Biofuels win two, lose one.

Source: David R. Baker • San Francisco Chronicle  • Posted: Tuesday, December 6, 2011

For the biofuels industry, the past week has been a case of two steps forward and one step back.

The U.S. Navy announced Monday that it would buy 450,000 gallons of advanced biofuels from two companies, including Solazyme in South San Francisco. It’s the government’s largest biofuel purchase to date, and will allow the navy to test how well bio-based versions of jet fuel and marine distillate fuel perform in a variety of ships and air craft.

It’s also a coup for Solazyme, which derives its fuel from algae. The navy has already bought Solazyme fuel in smaller batches — about 95,100 gallons so far — and seems to like the result.

“The Navy has always led the nation in transforming the way we use energy, not because it is popular, but because it makes us better war fighters,” said U.S. Navy Secretary Ray Mabus, in a prepared statement.

Meanwhile, across the Bay, Emeryville’s Amyris Inc. last week formed a joint venture with French oil giant Total to bring renewable diesel and jet fuel to the global market.

Total, the same oil company that bought a majority stake in San Jose’s SunPower Corp. earlier this year, operates in 130 countries and understands scale in a way no startup can. Amyris and Total launched a joint R&D effort last year, with Total contributing $105 million of the project’s estimated $180 million cost.

And yet, even as Amyris and Solazyme push forward, other advanced biofuel companies continue to struggle.

News broke late last week that Range Fuels, based in Colorado, would have to liquidate a biorefinery the company built in Georgia, using $86 million in federal government loans and grants.  The plant was supposed to produce cellulosic ethanol from wood chips, supplied by nearby timber operations. But it ran into technical issues and closed in January, less than a year after it opened. Like Amyris, Range is backed by Bay Area clean-tech VC Vinod Khosla.

(Those of you obsessed with the Solyndra scandal, take note: Range’s government loans and grants were issued by the Bush administration, via the U.S. Department of Agriculture and the U.S. Department of Energy.)

A few more details on the Solazyme deal:

The company will work with Dynamic Fuels, a joint venture between Tyson Foods Inc. and Syntroleum Corp. Solazyme will supply algal oil to Dynamic, which will then process the oil in jet fuel and marine distillate fuel. Dynamic will also use some of its own oil, derived from used cooking oil, as a raw material.

The finished products, both for aircraft and ships, are designed to be “drop-ins,” mimicking petroleum-based fuels closely enough that engines can’t tell the difference. Still, the Navy likely will use a 50-50 blend in its vehicles, said Solazyme CEO Jonathan Wolfson.

“There should be no difference with our fuel,” he said. “We haven’t heard anything from them that suggests anything other than complete, drop-in compatibility at this point.”