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Oil Incumbents Building Empires to Dominate Biofuels and Other Alternative Fuels

Lux Research

Large corporations such as Chevron and BP dominate partnership networks, which connect nearly 80% of the 753 firms active in alternative fuels, says Lux Research.

Boston, MA – April 17, 2012 – Over the past decade, hundreds of start-ups, corporations, financiers, and universities have developed compelling alternative fuel technologies, such as bio-based jet fuel and cellulosic ethanol. Now, as alternative fuels march to scale, partnership networks in this field are increasingly dominated by the same giant multinationals that control petroleum, according to a Lux Research report.

“As alternative fuel technologies go to market, aligning with the right partners is a necessary stepping stone. The massive incumbent fuel producers, refiners, and distributors can be the competition, but they’re also the key to integrating novel technologies into a century-old industry,” said Andrew Soare, Lux Research Analyst and the lead author of the report titled, “Mapping Empires, Goldmines, and Landmines in the Alternative Fuels Network.”

“The public market successes of Gevo, Amyris, and Solazyme have been based on their sound partnership portfolio, in addition to a robust technology platform,” he added. “As a result, they’ve been able to lead the way to the market, building commercial facilities this year and next.”

Lux Research analysts traced the history of the alternative fuel social network across national, industry, and technology lines from 2005. Among their findings:

  • The partnership web is far-reaching. Relationships in alternative fuels form a complex network of 800 partnerships among 753 companies, where almost every relevant company is connected to another. In fact, 79% of the companies in the space are connected in one large web.

  • Biological technologies form the major nodes. While many technologies are well-represented, it’s the few biological processing companies such as LanzaTech, Amyris, and Gevo that have built the more extensive partnership portfolios. The biological processes are inherently flexible with organisms capable of consuming several feedstocks and producing several end products.

  • Oil and gas majors are the glue in the network. Key downstream companies such as Valero, Shell, BP, and Chevron are building empires based on strong networks of partners that bring technology to combine with the majors’ resources, channels, and scale. Technology developers such as Novozymes and Amyris and next-generation ethanol players like Mascoma, Coskata, and LanzaTech form their own mini-networks.

The report, titled “Mapping Empires, Goldmines, and Landmines in the Alternative Fuels Network,” is part of the Lux Research Alternative Fuels Intelligence service.