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The Algae Fuel Backlash: Here Come the Skeptics

Jennifer Kho — Fri, 25 Sep 2009 19:58:35 +0000

Judging from the flurry of venture-capital deals, big oil company investments, and attention from politicians on startups creating biofuels from algae, it might seem like the world has fallen in love with the technology to power vehicles with pond scum. But after all of the algae euphoria this summer, we’ve started seeing a few signs of an algae fuel backlash, with several prominent investors publicly questioning the economics of algae fuel.

At the AlwaysOn’s GoingGreen conference, outspoken cleantech investor Vinod Khosla said his firm has aggressively been looking at algae technologies, but hasn’t found one viable plan after looking at “maybe two dozen.” “The economics of algae don’t seem to work,” he said.
(You can watch the video here by clicking on “Renewables at Scale.”)

In contrast, Khosla has been investing millions into biofuels made from cellulosic biomass. His sentiments also seem to be a change from the rhetoric just last year, when Khosla said at the Algae Biomass Summit that algae could “be a solution” and play a significant role in replacing oil.

Khosla isn’t the only one warning against too much optimism where algae fuel is concerned. At the EmTech conference this week, Jim Matheson, a general partner at Flagship Ventures, said he doesn’t think the costs calculate out either. “We just don’t believe in the economics,” he said, and added that he isn’t sure that “algae is going to come down the cost curve,” according to Technology Review.

At the same event, Technology Review also reported that David Eyton, head of research and technology at BP, which has invested in algae startups Synthetic Genomics and Martek Biosciences, questioned the viability of different types of algae technology, and more specifically the kind that Exxon Mobil recently invested $600 million in. “We don’t think that will ever reach the kind of cost or supply that we think people are prepared to pay,” he said.

Is the algae-fuel backlash snowballing into a full-on trend? Well, algae has always had its skeptics. As far back as three years ago, companies like Imperium Renewables were stating that producing significant amounts of algae for biodiesel was further away than cellulosic ethanol. “It’s not about whether algae can produce oil, but about whether it can meet a standard quantity needed for fuel,” then-CEO Martin Tobias said at ThinkEquity’s Greentech Summit in San Francisco back then. “It’s going to take longer than anyone wants to say at an investor’s conference.”

Nobody so far has been able to produce algae cost competitively in large quantities, and – in spite of all the promising ideas — it’s still unclear whether that will happen. Matt Horton, CEO of Propel and a principal at @Ventures, said his view of algae hasn’t changed in the last few years. “It’s one of the most promising opportunities in the liquid fuels arena, but the timelines for true commercialization are still years down the road,” he said. It’s tough for a company like Propel to work with algae companies at this point because it’s difficult to predict – with any certainty – when algae-based fuels might realistically be delivered.

When a technology like algae fuel gets as much attention as it has this summer — with politicians visiting algae fuel startups on a weekly basis — it becomes an easy target for the skeptics. What the industry needs right now is less hype and more proof that the pond scum can really come down in cost to reach mass commercialization.

Image courtesy of NREL.

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Waiting for Next-Gen Ethanol in 2009? Forget It

Katie Fehrenbacher — Thu, 26 Mar 2009 18:49:38 +0000

In the summer of 2008, 2009 looked like it could be a breakout year for the next generation of ethanol. There were dozens of companies racing to be the first to churn out cellulosic ethanol made from non-food crops and plant waste from pilot and even commercial-scale plants. Well, that was before the credit crunch hit and investors starting to close their wallets. Now there are just a couple cellulosic ethanol makers that have started producing the next-gen fuel on a pilot scale, and plans for commercial-scale have been largely been pushed from 2009 into 2010. And who knows if those deadlines will be met if we’re still deep in the downturn?

Range Fuel’s CEO David Aldous confirmed with us last week that the startup, which uses a thermochemical process to turn biomass into synthetic gas and then fuel, doesn’t expect its commercial-scale plant in Soperton, Ga., to start producing fuel well into 2010. The plant is supposed to be able to scale up to 100 million gallons per year and was originally planned to produce fuel in 2009. Range Fuels was an early mover in the space, and is still a little better off than some, having snagged an $80 million loan guarantee from the Department of Agriculture under the 2008 Farm Bill to complete construction of the commercial plant. Aldous says Range Fuels is also looking to get in on the next round of loan guarantees that the DOE is starting to hand out now.

Verenium, a cellulosic ethanol maker in Cambridge, Mass., found an important partner in UK oil giant BP, but is still struggling financially. The company confirmed with us that it is delaying starting construction on its first commercial-scale plant — a 36 million gallon-per-year, $300 million facility in Highlands County, Fla. — until at least 2010. And earlier this month an outside auditor said that Verenium might have to cease operations if it doesn’t raise more capital. The company needs at least $300 million to complete its JV with BP, according to Forbes.

Coskata, a cellulosic ethanol maker that created a lot of buzz because it’s backed by GM and Vinod Khosla, isn’t faring much better. Coskata CEO Bill Roe said this month that the company is now waiting for a loan guarantee from the Department of Energy to build its first commercial-scale plant and that it’s on hold until then. Coskata was previously hoping to break ground on the plant — expected to produce 50 million-100 million gallons of ethanol annually — this year and to complete the factory in late 2010 or early 2011.

As former CEO of biodiesel maker Imperium Renewables, Martin Tobias, explained at Earth2Tech’s Green:Net conference this week, when investors are looking at hundreds of millions in commitments to just get to the first stage of production, oftentimes that’s the first commitment they shy away from in a downturn. He should know, as Imperium raised hundreds of millions and was all set to IPO before the markets started to look shaky and the company pulled back. It puts a company in a difficult position when you’re halfway through a $100 million-buildout, and you need another couple hundred million to complete it, and the wind just gets knocked out of the market, Tobias said.

The same thing is happening to cellulosic ethanol, which often involves even more capital costs than more traditional biofuels because it’s a newer technology and the feedstocks are more diverse. That means the dream of filling flex-fuel vehicles with more sustainable non-food crops (not corn!) will be deferred for another couple years. Those capital costs will likely shut startups out of the physical buildout, at least while credit remains tight. But that doesn’t mean they have to sit on the bench. For the oil and corn ethanol companies that survive the downturn — and manage to finance big projects — startups will be there to add value by licensing their technology.

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Biodiesel Takes Another Body Blow

Justin Moresco — Fri, 06 Mar 2009 19:00:30 +0000

Talk about getting kicked while you’re down. Already, the biodiesel industry has seen its margins squeezed since petroleum prices plummeted last fall. Now, the news coming out of Brussels earlier this week is that the European Union plans to slap punitive tariffs on imports of U.S. biodiesel for six months. The $400-$500 per ton duty will make U.S. biodiesel less attractive in the European market at a time when U.S. manufacturers need all the buyers they can get.

So, how bad off is the industry? Banking-sector, or government-bailout bad? Maybe. As the economy slumped last year, demand for diesel dropped with it. That sent the price of petroleum diesel and biodiesel down so low that manufacturers now can barely cover production costs, let alone capital costs. And profits? Forget it: “The pressure is really to a point that biodiesel processing using canola oil or soy oil is unprofitable these days,” said David Woodburn, an analyst with investment bank ThinkEquity Partners. “The revenue you get per gallon of soy biodiesel in most cases isn’t enough to cover the cost of feedstock plus processing.”

Seattle-based Imperium Renewables has felt the pain of the industry. The biodiesel refiner has canceled its planned initial public offering, laid off employees, and halted plans to build a biodiesel plant in Hawaii.

The so-called crush spread provides insight. It’s the difference between the price of soy oil, what manufacturers process into biodiesel, and the going price for the fuel on the market. In November last year, with the industry already under pressure, that spread was at 81 cents per gallon. By late February, it had sunk 30 percent to 56 cents per gallon.

The blender’s subsidy is at the heart of the EU’s punitive tariff. The subsidy gives a $1 per gallon tax credit to outfits that blend biodiesel into petroleum diesel usually in quantities between 1 percent and 10 percent. The EU governing body argues, rightly, that it gives U.S. biodiesel exporters an unfair advantage. While this subsidy no doubt has helped the U.S. biodiesel industry, it’s mainly been a boon for blenders, who market the fuel. They may pass some of that subsidy benefit back to manufacturers, but not all of it.

So U.S. biodiesel manufacturers have done the only thing they could: slow production. Rick Kment, a biofuels analyst with market researcher DTN, said U.S. biodiesel production is down to between 25 percent and 30 percent of capacity. A large portion of the plants aren’t standalone biodiesel producers — they also crush the soy beans to produce the oil. Instead of continuing the refining process to biodiesel, they sell the oil off midstream to the food industry, Mr. Kment said. That helps explain why there haven’t been as many plants shuttered as some might anticipate, given the industry’s pain.

The industry will continue to struggle as long as petroleum prices remain low and feedstock prices high. But that hasn’t stopped die-hard biodiesel supporters from believing in the industry. “Biodiesel is a movement now,” said Steve Bash, the founder of California-based Sacramento Biofuels Network, which buys biodiesel in bulk for its 250 members. “It’s about a perception of choices. And in the long run, it’s inevitable that we’ll need choices beyond petroleum.” In the near-term, biodiesel producers will benefit from the renewable fuel standard that requires 1 billion gallons of biomass-based diesel be sold annually in the U.S. by 2012, from 500 million gallons this year. So producers might not be as bad off as Wall Street financial firms, but they’re still not a pretty sight to behold.

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The Green Rich List: Wealthy Doesn't Mean Savvy

Katie Fehrenbacher — Mon, 02 Mar 2009 16:27:22 +0000

Just because you’re among the world’s wealthiest doesn’t mean you’re good at investing in clean technologies. The London Times has released a “Green Rich List,” which looks at the world’s top wealthiest people that have some sort of investment in clean technology — from alternative vehicles to solar power. The list ranks the investors by net worth, not by how much they’ve invested in cleantech. Perusing the list, you can see that despite some smart green moves, these investors, particularly in the top 10, have made more than a few missteps.

Take No. 2 Bill Gates, worth £26 billion ($36.42 billion). He is lauded for his investment in corn ethanol maker Pacific Ethanol through the private investment and holding company he controls, Cascade Investments. Well, Pacific Ethanol, like most of the corn ethanol industry, has been crippled by the downturn and high corn prices last year, and just last week announced yet another round of plant suspensions. In late 2007, Gates’ Cascade Investments announced a plan to sell its 20 percent stake in Pacific Ethanol after the stake lost a good deal of its value. In mid-2008 Cascade started to chip away at that stake, selling it off trade by trade. We’re not sure if it’s all gone by now, but it wasn’t pretty.

Then there’s No. 8, Microsoft co-founder Paul Allen, worth £11.5 billion ($16.10 billion). Allen’s Vulcan Capital invested $250,000 in Seattle biodiesel-maker Imperium Renewables. Remember Imperium? That was the company that ended up withdrawing its IPO last year and since has lost a valuable contract to supply Royal Caribbean with 18 million gallons of biodiesel annually. The company shot for the moon too fast, but it’s just not a good time in general to be a large biofuel maker that needs a lot more capital to keep scaling up.

And last but not least there are the Google co-founders — Sergey Brin and Larry Page — who share the spot at No. 10, both worth £7.5 billion ($10.50 billion). Beyond their impressive work getting Google to invest in clean energy and energy efficiency they were also early investors in electric vehicle maker Tesla. As many of us know by now, Tesla hit a capital snag last year, and was unable to raise the cash it wanted at the valuation it wanted. Now it’s betting everything on a DOE loan, and has even stooped to jacking up prices on already delayed Roadsters.

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Former Imperium CEO Martin Tobias Goes Kashless

Katie Fehrenbacher — Fri, 24 Oct 2008 21:45:51 +0000

We’ve been wondering what the former CEO of biodiesel company Imperium Renewables, Martin Tobias, was going to do next. When we interviewed the serial entrepreneur and angel investor back in May at the Future In Review Conference he said he was mulling over his options — including the intersection of Internet and green — and said he still had another company in him. Well, we caught up with Tobias this morning, and he confirmed that he has founded and is running re-commerce company Kashless.org (noted here and here, and in this job posting).

Tobias won’t say much about the company, and the site is in private alpha right now. But Kashless is a return to the software/Internet side of green, and Tobias previously founded and ran streaming-media company Loud Eye. And compared to running Imperium, which raised hundreds of millions and was at one time planning an IPO, Kashless sounds like a much less capital-intensive way back into the entrepreneurial world.

On the job listing sites Kashless is described as a:

ReCommerce community and platform enabling person to person product reuse, sharing, lending, trade and other “cashless” transactions. By increasing reuse, Kashless.org will divert a significant amount of waste from the landfill and extend the useful life of many products. The company is fully funded . . .

Tobias writes on his blog about a formative experience of cleaning out his garage and trying to sell old, but still good, stuff that lead to forming Kashless:

In the end I got rid of everything but it was WAY TOO HARD and took way too much time/energy/effort. Heck, I was trying to give something away for free!

As Tobias points out in his blog post, there are a variety of web sites out there that help sell and swap used goods online. Craiglist, Freecycle, less well known sites like SwapThing and several Facebook applications come to mind. But it does still take a large amount of time and effort to get your stuff swapped or sold — perhaps Tobias has a better way.

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Imperium Renewables 'Royally' Screwed?

Celeste LeCompte — Mon, 18 Aug 2008 04:00:52 +0000

One year after the vaunted opening of its 100-million-gallon-a-year, $78 million biodiesel plant at the Port of Grays Harbor, Imperium Renewables has lost its contract to supply Royal Caribbean with 18 million gallons of biodiesel annually, the Seattle Post-Intelligencer reported. The news –which also revealed that the cruise ship company sold off its $10 million stake in the plant — broke just days after the Seattle-based biodiesel firm said it had closed its two-person Hawaii office.

The Royal Caribbean contract was named as a critical business opportunity in Imperium’s $345 million IPO filing, which was withdrawn in January. The company’s SEC filing noted the substantial negative impact the loss of the contract would have on its business.

As we reported earlier this year, the city of Seattle was also forced to put its biodiesel supply contract with Imperium on “indefinite hold” due to rising fuel costs.

The collapsed Royal Caribbean contract is likely part of an overall “cost savings” program announced by Royal Caribbean in its second quarter earnings statement, which detailed the heavy impact rising fuel costs have had on its business. Fuel prices climbed 55 percent for the quarter, and the cruise line company anticipates spending an additional $86 million for the year, bringing total fuel costs to $772 million. (We’ve left messages with Royal Caribbean and Imperium and will update if any more information becomes available.)

The news could also mark the start of troubles for a variety of other economic development activities in the region. Imperium’s plant played a key role in establishing the foundation for a $5 million workforce development grant awarded to the Pacific Mountain Alliance for Innovation. Although employees have continued to report for work, local paper The Daily World notes that exports from the Imperium Renewables terminal at the Port stopped in April.

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Legend of Neil, Synchronized Office Swimming on NTV Station Today

Liz Shannon Miller — Fri, 08 Aug 2008 19:30:07 +0000

Most people, especially today, dream just a little bit of being an Olympic superstar. But what if you’re a Russian office worker stuck at a desk? Well, with the help of a video camera and four friends, you could just create your own event — synchronized office swimming.

And speaking of a different kind of game, today we look at The Legend of Neil, a thoroughly adolescent and hilarious spoof on the original NES Legend of Zelda. What elevates this web series above the pack? Aside, of course, from a hilarious supporting performance by Dr. Horrible/The Guild‘s Felicia Day? Find out at NewTeeVee Station!

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Martin Tobias: The Fate of Next-Gen Biofuel Startups

Katie Fehrenbacher — Fri, 11 Jul 2008 07:39:07 +0000

The 10 next-generation biofuel startups that got funded last quarter were 10 of the reasons that cleantech venture investments hit a recent record. But how well are all these biofuel startups going to do in the market? We’re not sure, but Martin Tobias, angel investor and former CEO of Imperium Renewables, decided to give his take on how the younger crop will fare on his blog. While he agrees that some have promising technologies in the labs, he says getting the economics to work on the necessary large scale is an entirely different story.

Tobias’ favorite company is Sapphire Energy, a one-year-old startup that is looking to squeeze high-octane gasoline from algae that has raised $50 million from ARCH Venture Partners, the Wellcome Trust and Venrock. He likes the idea of skipping the big oil-controlled channel and going directly to the independent oil refiners, but wants to see more details on how the economics will work.

He also has a few nice things to say about GreenFuel, the algae fuel company that uses recycled carbon dioxide. He says he likes the strategy of placing algae farms near heavy carbon emitters for multiple revenue streams. Tobias has already invested in algae fuel startup Inventure Chemical, so he’s been following this area closely.

And that’s about the nicest things Tobias had to say about some of these companies. On Range Fuels he thinks the technology will be a lot more expensive than first-generation biofuels, and contends:

“While Khosla likes to pay lip service to investing in technologies that are economic w/o government incentives, cellulosic ethanol generally through the 2.5x RFS credits, and Range Fuels specifically through large DOE grants have been showered with government money. If the plant eventually does get up and running”

For the rest of them, it’s equally as bad. Mostly Tobias is skeptical of getting the lab processes to scale large enough and cheap enough to produce enough return on investment. When it comes to Altrabiofuels spin off EdenIQ and Khosla and GM-backed Mascoma, he says repeatedly “show me” the money.

For algae fuel company AuroraBiofuels Tobias says that the company “lays out too much wood to chop in my opinion and not enough focus.” And for both Fulcrum Bioenergy and Amyris Biotechnologies, Tobias thinks some of their commercial milestones are so difficult to reach in time that he’ll give anyone $100 if either company hits them.

Before Tobias digs into company specifics, he highlights the biggest problems he sees for the biofuel industry as a whole: oversupply, waning political support, lagging distribution infrastructure, and cold debt markets. We’ll see if a year later, cleantech investments are still up, despite the fact that there will be some misses for next-gen biofuels.

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World Time Engine Knows Timezones

Mike Gunderloy — Mon, 07 Jul 2008 21:00:00 +0000

We’ve discussed the hassles of dealing with multiple timezones and distributed web-working teams before. New site World Time Engine (in open beta) tries to bring order to this chaos. At root, it’s a huge database: type in a location (like “Scotland” or “Indianapolis” and it will show you the current time – with choices if your chosen location is ambiguous. But there’s a lot more here as well.

The best feature for web workers is probably the meeting planner – type in a whole set of locations and a proposed time, and it shows you what that time, and other times, works out to across all those locations. They also have a phone interface and a developer API available. You can also purchase their timezone maps for use in your own web site.

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Think $4 Gas Is Bad? Try $6 Biodiesel

Craig Rubens — Mon, 09 Jun 2008 16:05:58 +0000

Think $4 per gallon gas is bad? Try $6 per gallon biodiesel. While the prices for gas and diesel have been climbing higher and higher, biodiesel prices have been rising, too, crunching biodiesel makers and making large diesel purchasers rethink making the switch to biodiesel. Seattle-based biodiesel maker Imperium Renewables has had a 2 million gallon deal with King County Metro Transit put on “an indefinite pause” because the price has jumped so much since the agreement was signed less than a year ago, the Seattle Times reports.

Biodiesel prices are being pushed up by a confluence of events. With oil nearing $140 a barrel, all of the petroleum-powered biodiesel processing steps have become that much more expensive. Increased demand, including municipal contracts like that of King County, have pushed up prices. Also, farmers have been increasingly turning to the more profitable business of producing corn for ethanol, as opposed to growing soybeans for biodiesel, which has been shrinking the biodiesel supply. The Seattle Times estimates it takes $4.66 worth of soy to make one gallon of biodiesel, which doesn’t include any processing costs. Meanwhile, petro-diesel prices are around $4.80 a gallon.

Such market fluctuations will wreak havoc on young startups that don’t have the capital to weather the storm. Imperium’s move to withdraw its IPO earlier this year was likely a good one. (Even if Imperium’s former CEO, Martin Tobias, doesn’t think so). But unless diesel prices start climbing even faster or soy prices drop, the gulf between petro- and biodiesel could continue to grow. We’ll keep an eye out for more large contracted fleet customers backing out of their biodiesel deals.

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