Still early in its evolution, the renewable energy industry is operating in large part on potential. With few revolutionary game-changers over the past few decades, it is the ideas of what is possible that fuel the sector.
Synthetic biology is a prime example of this mindset. Through synthetic biology, scientists believe that by implementing advanced genetic engineering, and radically changing the way an organism functions, they could make use of bacteria and yeast to efficiently produce biofuel, biodiesel, and hydrocarbon fuels. These synthetic fuels would be nearly identical to their gasoline, diesel, and jet fuel counterparts, with minimal environmental impact.
A revolutionary idea indeed. Unfortunately, this has not worked out quite as investors, venture capitalists, and the companies tasked with creating the technology, initially planned. One former paragon of the cause, LS9, a company of premier scientists funded by the best and brightest of Silicon Valley VC’s, just recently sold off their remaining assets to the Renewable Energy Group, at a heavily discounted price tag.
Unable to turn their theories and investment pitches into actual returns, LS9 could not get past the dreary economics of the renewables space. Simply put, they could not compete with traditional fuels from a price standpoint.
This is a direct result of the biggest challenge facing clean energy companies going forward: economies of scale. LS9 was not able to scale-up in a cost-effective manner, dooming them to a financial no-mans land where profit growth is nearly impossible.
The research and development costs are just too high for many synthetic biology companies to offer even a minor ROI. They may be able to prove the viability of their product on a small-scale, but moving to a larger market was unfeasible due to high capital costs, low margins, and a low price incentive for consumers to make the switch. They have simply been unable to keep up.
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.”
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 micro-organism, then designing cells would be much faster. “We need to be as good at engineering biology as we are at engineering microelectronics.”
Discussing and noting advancements in renewable energy is all well and good, but until they can make it a viable business, and scale-up to compete with oil, scenarios like the one with LS9 will continue, and by doing so, slowing down the progress that needs to take place. Once that scalability takes shape though, the sky is the limit.