Making Good, Ceeoh

This blog recently admitted to some confusion about the use of ethanol as an alternative transportation fuel, and particularly about commercial development of cellulosic ethanol.

Much is made about the promise of cellulosic ethanol. We hear that it could be “game changing“. Certainly, the bio-technology industry wants to be part of a successful Biomass Biofuels Initiative and to help meet the expectation that ethanol can be made from waste.

Signing the Dirty Energy Bill


The Energy Independence and Security Act of 2007 set a required production level of 36 billion gallons of annual renewable energy use by 2022. Although the industry currently is at an annual production rate of 7.5 billion gallons, the new law requires that by next year the production rate should reach 9 billion gallons of ethanol per year. So, who will provide the additional 1.5 billion gallons.

Now, for better or worse, richer or poorer, in good times and climate change, we have an RFS (Renewable Fuels Standards), and more people are asking whether cellulosic ethano can be produced in a cost effective, environmentally conscious manner.

There needs to be investment for bio-technology to deliver on the promise of cellulosic ethanol at lower cost and greater efficiency than other industrial processes. Yet investors are reluctant in part due to the previous history of alternative fuels.

David Rotman1 observes, “Many remember the late 1970s, when the federal government earmarked roughly a billion dollars to fund biomass-related research, only to abandon it when crude-oil prices fell in the early 1980s.”

Stephen del Cardayré


Besides coal and petroleum, the United States already consumes a variety of hydrocarbon fuels: natural gas, propane, ethanol, diesel, biogas, and biodiesel. Stephen del Cardayré, vice president of research and development at LS9, believes in the potential of a focus on fatty acids. Organisms produce them in abundance, as a way of storing energy. “We wanted to take advantage of a pathway that [naturally] makes a lot of stuff,” he told David Rotman. “Think of it as a highway,” says del Cardayré. “Near the end of the highway, we add a detour, a pathway we designed and stuck there, so the fatty acids have a better place to go. We pull them off and chemically change them, using this new synthetic pathway that takes them to products that we want.”

Novel hydrocarbons may have caught the attention of some venture capitalists. While “chemical engineers, microbiologists, agronomists, and others struggle” to develop economical ways of overcoming cellulose recalcitrance, “a few synthetic biologists and metabolic engineers are focusing on” tweaking fatty-acid metabolism, discovering pathways that produce isoprenoids, and, as previously noted, the identification and utilization of genes associated with an endogenous butanoate pathway.

There are some advantages to hydrocarbons. Unlike ethanol they separate from water during production, thus eliminating energy-intensive distillation. Furthermore, “hydrocarbon biofuels could be shipped in existing petroleum pipelines,” informs David Rotman2.

  • “It’s all about cost,” says Robert Walsh, president of LS9. But a critical factor will be the price of feedstock, he says. “We want dirt-cheap sugars.”
  • John Melo, CEO of Amyris, perceives the Brazilian sugar industry as offering the most “viable, sustainable” way to make biofuels today.

“Unless the cost is reduced significantly, cellulosic ethanol is going nowhere,” says Wally Tyner, a professor of agricultural economics at Purdue University. Making cellulosic ethanol viable will require either a “policy mechanism” to encourage investment in new technologies or a “phenomenal breakthrough”–and “the likelihood of that is not too high,” Tyner says. Farmers and ethanol producers currently have no incentive to take on the risks of changing technologies.

While the price of a barrel of crude hovered in the mid-$90s this fall, and wholesale gas prices reached $2.50 a gallon, biofuel experts say they cannot count on such high prices. Many producers of next-generation biofuels say they want to be competitive with crude oil at around $45 a barrel to ensure long-term viability in the market.

Vinod Khosla


Vinod Khosla believes that technology got us into this mess and technology “can rise to the challenge of reducing GHG emissions.” The veteran venture capitalist is a member of the COB (Cruise On Booze) crowd, i.e., he advocates for the use of ethanol as an alternative transportation fuel. He goes along with ethanol initiatives favored by current politics, although I suspect that, as an investor, he sees the economic advantage in cellulosic ethanol.

Rotman tells us that both synthetic-biology companies, LS9 and Amyris, are among the portfolio companies of Khosla Ventures. Vinod Khosla has become a leading advocate of using ethanol as an alternative transportation fuel.

Khosla envisions biofuel production rapidly increasing over the next 20 years. According to his numbers, production of corn ethanol will level off at 15 billion gallons a year by 2014, but cellulosic ethanol will increase steadily, reaching 140 billion gallons by 2030. At that point, he predicts, biofuels will be cheap and abundant enough to replace gasoline for almost all purposes.

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