Is Sugar the New Oil?

Yes—at least, that’s what a handful of biofuel executives and investors said at a SDForum clean-tech panel discussion Tuesday morning in Palo Alto. Technology has come far enough to make sugar-based fuel and chemicals competitively priced with oil, solar energy, wind energy and ethanol, said panelists.

The panel included the CEO of Proterro Inc., a biofuel startup based in Princeton, NJ; two venture capitalists; and the director from LS9 Inc., a San Francisco-based biofuel startup company. All have seen millions pour into research and development of sugar-based biofuel, because the potential market ranging from cosmetics to jet fuel is “huge.”

Sugar makes for an attractive source of energy, because the price of sugar has less volatility than the price of oil, panelists said. Companies that use sugar for fuel can use a more stable energy source at cheaper rates and pass the fuel-energy-cost savings to customers, said Aaron Moser, director of corporate planning and development at San Francisco-based start-up LS9 Inc.

LS9 has partnered with Proctor and Gamble, maker of everyday products such as Tide laundry detergent, Duracell batteries, Head and Shoulders shampoo and Charmin toilet paper, to create a “specialty chemical” using a bio-engineered e-coli, which turns sugar into fuel, Moser said. Chevron has also invested in LS9, he said.

Most chemicals are derived from petroleum or vegetable oil, Moser said. Neither energy source is sustainable nor price stable, he added. Proctor and Gamble has seen commodity prices skyrocket, and they cannot necessarily pass on a 30 percent increase in fuel costs to a person who wants to buy Tide, he said.

Combining a patently protected bio-engineered e-coli bacteria with sugar to make fuel “is the most cost-, resource- and energy-efficient way to produce petroleum-replacement products and industrial chemicals,” the company’s website says.

A company like LS9 has to obtain its sugar from somewhere, which is where Proterro comes in. Proterro grows a cyanobacteria, which the company uses to make “Protose™ sugar, a fortified sucrose that is a sustainable, inexpensive, geoflexible, fermentation-ready feedstock.” LS9 can then combine the Protose sugar from Proterro with its designer e-coli bacteria to make biofuel. Proterro’s sugar is “non-agriculture-based, fermentation-ready sugar at a cost lower than sugarcane, corn or other energy crops,” says the company’s website.

In this way, fuel derived from Proterro’s sucrose is more cost-effective than fuels derived from current approaches, said CEO Kef Kasdin.

Sugar has largely gotten away unscathed in the food-versus-fuel debate compared with corn-based ethanol, said Brook Porter, partner at Menlo Park-based venture-capital firm Kleiner Perkins Caufield & Byers. “There’s so much available acreage in Brazil” to grow sugar crops, he said. Sugar has a more stable price than oil, because “supply can expand to meet demand,” he said. “So traders might not take the risk that sugar prices would spike,” he added.

Porter’s firm has invested in Emeryville-based startup Amyris, which went public last October, priced at $16 a share. The company’s stock nearly doubled in a few months hitting a high of $34 in January. The stock now trades at around $28.

Amyris’ IPO was a “signal to marketplace with what is possible with synthetic biology,” Porter said. Amyris plans to roll out production this year on its molecule called “farnesene,” which, according to the company website, “forms the basis for a wide range of products, varying from specialty chemicals such as detergents, cosmetics, perfumes and industrial lubricants, to transportation fuels such as diesel.”

Despite the rush to find something cheaper, more sustainable and more available than oil, it’s going to be a long time before technology advances far enough for anyone to fill up a car's gas tank with biofuel, panelists said. But the cosmetics and detergent markets have already bought in.

Right now the high price of oil is driving the rush to find alternative energy sources, said Porter. "Oil is a finite resource that will eventually run out,” he said. We need to find another way to replace our uses for oil to make things like glasses and shirts, he said. All these things get more expensive as the price of oil rises. “We need a lower cost, more sustainable solution for that,” he said.