Last week, ExxonMobil and Synthetic Genomics jointly announced they doubled the lipid content of an algae strain from 20% to 40% without significantly hindering the strain’s growth. The news comes on the heels of the second renewal of their joint research agreement originally started in 2009 and is the biggest breakthrough yet to come out of this partnership. According to the published research paper, the team used the CRISPR-Cas9 genome editing system to inhibit a gene that suppresses lipid production in the algae.
Lipid content is the most influential factor in the production cost of algal biofuels. We previously estimated the cost of algal fuels at $13.50 per gallon of gasoline equivalent (GGE) for an algae with 25% lipid content. However, increasing the lipid content to 40% only brings the fuel cost down to about $9.40/GGE, still a long way from the U.S. Department of Energy (DOE)’s target of $5.00/GGE by 2019. This improvement moves the needle in the development of algal fuels, but many more breakthroughs will be needed for the technology to reach commercial viability. This new development comes at a time where interest in algae fuels sharply collapsed, causing surviving algae developers to pivot into alternative markets. While consumer perception will curb the use of genetically engineered algae strains in food, animal feed may be a promising alternative target market although the technology will struggle to compete with inexpensive fish meal lipid alternatives. ExxonMobil’s and Synthetic Genomics’ announcement steers algal biofuels in a positive direction after years of failed promises but readers should remain cognizant that algae will unlikely be an economically viable technology solely for biofuels.
For a number of reports, Lux has relied on electricity grid mix forecasts and future plug-in adoption models. In this analysis, we further investigate these projections in the context of energy infrastructure capital expenditures and carbon emissions. The implications of how energy infrastructure is invested in over the next two decades are tremendous, ranging from flat capital expenditures with grim environmental consequences, to a growing investment market that achieves climate targets. We’ll investigate the conditions that lead to these divergent energy capital expenditure scenarios to understand the key drivers and implications. Continue reading →
In an era of cheap oil and falling profits, the oil and gas industry must prepare itself for the future. The energy landscape is quickly evolving with the emergence of potentially disruptive technologies and regulatory pressure to reduce carbon emissions. One strategy the oil and gas industry has taken in developing novel technologies is through corporate venture capital (CVC). Earlier this year, we analyzed CVC portfolios in the oil and gas industry and found that ExxonMobil is absent with no public indications it will start in the foreseeable future. Continue reading →
French oil major Total has made a billion-dollar bet on energy storage with its purchase of Saft – complementing its existing stake in solar major Sunpower and other investments in distributed generation. This move is just an opening salvo in a Darwinian competition emerging among energy supermajors to get ahead of the future of the power sector. The remaining energy storage landscape offers oil firms few appealing opportunities to respond – but they should aim to make deals nonetheless, and changes in the energy landscape mean that doing nothing is an even worse option.
Corporate venture capital (CVC) groups at major oil companies are vital to the oil and gas start-up ecosystem. They have an equity stake in about half of all oil and gas start-ups that have raised funding. However, oil companies have also committed hundreds of millions of dollars to petroleum substitutes like biofuels, solar, and wind. Among the top eight CVCs’ investments in unique start-ups since 2005, they have publicly announced investments in 153 unique start-ups, 37% of start-ups are focused on oil and gas substitutes, with BP and Total leading the effort. However, there is more to the story than the high level numbers.
After a brief period of experimentation, oil majors have shifted their focus from renewable power and alternative feedstocks to focus back on oil and gas. While the number of deals has remained relatively consistent, averaging 22 transactions per year, the share of renewable power and alternative feedstocks deals has dramatically decreased, from 79% in 2010 to just 16% in 2015. Unlike traditional venture capital firms focused purely on financial results, CVCs theoretically aim to invest in technology that add value in their operations. Given oil majors did not have major businesses dedicated to renewable power or alternative feedstocks, their operations did not benefit from these investments. Similarly, CVCs could not add value beyond their cash (i.e. field trials, technical expertise, industry knowledge, etc.) to the start-ups they invested in, which is counter to the true value of a strategic investor. Little surprise, therefore, to see the oil and gas CVCs progressively retrench back to their core. With the exception of Statoil, most oil majors have plans to exit the alternative feedstock and renewable power generation space to focus on technologies more closely aligned with their core business. Oil and gas technology start-ups accounted for 84% of investments in 2015, up from 21% in 2010. That said, while the new investment strategy might be financially beneficial in the short term, it may leave oil majors vulnerable in the long term.
Among the top eight CVC groups, Chevron and Shell have the strongest track record of success. Continue reading →
As the alternative fuels industry diversifies and scales up, financing is always the key to technology commercialization. While several sources of financing drive the whole industry forward, we investigate the trends of corporate financing from oil majors, based on a non-exhaustive database of over 1,000 deals and partnership engagements from 2000 through September 2014. With the focus on financial engagement, we only look into the private placement, equity stake, joint venture (JV), mergers and acquisitions (M&A), other than general partnerships. For example, we counted BP’s bioethanol JV plant with British Sugar, but we didn’t include BP’s research work with the Energy Biosciences Institute. We then drew a graph based on the investment counts (rather than invested companies) of the seven most activate oil majors in our database, namely, Shell, BP, Total, Valero, Chevron, Petrobras and Reliance. Particularly, repeated investment activities on the same company would be counted as multiple. We further sorted the investment by six core technology families – algae, biomass to sugar, catalysis, crop development, fermentation (and enzyme development), and pyrolysis/gasification.
From our analysis of their activities in the alternative fuels industry, we find that:
BP leads the investment frequency in a variety of technology families. Particularly, it has a strong focus on the crop development by transgenics and breeding, with repeated investments made to Chromatin (client registration required) and Mendel Biotechnology (client registration required). It also continues investing on biomass to sugar technology including to handle cellulosic biomass, such as REAC Fuel (client registration required).
Shell is not a fan of crop development, but has a wide coverage on other technologies. For example, it invested on multiple rounds and formed a JV with Iogen (client registration required), but terminated the JV in 2012. Then the oil giant formed partnerships and JVs with Codexis (client registration required), Cosan, and Novozymes to continue its interests in cellulosic ethanol. Shell shifted its shares in Codexis to Raizen, its ethanol JV with Cosan and “formed the largest sugar and ethanol company in the world”. It also partnered with Virent (client registration required) on the biomass catalytic conversion to produce renewable gasoline, and Cellana (HR BioPetroleum) on algae biofuel. Moreover, Shell Foundation also funded Husk Power System (client registration required) on gasification development.
Total and Chevron are the most active corporate investors in the fermentation domain. Total did the private placement on the IPO of Gevo (client registration required) and formed a JV with Amyris (client registration required) with both focusing on corn and sugar cane feedstocks. Gevo is focusing on isobutanol fermentation and Amyris is doing the bioconversion to produce isoprenoids. On the other hand, Chevron invested in Codexis (client registration required) and LS9 (client registration required) with its concentration on the genetic engineering, while LS9 was acquired by Renewable Energy Group in early 2014 (client registration required). All invested companies by these two giants are diversifying their revenue streams with drop-in fuels, specialty chemicals, and/or drugs in downstream markets.
Velero has a strong focus on the drop-in fuel production either by bioconversion or catalysis. Valero owns 10 facilities in the U.S. with over 1,000 MGY corn ethanol capacity. However, it is also interested in cellulosic ethanol with its funding of Qteros, Mascoma Corporation (client registration required), and Enerkem (client registration required). Additionally, the focus on waste feedstock can be reflected by its investments in the ill-fated Terrabon (client registration required), which was focused on wet waste-to-gasoline.
Investments of oil majors in developing countries are more constrained by local resources and policy drivers. For example, Reliance is investing the algae technology developers such as Algae.Tec (client registration required), Aurora Algae (client registration required), and Algenol Biofuels. Petrobras is concerned with fuel production from sugar cane or bagasse, such as BTG-BTL (client registration required) and BIOecon, which combine the feedstock advantage and local policy driver. Other oil majors not listed in the graph, such as Chinese oil majors, Sinopec and PetroChina (CNPC), are shifting their focuses from food ethanol to cellulosic ethanol and coal-to-ethanol, which is responding to the call of the Chinese government to discourage the food ethanol industry (see the report “Fueling China’s Vehicle Market with Advanced and Coal-based Ethanol” — client registration required.)
Less active oil majors in this space include ExxonMobil and ConocoPhillips. They only made sporadic investments – such as Synthetic Genomics (client registration required) by ExxonMobil and ADM by ConocoPhilips. Additionally, ExxonMobil mobile recently teamed up with Iowa State University to research pyrolysis.
On June 24, Aspen Aerogels filed for an initial public offering (IPO) with the U.S. Securities and Exchange Commission, announcing plans to raise up to $115 million to expand its operations and manufacturing capacity. Aspen makes aerogel insulation, a highly-porous nanostructured material targeted at building insulation, industrial applications, transportation, and even clothing. The announcement has seemingly been in the works for years. In 2005, CEO Don Young projected his firm was on the cusp of profitability and a potential IPO, and we speculated in 2006 about an imminent exit for the company. However, the company has been held back by limited demand for its product, stemming both from its high cost as well as the building construction downturn in 2009.
Aspen originally targeted the building insulation market, but has found better traction in oil and gas applications, namely for undersea pipeline insulation. These “pipe-in-pipe” lines are high-value, space-constrained applications that are well suited to aerogels. Companies will pay a premium for a thermally-robust, highly-insulating material that is packed between the inner and outer pipe. This translates into a reduced diameter of the outer pipe, saving material costs of steel. Aspen’s customers in the subsea pipeline market include ExxonMobil, BP, and Total. Aspen’s shift of focus is analogous to many water desalination companies now targeting fracking applications for gas and enhanced oil recovery. Water and electricity remain subsidized commodities in many regions of the world, and emerging cleantech players may have to look at higher value markets , such as oil and gas, for their technologies.
Aerogels are one of several emerging technologies vying for a piece of the multi-billion dollar general insulation market in buildings. Although aerogels have suffered in the past from handling difficulties on a construction site, by far their main issue is cost. At up to $10/ft2, Aspen Aerogel’s Spaceloft aerogel blanket is simply not competitive with standard insulation like fiberglass, which costs about $0.50/ft2, except for niche, space-constrained applications. Cabot Corporation, one of Aspen’s rivals, is proposing a solution to both problems. Cabot encapsulates its granular Lumira aerogel material into translucent “daylighting” panels that enable natural light to be transmitted while being more insulating than standard double-glazed windows. With this product, Cabot is hoping to find a profitable niche as an eco-friendly daylighting solution in the green building sector. We review the prospects for advanced insulation products – namely aerogels, phase-change materials, and vacuum insulation panels – and size the market forward to 2020 in our latest LRGI state of the market report, Opening the Thermal Envelope: Emerging Innovation in Dynamic Windows and Advanced Insulation, projecting a $230 million market for aerogel building insulation by 2020.