It has been an interesting few weeks as "green" has ruled the headlines, the optimism around biofuels has taken a downward plunge, Al Gore accepted the Nobel Prize, and Google made one of the most significant announcements of the year. Going out of 2007 and entering the new year, there is much room for optimism despite the negative headlines associated with ethanol and biodiesel.
I am not concerned about the downturn in the interest in the biofuels sector and the resulting consolidation as long as the momentum that has been directed in that sector can be carried forward into the general development of biobased products and in the cleantech sector. This seems to be the general motion as venture capitalists increased their investments in the green sector. Venture investing in clean technology hit $892.6 million in 71 deals during the first six months of 2007, according to new data from Dow Jones VentureOne and Ernst and Young LLP. That marks a 70 percent increase over the $525.1 million invested in 49 deals in the first half of 2006.
As I mentioned above, I think the most significant announcement of 2007 in the renewables area was from Google who announced that it will invest hundreds of millions of dollars in ways to make "green" energy less costly than that from pollution-spewing coal. According to company announcements, the US-based Internet company will invest in advanced solar, wind and geothermal power systems along with other technologies promising potential breakthroughs. The company wants to apply the same creativity and innovation it has demonstrated in developing its portfolio of online tools to the challenge of generating renewable electricity at a globally-significant scale, and produce it at a cheaper cost than coal.
This is highly significant beyond just the scale of the investment, for there are other huge companies doing the same, such as General Electric who has pledged $3 billion into the renewable sector over the next 18 months. The significance lies in the fact that Google is now combining several elements of an emerging economy that bring together creativity, green technology, and the knowledge-based economy. First, they are a product of, and in many cases for, the creative class which is increasingly being defined by writers such as Richard Florida, thereby giving a new way of thinking about human potential, product development, and communication. Second, Google represents an entirely new way of thinking about communication and research which has already changed the world. Third, they have direct access to hundreds of millions of consumers worldwide. More importantly than these three is the fact that Google is committed to developing base/foundational technologies with the goal of making coal obsolete – such forward thinking that is not driven by a venture capital return model is of paramount importance to the entire industry and is very encouraging.
I mentioned before that I am not concerned about the failures and consolidations within the corn and soybean-based biofuels businesses in the United States, as I think it will drive us to innovate and develop new crops and biobased products. I am very concerned, however, about the farmers and rural investors that have lost resources because of plants that are being closed or sold. I am also very concerned about some of the global perspectives on biofuels by several of the major players pertaining to ongoing trade negotations and human rights issues.
From the perspective of the big agribusiness and biotechnology firms, the long term play for biofuels is going to be Brazil, Indonesia, and other countries/regions that can produce high volumes of material with inexpensive labor, while U.S. agriculture will increasingly move toward the production of identity-preserved crops. The biofuel plantations may contribute to the already devastating deforestation of rainforests and offer questionable long term solutions for those living in rural areas. A great example of this is the recent promotion of jatropha as an oilseed crop. The fact that this crop is toxic and causes illness and harm to those working in the fields and in processing is rarely discussed. To move a strong, sustainable global industry forward we need to be aware of these issues.
I want to mention a few more observations from the busy past few weeks. For one, interest in the use of algae as a biodiesel feedstock seems to be increasing very rapidly. A feature article appeared in Business Week and a venture forum was held in San Francisco. The Business Week article quoted Dave Daggett, technology leader for energy and emissions at Boeing as saying, "In the past two years, we have changed from algae skeptics to proponents." I must admit that I have been in the same position, discounting the technology based on my perceptions of high water consumption and inadequate handling. I am becoming increasingly convinced, however, as systems for integrating the algae with waste water treatment begin to look promising. It also helps that companies such as Chevron, Honeywell and Boeing are all setting up in-house business development units around algae-to-fuel platforms.
Lastly, I heard a great talk from the representative of a major agricultural chemical company that discussed the relative value of agricultural materials going into biobased products and biofuels over the coming decade. Because I am always looking at ways to increase the "per-acre" value of farm products, his comments proved to be very enlightening. The biofuels market is expected to utilize approximately 67% of the non-food agricultural production into a $350 billion market, while the market for specialty chemicals and plastics will utilize 7% of the feedstocks into a $255 billion market. Although some of this difference can be attributed to higher manufacturing and logistics costs (fuels versus plastics), there is still a significantly higher value per acre looking at biobased products.
In summary, I think the opportunities are greater than ever. The media attention on "green" can be increasingly effective in developing new opportunities. With major pushes by new generation companies such as Google, the whole playing field will continue to shift in favor of diverse feedstocks, high value-green bioproducts, and new opportunities.
Please feel free to contact Peter Nelson of BioDimensions at pnelson@biobased.org to discuss this article.