Why the Promise of Cheap Fuel from Super Bugs Fell Short
Biotech company LS9 launched in 2005 with great ambitions: founded by premier scientists and top-flight venture capitalists, it planned to genetically engineer microörganisms to make hydrocarbon fuels such as diesel cost-effectively from sugar.
But after nine years and $81 million in investment, the owners of LS9 sold the San Francisco-based company last month to biodiesel maker Renewable Energy Group for $40 million in cash and stock, with an additional $21.5 million promised if technology and production milestones are met.
LS9 had hoped to be selling diesel to refineries at least two years ago (see “Making Gasoline from Bacteria”). Instead, Renewable Energy Group, based in Ames, Iowa, intends to use the LS9 process to make smaller-volume specialty chemicals sometime in the next two years, and it has no immediate plans to make biofuel with the LS9 technology.
LS9 is one of several companies founded on the premise that synthetic biology—advanced genetic engineering that radically changes the way an organism functions—could be used to make new strains of bacteria and yeast that would produce not just the common biofuels ethanol and biodiesel but also hydrocarbon fuels that are nearly identical to gasoline, diesel, and jet fuel. Such fuels could be used more widely than existing biofuels, which typically need to be blended with conventional fuels or require special infrastructure.
But synthetic-biology companies have struggled to develop organisms that can make fuels at costs that can compete with oil, and they’ve yet to produce fuel at a large scale. Like LS9, many companies that set off to tap the gigantic markets for biofuels have pivoted toward chemicals, which command higher prices. (Breaking into these markets isn’t likely to be easy, however—they often require very high quality products, and new entrants face stiff competition from large petrochemical companies.)
LS9 has a demonstration facility in Okeechobee, Florida, that successfully produced diesel at low volumes, and it signed partnerships with larger corporations for testing. But it struggled to get the financing to build a large-scale facility, says David Berry, a cofounder of LS9 and investor at Flagship Ventures. Solazyme, which uses genetically engineered algae to make products from sugar, has a program to develop fuels for the U.S. military, but much of its commercial activity is making oils for personal care and nutritional products. Amyris, which makes an oil called farnesene that can be converted into diesel, sells small amounts of fuel for buses but has focused its business on making products such as moisturizers and fragrances.
“Many of the claims being made in connection with biofuels in 2006 and 2007 were way too optimistic,” says MIT biotechnology and chemical engineering professor Gregory Stephanopoulos.
The trouble, says James Collins, professor of biomedical engineering at Boston University, is that while the science behind these companies was promising, “in most cases, they were university lab demonstrations that weren’t ready for industrialization.”
In addition to the challenge of designing effective organisms, synthetic-biofuel companies struggle with the high capital cost of getting into business. Because fuels are low-margin commodities, biofuel companies need to produce at large volumes to make a profit. Commercial plants can cost on the order of hundreds of millions of dollars. Some advanced biofuel companies have been able to secure the money for large-scale plants by going public, but now many investors have soured on biofuels. “People want to see things validated a little further along and take more technology risk off the table early. There’s little willingness for investors to pay for proofs of concept,” Berry says.
Jay Keasling, cofounder of LS9 and the CEO of the Department of Energy’s Joint BioEnergy Institute acknowledges that synthetic-biology companies have moved more slowly than many investors had hoped. He also cautions against expecting bioenergy to undercut petroleum fuels on price anytime soon. Making cost-competitive fuels with genetically engineered microbes will require advances in both science and engineering, he says. “We’re never going to have biofuels compete with $20-a-barrel oil—period,” he says. “I’m hoping we have biofuels that compete with $100-a-barrel oil.”
In theory, hydrocarbons that can power planes and diesel engines are more valuable than ethanol, which has to be blended. But the yield of converting sugars to hydrocarbons is lower than the yield for ethanol because of the basic chemistry, Keasling says, so the economics depend more heavily on the price of sugar. “[Getting] the yields up to make them economically viable is very hard to do,” he says.
Keasling says new techniques are needed to speed up the process of engineering fuel-producing organisms. If engineers could isolate desired genetic traits quickly and predict how a combination of metabolic pathway changes would affect a microörganism, then designing cells would be much faster, he says. “We need to be as good at engineering biology as we are at engineering microelectronics,” he says. Optimizing crops for energy production and new techniques for making cheaper sugars could also help bring down the cost.
After cofounding LS9, Berry cofounded another biotech company called Joule that seeks to decouple fuel production from the price of sugar. It has engineered strains of photosynthetic microörganisms to produce fuels using sunlight, carbon dioxide, and nutrients, rather than from sugar (see “Audi Backs a Biofuel Startup” and “Demo Plant Targets Ultra-High Ethanol Production”).
Given the challenges that have beset synthetic biology companies so far, some new companies are deciding from the outset not to make biofuels. Indeed, the first company to be spun out of Keasling’s Joint BioEnergy Institute—Lygos, based in Albany, California—has decided to make a few high-value chemicals, rather than fuel.
Geoffrey Hinton tells us why he’s now scared of the tech he helped build
“I have suddenly switched my views on whether these things are going to be more intelligent than us.”
ChatGPT is going to change education, not destroy it
The narrative around cheating students doesn’t tell the whole story. Meet the teachers who think generative AI could actually make learning better.
Meet the people who use Notion to plan their whole lives
The workplace tool’s appeal extends far beyond organizing work projects. Many users find it’s just as useful for managing their free time.
Learning to code isn’t enough
Historically, learn-to-code efforts have provided opportunities for the few, but new efforts are aiming to be inclusive.
Get the latest updates from
MIT Technology Review
Discover special offers, top stories, upcoming events, and more.