While biofuel production has increased 82% from 2000 to 2008, it remains a narrow niche of the overall market for transportation fuels, frustrating start-ups’ dreams of easy riches. What’s more, new technologies like cellulosic and algal biofuels are beginning to leave the realm of science and turn up the competitive heat.
While some biofuel companies will succeed, many will wither on the vine – to pick the winners, Lux Research analysed the biofuel landscape to help investors, feedstock suppliers, end-users, and biofuel companies themselves make better decisions.
Titled Ranking Biofuel Startups on the Lux Innovation Grid, the report analyses biofuel developers in five key technology categories: fermentation, gasification, algae, synthetic biology, and chemical processes. Based on its analysis, it ranks biofuel companies on the Lux Innovation Grid according to how they score in technical value, business execution, and maturity.
“It’s challenging enough to predict which of the biofuel market’s technology segments will gain traction, much less which companies will be the likely winners in each space,” says Samhitha Udupa, a Research Associate at Lux Research, and the report’s lead author. “The Lux Innovation Grid provides a single set of intuitive metrics that allows readers to make apples-to-apples comparisons within a particular technology.”
The report groups biofuel companies by technology category since the key factors for success differ more by production process than by biofuel chemistry or feedstocks used. Among its key observations:
- New biofuel start-ups will favour capital light models over large construction projects. The era of enormous funding rounds for large-scale cellulosic and first-generation ethanol start-ups is over, as venture capitalists begin to focus instead on leverageable platform technologies like algae and synthetic biology – both of which require less capital, and produce higher value products like butanol or jet fuel.
- The success of algae-growth biofuel technologies will depend on collaboration. Representing the least mature biofuel segment, most companies in this space are still trying to decide which end-markets to pursue. Consequently, abundant cross-licensing and joint ventures will promote success by allowing companies to pursue a combination of biofuel technologies and end-markets.
- Synthetic biology will favour higher-value products over ethanol. Companies in this field engineer organisms that promote fermentation of sugars to produce a range of fuels and chemicals. One common theme among them is the general avoidance of ethanol, as its higher-value cousins, such as butanol, propanol, or even renewable diesel, are equally simple to make for these biofuel developers.
“Following on the heels of our more strategic-minded report, Biofuels' and Biomaterials' Path to Petroleum Parity, released in December, this report aims to provide more actionable analysis for players navigating the biofuels space,” says Udupa. “Its intent is to provide some measure of the viability of specific companies and technologies.”