Next-generation biofuels are on the verge of a breakthrough but aren't ready to displace conventional fuels, three Bay Area biofuel company CEOs said at Climate One on October 6. The CEOs insisted that their fuels must compete on price with conventional gasoline or diesel, with or without government support, or a price on carbon, which means they have to scale up, fast.
For biofuels to scale, all agreed, they must be drop-in fuels. Meaning, said Jonathan Wolfson, CEO, Solazyme, "a fuel that fits directly into the existing infrastructure without modification."
None of the panelists underestimated the scope of the challenge. "We're talking about one of the biggest industrial initiatives of all time. This is not a small undertaking," said Alan Shaw, CEO, Codexis. He is not convinced electric vehicles will be of much help in displacing oil, calling them "a niche player." "You'll not replace mass transportation, internal combustion engines, in our lifetime – not at mass scale. We're talking millions and millions of cars; two billion cars within ten years from the current 1 billion," he said. "What drives it is a liquid transportation fuel. We need an alternative to that. We're still in the very early days. And that's because the technology is not ready to be deployed at scale." Ed Dineen, CEO, LS9, noted that we have seen examples of first-generation, bio-based fuels reaching scale, citing the success of ethanol in the United States and Brazil. "For the type of technologies we're practicing" – second-generation biofuels – "I think three years you'll start to see plants be established. And once the initial plants get established, and we learn the technology, the acceleration will pick up," he said. "The bigger issue is the capital intensity of these plants," he added. "A number of our processes are more efficient, but they are still capitally intense – particularly when you are talking about fuels, where the scale is so large. "People are always going to look at the level of crude oil. Cost is important. Sustainability is nice, and renewable is nice, but you have to be competitive with conventional fuels. If we see a world of $150 [per barrel] crude, I think that's going to accelerate the pace of this technology," he said. "There are many companies around the world trying to drive down that cost," said Alan Shaw. "Capital is the biggest inhibitor in developing this industry, at scale. They'll always be niche players. But if you're talking about deploying at scale, capital costs have to come down from where they are. That will take very clever technology and time."
Agreeing with Jonathan Wolfson, Shaw said that "the key driver of economics here is feedstock costs" – in this case, sugars. "Feedstock will make or break every company in this sector." Promisingly, he said, the second-generation cellulosic sugars that he and fellow panelists' are developing run about of their first-generation predecessors. "That factor of a tenth will enable this industry," he said. The larger price competition, biofuels pitted against conventional crude, would be a fairer one, Wolfson said, if the two sides were evenly matched. "There is one thing people forget, which is that the big integrated oil companies have had 100 years to bury subsidies in all kinds of places. People are talking about Industry should stand up, and We should all be dependent on alternative and renewable fuels meeting parity with petroleum. But the truth is parity isn’t parity because of all these hidden subsidies."
Gregory Dalton is chief operating officer at the Commonwealth Club of California and Director of The Club's Climate 1 Initiative. He previously was international editor at The Industry Standard magazine, an editor for the Associated Press in New York, and a correspondent in China and Canada for the South China Morning Post, a Hong Kong newspaper.
Proficient in both Mandarin and Cantonese, he is a former term member of the Council on Foreign Relations.
Ed Dineen is Chief Executive Officer of LS9 and a member of the LS9 Board of Directors. Most recently, he was Chief Operating Officer of LyondellBasell Industries, one of the world's largest polymers, petrochemical and fuels companies, where he was responsible for manufacturing, environmental, health and safety, business management and sales, research and development, supply and procurement and business finance.
Alan Shaw has served as President of Codexis since its inception and Chief Executive Officer since 2002. As President and Chief Executive Officer, Dr. Shaw brings an understanding of our business and operations to the board of directors, of which he has been a member since 2002. Prior to Codexis, Dr. Shaw was Head of New Business Development for Clariant and Managing Director for Lancaster Synthesis and prior to Clariant's acquisition of BTP plc, Chief Operating Officer of Archimica, the pharmaceutical chemicals division of BTP plc. From 1994 to 1999, he was with Chiroscience Group plc, most recently as Managing Director of the pharmaceutical services unit, Chirotech Technology Limited, and a member of the board of directors of Chiroscience Ltd.
Earlier in his career, Dr. Shaw held various scientific and management positions for over 15 years at Imperial Chemical Industries PLC (ICI)/Zeneca. Dr. Shaw serves on the board of directors of CO2 Solution Inc. and BIO, the biotechnology industry trade association, and is past chair of the BIO Industrial and Environmental Section.
He holds a B.S. in chemistry from Teesside University, England and a Ph.D. in chemistry from the University of Durham, England. Dr. Shaw is a Fellow of the Royal Society of Chemistry (FRSC, C.Chem.) and the Chartered Institute of Marketing (FCIM, Chartered Marketer).
Mr. Wolfson is a co-founder of Solazyme and the Chief Executive Officer. Prior to founding Solazyme, Mr. Wolfson held a variety of positions in finance, business and law including at Triarc, and serving as co-founder and Chief Operating Officer of InvestorTree. Immediately prior to Solazyme, he was the Vice President of Finance and Business Development for 7thOnline, a supply chain software company.
Mr. Wolfson sits on the board of the Clean Economy Network, a green business advocacy association. He is also a member of the board of directors of the Biotechnology Industry Organization (BIO) and is on the governing board of BIO’s Industrial and Environmental Section. Mr. Wolfson also serves on the Executive Council for the Advanced Biofuels Association (ABFA). In September of 2009, Mr. Wolfson accepted the "Green Leap" award from the Clinton Global Initiative for his commitment to commercializing Solazyme's breakthrough technology for renewable oil production for fuel and for food. He is also an inventor on five of Solazyme's patent applications.
Mr. Wolfson holds J.D. and M.B.A. degrees from the NYU School of Law and the NYU Stern School of Business. Additionally, he spent several years as an Adjunct Assistant Professor of Economics at Hunter College of the City University of New York.