Can we find a clean, planet-friendly fuel to power our cars? Electric cars will take a decade, at least, to have a majorimpact on climate change, while corn ethanol has a slew of well-documented problems. Investors and the government are increasingly focused on so-called next-generation biofuels, which turn sustainable feedstocks (not food-stocks) into transportation fuels.
Dozens and perhaps hundreds of companies are frantically searching for the perfect biofuel. One is Qteros, a Massachusetts-based startup, spun off from Umass-Amherst, that has discovered and refined a microbe called the Q Microbe that turns biomass—switchgrass, wood chips, grass, corn stover or even municipal liquid waste—into ethanol. Qteros’s CEO is Dr. William Frey, former global director of biofuels at Dupont, who recently told a reporter that the company is “basically trying to become the Microsoft of energy.
Since Qteros was formed in 2006, the company has raised about $30 million from venture capital firms, big companies, individuals and, yes, taxpayers like you. The investors include Battery Ventures, BP, Camros Capital, Long River Ventures, the Quantum Group of Funds (advised by George Soros), Valero and Venrock. The U.S. government has given Qteros a $2 million grant towards construction of a pilot plant, and the company wants more, specifically, another $18 million from the U.S. Department of Energy. The DOE says it will provide nearly $800 million from the stimulus package for biofuels research and development, inviting companies to submit proposals to compete for the money.
I met with Qteros executive vice president Jef Sharp and business-development chief Jon Gorhan last week in Washington. They told me that company traces its beginnings to 1996 when Tom Warnick, a lab assistant to a University of Massachusetts microbiologist named Susan Leschine, took a walk near a reservoir in western Massachusetts (below), brought a batch of mud back to her lab and isolated a microscopic organism that has since been recognized as a “novel life form.” It’s a nice origin story: Informational technology companies (HP, Apple) often start in a garage, so why can’t a clean tech company get its start in the mud?
The microbe’s scientific name is Clostridium phytofermentans but Qteros has branded it as the Q Microbe. It’s evidently a ravenous and omnivorous little bug that reproduces itself quickly. If Qteros can prove that the Q Microbe can be used to make ethanol efficiently, and from a variety of feedstocks, it will then sell the microbes to refiners who will use them to turn biomass into ethanol. “First we have to prove it in the lab,” Sharp says, “and then we have to prove it at scale.”
Qteros has about 40 scientists on its staff who operate out of a 25,000-square foot lab in Marlborough, Massachusetts. “It’s very science-intensive, to improve the performance of the microbe so it becomes economical enough to compete with gasoline,” Sharp says. Another key to holding costs down is to find the right feedstock. Corn’s too expensive. Municipal liquid waste (don’t ask) would be ideal because people will pay to have it taken away, but there’s not enough to generate ethanol at scale. “Ultimately, we’ll need millions of tons of biomass,” Sharp says.
Qteros wants a DOE grant to build the pilot plant, most likely in western Massachusetts. Here’s the thing, though: Ethanol already gets lots of government help. Each gallon of ethanol produced gets a $1.01 federal subsidy. Plus, the government has in place mandates requiring ethanol production to grow dramatically between now and 2020. You’d think that would be enough to provide a boost to a biofuel company with the right technology and a compelling business plan but no, says Sharp:
When we have the costs down to the point where we can compete with gasoline, we will not want federal support. But getting there is very expensive and there’s a lot of risk involved. The government does have a legitimate role in helping a new industry get off the ground.
Look what the government gets back as a return on its investment., They get tax revenues and jobs. Local farmers working. They get lower CO2 emissions so they can get to Copenhagen [where the global climate negotiations will be held later this year] with their head held high. And energy security—think about the amount of money that’s spent to secure Mideast oil.
Good points. And as Jon Gorham noted, the government has spent many billions of dollars over the past 30 years providing R&D funding for nuclear energy and fossil fuels, as this EIA chart shows.
I wonder, though. If Qteros gets its DOE grant, the federal government will be the single biggest investor in the company. I wonder if Uncle Sam should get an ownership stake in return. You and I and other Americans already own big stakes in GM, Chrysler, Citi and AIG. They don’t strike me as particularly promising investments. Why shouldn’t we take shares of the energy startups being funded by DOE? In the unlikely event that Qteros really does become the Microsoft of energy, we’d end up sharing the upside.