Egyptian unrest, rising oil prices focus attention on biofuel

January 31, 2011 7:21:48 PM PST
Last week, it was President Barack Obama renewing his call for U.S. energy independence. On Monday, crude oil hit a two-year high (a benchmark, Brent crude, closed today at $101.01 a barrel), reflecting fears that unrest in Egypt could disrupt Middle Eastern oil supplies. Those two events have re-focused attention on the biofuel research and its efforts to provide Americans with an alternative, renewable energy for cars, trucks and buses as soon as possible, and much of that work is done in the Bay Area.

Ed Dineen, the president and CEO of LS9 in South San Francisco, says his biofuel company is about two and a half years away from full-scale commercial production. LS9 makes its biofuel from sugar cane and from waste materials. It has a team of 60 employees working on ways to speed up the fermentation process.

"We're definitely getting closer," Dineen said. "We're at the stage now where we 're producing samples that can be used in bus fleets and engine testing. We'll be scaling up greater capabilities in Florida by the end of the year that will give us more capability." LS9 last month announced it raised $30 million in private capital to finance its efforts towards commercialization. President Obama said the federal government should divert funds going to oil companies as subsidies to clean technology research to speed up the development and deployment of alternative fuels.

Shareez Haji, CEO at Cleantech Group in San Francisco, projects it will take at least $50 billion over the next decade to accomplish that. Venture capitalists put in $7.7 billion globally last year into clean technology companies. Biofuel ventures received only eight percent of that. Federal tax breaks to the oil industry average about $4 billion per year. Subsidies for deep-water oil drilling are estimated by the General Accounting Office to cost the government $55 billion over the life of a drilling lease. However, Dineen believes the government should play only a minor role in the beginning.

"We strongly believe we need to be able to compete with the existing technologies on our own two feet without the need for subsidies," he said.

Biofuel companies are getting support instead from private industry. Chevron and Procter & Gamble are investors in LS9, and in 2007, Oil giant BP funded a biofuels research institute at UC Berkeley to the tune of $500 million.