VCs, driven by their appetite for quick results, are missing out on huge opportunities in renewable biofuels and chemicals. That leaves the market wide open to a variety of alternative investors who, if equipped with the patience needed,...
VCs, driven by their appetite for quick results, are missing out on huge opportunities in renewable biofuels and chemicals. That leaves the market wide open to a variety of alternative investors who, if equipped with the patience needed, will realize the substantial returns that await those who can see the industry through a long lens. Only time will tell who will take home the prize.
Challenges that Continue to Mire Biofuels and Renewable Chemicals in the Valley of Death
“The venture community is poorly positioned to execute on the energy environment opportunity, which is huge, enormous.” That’s Gregory Manuel, formerly of Amyris Biotechnologies and former Special Advisor for Alternative Energy to the US Secretary of State. His view is that in order for the renewable biofuels and chemicals market to thrive, more investors with patience and an appreciation for the longer term required for these projects will be needed. Given the unique challenges faced by an industry that’s constantly running after an elusive breakthrough with only intermittent and marginal success, this could be a deal breaker. The good news, according to Manuel, is that those investors exist; it’s just a matter of them making themselves known.
Manuel is not alone in his thinking. Bob Johnsen, CEO of Primus Green Energy, Inc. has a similar view of the market today. He comments, “VCs are looking for quick exits, but if you consider the market for energy being enormous, it’s a long-game play. That said, absolute payouts are enormous and fluid.”
In recent years, renewable biofuels and advanced chemicals have attracted a lot of investor attention because of the lucrative payout promised. However, the biofuels industry has been struggling against a set of hurdles with little in the way of spectacular successes to show for their efforts. Perhaps most perplexing has been the problems on the process engineering side and scaling up effectively.
According to Manuel, broadly speaking, when you look at the technologies across a variety of sectors, there has been a real lack of understanding of things like the upstream process and feedstock requirements, quality control of feedstocks for different systems, optimization in the middle whether it’s for algae, fermentation, or catalytic production, and other nuts and bolts of the technology platforms required for this kind of development. As a result, the relationship between the upstream and downstream scale up is one that the industry has yet to fully recognize and appreciate.
Furthermore, time continues to be a major sticking point. “The customer adoption phase is very slow and very long,” reflects Manuel. Of course, there are also regulatory hurdles, especially in the high-value chemical space, which slow down the process even further.
As a result, a lot of the advanced chemical plays are having a tough time getting funding. Similar things are happening in the biofuels market according to Vonnie Estes, Managing Director at GranBio. “What’s happening with larger seed companies like Monsanto is that they’re a little bit in a “let’s sit and watch this area” mode. They’re not going to jump into this. Instead, they’ll let the market determine the course and will take over successful ventures when they’ve become real businesses.”
Aside from the scale up difficulties, the regulatory hurdles, and the long timelines experienced in this market, the most perplexing problem yet is the lack of technological breakthroughs needed to create a strong market position for any one renewable fuels or chemicals technology. Given the spectacular results the market expects, it is likely that not until a major breakthrough occurs will biofuels or renewable chemicals really find their stride.
Bob Johnsen put it well when reflecting on the work of Primus Green Energy; “Nothing succeeds like success! While in R&D, we miniaturize the footprint of the process to enable us to build a plant that produces only about 6 million gallons. But if we were
