From biofuels to green chemicals (images)

Over the past 10 years, dozens of start-ups were formed to make biofuels to displace oil. But many companies have found that the fuels business is tough to crack and, because it's a commodity business, difficult to undercut petroleum oil on price. That's why many biofuel companies are first making industrial chemicals, foods, or even skin care products. It's a strategy to get sales and ramp up production with a higher-margin product.

One company with a diversified product strategy is Solazyme which grows sugar-fed algae in industrial fermenters to make diesel fuel, industrial chemicals, nutritional oil, or skin care products. Pictured here is oil for cooking.

See related story: "Molecules for sale: Biofuel outfits bet on chemicals.

Making chemicals first, rather than fuels, in industrial fermenters such as these is the strategy that Amyris is following. The company last month announced a contract manufacturing deal in Brazil to produce industrial chemicals used in lubricants and skin care products using sugar cane as a feedstock. The company, which recently went public, expects to do jet fuels later but is focusing on chemicals in the near term to boost revenue and bring down its production cost through higher-volume manufacturing.

Gevo is another company which intends to enter the jet fuel business longer term but in the near term plans to make isobutanol from cornstarch. It's a chemical "building block" used in the production of many products such as rubber, paints, and plastics. Its process uses genetically modified yeast with metabolic pathways that secrete isobutanol molecules rather than alcohol (ethanol) during fermentation. Its goal is to retrofit corn ethanol plants, using essentially the same equipment.

Biotech company Genomatica is one young company which started out targeting industrial chemicals with its genetically engineered bacteria grown in industrial fermenters from sugars. The company is initially going after BDO, a chemical used in spandex, running shoes, and automotive plastics.

Certainly not all biofuels companies are targeting renewable chemicals first. Joule Unlimited announced last week a deal to secure 1,200 acres of land in New Mexico to grow a diesel-producing microorganism in its bioreactors. The company said that once at full scale, its process--which does not rely on sugars and fermentation--can make fuel at $20 a barrel or 60 cents a gallon, "including current subsidies."