SOURCE: Lux Research

Lux Research

February 09, 2010 08:00 ET

Bursting Biofuel Bubble Begins Start-Up Shakeout

Lux Research Calls Out the Likely Winners as Biofuels Market Matures

BOSTON, MA--(Marketwire - February 9, 2010) - While biofuels 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 biofuels companies will succeed, many will wither on the vine -- to pick the winners, Lux Research analyzed 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 analyzes 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," said 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 start-ups will favor 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 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
      technologies and end-markets.

  --  Synthetic biology will favor 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 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," said Udupa. "Its intent is to provide some measure of the viability of specific companies and technologies."

"Ranking Biofuel Startups on the Lux Innovation Grid" is part of the Lux Biosciences Intelligence service. Clients subscribing to this service receive ongoing research on market and technology trends, continuous technology scouting reports and proprietary data points in the weekly Lux Research Biosciences Journal, and on-demand inquiry with Lux Research analysts.

For more from Lux Research on biofuels and biomaterials, register to join an upcoming webinar at: https://www2.gotomeeting.com/register/366555811.

About Lux Research

Lux Research provides strategic advice and on-going intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.

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