as high as $17.42 on the first day of trading, and are now trading at around $27. Didn’t see that coming, but it’s good news for Amyris’ investors, which include Kleiner Perkins, Khosla Ventures, and Advanced Equities. Gevo, which is backed by Khosla Ventures and Richard Branson’s Virgin Green Fund among others, also filed for a $150 million IPO in August.
5. Crunch time for capital-intensive, next-gen biofuel. Next-gen biofuel companies that aren’t financially solid enough to IPO, but need financing to build plants and commercialize, struggled to raise funding from private investors in 2010, and in 2011, will continue to do so. Synthetic biology biofuel startup LS9 just raised $30 million from BlackRock, and KiOR upped its funding to a whopping $110 million this summer from backers including Khosla Ventures. These types of companies will need a lot of money to commercialize their tech, and if they don’t get it, expect some to go bust in 2011.
6. Corn ethanol still hanging on. Even Al Gore has admitted that supporting corn ethanol was not a good policy, but the corn ethanol lobby still wields power on the Hill. Earlier this month, Obama extended an important tax credit that has been supporting corn ethanol, despite the fact that a good portion of corn ethanol is reportedly being exported outside of the U.S.
7. Khosla as biofuel baron. The venture firm behind a significant portion of next-gen biofuel investments is Khosla Ventures, Vinod Khosla’s fund. Khosla Ventures backed Amyris, Gevo, KiOR, and LS9.
Biofuels have their place, especially as a stopgap fuel source as we gradually wean the world off fossil fuels. Ideally, biofuel crops should be able to grow on marginal land and require little water and fertilizer. If the energy input for a biofuel crop equals or exceeds the energy output potential, it obviously should not be grown. Jatropha is seen to be a potentially good candidate but already controversy surrounds jatropha cultivation in some parts of Africa where it is being planted instead of food crops. There are many pros and cons of biofuels which must be carefully considered in specific circumstances.
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