Amyris

Codexis aims to stand out from the biofuels crowd

March 3, 2011

Biofuels development at Codexis headquarters in Redwood City, CA.

In the overcrowded biofuels business, it’s hard to tell the pretenders from the contenders.

Every company claims to possess breakthrough technology that is just about ready for commercialization. Just ask Algenol, Amyris, Bluefire Ethanol, Coskata, Genencor, Gevo, LS9, Mascoma, Novozymes, Range Fuels, Synthetic Genomics (which is funded by ExxonMobil) and Terrabon. In the last couple of years, I’ve taken a look at Poet, (See Poet, seeking patronage), Qteros (Qteros: Turning mud to big money) and Solazyme (Gee whiz, algae!), among others.

Today, I’ll turn my attention to Codexis, which, like its rivals, has a beautiful website, big ideas and very little in the way of commercial production of a biofuel not made from food. That’s the problem here — a sustainable biofuel such as cellulosic ethanol, which is ethanol made from the wood, grasses or the non-edible parts of plants, always seems to be a few years away, despite the hopes of venture capitalists and politicians.

It was back in 2007, after all, Congress mandated that the U.S. use 100 million gallons of cellulosic ethanol yearly by 2010, and 250 million gallons by 2011. Congress, alas, can’t mandate technological progress or persuade algae to grow faster, no matter how much money it throws at the problem, so neither target will be met, not by a long shot. For a skeptical view of the biofuels biz, see Robert Rapier’s blogpost, Cellulosic Ethanol Reality Begins to Set In. A former ConocoPhillips exec and a chemical engineer, Rapier doesn’t think that “large-scale commercialization of cellulosic ethanol will ever be viable.”

Alan Shaw

And yet…many scientists, investors and corporate executives, including some in the oil industry, believe strongly in biofuels, which brings us to Codexis. Shell has invested $350 to $400 million in Codexis, according to the company’s CEO, Alan Shaw, who spoke with me this week in Washington. “It’s the largest privately funded biofuels program in the world,” Shaw told me.

Codexis also has partnerships with Merck and Pfizer, because its enzymes can be engineered to produce pharmaceuticals, and with Alstom, which is using Codexis technology to capture carbon dioxide emissions from coal-fired power plants.

“Our model is to work with Big Brother,” Shaw said.

Codexis (CDXS), which was spun out of a biotech firm called Maxygen in 2002, went public last April. The company reported $107 million in revenues in 2010, with most coming from Shell, which, in effect, is outsourcing its biofuels R&D to Codexis. The company isn’t making money yet and the stock’s down by about 20% since the IPO.

If I’d taken biology and chemistry in college, I might be explain to explain Codexis’s technology in a sophisticated away. Here’s the best I can manage: In brief, the company rearranges the DNA of enzymes–which are proteins that speed up or slow down chemical reactions–in order to make new industrial processes possible and make existing processes faster, cleaner and more efficient than conventional methods.

In Codexis’s biofuels business, that means turning feedstocks like sugar cane bagasse and leaves, wheat straw, woody biomass, or waste from pulp and paper mills into sugars that can then be fermented into ethanol.

Shaw does not believe that using corn or sugar as feedstocks makes long-term sense for the biofuels business. He’s surely right about that. The environmental benefits of corn ethanol are questionable at best, and groups including the American Meat Institute, the American Jewish World Service, the Competitive Enterprise Institute and moveon.org (strange bedfellows!) all oppose further federal subsidies for corn ethanol.

Sugar, meanwhile, costs more than $700 a ton, which makes the economics of turning sugar cane into ethanol very challenging. Prices will only raise as the world’s population grows, Shaw says. Instead of turning sugar into ethanol, why not find ways to take biomass with no food value and turn it into sugar?

That’s Codexis’s approach, of course. In Canada, Codexis is working with Iogen, which has been making cellulosic ethanol from wheat straw in a small demonstration plant since 2004. In Brazil,  Codexis is working with Cosan, the world’s largest sugar and ethanol company, and Royal Dutch Shell, which have formed a joint venture called Raizen. They’ll focus on sugar cane bagasse, leaves and stalks, none of which are edible.

Shaw told me that he expects to see Codexis’s technology used in pilot plants in Canada this year and Brazil next year.

And when will the technology be commercialized?

“You’re talking about hundreds of millions of dollars of investment,” Shaw said. “Large scale, I think we’re looking at 2015.”

In the long run, there ought to be a future for sustainable low-carbon biofuels. Even if the automakers electrify most or all of their cars, clean transportation fuels will be needed to power planes, trains and ships.

What’s more, no industry wants to be dependent on oil forever–not even the oil industry.

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Woolsey, Khosla: Bullish on biofuels

June 29, 2010

Corntassel_7095What should we do with corn?

Shove it into cows that become fatty, high-cholesterol meat that contributes to heart disease? Turn it into cheap sugars that make people fat or sick?

Or use it to produce biofuels that will help reduce the U.S.’s dependence on Middle East oil, improve our balance of payments and  create jobs instead of funding terrorists?

That’s a loaded question, of course, but that’s the way that James Woolsey, the former head of the CIA who is now a venture capitalist, put it to a friendly audience of biotech executives.

The biofuels industry has been subject to “propaganda” and “false narratives,” he said

Putting a new twist on the food-vs.-fuel debate, Woolsey argued that there’s plenty of acreage to grow corn and, in any event, that corn is better used as a biofuel to replace oil than it is to make “cheap junk food” so that the “grocery manufacturers association can make more money making our children obese.”

“We need to go on the attack,” he declared.

No wonder he’s been called a “green hawk.”

Woolsey, a partner at VantagePoint Venture Partners, and Vinod Khosla, the venture capitalist and relentless advocate of biofuels, spoke today to BIO’s World Congress on Industrial Biotechnology and Bioprocessing at the National Harbor convention center, just across the Potomac from Washington, D.C.

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CEOs to Washington: Spend on energy R&D!

June 10, 2010

Can a massive government spending program bring us closer to a clean energy economy and help fight climate change?

Absolutely, say some of the America’s most powerful CEOs and ex-CEOs, capitalists all.

Solar_PanelsMicrosoft’s Bill Gates,  Jeff Immelt of GE, Ursula Burns of Xerox, Tim Solso of Cummins and former CEOs Chad Holliday of DuPont and Norman Augustine of Lockheed Martin, along with venture capitalist John Doerr, came to Washington today to release a new report calling for the government to invest in energy innovation.

They’re calling for $16 billion a year to be spent on energy R&D. That’s more than three times the current Department of Energy research budget—although last year’s stimulus package included a one-time boost of about $37 billion for the DOE.

Yes, it’s a lot of money, but as John Doerr put it: “Americans today spend more money on potato chips than we do on energy R&D.” Yikes.

The CEOs held a press conference at the Newseum and then took their message to the White House, where they were scheduled to meet with President Obama. They were also headed for Capitol Hill, which energy-and-climate legislation has been stalled for months.

“Our job is to keep agitating and be a force for positive change,” Immelt said at the press event.

If America doesn’t get its clean-energy industry going, the GE chief said, “everybody else around the world will. This is a primary pillar of national competitiveness.”

Now let’s be clear—there is obviously some self-interest at work here. GE and Cummins, which makes diesel engines, would both benefit if the government helps research and finance clean energy. (See GE and Washington: Too cozy?) The same is true for Kleiner Perkins, which has invested in startups that need financing to get to the next level, companies like the biofuels firm Amyris and Bloom Energy, which makes fuel cells.

But this group was brought together by Gates, who is spending more time focusing on energy and climate, and it includes retired CEOs like Holliday and Augustine, who have no stake in government handouts or guarantees.  Call me naïve if you like, but I think they they’re putting their time into this because they are worried about the future. As they write in the report:

the energy challenge is much worse than most people realize. The problem is already imposing a heavy burden on our nation—a burden that will become even more costly. The economic, national security, environmental and climate costs of our current energy system will condemn our children to a seriously constrained future unless America makes significant changes to current policies and trends.

Or, as Immelt put it at today’s event: “It’s really easy to be cynical about whether something can actually be done. But I’d say status quo for this country is a losing hand, right now. We’re falling behind some of our global competitors.”

To push their agenda forward, the business people formed a group called the  American Energy Innovation Council. You can download their 32-page “business plan for America’s energy future” here, and watch them talking about energy. Here’s a short video in which their make their case:

Because I’m a skeptic about the ability of government to spend that much money smartly–my preference would be to find market mechanisms to invest capital in a variety of technologies, and keep politics out of it, or simply to put a steep price on carbon and let the chips fall where they may–I asked several of the CEOs why they had confidence that a centralized approach made sense.

Immelt noted that GE is in the health-care business as well, and said the National Institutes of Health has been very effective. That NIH spends about $30 billion a year, most of which supports research done at universities. “The NIH is a pretty good model,” he said. Partly because of work done at NIH, he said, the U.S. is the world’s leader in health care, at least when it comes to innovation and technology. The report notes that Gleevec, a cancer drug, came out of work done by an NIH-backed researcher. Presumably there are many more examples.

I also talked with John Doerr after the event. Naturally, being a venture capitalist who made his fortune from information technology (Kleiner funded Google, among others), he cited the Defense Advanced Research Projects Agency (DARPA), where the Internet got its start, as an example of successful, government-backed R&D.

“So much of America’s prosperity can be traced back to those investments,” Doerr said. “ARPANET essentially created the discipline of computer science. ARPANET funded radar. ARPANET created the computer-assisted design industry.”

There’s no reason, he said, that the DOE can’t do as well. “The national labs are already doing some really good work,” he said. They just need more sustained support. Government loans, he said, can play a key role in bringing proven technology to scale.

One final note: When I saw the names of climate scientist Ken Caldeira and geoengineering expert David Keith listed on the AEIC’s “technical review committee,” I asked Gates whether he thought some  government funding should be used to research geoengineering. Gates has made small grants of his own to Caldeira and Keith to fund research into ways that humans can deliberately manipulate the climate to deal with the threat of global warming. (See Is Geoengineering Inevitable?)

While geoengineering isn’t mentioned in the report, Gates said it’s worth researching. “Fortunately,” he said, “we’re a long ways away from anyone would have to look at deploying” geoengineering technology. “But you’d want to be fully informed,” particularly if, as seems likely, other countries that fear climate change do their own geoengineering research.

There’s lots more at the American Energy Innovation Council website, including a model budget on how the $16 billion could eventually be spent–basic energy science ($2.6b), nuclear fission ($1.0b), nuclear fusion ($400 million), efficiency ($2.1b), renewables including solar, wind, bioenergy, geothermal and hydropower ($2.4b), fossil energy including clean coal ($1.3b), electricity transmission and distribution ($1.2b), as well as large-scale pilot and demonstration projects.

Said Chad Holliday: “We don’t see a better investment that our country can make in future generations.”

People will, of course, argue about the priorities. But isn’t it time that we get going?

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