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RENEWABLES & BIOFUELS: Biofuels launch biotech's 'third wave' tohelp meet increasing demand for energy

------------------------------- GENET-news -------------------------------
TITLE:  Biofuels launch biotech's 'third wave' to help meet increasing
        demand for energy
SOURCE: North County Times - The Californian, USA
AUTHOR: The Associated Press, by Paul Elias
DATE:   21.03.2007

Biofuels launch biotech's 'third wave' to help meet increasing demand
for energy

SAN FRANCISCO -- Biotechnology was first applied in medicine, then
farming. Today, dozens of lifesaving drugs are on the market, while many
crops are genetically engineered to withstand weed killers.

Now, a 2-year-old push to develop alternative fuels is driving
biotechnology's growth into the industrial sector.

Thousands of corporate executives and scientists gather this weekend in
Orlando, Fla. for an industry trade show specifically aimed at touting
biotechnology's so-called third wave, industrial applications. The word
on everyone's lips: ethanol.

After decades of unfulfilled promise and billions in government corn
subsidies, energy companies may finally be able to produce ethanol
easily and inexpensively thanks to breakthroughs in biotechnology.

Most of the 5 billion gallons of ethanol produced annually in the United
States is still made by fermenting corn, but the crop is expensive and
its use in biofuels cuts into the nation's food supply. So the Canadian
biotech company Iogen Corp. has developed a method for deriving ethanol
from a variety of plants including wheat, oats and barley. Others are
genetically engineering microbes to produce enzymes that will convert
the cellulose in crop waste, wood chips and other plants into ethanol.

President Bush helped breathe new life into this once-sleepy biotech
sector by touting the need to ramp up production of this "cellulosic
ethanol" in his last two State of the Union speeches.

The president wants to reduce the country's oil consumption by 20
percent within 10 years and he sees alternative fuels as the way to get
there. Bush visited the North Carolina biotechnology company Novozymes
Inc. last month to underscore the industry's vital role in accomplishing
that ambitious goal.

Government agencies led by the Department of Energy are sinking millions
into biotech projects aimed at making ethanol more efficiently. And
startups dedicated to turning plants into fuel have captured the fancy
of deep-pocketed venture capitalists like Vinod Khosla. The billionaire
co-founder of Sun Microsystems Inc. is investing hundreds of millions of
dollars in green technology and will be a featured speaker this year at
the World Congress on Industrial Biotechnology & Bioprocessing.

Other heavy hitters attending the conference include University of
California scientist Jay Keasling, Discover magazine's Scientist of the
Year in 2006 and a leader in the burgeoning "synthetic biology" field,
which aims to create living species that will spit out drugs and fuel.

Oil companies are also investing heavily in biotechnology these days,
and executives from ConocoPhillips Co., Chevron Corp. and Shell Oil
Corp. will also be on hand at Walt Disney World for the conference,
which starts Thursday.

By contrast, these annual gatherings have historically been sleepy
affairs. Last year's industrial biotech meeting, sponsored by the
Biotechnology Industry Organization, drew little interest even though it
was held in Hawaii in January. That state's lieutenant governor may have
been the biggest draw.

Past conferences have featured discussions on topics like biotech's role
in manufacturing enzymes used to help laundry detergent break down dirt
and give blue jeans the stone-washed look. But this year's meeting will
be focused on the industry's role in making ethanol and other
alternative fuels.

The DOE has awarded up to $385 million over four years to six companies
to develop ethanol.

"We are moving into a very diversified fuel era," said Ron Pernick, who
co-founded Portland, Ore.-based Clean Edge, which tracks venture capital
investment. "Private investment is really taking off."

Pernick said venture capital investment in biofuels has increased from
less than $1 million in 2004 to $20.5 million in 2005 to $813 million
last year. Much of that investment is flowing to biotechnology companies
that genetically engineer microbes that produce enzymes needed to break
down crops into alcohol.

At least one industrial biotechnology company has radically remade
itself into an energy company in hopes the alternative fuel craze is
here to stay.

San Diego's Diversa Corp., which has lost $329.5 million since its
inception in 1994, bought the Cambridge, Mass.-based ethanol company
Celunol in January for $154.7 million in stock, plus debt financing. The
Celunol management team will take over the new energy company once the
deal is approved.

Still, even industrial biotechnology's adherents concede that commercial
success in the alternative energy industry is years away -- if ever.

"Taking any invention from the lab to the marketplace is a long-term
process and takes a lot of patience," said Celunol spokesman John Howe,
who said the company's plan to convert sugar cane into ethanol will take
many years to become profitable.

Others wonder if trend to making more ethanol has created a bubble that
may soon burst.

Economist Lester Brown, who launched the Washington-based think tank
Earth Policy Institute, said it's easier to make automobiles more fuel
efficient than it is to radically alter the country's fuel supply.

"If we were to raise fuel efficiency standards, we could save as much
oil as the president wants," Brown said. "Ethanol is not a winning ticket."

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