Although biofuels production increased 82% from 2000 to 2008, they still control a narrow niche of the overall market for transportation fuels, frustrating start-ups’ dreams of easy riches. Even so, biofuels created through new technologies like cellulosic fermentation are beginning to leave the realm of science and turn up the competitive heat.

Today’s cellulosic fermentation players, in general, aim to optimize the conversion of sugars into biofuel – either by improving traditional fermentation technologies that employ natural yeast or by applying advanced fermentation techniques using genetically-enhanced yeast, other microbes, or some combination of the two.

While technology is a differentiator, scale matters more right now. As with most emerging biofuel technology spaces, novel fermentation technologies haven’t been around long enough to prove or disprove viability. The industry knows what needs to happen: the production cost of cellulosic ethanol (propanol, butanol, or methanol) need to become cost-competitive with their petroleum counterparts. Right now, all of these companies are in a heated race to achieve that low cost, which can only happen at commercial scale.

Companies that achieve scale first, however, have the best chance at success. The two biggest contenders are Iogen – the most mature company of the lot – and Mascoma, which scores well on business execution and technical value thanks to its potentially cost-cutting “consolidated bioprocess” in which a single microbe breaks down cellulose and ferments the sugar to produce ethanol.

Qteros and Genomatica also show promise. Like Mascoma, Qteros is developing a consolidated bioprocess backed by high-profile partners. But its progress has been slow, and the lack of production beyond lab scale accounts for its low technical score. Similar issues face Genomatica, whose genetically modified microbes produce BDO, a chemical intermediate valued much more highly than ethanol. But it too scores low on technical value as it has yet to move production beyond lab scale. Despite Genomatica’s strong leadership, it lags in business execution due to a lack of commercial partnerships and low momentum, as its slow path to scale-up means it will likely require additional investment.

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