# Advanced Biofuel Market Report 2011

Meeting the California LCFS

Authors Mary Solecki, E2 David Richey, Goldman School of Public Policy Bob Epstein, E2

111 Sutter Street, 20th Floor San Francisco, California 94014 www.e2.org Revised report 22 August 2011.

# Table of Contents

Introduction 3 The Advanced Biofuel Industry 4

Active Companies 4 2015 Fuel Capacity 5 Financing 6

Private Equity Investment 6 Public Funding 6 Market Factors for Industry Growth 7

Biofuel Feedstocks 7 Cellulosic Biomass Low-Cost Sugars Algae and CO2 Capture Latin American Sugarcane Funding 8 Revenue Generation through Biochemicals Initial Public Offerings Shift to Commercial Production 10 Regulatory Environment 10 Credit Trading Market Off-Take Agreements Price Stability Willing Market Participation Meeting the LCFS - Scenarios for California 12
Conclusions 13 Acknowledgements 14

Appendix A: US and Canadian Advanced Biofuel Producers 15

Appendix B: International Advanced Biofuel Producers 21

Appendix C: Related Businesses 22 E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 2 Environmental Entrepreneurs (E2) is a non-partisan national community of 850 business people who believe in protecting the environment while building economic prosperity. Our mission is to provide a platform for an independent business voice to promote environmentally sustainable economic growth. E2 represents entrepreneurs, investors and professionals from every sector of the economy. We work at both the state and national levels through bipartisan efforts.

## Introduction 

# A dvanced biofuels are renewable transportation fuels that can replace traditional gasoline and diesel at a competitive price and with significantly lower greenhouse gas (GHG) emissions. 1 This report collects data from a variety of public sources and private interviews for the purpose of summarizing current economic activities in the advanced biofuel industry.

California enacted the Low Carbon Fuel Standard (LCFS) regulation in 2007 as part of the Global Warming Solutions Act of 2006 (known as AB 32). The LCFS requires that, by 2020, blenders, refineries, importers and distributors of transportation fuels reduce the “carbon intensity” (CI) of the fuels they sell by ten percent below a 2006 gasoline and diesel baseline. While the LCFS will be achieved with a variety of alternative fuels including electricity and natural gas, this report examines the ability to meet the reduction target only through the use of advanced biofuels in gasoline and diesel vehicles.

California uses approximately 18 billion gallons of transportation fuel per year. 2 E2's research shows that the vast majority of advanced biofuels are expected to possess just one quarter the CI of gasoline. For simplicity’s sake, this report assumes that reduced travel and improvements in fuel efficiency will keep demand constant at 18 billion gallons per year through 2020. Therefore a ten percent reduction in carbon intensity could be met with a combination of 15.6 billion gallons of traditional fuel plus 2.4 billion gallons (gasoline equivalent) of advanced biofuels (assuming advanced biofuels’ CI is one quarter that of gasoline and that traditional fuels’ CI does not increase). To meet the earlier 2015 milestone of a 2.5 percent reduction, 600 million gallons (gasoline equivalent) of advanced biofuels are needed - although the 2015 target is more likely to be met with a combination of improved CI ethanol and advanced biofuels.

This report does not claim nor is it designed to prove that the private sector will produce 2.4 billion gallons (gasoline equivalent) of advanced biofuel for the California market. Rather it provides evidence that the combination of market forces and public policies has put the advanced biofuel technology and industry in the United States on a path where it should be able to produce a significant amount of low-carbon fuel in the next few years

, thereby making it possible to deliver sufficient fuel to meet the California LCFS. This report aggregates and analyzes the advanced biofuel industry’s estimates of annual fuel production per year through 2015, as well as public and private investments in companies and production facilities. The report examines how different market factors and government policies influence investments, production, and distribution. Lastly, it describes various pathways through which fuel would be distributed into California to count towards the LCFS.

In summary, this report concludes that it is indeed possible to deliver enough advanced biofuel to meet the California LCFS. It finds that investment, not technology, is the biggest market barrier and that regulatory certainty is needed to ensure market stability. It also describes additional policies that California could pursue to improve the likelihood of meeting its LCFS goal. E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 3 1 US Environmental Protection Agency, “EPA Proposes New Regulations for the National Renewable Fuel Standard Program for 2010 and Beyond.” Web. Retrieved 15 July 2011 from <http://www.epa.gov/oms/renewablefuels/420f09023.htm#2>.

2 "Transportation Energy Statistics." California Energy Almanac. California Energy Commission. Web. 13 July 2011. <http://energyalmanac.ca.gov/transportation/summary.html>.

## The Advanced Biofuel Industry

From start-ups to publicly traded companies, the advanced biofuel industry is experiencing significant activity and growth. Government regulations such as the Federal Renewable Fuel Standard (RFS2), the California LCFS, and the European Fuels Quality Directive, 3 in conjunction with rising oil prices and technological advances have improved investment opportunities over the last five years.

Under the RFS2, advanced biofuel or low-carbon fuel is defined as any fuel with a CI that is at least 50 percent lower than gasoline’s. 2 While researching this report, E2 found that if a fuel lowers GHG emissions by 50 percent (or 48 g CO 2 e/MJ) below the baseline of 96 g CO 2 e/MJ, it typically goes significantly farther and reaches a carbon intensity of 24 g CO 2 e/MJ or below. 4 This equates to a 75 percent reduction over gasoline produced from crude oil. Companies that are choosing to pursue low-carbon fuelpathways have discovered significant reductions through cogeneration of renewable biomass not utilized for liquid fuel production, reusing or finding value-added commercial markets for byproducts, sourcing locally to reduce transportation impacts, and choosing non-food based feedstocks or byproducts residual to food production. Because of the significant CI reduction between these low-carbon fuel companies and their higher carbon counterparts, this report examines only the markets and industry forecasts for these low-carbon fuels estimated by E2 at 75 percent lower than gasoline or diesel.



### Active Companies The advanced biofuel industry is a new, cleantech sector with many market entrants and players. As can be expected in an emerging industry, the number of advanced biofuel companies changes constantly. Consequently, very few, if any, comprehensive lists of active biofuel companies exist. The absence of such a database does not represent a lack of data or activity, merely the difficulty in tracking an ever-moving target. For this report, E2 has gathered information on currently active advanced biofuel companies. This snapshot of the current state of the industry gives us a baseline on which to gauge market projections and activity.

E2 identified 240 advanced biofuel companies in the United States and Canada. These companies are scattered across all stages of business development including venture capital backed start-ups, joint ventures and publicly traded companies. Some companies are only at the research and development stage, while many biodiesel facilities are already commercially producing fuel. Table 1 shows an overview of advanced biofuel producers and ancillary support businesses that provide feedstocks, infrastructure, distribution, catalytic processes, and more. These businesses are integral to providing the support and technology needed for advanced biofuels. Appendix A shows a complete listing of the active advanced biofuel companies, and Appendix C details supply chain affiliates identified by E2.

In the US and Canada alone, these companies are producing over 400 million gallons of low-carbon fuels in 2011 (Table 1). Non-soy biodiesel comprises the majority of this production, at approximately 350 million gallons. 5 Facilities producing biodiesel, the first advanced fuel in commercial production, have a significantly higher capacity and could produce as much as 2.1 billion gallons. 6 However, according to Shelby Neal of the National Biodiesel Board, total “biodiesel production will follow the RFS2 mandates pretty closely ,” demonstrating the impact of regulation on the industry’s available markets. The RFS2 calls for 800 milliongallons of biomass-based diesel in 2011, of which LouisianaE2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 4 3 RFS2: http://www.epa.gov/otaq/fuels/renewablefuels/index.htm LCFS: http://www.arb.ca.gov/fuels/lcfs/lcfs.htm European Fuels Quality Directive: http://ec.europa.eu/environment/air/transport/fuel.htm

4 Carbon intensity values calculated by E2, based on publicly available information of each company’s targeted fuel pathway and CI values or proposed CI values from California Air Resources Board.

5 Wisner, Robert. Soybean Oil and Biodiesel Usage Projections and Balance Sheet, updated 18 Feb 2011. <http://www.extension.iastate.edu/agdm/crops/outlook/soybeanbalancesheet.pdf>. Values cited are for the ‘‘High’’ case.

6 Neal, Shelby, National Biodiesel Board. Email correspondence with Mary Solecki 21 June 2011. Table 1 : The 240 active advanced biofuel companies are already

producing over 400 million gallons of low-carbon fuel in 2011. Fuel Type Companies Million Galbased Dynamic Fuel’s renewable diesel is expected to provide 75 million gallons (MG), soy biodiesel 375 MG, and non-soy biodiesel 350 MG.

In contrast to the EPA’s production numbers, E2 has counted production from pilot and demonstration facilities even though it is not actively traded in the fuel mix, and thus not tracked by EPA. Also, E2 has counted production from US-based Amyris for its Brazilian ethanol plant, as well as AE Biofuel’s Keyes plant which is ahead of the EPA’s latest production timeline. Beyond that, all other fuels are consistent with the production numbers available from the EPA for 2011 and 2012 (complete list in Appendix A). 7

Abroad, at least 25 additional advanced biofuel companies have the potential to export to the US domestic market (Table 2). They are currently producing 791 million gallons of advanced fuel. Two of the largest companies, Neste Oil and Argent Energy, have registered facilities under the RFS2. This report identifies these foreign companies based upon significant levels of investment, development, and proximity to waterways or other distribution infrastructure. Detail of these companies may be found in Appendix B.



### 2015 Fuel Capacity To evaluate the market’s capacity to meet the LCFS mandate by 2020, E2 used company-supplied forecast numbers for 2015 production. E2 discounted some production numbers, excluding producers that seemed unlikely to meet their targets. Information such as the company’s funding status, planned construction, and annual fuel production targets were considered.

Given these considerations, the advanced biofuel industry is selfreporting capacity to produce nearly 3.2 billion gallons of lowcarbon fuel in the United States by 2015 . This is summarized in Table 3, and detailed in Appendix A. Adding international com

pany projections brings the total to 4.4 billion gallons of fuel which could be used in California. As previously mentioned, 600 million gallons of fuel are needed to meet the LCFS in 2015 exclusively through advanced biofuels.

Of note is the increasing market share of renewable drop-in fuels 8 over time. Given their lower CI value, ease of integration into the existing infrastructure, and high energy content over ethanol, these fuels are of increasing interest to the fuel market and its investors. The total renewable drop-in fuel production (renewable diesel, renewable gasoline and multi-fuel renewable) will eclipse that of both biodiesel and cellulosic ethanol by 2015 at 1.5 billion gallons. E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 5 7 United States Environmental Protection Agency. “Regulations of Fuels and Fuel Additives: 2012 Renewable Fuel Standards.” Vol 76, No. 127. Web. Retrieved 19 July 2011. < http://www.gpo.gov/fdsys/pkg/FR-2011-07-01/pdf/2011-16018.pdf >

8 Drop-in fuels may be processed through existing distribution infrastructure and combustion engines. Table 3 : MGPY = Millions of Gallons Per Year. The biofuel market reports increased production of all advanced biofuels in the next four years. Table 2 : MGPY = Millions of Gallons Per Year. International companies likely to export fuel to California are

forecasting 1.2 billion gallons of fuel production in 2015, 1.1 billion of which is renewable drop-in fuels. Companies MGPY MGPY Fuel Type # 2011 2015

Fuel Type 2011 2015

## Financing

Significant investment has already been required to reach the current production of 400 million gallons. This investment trend must continue for the industry to expand commercial facilities. Investors and companies commonly refer to policies such as the LCFS and the federal RFS2 as factors that are increasingly pushing companies toward producing advanced biofuels with low CI values. Advanced biofuel companies access both private equity and public funding for financial support.



### Private Equity Investment The Cleantech Group forecasts the market of low-carbon fuels at $33.4 billion by 2020 . This is nearly double the future market of energy efficiency ($17.3 billion), and significantly higher than renewable electricity ($20 billion). 9 To seize this opportunity, venture capitalists have invested at least $3.1 billion worldwide, or $2.4 billion in active North American companies from 2007 through the second quarter of 2011 and according to publicly available data (Appendix B). Figure 1 shows a quarterly overview of these investments.


### Public Funding
Both the U.S. Department of Energy (DOE) and U.S. Department of Agriculture (USDA) have developed grants and loan guarantee programs, through which funding is lent to start-up companies and ventures. USDA has at least three active loan guarantees or grants, and the DOE at least eighteen. The state of California also operates a renewable energy grant program, authorized by Assembly Bill 118 (AB 118). 10 The AB 118 program dedicates approximately $200 million annually to fund clean transportation projects through 2015. The California Energy Commission oversees up to $120 million of these grants, and has awarded funding to four California biofuel producers along with two additional supportive technology providers as of 2010. The American Recovery and Reinvestment Act (ARRA) provided an additional infusion of cash by matching funding of several AB 118 grantees. 11

Grant, loans and funding sources are listed in Table 4. This data was compiled from company statements only, so it does not claim to be exhaustive. E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 6 9 Cheng, David, “California in Perspective: An Overview of State Energy Policies.” Cleantech Group, 2010.

10 http://www.energy.ca.gov/ab118/index.html

11 "Alternative and Renewable Fuel & Vehicle Technology Program." California Energy Commission Home Page. State of California. Web. 07 July 2011. <http://www.energy.ca.gov/altfuels/index.html>. Company Millions State Program

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## Market Factors for Industry Growth

To determine how advanced biofuels can meet the California LCFS demand, E2 interviewed biofuel industry stakeholders ranging from venture capitalists and land-use experts to environmentalists and biofuel producers. While some perspectives on the current and future state of the biofuel industry differed, a number of commonalities emerged.

This report will discuss the key findings from these interviews according to four critical areas: feedstocks, funding, shift to commercial production, and regulatory landscape.

Venture capitalist Vinod Khosla best summarized many stakeholders concerns: "Technology is the not issue, it already exists - our concern is market commitment and feedstock." 12 The industry desires market commitment since it would yield financing. Hence the need for the State of California to pursue a robust LCFS program.



### Biofuel Feedstocks Advanced biofuel companies are moving forward with production based on conversion processes that enable use of multiple feedstock materials found in a wide variety of biomass sources, including fast-growing trees, grasses, municipal solid waste (MSW), algae and logging residue. The availability and cost of these feedstocks will also dictate the location of commercial facilities and the ability to scale. Among available feedstocks, cellulosic biomass represents significant commercial potential as a long-term feedstock source. 13

With so many promising fuel pathways and companies, it is clear that the LCFS will not be met by a single fuel type, technology or feedstock, but through a combination thereof. Each feedstock category has numerous companies vested in the successful development and production of this critical input. Feedstocks being pursued by active advanced biofuel companies that could enter the California market include: Cellulosic Biomass Cellulosic biomass, including corn stover, woody biomass and waste is available in both tropical and temperate climates, has high yields, and does not compete with food. 14 For example, cellulosic biomassresidue from agricultural and forest activities and microalgal oil would be low-cost and result in minimal competition for land. 15 In the United States and

California, woody biomass feedstock is seen as a viable option for volume production based on availability, cost, and yields. However, some in the environmental community have raised the concern thatexpanding the use of cellulosebased biomass, particularly woody biomass, could exert pressure on existing forest ecosystems and range land. 16 The most promising regions for woody biomass are likely to be private forest lands developed for the pulp and paper industry.

High-density biomass crops are being actively pursued by a number of companies, including CERES, Mendel, Chromatin and Yulex.

Low-Cost Sugars Many companies are “feedstock agnostic,” only seeking low-cost, abundant sources of sugar. Since there may not be sufficient California-grown sugars, in-state facilities may be smaller, and will be co-located with any available feedstocks. Outside of California, the Southeastern United States will likely be a choice location for many facilities, with its abundant arable land and favorable climate.

For example, Virent currently operates a demonstration facility in Madison, Wisconsin using sugar beets from Cargill. Virent is testing and proving fuels with a variety of sugar sources, and could therefore change its ultimate commercial-scale feedstock and location based on price and availability. 17 E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 7 12 Khosla, Vinod. Principal, Khosla Ventures. Interview by Bob Epstein and David Richey, Environmental Entrepreneurs. 26 May 2011. Palo Alto.

13 Timilsina, Govinda R., and Ashish Shrestha. “How much hope should we have for biofuels?” Energy (2010).

14 McGee, Chandra, and Amy B. Chan Hilton. “Analysis of Federal and State Policies and Environmental Issues for Bioethanol Production Facilities.” Environmental Science & Technology (2011).

15 Carriquiry, Miguel, Xiaodong Du, and Govinda R. Timilsina. “Second generation biofuels: Economics and policies.” Energy Policy (May 2011).

16 Strittholt, James R and Tutak, Jocelyn “Assessing the Impact of Ecological and Administrative Considerations on Forest and Shrubland Biomass Projections for California.” Conservation Biology Institute. Web, 10 July 2011 <http://consbio.org/assessing-the-impact-of-ecological-considerations-on-forest-and-shrubland-biomass-projections-for-california/>.

17 Rozmiarek, Robert and Blanchard, Mary. Virent Energy Systems. Phone Interview with Mary Solecki, 26 July 2011.Algae and CO 2 Capture Algae and CO 2 capture, among other areas of exploration, are potential sources of future fuels as active, well-funded companies are looking at scaling up technologies. An example of such a company is Joule Unlimited, which produces diesel through solar conversion of CO 2 capture. Joule has a target productivity rate of 15,000 gallons of diesel per acre, per year. (E2’s 2015 projection of advanced biofuel production does not include any fuel from Joule, but the company could be a market entrant near that date.)

Algal biomass has a dedicated set of stakeholders investing in the development of algae as a feedstock. Companies like Sapphire and Kuehnle Agrosystems are focused on the economic and environmental gains from the commercial production of algae. Additionally, DARPA (Defense Advanced Research Project Agency) and the DOE have dedicated significant funding to the development of algae feedstocks through loan guarantees and research grants.

Latin American Sugarcane Biofuels like sugarcane ethanol remain an option for the California market while the advanced biofuel industry is approaching commercial-scale production. As an average of 380 MGPY (Million Gallons Per Year) of sugarcane ethanol has already been imported from Brazil over the past five years to meet the RFS2, it is likely that Latin America will keep providing some portion of biofuel for the California market. If the RFS2 establishes an increased U.S. demand for 484-496 million gallons of other advanced biofuel in 2012, it could be economical for Brazilian producers to export higher volumes of sugarcane ethanol to the United States. The LCFS may also result in some refiners importing additional volumes of sugarcane ethanol from Brazil into California in 2012. These same volumes could count towards the RFS2 program as well. 18 Recently, federal legislation was introduced to lift the tariff on the import of South American ethanol, further increasing the ease of importing this fuel into the California market. 

### Funding The advanced biofuel industry has received significant venture capital funding, as evidenced by the $2.4 billion of venture capital invested since 2007 mentioned earlier. This funding carries companies through research, development, and building pilot or demonstration facilities. However, to reach the next level of growth, companies need greater infusions of cash to build commercial-scale facilities. Most of that cash is expected to come from debt financing, which is typically difficult to obtain for the first few facilities due to the operational risk. Once those first few facilities are online, debt financing becomes much more feasible.

Revenue Generation through Biochemicals To provide higher margin products with shorter paths to revenue, advanced biofuel companies are producing biochemicals and other high-value products in the short-term, allowing demonstration of functional product pathways and revenue growth. Companies such as Amyris and Solazyme are producing bio-oils as a biochemical replacement for the petroleum-based specialty chemical market. 19 This model of diversification provides the industry with multiple markets allowing companies to continue the development and scale-up of cost-efficient production.

As Jim Lane, editor of Biofuels Digest , stated in an interview with Cobalt Chief Executive Officer Rick Wilson:

“If fuels incentives are just too tough for the country to afford, why not construct a mechanism by which advanced biorefineries can at least get a hand-up in getting into business as bio-based chemicals producers.

That can in itself create the proof positive of performance that may well crack open the project finance market, and create the very expansion of fuel-producing capacity that the Renewable Fuel Standard expects and that the US, among many countries, both needs and can benefit from.” 20

This market bifurcation means that as more low-carbon fuels come to market, petroleum replacements will spread across all E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 8 18 Environmental Protection Agency, “ Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards.” Web, 10 July 2011.

< http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm >.

19 "Form S-1 Amyris Biotechnologies, Inc." U.S. Securities and Exchange Commission (Home Page). 16 April 2010. Web. 16 June 2011.

< http://www.sec.gov/Archives/edgar/data/1365916/000119312510085595/ds1.htm >.

20 "Why Make a $2 Fuel When You Can Make a $5 Chemical." Interview by Jim Lane. Biofuels Digest. 16 March 2011. Web. 08 July 2011. <http://biofuelsdigest.com/bdigest/2011/03/16/why-make-a-2-fuel-when-you-can-make-a-5-chemical-cobalt-ceo-rick-wilson/>. potential product categories, not just fuels.Initial Public Offerings Recently, four companies have gone public to raise cash needed to fund expansion plans. Renewable Energy Group has also recently announced an impending IPO. The successful recent IPOs have included:



### • Amyris (California) - Raised $84.8 million in its IPO priced at $16 per share in September 2010. 21



### • Gevo (Colorado) - IPO raised $123.3 million, with the company selling 8.223 million shares at $15 per share in March 2011. 22



### • Solazyme (California) – May 2011 IPO priced at $18 a share netted $198 million. 23



## • KiOR (Texas) – June 2011, IPO raised $150 million selling 10 million shares at $15 per share. 24

Looking at Solazyme, KiOR, Gevo and Amyris, clear commonalities emerge with respect to factors perceived as critical to achieving commercial market success:

• Solazyme is currently pursuing commercial scale-up in the fuels, chemicals and nutrition markets through partnerships whereby partner companies will invest capital and operational resources in building manufacturing capacity. The company has completed engineering designs for large commercial plants to service the fuels and chemical markets. The company’s current Brazilian operations, California pilot plant, and Illinois demonstration fermentation facility will be augmented by a commercial facility in 2013 and additional commercial capacity in 2014 and 2015. 25

• KiOR began construction of its initial-scale commercial production facility in Columbus, Mississippi in the first quarter of 2011. This is financed in part with a combination of existing cash on hand, equity commitments from existing investors and a $75 million interest-free loan from the Mississippi Development Authority. Critical to scaling success, all planned plants are located near feedstock sources, transportation infrastructure and pipelines. 26

• Amyris currently operates a research and development laboratory in California and pilot facilities in Brazil. The company is expanding its production through a joint venture with the world’s largest sugarcane processing facility. Amyris has also established non-binding letters of intent with three leading Brazilian sugar and ethanol producers to build new, bolt-on facilities for production. 27

• Gevo's technology platform is based on modifying existing corn ethanol facilities to produce advanced biofuel. The company has demonstrated its production process via the retrofit of an ethanol facility in Missouri, and has acquired its first commercial facility in Luverne, Minnesota through direct acquisitions and joint ventures to produce more than 350 million gallons of advanced biofuel by 2015. 28 E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 9 21 Lane, Jim. "Amyris Raises $84.8M in IPO, Prices at $16, Well below Expected Range." Biofuels Digest. 28 Sept. 2010. Web. 22 June 2011.

< http://biofuelsdigest.com/bdigest/2010/09/28/amyris-raises-84-8m-in-ipo-prices-at-16-well-below-expected-range/ >.

22 Lane, Jim. "Gevo Raises $123.3 Million in IPO after Underwriters Oversubscribe." Biofuels Digest. 16 Mar. 2011. Web. 22 June 2011. <http://biofuelsdigest.com/bdigest/2011/03/16/gevo-raises-123-3-million-in-ipo-after-underwriters-oversubscribe/>.

23 Lane, Jim. "Solazyme IPO Nets up to $227M." Biofuels Digest. 27 May 2011. Web. 22 June 2011. <http://biofuelsdigest.com/bdigest/2011/05/27/solazyme-ipo-nets-up-to-227m/>.

24 Lane, Jim. "KiOR raises $150M in IPO, 30 percent below latest forecast." Biofuels Digest. 24 June 2011. Web. 27 June 2011. <http://biofuelsdigest.com/bdigest/2011/06/24/kior-raises-150m-in-ipo-30-percent-below-latest-forecast/>.

25 "Form S-1 Solazyme, Inc." U.S. Securities and Exchange Commission (Home Page). 11 Mar. 2011. Web. 16 June 2011.

< http://www.sec.gov/Archives/edgar/data/1311230/000119312511064209/ds1.htm >.

26 "Form S-1 KiOR, Inc." U.S. Securities and Exchange Commission (Home Page). 11 Apr. 2011. Web. 16 June 2011. <http://www.sec.gov/Archives/edgar/data/1418862/000095012311034676/h80686sv1.htm>.

27 "Form S-1 Amyris Biotechnologies, Inc." U.S. Securities and Exchange Commission (Home Page). 16 Apr. 2010. Web. 16 June 2011.

< http://www.sec.gov/Archives/edgar/data/1365916/000119312510085595/ds1.htm >.

28 "Form S-1 Gevo, Inc." U.S. Securities and Exchange Commission (Home Page). 12 Aug. 2010. Web. 16 June 2011. <http://www.sec.gov/Archives/edgar/data/1392380/000119312510187275/ds1.htm>.

### Shift to Commercial Production Each advanced biofuel company’s initial public offering lays out a plan to scale production capacity. While few advanced biofuel companies currently operate large-scale facilities, the industry is shifting towards commercial scale production through these IPOs and other funding sources, with numerous companies expecting to complete facilities by 2015. According to E2’s research, 29 advanced biofuel companies expect, by 2015, to complete commercial production facilities - each with a capacity in excess of ten million gallons per year, in addition to the 160 non-soy biodiesel facilities already in existence.

While construction of commercial production facilities does represent a significant cost, the marginal cost of production and capital costs are expected to decrease as the industry advances. Capital for commercial scale production facilities is becoming increasingly available as demonstrated by both public and private financial activity. As seen in the business plans of the publicly traded companies, costs are expected to be driven down byconstruction of facilities that can be readily replicated and colocated with sufficient and long-term sources of feedstocks. Additionally savings can be achieved with facilities that can be scaled and retrofitted from existing plants through bolt-on applications or simple modifications. Using woody biomass as a feedstock, KiOR stated in its S-1 filing an expectation of an unsubsidized production cost at below $1.80 per gallon of biofuel for its wood chips-to-biocrude technology. 29

Despite being home to numerous advanced biofuel companies’ headquarters, California faces some challenges as a center of commercial production. This is due to regulatory structure and feedstock limitations. As highlighted by a number of stakeholders, California's regulations and often lengthy approval process disincentivize companies from placing commercial production facilities within the state. Also the viability of commercial production facilities is dependent on long-term supplies of feedstock. While cellulosic biomass is readily available in California, the land where it can be sourced is primarily agriculturalor public land, thereby increasing the challenge to providing longterm feedstock supplies. 30 Despite these hurdles, commercial production in California has potential due to the strong market demand for advanced biofuels and the consequent job creation potential. It may also benefit from strategies such as co-locating at paper and pulp facilities, streamlining regulations and approval processes, and clarifying municipal solid waste policy. 31

To address the challenge of feedstock availability, California could consider a model similar to the USDA's Biomass Crop Assistance Program (BCAP). 32

BCAP is a program which bridges the gap between growing bio

mass crops and constructing a large-scale biofuel facility. To help ease the time lapse while these two are simultaneously being es

tablished, BCAP assists with start-up costs and guarantees crop purchase. This program complements the requirements of the RFS2 by stimulating the development of new energy crops.



### Regulatory Environment Since fuel is a highly regulated market, government’s role in spurring market development will help eliminate advanced biofuels’ barriers to entry. Among industry stakeholders interviewed for this report, there is significant consensus that state and federal governments must help provide market certainty through the strong enforcement of regulations. Vantage Point partner Thomas Huot asserts "California can meet the 10% reduction with current market practices, but the state needs to recommit to driving the biofuel industry by keeping the goal and mandate robust." 33 Many industry stakeholders, especially producers, voiced concerns about the risk of ARB (California Air Resources Board) changing or lowering compliance targets, or granting waivers to non-compliant parties. This would weaken the overall effect of the LCFS by not giving investors the market signal needed to fund low-carbon fuel projects. As explained by the venture capital community, California can meet the LCFS reduction target with current market technologies and products, E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 10 29 Form S-1 KiOR, Inc." U.S. Securities and Exchange Commission (Home Page). 11 Apr. 2011. Web. 16 June 2011.

< http://www.sec.gov/ Archives/edgar/data/1418862/000095012311034676/h80686sv1.htm >.

30 White, Eric M. Woody Biomass for Bioenergy and Biofuels in the United States— A Briefing Paper. U.S. Department of Agriculture, Forest Service, Pacific Northwest Research Station., 2010. http://www.fsl.orst.edu/lulcd/Publicationsalpha_files/White_pnw_gtr825.pdf.

31 “E2 Biofuel Roundtable." Interview by Mary Solecki. Environmental Entrepreneurs 26 Jan. 2011. New York.

32 http://www.fsa.usda.gov/FSA/webapp?area=home&subject=ener&topic=bcap

33 Huot, Thomas. Parter, Vantage Point Venture Capital. Interview by Bob Epstein and David Richey, Environmental Entrepreneurs. 7 June 2011.but government must ensure a strong mandate and a clear value for reduced CI. 34 Decreased regulatory certainty at the state-level results in companies not committing to the market. Conversely, providing long-term market commitment is likely to give companies the incentive to expand production to include both higher-margin biochemicals and biofuels.

To incite such a commitment, E2’s interviews uncovered a number of recurring approaches: a credit trading market under the LCFS, off-take agreements in California, and price stability created through regulatory stability, all leading to willing market participation.

Credit Trading Market Creating a transparent market under the California LCFS is predicated on a credit trading market. Matt Horton, CEO of Propel Fuels states that the industry “need[s] more certainty from ARB about what the compliance mechanism and trading scheme will be, in order to give a backbone to the credit market.” 35 Investors and advanced biofuel producers must have an early price signal on the value of low-carbon fuels to guide investments and scale-up production. Such a price would attract “willing market participants” to enter the market in advance of the “obligated parties” (see below).

To create a market, it is essential that agencies – such as the California Air Resources Board (ARB) – utilize a mechanism that establishes a transparent carbon price, allows fuel providers to buy and sell credits in an open market, and allows for strong oversight by the regulatory entity. One mechanism that can achieve these goals is a formal trading exchange for LCFS credits. In contrast, an unregulated ‘hands-off’ approach to the market would require that oil companies and alternative fuel providers contact each other directly, which would result in many market inefficiencies. 36 A credit trading mechanism must also provide a financial incentive to those regulated parties that over-comply, and a cost control mechanism for regulated parties struggling to meet the standard. For example, at Propel Fuels, an alternative fuel distributor, low-carbon E85 cannot yield a higher price than a higher-carbon equivalent. If the value of the credits were equal or higher than the extra cost of low-carbon ethanol, companies would have an incentive to switch.
Off-Take Agreements Hawaii serves as a worthwhile case study in market creation through off-take agreements. In order to meet strong state mandates for renewable electricity (40 percent by 2030), Hawaiian Electric (HECO) issued a request for proposals (RFP) to supply up to 200 million gallons of sustainably produced, renewable biofuel per year to fuel power generation stations starting as early as July 2014. This resulted in ten proposals to create new, locally sourced biofuels (Hawaii produces nearly all of its electricity from liquid petroleum derivatives). HECO and the Hawaiian Public Utilities Commission are currently vetting proposals. Once approved, entrepreneurs can use this market guarantee to secure project financing, and to access needed resources to scale-up biofuel production. 37

As a small island chain, Hawaii wants to reduce risk factors of its energy supply by producing fuels locally. As a result, all proposals have been tied to a landowner, assuring access to needed land. Stimulated by strong state policy, HECO is serving as a market creator with its unique off-take agreements, and therefore develops milestones for each project to ensure success. These milestones include proof of financing, start-up instruction, test quantities, land access, lifecycle assessments, and more. Similar off-take agreements could be implemented by California state agencies to spur additional market activity. E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 11 34 “E2 Biofuel Roundtable." Interview by Mary Solecki. Environmental Entrepreneurs 26 Jan. 2011. New York.

35 Horton, Matt. Propel Fuels CEO. Telephone interview by Bob Epstein and David Richey. 14 July 2011.

36 Garderet, Remy. “Comments on the design of the LCFS credit market.” Letter to Mary Nichols, 8 October 2009.

37 Barnes, Cecily, Program Manager of Hawaiian Electric. Interview by Mary Solecki. 8 June 2011.Price Stability Price stability can be achieved in part through regulatory stability. ARB or the regulating entity must send clear signals to regulated parties that targets will not be postponed or reduced. As ARB’s intentions to enforce the LCFS and non-compliance penalties remains steadfast, the value of biofuels will become dependable and worthy of additional investments.

Willing Market Participation The advancement of policies to incentivize LCFS market participation will help ensure sufficient biofuel supplies to California. As highlighted by stakeholders, the state should develop a framework that enables “willing participants” to join the LCFS market rather than relying solely on “obligated parties” who participate only because of regulatory requirement. Both a credit trading market and off-take agreements would provide such willing participation. Today the LCFS mandates major fuel blenders, refineries, importers and distributors to reduce their CI. This current structure will result in a natural tendency to invest last and least given insufficient incentives and the higher risk to being early to the market. By contrast, a framework where third parties can identify early market opportunities and invest in the distribution of low-carbon fuels will incentivize them to join the market. As previously stated, a seller of E85 cannot charge extra for using a low CI ethanol. If instead, they can accumulate credits whose value is greater than the additional cost of using low carbon ethanol, they would have a natural business incentive to enter into agreements with advanced biofuel producers. 

## Meeting the LCFS - Scenarios for
California

Today the advanced biofuel industry is actively pursuing the development and commercialization of a wide variety of possible advanced biofuels accessible to the California market. If only ten percent of the 2015 potential market capacity of 3.2 billion gallons of advanced biofuel this report found was delivered to California, it could more than meet the market requirement of fuels to satisfy the CI reduction target, when combined with other technologies such as natural gas and electrification.

As California approaches the 2020 deadline, numerous pathways exist to meet the LCFS. It will not be met by a single fuel type, technology or feedstock, but through a combination. Pathways available could include the following:

• A large portion of the demand is likely to be met by existing biofuel facilities with a reduced CI over gasoline’s, although greater than advanced biofuels’.

• In the short-term, it can be expected that fuels such as grain-based ethanol and biodiesel could fill the LCFS market demand while advanced biofuel producers are shifting to full commercial production in the second half of the decade.

• Based on the market potential identified in this report, advanced “drop-in” biofuels could meet the majority of the LCFS mandate in the long-term.

• With biofuel production dependent on proximity to longterm sources of biomass, available advanced biofuels are likely to be produced outside of California.

• Sugarcane ethanol also remains an option for the California market while the advanced biofuel industry is still approaching commercial-scale production.

• As sugarcane ethanol is already produced at scale in countries such as Brazil, it is likely that Latin America could provide some portion of biofuel for the California market.

• While biofuels can be transported through standard shipping channels, infrastructure to off-load, store, and transport fuel will have to be repurposed or expanded. Advanced biofuels produced outside of the state will similarly require infrastructure for transport, storage, and distribution. E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 12

## Conclusions

The report documents extensive economic activity surrounding advanced biofuels. This activity is illustrated by the significant venture capital investments over the last four years, the successful IPOs of four advanced biofuel producers, the transition from development to production of advanced biofuels represented by as many as 29 companies with new production facilities by 2015, and the number of total projects already underway.

This report leads to the following conclusions:

1. Shift from technology to production risk – The companies in this market have generally demonstratedthat they have the technology needed to produce lowcarbon fuels at volume. The market risks are concentrated on financing and scaling up production facilities and the availability of affordable biomass feedstocks. 2. Bifurcation between high-value oils and fuels – Companies such as Amyris and Solazyme have business models that benefit from short-term revenues producing high-value biochemicals and bio-oils while companies like Gevo and KiOR focus on transportation fuels. This market bifurcation means that even as more advanced biofuel companies come to market, resources will be spread replacing a variety of petroleum and oil products – not just fuels. 3. Scaling will depend on availability of biomass – Production facilities need to be co-located with sufficient, long-term sources of biomass. We will see smaller facilities located near sources of waste material that can be converted. Much of the industry is currently oriented towards woody biomass that can be sustainably harvested from private forests, and eventually derived from tree plantations. 4. Fuels are likely to be produced outside of California – As mentioned in (3), fuel production needs to be close to the source of biomass. Consequently, E2 expects most of the US fuel to be produced outside California given the low availability of local feedstock. Thus California needs to be an attractive market where the additional cost of transporting fuel is overcome by the economic value of a low CI. 5. Drop-in fuels will be the main source of low-carbon biofuels – Drop-in fuels are those that can operate in the same pipelines and facilities as petroleum-based fuels, e.g. renewable diesel and renewable gasoline. The 2015 production projections from companies show that the majority of volume will come from these fuels rather than ‘specialty’ fuels such as ethanol and biodiesel that require separate infrastructure. Thus while ethanol and biodiesel will fill the short-term demand, the second half of the decade will be dominated by advanced drop-in biofuels. 6. Need to enable “willing participants” and not depend completely on “obligated parties” – The LCFS defines major fuel blenders, refineries, importers and distributors as obligated to reduce their CI. However, they will naturally invest last, not first because there is higher risk in being early to market. By contrast, third parties can identify early market opportunities and invest in the distribution of low-carbon fuels. These “willing participants” need a mixture of market opportunities (see 7) and/or opportunities to accumulate credits (see 8) that they can sell at a later date. 7. Off-take agreements can accelerate the early market – As demonstrated in Hawaii by the HECO offtake agreements, firm contracts to purchase low-carbon fuel will draw business to the market. California government purchases should be considered as a way to start the early market. 8. A transparent credit trading market is essential to developing biofuels – A credit market creates a clear economic value for the reduced CI of a fuel. The credit market has been an important part of the development of RFS2, and the absence of the market is a barrier to developing the LCFS. 9. The LCFS and RFS2 are stimulating investor interest – Investments in advanced biofuels are heavily influenced by the economic value of low CI and by the demands for fuels to compete with, and displace, petroleum fuels that arise from the LCFS and RFS2. Any signals of weakening the programs would have a material effect on the industry. E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 13

## Acknowledgements E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 14 In addition to the dozens of advanced biofuel companies who provided data on their businesses and perspectives, the report authors would like to acknowledge the following friends and colleagues for their time & contributions:

Dan Adler, California Clean Energy Fund Judith Albert, E2 Staff Eric Bowen, Renewable Energy Group Dallas Burkholder, US Environmental Protection Agency David Cheng, Cleantech Group Sabrina Eshaghi , E2 Intern Remy Garderet, Energy Independence Now Nathanael Greene, NRDC Jamie Hall, CalStart Debbie Hammel, NRDC Jamie Knapp, J Knapp Communications Jim Lane, Biofuels Digest Neil Lawrence, NRDC Kevin Levy, E2 Staff Christine Luong, E2 Staff Simon Mui, NRDC Shelby Neal, National Biodiesel Board Paul Zorner, Entrepreneur

The authors would also like to thank the following for affording us an interview:

Cecily Barnes, HECO Linda Beltz, Weyerhaeuser Thomas Huot, Vantage Point Venture Partners Matt Horton, Propel Fuels Vinod Khosla, Khosla Ventures David Mann, Khosla Ventures John Pierce, Wilson Sonsini Brook Porter, Kleiner Perkins Rick Weyen, Tesoro

Report revisions 22 August 2011:

-Added Q2 2011 data to investment information -Corrected investment chart, page 6 by filtering out international and high-carbon fuels. -Per request, amended ZeaChem’s 2015 production projection to 25.25 million gallons. -Page 4, end of second paragraph, amended wording to specify that fuels 75% better than gasoline or diesel have lower CI values.

# Appendix A: US and Canadian Advanced Biofuel Producers

Biodiesel at least 50% better than crude

Company State Private Investment

(Millions 2007-Q2

2011) 

### Annual Production

Capacity Feedstock Start Date Website Absolute Fuels TX 50,000,000 Multi Feedstock Q1 2010 www.absolutelubbock.com Adirondack Biodiesel NY 1,460,000 Waste Oils ADM ND 85,000,000 Canola Aug-07 www.adm.com Agri-Source Fuels FL 10,000,000 Multi Feedstock Oct-07 www.asfuels.com Agribiofuels TX 12,000,000 Multi Feedstock Dec-06 www.agribiofuels.com Agrifuels OH 1,000,000 Multi Feedstock Mar-07 www.ohioagrifuel.com Alternative Fuel Solutions IN 800,000 Multi Feedstock Jan-10 Alterra Bioenergy of Middle Georgia GA 15,000,000 Multi Feedstock Aug-07 www.alterrabioenergy.com

American Biodiesel Energy PA 4,000,000 Multi Feedstock www.americanbiodieselenergy.co

m Baker Commodities CA & MA 25,000,000 Multi Feedstock Dec-10 www.bakerscommodities.com BARD PA algae www.bardllc.com Batchelder Biodiesel Refin

eries NH Waste Oils http://www.bbr-llc.com Bay Biodiesel CA 3,000,000 Multi Feedstock Mar-07 www.baybiodiesel.com Baystate Biofuels MA Waste Oils www.baystatebiofuels.com Beacon Energy TX 12,000,000 Multi Feedstock Mar-06 www.beacontx.com Beaver Biodiesel OR 940,000 Waste Oils www.chemtools.com Benefuel IL Waste Oils http://www.benefuel.net/ Bently Biofuels NV 1,000,000 Multi Feedstock Nov-05 www.bentlybiofuels.com Bio Alternative IN 15,000,000 Waste Oils http://www.bio-alternative.com Bio Blend Fuels WI 2,600,000 Multi Feedstock May-09 www.bioblendfuels.com Biodiesel Industries of Greater Dallas-Fort Worth TX & CA 6,000,000 Multi Feedstock www.biodieselindustries.com Biodiesel of Las Vegas NV 1,000,000 Multi Feedstock 4Q 2009 www.biodieseloflasvegas.com Biodiesel of Pennsylvania PA 1,500,000 Multi Feedstock Mar-07 www.biodieselpa.com Biodiesel of Texas TX 2,000,000 Multi Feedstock 3Q 2009 www.biofuelsoftexas.com BioDiesel One Ltd CT 4,000,000 Multi Feedstock Feb-09 http://biodieseloneltd.com/ Biofuels of Colorado CO 15,000,000 Multi Feedstock BioPur CT 1,000,000 Multi Feedstock Jul-06 www.biopurinc.com Blue Ridge Biofuels NC 1,000,000 Multi Feedstock May-06 www.blueridgebiofuels.com Blue Sky Biofuels CA 4,000,000 Waste Oils www.blueskybio-fuels.com/ Blue Sun CO Waste Oils www.gobluesun.com Bluegrass Biodiesel KY 9,000,000 Multi Feedstock Jun-11 www.bluegrass-biodiesel.com Buffalo Biodiesel Inc NY waste oils www.buffalobiodiesel.com/ BullDog BioDiesel GA 18,000,000 Multi Feedstock Jan-08 www.bbiod.com Cape Cod BioFuels MA 500,000 Waste Oils Sep-09 www.capecodbiofuels.com Center Alternative Energy Company OH 5,000,000 Multi Feedstock May-07 www.centeroil.com CGF Clayton DE` 11,000,000 Multi Feedstock Jan-10 www.cgfcorp.com Chieftain BioFuels OH 3,000,000 Multi Feedstock Clinton County Bioenergy IA 10,000,000 Multi Feedstock Aug-06 www.ccbebiodiesel.com Community Fuels CA 10,000,000 Multi Feedstock Jun-08 www.communityfuels.com Crimson Renewable Energy CA 30,000,000 Multi Feedstock 3Q 2009 www.crimsonrenewable.com E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 15CV Biofuels CA Waste Oils http://www.cvbiofuels.com Delta American Fuel, LLC AR 40,000,000 Multi Feedstock Mar-09 Delta Biofuels, Inc. MS 80,000,000 Multi Feedstock May-07 www.deltabiofuels.com Down to Earth Energy GA 2,000,000 Multi Feedstock Aug-09 www.downtoearthenergy.net e-biofuels IN 15,000,000 Multi Feedstock Jun-07 www.e-biofuels.com Eagle Biodiesel AL & PA 33,000,000 Multi Feedstock www.eaglebiodiesel.us Earl Fisher Bio Fuels MT 250,000 Multi Feedstock Apr-08 www.earlfisherbiofuels.com Eberle Biodiesel TX 500,000 Multi Feedstock Jan-11 www.eberlebio-diesel.com Ecogy Biofuels SC 30,000,000 Multi Feedstock Dec-07 www.ecogybiofuels.com Ecolife Biofuels CA 1,500,000 Multi Feedstock 4/1/2010 www.ecolifebiofuels.com Emergent Green Energy KS 2,000,000 Multi Feedstock Mar-09 www.egebio.com Endicott Biofuels TX $40 0 Multi Feedstock www.endicottbiofuels.com Energy Tec IA 30,000 Waste Oils Sep-08 Environmental Development Group AZ 1,500,000 Used Cooking Oil Q2 2010 www.edgroup.us Ever Cat Fuels MN 3,000,000 Multi Feedstock Oct-09 www.evercatfuels.com Evergreen Biodiesel Produc

tion Facility SC 36,000,000 Multi Feedstock Jun-11 Fina OH 60,000,000 Multi Feedstock Dec-06 www.fina-us.com Foothills Bio-Energies NC 5,000,000 Multi Feedstock Sep-06 www.foothillsbio-energies.com FUMPA BioFuels MN 3,000,000 Multi Feedstock Dec-04 www.biopup.com Future fuel AR 59,000,000 Multi Feedstock www.futurefuelcorporation.com Gen-X Energy Group WA 15,000,000 Multi Feedstock Jun-07 www.genxenergies.com General Biodiesel WA 10,000,000 Waste Oils 3Q 2009 http://generalbiodiesel.com Genuine Bio-Fuel FL 3,900,000 Jan-09 www.genuinebiofuel.com Global Fuels MO 3,000,000 Multi Feedstock Apr-07 Grecycle Arizona AZ 2,500,000 Yellow Grease May-09 www.grecycle.com Green Earth Fuels of Hous

ton TX 90,000,000 Multi Feedstock Jul-07 www.greenearthfuelsllc.com Green Star Products 0 algae http://www.greenstarusa.com Green Valley Biofuels SC 35,000,000 Multi Feedstock 3Q 2009 www.greenvalleybio.com Greenleaf Biofuels CT $0.15 Waste Oils www.greenleafbiofuels.com Greenwave Biodiesel FL 4,000,000 Waste Oils Aug-10 www.greenwavebiodiesel.com Griffin Industries KY 1,750,000 Multi Feedstock Dec-98 www.griffinind.com Heartland Bio Energy FL 5,000,000 Multi Feedstock www.heartlandbioenergy.us Heartland Biofuel IN 500,000 Multi Feedstock Apr-06 High Plains Bioenergy OK 30,000,000 Multi Feedstock Mar-08 www.highplainsbioenergy.com Imperial Western Products CA 10,500,000 Multi Feedstock Oct-01 www.biotanefuels.com Imperium Renewables WA $70 100,000,000 Multi Feedstock Aug-07 www.imperiumrenewables.com Inland Empire Oilseeds WA 8,000,000 Canola Nov-08 www.inlandempireoilseeds.com Integrity Biofuels IN 5,000,000 Multi Feedstock Aug-06 www.integritybiofuels.com Interstate Biofuels NY Waste Oils www.interstatebiofuels.com Iowa Renewable Energy IA 30,000,000 Multi Feedstock Jul-07 www.iowarenewableenergy.com Jatrodiesel OH 5,000,000 Multi Feedstock Jun-07 www.jatrodiesel.com Johnson Biofuels FL 1,000,000 Waste Oil Nov-09 www.johnsonbiofuels.com Kansas Biofuels KS 1,800,000 Multi Feedstock Oct-07 www.kansasbiofuels.com Keystone BioFuels PA 60,000,000 Waste Oils Mar-06 www.keystonebiofuels.com Lake Erie Biofuels PA 45,000,000 Multi Sep-07 www.lakeeriebiofuels.com Lantic Green Energy RI 500,000 Waste Oils 4Q 2008 Leland Organic Corporation NC 30,000,000 Multi Feedstock Sep-08 Life Technologies CA Multi Feedstock www.lifetechnologies.com/ Maine Standard Biofuel ME 500,000 Yellow Grease Jan-10 www.mainestandardbiofuel.com Manning Beef CA Tallow 3Q 2009 Mass Biofuel MA www.massbiofuel.com MBP Bioenergy MA 500,000 Waste Veg Oil Jan-11 ME Bioenergy MO 5,000,000 Multi Feedstock Jul-10 Memphis Biofuels LLC TN Waste Oils http://www.memphisbiofuels.com Metro Fuel Oil Corp NY 2009 www.metroenergy.com Michigan Biodiesel MI 17,000,000 Multi Feedstock Jan-07 www.mibiodiesel.com E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 16Midwest BioDiesel Produc

ers SD 7,000,000 Multi Feedstock Mar-06

Midwest Biodiesel Products IL 30,000,000 Multi Feedstock May-07 www.midwestbiodieselproducts.c

om Natural Biodiesel Plant MO 5,000,000 Multi Feedstock Apr-07 New Fuel Company TX 250,000 Multi Feedstock Apr-06 www.newfuelco.com New Leaf Biofuel CA 1,500,000 Used Cooking Oil Dec-08 www.newleafbiofuel.com Newport Biodiesel RI 500,000 Used Cooking Oil Jan-08 www.newportbiodiesel.com NextDiesel MI 20 Waste Oils http://www.nextdiesel.net NextFuels CA Multi Feedstock www.nextfuels.com Noil Energy Group CA 5,000,000 Multi Feedstock 2Q 2009 Northeast Biodiesel MA $0.96 Waste Oils www.northeastbiodiesel.com/ Northern Biodiesel NY 20,000,000 Multi Feedstock Jun-08 www.northernbiodiesel.com Orbitek OK $5 Multi Feedstock http://www.orbitekinc.com/ Paquin Energy and Fuel TX 5,000,000 Multi Feedstock www.paquinenergyandfuel.com Patriot Biodiesel NC 1,500,000 Multi Feedstock Dec-08 www.patriotbiodiesel.com Pennslyvania Biodiesel PA 25,000,000 Multi Feedstock Jul-09 Piedmont Biofuels NC 4,000,000 Multi Feedstock Nov-06 www.biofuels.coop Pinnacle Biofuels AR 10,000,000 Multi Feedstock May-08 www.pinnaclebiofuels.com Pleasant Valley Biofuels ID 1,500,000 Used Cooking Oil Aug-08 www.pvbiofuels.com Promethean Biofuels Coop

erative CA 1,500,000 Multi Feedstock 9/5/2009 www.prometheanbiofuels.com RBF Port Neches TX 180,000,000 Multi Feedstock 4Q 2008 www.rbfuels.com RECO Biodiesel VA 10,000,000 Multi Feedstock Dec-06 www.recobio.com Red Birch Energy VA 2,500,000 Multi Feedstock Jun-08 www.redbirchenergy.com REG Many $22 272,000,000 Multi Feedstock www.regfuel.com Renewable Fuel Products CA Waste Oils www.renewablefuelproducts.com/ REV Biodiesel AZ 30,000,000 Multi-feedstock Dec-10 www.revbiodiesel.com Rio Valley Biofuels NM 1,000,000 Multi Feedstock Jul-06 www.riovalleybiofuels.com San Francisco Public Utilities Commission CA www.sfwater.org Sanimax Energy WI 20,000,000 Multi Feedstock Apr-07 www.sanimax.com SBI Bioenergy Alberta Multi Feedstock www.sbibioenergy.com Scott Petroleum Corporation MS 20,000,000 Multi Feedstock Oct-07 www.scottpetroleuminc.com Seminole Biodiesel GA 10,000,000 Multi Feedstock Jan-08 www.inland-stores.com Sequential OR 17,000,000 Waste Oils www.sqbiofuels.com Shenandoah Agricultural Products VA 300,000 Used Cooking Oil 3/15/2010 Simple Fuels Biodiesel CA 1,000,000 Waste Oils 3Q 2009 www.simplefuels.com Simply Green Biofuels NH www.seacoastbiofuels.com Smart Fuels Florida FL 3Q 2009 http://www.smartfuelsllc.com/ South East Oklahoma Biodiesel OK 5,000,000 Multi Feedstock Nov-08 Southern Alliance for Clean Energy TN 380,000 Used Cooking Oil Jul-09 www.cleanenergy.org Soymor MN 30,000,000 Vegetable Oils Aug-05 www.soymor.com Stepan Company IL 22,000,000 Multi Feedstock Jan-01 www.stepan.com Sullens Biodiesel TN 2,000,000 Waste Veg Oil Nov-09 Sun Power Biodiesel WI 3,000,000 sunflower, canola Dec-09 http://www.growsunpower.com/ Synergy Biofuels VA 3,000,000 Multi Feedstock Dec-08 www.synergybiofuels.com Terra Bioenergy MO 30,000,000 Multi Feedstock 4Q 2009 Texas Biotech TX www.txbiotech.com Texas Green Manufacturing TX 1,250,000 Tallow Apr-09 www.texasgreen.biz The La Grange Plant TX 3,500,000 Multi Feedstock Oct-10 www.thelagrangeplantinc.com Thumb BioEnergy MI www.thumbbioenergy.com TMT Biofuels NY 250,000 Used Cooking Oil Sep-08 TPA Inc. MI 20,000,000 Multi Feedstock Jul-08 www.thepoweralternative.com Tri-State Biodiesel Waste Oils www.tristatebiodiesel.com Triangle Biofuels Industries NC 3,000,000 Multi Feedstock Jan-08 www.trianglebiofuels.com E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 17United Oil Company PA 5,000,000 Multi Feedstock Dec-05 www.unitedb100.com US Alternative Fuels Corp. PA 4Q 2008 Valley Biodiesel CA Vanguard Synfuels LA 12,000,000 Multi Feedstock Apr-06 Virginia Biodiesel Refinery VA 7,000,000 Multi Feedstock Oct-03 www.virginiabiodiesel.com Walsh Bio Fuels WI 5,000,000 Multi Feedstock May-07 Washakie Renewable En

ergy UT 10,000,000 Multi Feedstock Jan-09 www.wrebiofuels.com

Western Dubuque Biodiesel IA 36,000,000 Crude or Refined Vegetable Oils Aug-07 www.wdbiodiesel.net Western Iowa Energy IA 30,000,000 Multi Feedstock Jun-06 www.westerniowaenergy.com White Mountain Biodiesel NH 5,500,000 Multi Feedstocks Jun-10 www.whitemountainbiodiesel.com Whole Energy Fuels WA & CA 10,500,000 Used Cooking Oil 1Q 2009 www.whole-energy.com Yokayo Biofuels CA 500,000 Used Cooking Oil Apr-06 www.ybiofuels.org 

### 160 Biodiesel

Companies Capacity* (GPY): $138.11 2,189,460,020

* Actual production of biodiesel closely follows that of the RFS2 requirements, despite the availability of higher capacity.

List provided by National Biodiesel Board.

Advanced Biofuels at least 50% Better than Crude

Company State Fuel Type Production in 2011 MGPY Anticipated 2012 Production Capacity

MGPY Anticipated 2015 Production Capacity

MGPY Feedstock Private Investment (Millions

2007- Q2 2011) LCFS/ RFS2 Registered Website

American Energy Independence NH Diesel-Renewable biomass RFS2 www.amenico.com
Amyris CA Diesel-Renewable 2.51 17.01 44.01 sugar $363.8 www.amyrisbiotech.com
Diamond Green LA Diesel-Renewable 0 0 137 animal waste valero.com Dynamic Fuels LA Diesel-Renewable 75 75 75 animal waste RFS2 www.dynamicfuelsllc.com
Flambeau River Biofuels WI Diesel-Renewable 0 0 6 woodwaste www.flambeauriverpapers.com
Kent Bioenergy CA Diesel-Renewable 0.01 0.01 0.01 algae www.kentbioenergy.com
LS9 CA Diesel-Renewable 0 0.05 0.1 biomass $78 www.ls9.com ORYXE Energy CA Diesel-Renewable www.oryxe-energy.com

REII CA Diesel-Renewable 0.02 0.35 0.35 Multifeedstock www.reiinternational.com

Rentech CA Diesel-Renewable 0.15 0.15 259 Multifeedstock www.rentechinc.com

SG Biofuels CA Diesel-Renewable Jatropha $9.4 www.sgbiofuels.com
TerViva CA Diesel-Renewable 0 0 0.5 Seed Oil www.terviva.com
Trenton Fuel Works NJ Diesel-Renewable 0 0 3.87 mixed cellu

lose RFS2 www.trentonfuelworks.com
Abengoa MO Ethanol 0.01 0.01 15 cellulose LCFS/RFS2 www.abengoabioenergy.com
AE Biofuels CA Ethanol 0.05 10.04 10.05 cellulose www.aebiofuels.com Algenol FL Ethanol 0.1 0.1 100.1 algae www.algenolbiofuels.com
Altra Biofuels CA Ethanol cellulose $63 RFS2 www.altrabiofuels.com
American Process GA Ethanol 0 0.47 0.47 cellulose www.apiweb.com

Archer Daniels Midland IL Ethanol 0 1 1 stover www.adm.com

BlueFire Ethanol CA Ethanol 3.9 3.9 22.9 woody bio

mass $10 http://bluefireethanol.com/
BP (Verenium) CA Ethanol 1.4 1.4 37.4 bagasse www.bp.com E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 18Bunge MO Ethanol sugarcane RFS2 http://bunge.com Calgren CA Ethanol 0 0 58 corn RFS2 www.calgren.com Catchlight Energy CA Ethanol woody bio

mass www.catchlightenergy.com
Citrus Energy FL Ethanol cellulose www.citrusenergy.net

Coskata IL Ethanol 0.05 0.05 55.05 multifeedstock $83.2 www.coskata.com

DDCE TN Ethanol 0.15 0.25 50.25 stover www.ddce.com EdeniQ CA Ethanol corn $45.4 www.edeniq.com

Enerkem Que

bec Ethanol 0.3 0.3 21.3 MSW $118.6 www.enerkem.com
Fiberight IA Ethanol 0.01 3 6 MSW RFS2 www.fiberight.com
Fulcrum Bioenergy CA Ethanol 0.01 0.51 42 MSW $95 www.fulcrum-bioenergy.com

Garden State Ethanol NJ Ethanol algae

Genahol OH Ethanol 0 0 18 MSW www.genahol.com
Gulf Alternative Energy TX Ethanol cellulose www.gulfalternativeenergy.com

Helios PA Ethanol 0.03 0.03 0.03 cellulose
INEOS Bio IL Ethanol 0 3 8 MSW www.ineosbio.com
Iogen On

tario Ethanol 0 0 1 cellulose www.iogen.ca
KL Energy Corp WY Ethanol 1 1 1.3 wood waste $4 www.klenergycorp.com Lignol Biofuel BC Ethanol 0.02 0.02 0.02 woodwaste www.lignol.ca Logos Technologies VA Ethanol 0 0.8 0.8 cellulose/ MSW www.logostech.net

Masada AL Ethanol MSW www.masadaonline.com
Mascoma NH Ethanol 0.4 0.4 40.2 wood chips $142 www.mascoma.com Mendota Advanced Bioenergy CA Ethanol Beet waste

Novogy MA Ethanol Pulp waste $0.75 www.novogyinc.com
POET SD Ethanol 0 0 25 LCFS/RFS2 www.poet.com
Powers Energy IN Ethanol MSW www.powersenergyofamerica.c

om Purevision Technology CO Ethanol Multifeedstock www.purevisiontechnology.com

Qteros MA Ethanol Multifeedstock $50.6 www.qteros.com

Syntec Biofuel BC Ethanol waste/mixed cellulose www.syntecbiofuel.com

US Envirofuels FL Ethanol sorghum/ sugarcane www.usenvirofuels.com
Verdezyne CA Ethanol sugars $15.3 www.verdezyne.com
Woodland Biofuels On

tario Ethanol 0.02 0.02 0.02 wood waste $5.2 www.woodlandbiofuels.com

Zeachem OR Ethanol 0 0.25 25.25 mixed cellu

lose $38 www.zeachem.com

Cool Planet Biofuels CA Gasoline - Renewable biomass $11.5 www.coolplanetbiofuels.com

CORE Biofuel BC Gasoline - Renewable 0 4.4 17.8 woodwaste www.corebiofuel.com

Joule Biotechnologies MA Gasoline - Renewable 0.01 0.01 0.01 CO2 $30 www.jouleunlimited.com

Murphy Oil AR Gasoline - Renewable 0 0 115 animal waste RFS2 www.murphyoilcorp.com

Primus Green Energy NJ Gasoline - Renewable 0.02 0.02 0.02 cellulose www.hclcleantech.com

Terrabon TX Gasoline - Renewable 0.1 1 25 MSW $1.25 www.terrabon.com E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 19Zeropoint NY Gasoline - Renewable woodwaste $3.12 www.zeropointcleantech.com
Gevo Develop

ment CO Other - Isobutanol 1 10 350 multiple feedstocks $90 www.gevo.com

Butamax DE Other- Biobutanol 0 0.5 160.5 corn www.butamax.com
Cobalt Technology CA Other- Biobutanol 0.01 0.48 0.48 corn $61.5 www.cobaltbiofuels.com

BioFuels Energy CA OtherBiomethane MSW RFS2 www.biofuelsenergyllc.com

EcoTech Fuels CA Other- Synfuel MSW www.ecotechfuels.com
Nexterra BC Other- Syngas woodwaste $28.1 http://www.nexterra.ca/ Aquatic Energy LA Multi Renew 0.03 0.03 0.03 algae www.aquaticenergy.com
Bio Architecture Lab CA Multi Renew algae $8 www.ba-lab.com
Blue Fuel Energy Corporation BC Multi Renew 0 0 61.32 CO2 www.bluefuelenergy.com

ClearFuels HI Multi Renew 0.07 0.07 38.07 woodwaste www.clearfuels.com
Diversified Energy AZ Multi Renew Multifeedstock www.diversified-energy.com

General Atomics CA Multi Renew algae www.gat.com Green Pacific Biologicals CA Multi Renew algae $0.23 www.greenpacificbio.com

KiOR TX Multi Renew 0.23 6.7 250.23 woody bio

mass $179.37 www.kior.com Sapphire Energy CA Multi Renew 0.02 0.02 1.02 algae $101.4 www.sapphireenergy.com SCIPIO Biofuels CA Multi Renew 0 0 320 algae www.scipiobiofuels.com Solazyme CA Multi Renew 0.38 0.75 145 Multifeedstock $350 www.solazyme.com

Sundrop Fuels CO Multi Renew 0 0 40 Multifeedstock www.sundropfuels.com

SynGest CA Multi Renew mixed cellu

lose www.syngest.com

Virent WI Multi Renew 0.01 0.01 20.01 mixed cellu

lose $67.4 www.virent.com 80 Companies Total (MGPY): 87.02 181.11 2,609.47 $2,054.12

Production capacity was left blank for companies without data available to E2. E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 20

# Appendix B: International Advanced Biofuel Producers Likely to Enter the California Market

Company Country Fuel Type Production in 2011 MGPY Anticipated 2015 Production MGPY Feedstock Private Investment (Millions of

Dollars) LCFS/ RFS2 Registered Website

Argent Energy UK Biodiesel 13.2 13.2 waste oil RFS2 www.argentenergy.com
Australian Renewable Fuels Australia DieselRenewable used cooking oil www.arfuels.com.au

Bionersis SA France Other – Biogas $20.40 www.bionersis.com

Biotor Industries India Biodiesel Castor Oil $38.5 www.biotorindustries.com Borregaard Norway Ethanol 0.11 0.11 Mixed cellulosic residue
Brazilian Renewable Energy Company Brazil Ethanol - Sugarcane 0.8 0.8 sugarcane $200 www.eth.com

COFCO/Sinopec China Ethanol 3 3 corn stover Ensyn Corporation Malaysia RDIF 0 316 pal waste $3 http://www.ensyn.com/
Green Gas International BV UK Other – Biogas $20.86

Gushan Environmental Energy China DieselRenewable www.chinagushan.com/ en/

Hebei Zhenghe China DieselRenewable
Inbicon Denmark Ethanol 1.4 19.4 Straw
Kumho Petrochemical Korea Biodiesel 0.39 0.39 algae www.kkpc.co.kr

Lanza Tech China Ethanol 0.5 40 Steel gas waste $30 www.lanzatech.co.nz MBD Energy Australia DieselRenewable 0.01 3 algae www.mbdenergy.com

Naturally Scientific China Other – Bio-oil 0.01 20.01 CO2

Neste Oil Finland DieselRenewable 772 772 palm, rapeseed oil, waste fat RFS2 www.nesteoil.com

Petrobras Brazil Ethanol 0 4 bagasse www.petrobras.com Praj Industries India Ethanol www.praj.net
Qantas/Solena Australia RDIF 0 16 http:// www.solenafuels.com/
Santelisa Vale SA Brazil Ethanol $212
SBAE Industries Belgium DieselRenewable $1.2 www.sbae-industries.com

Seaweed Energy Solutions Norway Other – Biogas www.seaweedenergysoluti

ons.com TMO Renewables UK Ethanol 0.01 0.01 cellulose $48.6 www.tmo-group.com Weyland / Statoil Hydro Norway Ethanol 0.05 8 mixed cellulose http://weyland.no

25 Companies Total MGPY: 791.48 1,215.92 $574.56 E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 21

# Appendix C: Related Businesses

Feedstock/Biomass Producers

Company State Production in 2011 MGPY Anticipated Production 2015 MGPY Private Investment (Millions of $) Website AgRefresh VT www.agrefresh.org Alchemix Corporation AZ www.alchemix.net AlgaeVenture Systems OH www.algaevs.com

ArborGen SC www.arborgen.com Aurora Algae CA 0.03 .52 $48.41 www.auroraalgae.com BEST Energies WI www.bestenergies.com
Bio-fuels Inc FL http://bio-fuelsusa.com/
BioMCN Netherlands $46 www.biomcn.eu
Ceres Biofuels CA www.ceres.net Chip Energy IL www.chipenergy.com
Chromatin IL www.chromatininc.com Community Biofuels CA www.communitybiofuels.com Florida Crystals Corp FL www.floridacrystals.com
Genomatica CA www.genomatica.com Green Pacific Energy Ltd. Australia Imperative Energy Ltd Ireland $42.5 www.imperativeenergy.ie
Kuehnle AgroSystems HI www.hawaiibioenergy.com
Maine Bioproducts ME www.mainebioproducts.com Mendel Biotechnology CA www.mendelbio.com
Nova Fuels CA www.novafuels.com Petro Algae FL .12 110.12 www.petroalgae.com
Power Stock WA www.pacificpowerstock.com Renewed World Energies SC www.rwenergies.com
Renmatix (Sriya Innovations) GA $15 renmatix.com
Shalivahana Projects Ltd India $44.5 http://shalivahanaprojects.com SmartSoil-Energie Inc. Quebec http://www.cleanenergy.gc.ca
Solix CO 0.01 0.01 $36.9 www.solixbiofuels.com SunEco Energy CA http://sunecoenergy.com Xylowatt Belgium $4.1 www.xylowatt.com Yulex Corporation CA http://www.yulex.com Zymetis MD $0.75 www.zymetis.com 31 Companies 0.16 110.65 $238.16 E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 22

### Enzymes & Chemicals

Company State Production in 2011 MGPY Anticipated 2015 Production

MGPY Private Investment (Millions of $) Website AgriVida MA $2 www.agrivida.com Algae Producers OH www.algaeproducersinc.com
Allopartis Biotechnologies CA $0.75 www.allopartis.com
Arisdyne Systems OH $5.3 www.arisdyne.com
BioAmber MN $45 http://www.bio-amber.com C5-6 Technologies WI www.c56technologies.com
Codexis CA www.codexis.com
DuPont DE www.usa.dupont.com Dyadic FL www.dyadic.com
Genencor NY www.genencor.com GlycosBio TX www.glycosbio.com Haldor Topsoe TX 0 0.8 www.topsoe.com
HCL CleanTech NC $15.4
Inventure, Inc. WA $1.5 www.inventurechem.com Myriant MA http://www.myriant.com Novozymes CA www.novozymes.com Segetis MN www.segetis.com 17 Companies $69.95



### Related Technology

Company State Fuel Type Production in 2011 MGPY Anticipated 2015 Production

MGPY Private Investment (Millions of $) Website Agricultural Waste Solutions CA Biogas www.agwastesolutions.com
AgriFuels CT Consulting www.agrifuels.com
AltAir Fuels WA Aviation 0 100 www.altairfuels.com
Blendstar TX Distribution www.blendstarllc.com Blue Marble Energy WA Biogas $3.3 http://bluemarbleenergy.net/ Bodega Algae LLC MA Equipment http://www.bodegaalgae.com/
Chemrec NC Natural Gas 0.58 30.58 $20 www.chemrec.se Clean Energy CA Natural Gas www.cleanenergyfuels.com Dynamotive BC Bio-oil 1.01 1.01 $10.5 www.dynamotive.com
Enviromech Industries CA Natural Gas http://emifuel.com/
Global Green Solutions BC Biomass steam $3.8 www.globalgreensolutionsinc.com GreenShift Corporation NY Other www.greenshift.com Live Fuels CA Bio-oil .01 .01 $10 www.livefuels.com Michigan Biotech Institute MI Consulting http://www.mbi.org/

Nella Oil CA Distribution http://nellaoil.com Origin Oil CA Algae www.originoil.com Propel CA Distribution $19.25 www.propelfuels.com
R-Qubed TX Biogas $0.15 www.r-qubedenergy.com Solena Group CA Aviation 16 www.solenafuels.com
Ze-Gen MA Biogas www.ze-gen.com 20 Companies 1.6 147.6 $67 E2 | Environmental Entrepreneurs

Advanced Biofuel Market Report 2011 23