Are Manufacturers and Investors Looking for the Same Thing From Industrial Biotech?

The morning plenary session at BIO’s World Congress featured Jenny Cross from Mohawk Industries, makers of carpets, and Steven Mirshak of DuPont Tate & Lyle, suppliers of a biobased ingredient for Mohawk, discussing what consumers are looking for and how industrial biotech can meet their needs. Cross noted that their consumer research indicates that the typical consumer is looking for quality and durability, with price and “green” attributes coming second.

One point that Cross emphasized is that the carpet and flooring industry is a mature industry, with established (very old) capital infrastructure and well defined markets. To increase their revenue, the industry can’t raise prices — it must lower costs of production. So industrial biotech applications must fit into existing infrastructure without adding to capital costs.

Interestingly, in the lunch plenary with venture capital investors Michael Curry of Investeco Capital, Kef Kasdin of Battelle Ventures, Bill Lese of Braemar Energy Ventures, and Don Roberts of CIBC, all the speakers reiterated the search for capital-light opportunities. Following the recent economic downturn, venture capitalists are looking for companies with lower capital requirements and lower risks, which means they must have either lower up front costs or shorter timelines to return on the venture investment.

Roberts emphasized that recent IPOs — such as Gevo and Amyris — show good value by keeping capital costs low, ensuring steady low-cost raw material supplies, and planning to reach profitability quickly.

Biofuels Digest, BIO Launch Spring 2011 Bioenergy Business Outlook Survey

Biofuels Digest and the Biotechnology Industry Organization (BIO) invite the industry to take part in the Spring 2011 Bioenergy Business Outlook Survey.

The survey examines growth expectations and opportunities from a company, national and organizational point of view. It also examines the role of research, government policy, finance, and research and market partners in creating opportunities or barriers to the growth of green jobs, energy security and reductions in greenhouse gas emissions.

The survey is open to organizations in all sectors of the industry – including producers, research and teaching organizations, associations, equipment suppliers, offtake partners and suppliers of services to the industry.

Respondents to the 21 question survey will receive a detailed summary of the survey’s findings and commentary on trends from the Biofuels Digest editorial team. Summarized results will be published in Biofuels Digest, but the customized, in-depth summary will be available only to respondents.

The Winter 2010 Bioenergy Business Outlook Survey conducted in December drew responses from companies representing an estimated 4,200 green jobs and more than $3 billion in annual sales. That survey showed that 80 percent of bioenergy executives were more optimistic both about their organization’s prospects for growth and industry growth, than 12 months prior. It also showed that confidence about industry growth prospects had jumped 11 percentage points in the final quarter of 2010.

Follow this link to go straight to the 2011 Spring Bioenergy Business Outlook Survey.

Biofuels Digest Surveys Readers on 2011 Industry Trends

Biofuels Digest, the world’s most widely read biofuels daily, is asking readers to rank the trends that will drive the biofuels and biorefining industry in 2011. Will Congress debate new energy legislation? Which federal agency will support construction of the first commercial advanced biofuel biorefinery, USDA, DOE or DOD? How important will biobased products and renewable chemicals be as advanced biofuels producers look for an economically viable model?

BIO member companies weighed in to suggest the trends. Now, we’re encouraging everyone interested in the industry to read Biofuels Digest and rank the trends they think are most important.

BIO and Biofuels Digest will co-publish the top trends in coming weeks and continue watching throughout the coming year.

Video of Plenary Sessions from BIO’s World Congress

BIO’s World Congress on Industrial Biotechnology held 6 plenary sessions, featuring Agriculture Secretary Tom Vilsack and DOE Asst. Secretary Cathy Zoi. Additionally, a World Economic Forum report on the Future of Industrial Biorefineries, detailing the potential economic contribution that industrial biotechnology can make, was presented by Novozymes CEO Steen Riisgaard. And a survey of the industrial biotech and advanced biofuel industry by McKinsey & Co. took the pulse of executives in the industry.

In the June 28 plenary session, DOE Asst. Sec. Zoi announces funding totaling $24 million for three algae biofuel research consortia.

During the June 29 plenary session, Ag. Sec. Vilsack indicated that the Obama administration supports biofuel development as a means of boosting rural employment and economic development.

Novozymes CEO Riisgaard followed Vilsack, saying that “converting biomass into fuels, energy, and chemicals has the potential to generate upwards of $230 billion to the global economy by 2020.”

Earlier that day, McKinsey & Co.’s Raoul Oberman presented the findings of a survey of the industry, including that more than half of respondents said there is currently insufficient capital to support growth of the industry.

Biofuels Done Right?

Images from the “slow-motion catastrophe” that began last week 50 miles off the coast of Louisiana brought to mind a bit of sarcasm I offered to a colleague almost exactly a year ago. The NRDC was running the below ad on Capitol Hill, saying, “Biofuels. If we’re going to use them, let’s do it right,” with a picture of the deforestation that many assumed would occur from use of biofuels.

My facetious idea was to run a counter ad, with pictures from the Exxon Valdez disaster, asking NRDC if they considered “biofuels not done at all” to be done right. And perhaps that ad could have been rerun on March 31, as the Obama administration announced with purely Orwellian logic that plans for expanding offshore oil drilling were “part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies on homegrown fuels and clean energy.”

Now, of course, 5,000 barrels of oil each day are spilling into the Gulf of Mexico from the ruptured pipes of a deep sea oil well, creating an oil slick covering 400 square miles. While not yet rivaling the Exxon Valdez disaster, where 258,000 barrels leaked, the threat to wildlife and sensitive wetlands still exists. And consider, an estimated 90 rigs drilling in the Gulf of Mexico provide 1.7 million barrels of oil a day, nearly one-third of total US production.

Today, President Obama is touring a POET biorefinery in Missouri and talking about the need for increased biofuel production:

For decades, we’ve talked about how our dependence on oil from other countries threatens our economy. But usually our will to act kind of rises or falls depending on the price at the pump. We talked about how it threatens future generations, even as we witnessed some funny things going on in terms of our climate change, and recognizing the environmental costs of relying on fossil fuels, but, frankly, we always said we’ll get to it tomorrow. We talked about how it threatened our security, but we’ve grown actually more dependent on foreign oil every single year since Richard Nixon started talking about this danger of dependency on foreign oil.”

But of course, cellulosic and advanced biofuel production has fallen short of goals, primarily due to a lack of capital needed for rapid scale up. Investor confidence in the sector was undermined in 2008 and 2009 by a combination of the economic recession, wild volatility in feedstock costs, and predictions of impending doom by opponents of biofuels.

Investor confidence may be slowly recovering, according to recent indications, but the overall mood still remains skeptical. A few of the more choice pronouncements indicate the general mood.

Want to become a millionaire investing in publicly traded advanced biofuel stocks? One way would be to start as a multi-millionaire.”

“Very few investors in any cleantech sector are going to be investing the amounts of capital we saw at the height in 2008,” when venture capitalists were investing in production facilities, says Dallas Kachan, managing director of the Cleantech Group, a research and consulting firm that tracks venture-capital spending in green technology.

Ways and Means Should Include Job Creation of Advanced Biofuels and Bioproducts in Green Jobs Leg

On Wednesday, April 14 the House Ways and Means Committee will hold a hearing on Energy Tax Incentives Driving the Green Job Economy. The focus of the hearing is to examine the effectiveness of current energy tax policy and identify additional steps that the Committee can take to ensure continued job growth in this area while at the same time advancing national energy policy focus on a discussion of current and proposed energy tax incentives. Witnesses for this hearing have not been announced and we do not know how much of the hearing will focus on transportation fuels however, energy tax incentives for biofuels and biobased products should be a significant area of focus for this round of green jobs legislation. These technologies are ready to deploy and create near term job opportunities.

Industrial biotechnology is the key enabling technology for producing biofuels and biobased products like bioplastics and renewable chemicals to aid in reducing our dependence on foreign sources of oil, thereby reducing greenhouse gas emissions. They also have the ability to crate jobs, jobs that are currently moving overseas due to their reliance on petroleum as a feedstock or more favorable economic or political environments.

The United States has invested considerable amounts of taxpayer dollars to try to revive our economy. Too often, though, the resulting jobs are being created overseas, as other countries invest in green technology deployment. As a result, the opportunity to improve our economic competitiveness is lost. The United States is a leader in the research and development of green technologies, but to maintain that lead we must invest in the companies that are putting that green technology to work in our economy. These industries have shed hundreds of thousands of domestic jobs over the past two decades, as petroleum producing countries have attracted more capital investment. For example, U.S. chemical and plastics companies have increased capital investment outside the United States by 32 percent over the past decade, while increasing investment within U.S. borders by only 2 percent.

The Renewable Fuel Standard (RFS) enacted as part of the Energy Independence and Security Act of 2007 sets the minimum level of renewable fuel that must be produced and blended into the US transportation fuel supply at 36 billion gallons by 2022. 21 billion gallons of that requirement must be cellulosic or advanced biofuels. Direct job creation from the advanced and cellulosic biofuels volumes in the RFS could reach 29,000 by 2010, rising to 190,000 by 2022. Total job creation could reach 123,000 in 2010 and 807,000 by 2022. Jobs will be across many sectors of the economy. Some projected job creation sectors are: labor/freight, mixing and blending machine operators, shopping/receiving/traffic clerks, truck drivers, chemical equipment/technicians, chemical plant/system operators/electrical, sales etc.

The Ways and Means Committee can aid in accelerating this job creation by incentivizing biorefinery construction here in the United States. In 2008 Congress enacted a cellulosic biofuels production tax credit and enhanced depreciation for advanced biofuels facilities as part of the 2008 Farm Bill, both of which are scheduled to expire on December 31, 2012. Due to an overall downturn in the worldwide economy, this tax credit has not yet been utilized by cellulosic biofuels producers. This credit needs to be extended now in order to signal to investors that a plant being constructed this year, will have certainty in the availability of that tax credit once the plant begins to produce the advanced biofuel. A tax credit that expires before or shortly after production begins, does not create economic security for a yet to be built advanced biofuel biorefinery looking for funding. Furthermore, capital costs for construction of next generation biorefineries, which utilize renewable biomass to produce next generation biofuels and biobased products, are a substantial barrier to commercialization. Congress should provide an investment tax credit to help accelerate construction of next generation biorefineries and speed deployment of next generation fuels, chemicals and products.

Historically, the U.S. chemicals and plastics industry was the envy of the world. At its peak in the 1950s, the industry was responsible for over 5 million domestic jobs and a $20 billion positive trade balance for the United States. Jobs associated with the industry were typically among the highest paid in U.S. manufacturing. However, the petro-chemicals and plastics industries are now hemorrhaging jobs overseas. Conversely, biobased products and chemicals production, like domestically produced biofuels, will stay in the U.S., in close proximity to their biomass feedstocks. Total US employment in the chemicals industry declined by over 20% in the last two decades and is projected to decrease further. The US is a world leader in industrial biotechnology with a wide range of companies pioneering new, renewable pathways to traditional petroleum-based chemicals and plastics.

The potential job creation from bio-products is immense. Consider that the nascent biobased products industry employed over 5,700 Americans at 159 facilities in 2007 and every new job in the chemical industry creates 5.5 additional jobs elsewhere in the economy. Currently the biobased products portion represents only about 4 percent of all sales for the industry. Congress should create targeted production tax credits that can help them to expand their share of the market and grow additional domestic jobs. With an industry with the potential to grow by over 50% per year, bio-products can form the basis for a strong employment growth engine for the US.

Clearly commercializing the advanced biofuels and biobased products industries is an integral solution to creating high caliber domestic green jobs in the United States that will catapult this country to be a leader in successful high tech, sustainable technologies. BIO will be urging the Ways and Means Committee through written comments to recognize that innovations such as these are some of the most promising sources of green jobs and economic growth for the future.

DOE Awards Grants to Biofuel, Chemical Biorefineries

Last month, Energy Secretary Steven Chu and Agriculture Secretary Tom Vilsack announced 19 biomass projects that would receive renewable energy grants under the American Recovery and Reinvestment Act. The list included 14 pilot, 4 demonstration, and 1 commercial-scale project, receiving a total of $561 million in grants ranging in size from $2.5 million to $81 million. The projects will be located in 15 different states.

Additionally, Vilsack announced a $54.5 million Biorefinery Assistance Program loan guarantee for Sapphire Energy, one of the projects that received a grant to turn algae into jet fuel and diesel. The project will be constructed in Columbus, New Mexico.

Most interesting about the list is that it is not limited to liquid transportation biofuels. Many of the projects will co-produce renewable chemicals — specifically mentioned are plans to produce potassium acetate, ethyl acrylate, and succinic acid.

The grants are intended to underwrite an equal share of private investment in the projects. That may confound the prediction of Seeking Alpha’s Neil Dikeman, who predicts, “The last petal of the last bloom off the biofuel rose falls by the anniversary of Pearl Harbor in 2010.” While small biofuels producers may not have “the horsepower, expertise, or balance sheet” to compete against the oil giants, the production of renewable and specialty chemicals may provide a handhold in the market.

BIO Pacific Rim Summit: Status of Cellulosic Ethanol Commercialization

Qteros, ZeaChem and Verenium presented updates on their efforts to bring three unique cellulosic ethanol processes to commercial status.

Qteros CTO Kevin Gray described how the company’s Q Microbe™ (Clostridium phytofermentans) enables a single step (consolidated bioprocessing) conversion and fermentation process for fuels. This approach can save as much as 40 percent in production costs. Qteros is currently scaling its technology up for a 100 liter laboratory bioreactor.

ZeaChem President and CEO Jim Imbler outlined the challenges facing the industry, which include the need for coherent government policy to help the industry make it through the “Valley of Death,” which he described as the stage between proving that a technology works and attracting enough investment to make it a reality. Raising capital for a first-of-its-kind project is particularly difficult, Imbler noted. Traditional project finance is not available; but companies could move forward with a combination of strategic investors and short-term government support.

Zeachem uses a Clostridium thermoaceticum found in the gut of termites to produce acetic acid, which is then converted to ethyl acetate and ethanol. They are constructing a demonstration-scale plant expected to be online in 2010.

Bill Baum of Verenium then described the status of the company’s joint venture with BP, Vercipia Biofuels, which is building a commercial scale cellulosic biofuel plant in Highlands County, Fla. and seeking a site for a second facility.

An audio recording of the webinar can be downloaded from BIO.org.

Pacific Rim Summit — Biobutanol: Overcoming the Barriers

The biobutanol panel at the 2009 Pacific Rim Summit on Industrial Biotechnology and Bioenergy had three dynamic speakers from the biobutanol industry: Pat Gruber, CEO of Gevo, Inc.; Jay Kouba, CEO of Tetravitae Bioscience and Rick Wilson, CEO of Cobalt Technologies. Besides the individual company presentations the conversation concentrated on technology, risk, barriers and financing on the path to commercialization.

Jay Kouba related to the audience that the business plan with the best technology is often not the one that makes it to commercialization; the path to commercialization is often paved by the plans with the lowest barriers to commercialization.

Pat Gruber of Gevo started the session off by giving background on his company, Gevo Inc., founded in 2005. Gevo’s biobutanol plans center around retrofitting corn ethanol plants to produce isobutanol. The main thing Gevo is concerned with is access to cheap feedstock, they will make their fuel out of whatever is most economically viable, currently sugarcane and grain, but eventually cellulosic feedstocks will be used. Gevo has a 1 million gallon demonstration plant in St. Joseph, Mo. Gevo also has business plans for renewable gasoline, jet fuel and isobutylene for use in such products as rubbers and plastics. These molecules will serve as building blocks for the chemical industry and they are beneficial, because the chemical industry already knows what to do with them. Gevo plans to have a commercial plant (20-50 million gallons per year) operating in 2011.

Tetravitae will be focusing on the chemical industry for their butanol to take advantage of what they see as a weak point in the petrochemical web. They are focusing on finding a low capital route that they can get to market quickly and follow up with improvements, and they see many opportunities with biobutanol for chemicals. Tetravitae will be using a similar business plan to Gevo in retrofitting corn dry mill plants for production. Tetravitae has partnered with the University of Illinois to develop the organism they are using. Mr. Kouba said that their process is already cost competitive and they are planning on having a demonstration facility operating in 2010 and a commercial facility up and running in 2011.

Rick Wilson’s company, Cobalt Technologies, is focusing on commercializing their cellulosic butanol for fuels and chemicals business. The big question for them was, “What’s going to make the biggest difference and be the most cost effective cellulosic biofuel on the market?” The answer was biobutanol. According to Mr. Wilson, the advantage of this renewable fuel is that 15 billion gallons is mandated by the Renewable Fuel Standard, it has an estimated 70 to 90 percent reduction in lifecycle assessment in greenhouse gases versus petroleum, increases fuel efficiency, lowers tailpipe emissions and is compatible with existing fuel infrastructure. Cobalt Technologies is interested in a venture with high margins that requires low capital investments. Rick made the observation that the most important cost for them is the price of the feedstock. Cobalt currently has pilot plants constructed in Colorado and California with a 200,000 gallon per year facility planned for operation in 2011 and a 15 million gallon per year facility planned for 2013.

All of the speakers agreed that access to capital is a barrier to commercialization, and education for the public, the regulatory community and opinion leaders such as Members of Congress on the benefits and technological attributes of biobutanol is a priority. Lively discussion and debate followed during the question and answer portion of the session. Stay tuned as biobutanol moves forward into commercialization for fuels and chemicals.

Webinars for Reporters: Pacific Rim Summit to Host Forums on Algae, Cellulosic Biofuels and Renewable Chemicals

BIO will host three webinars from the Pacific Rim Summit on Industrial Biotechnology and Bioenergy in Honolulu, featuring companies, researchers, and policy makers at the forefront of efforts to commercialize algae applications, cellulosic biofuels, and renewable chemicals.

1.International Developments in Algae Commercialization
Valerie Reed, U.S. Department of Energy;
Patrick McGinn, Institute of Marine Biosciences, National Research Council, Canada;
Ravi Shrivastava, Defence Research Development Organization, India.
Monday Nov. 9, 3:00 p.m. to 4:30 p.m. EST
(12:00 p.m. to 1:30 p.m. PST
10:00 a.m to 11:30 a.m HST)

2.Meeting the Challenges of Commercializing Cellulosic Ethanol
William Baum, Verenium Corporation, http://www.verenium.com;
Kevin Gray, Qteros, http://www.qteros.com;
James Imbler, ZeaChem, Inc., http://www.zeachem.com.
Tuesday Nov. 10, 2:30 p.m. to 4:00 p.m. EST
(11:30 a.m. to 1:00 p.m. PST
9:30 a.m. to 11:00 a.m. HST)

3.Commercialization of Renewable Chemicals
Christophe Schilling, Genomatica, http://www.genomatica.com;
Steven J. Gatto, Myriant Technologies, LLC, http://www.myriant.com;
Bhima Vijayendran, Battelle Memorial Institute, http://www.battelle.org.
Wednesday Nov. 11, 2:00 p.m. to 3:30 p.m. EST
(11:00 a.m. to 12:30 p.m. PST
9:00 a.m to 10:30 a.m HST)

RSVP: A password will be required to participate in each webinar. The webinars will be available at https://biotechnology.webex.com/biotechnology. To reserve space and receive password instructions, please contact Paul Winters, Communications Director, BIO at 202-962-9237 or pwinters@bio.org.
These sessions are presented live from the 2009 Pacific Rim Summit on Industrial Biotechnology and Bioenergy, being held Nov. 8-11, 2009 in Honolulu. The Pacific Rim Summit is the only global conference dedicated to building innovative collaborations in industrial biotechnology across the Pacific. http://www.bio.org/pacrim/.