The Green-Energy Mecca of Emeryville, California

One startup, Amyris, hopes to make fuels and feedstocks that are highly profitable even with $50-a-barrel oil

The drying up of venture capital for alternative-fuel projects ought to have been a death knell for Emeryville, Calif., a square-mile sliver of land near Silicon Valley that until recently advertised itself as a "green corridor" for biofuel businesses. But, while the talk of a biofuel boom to rival the tech boom across the bay now sounds outlandish, this city of 6,800 people so far seems to be weathering the recession and the drop in oil prices that are hurting other parts of the green-tech sector.

Emeryville has a history as a rollicking industrial hub, with meatpacking, steelmaking, and paint companies sharing the streets with brothels and gambling houses. The 1970s marked a low point, but the town was cleaned up and revived by the ensuing technology boom. Today, a single, 24-hour gambling house remains: the Oaks Card Club, situated across the street from Pixar Animation Studios. "The town has completely changed," says John Tibbets, who owns Oaks.

A Foundation Already in Place

The city's push to be a hub for biofuels isn't as contrived as it might appear. Biotech and pharmaceutical firms, including giants such as Roche and Novartis NVS, have had facilities in Emeryville for years, and they rely on some of the same processes used to make biofuels. Geoffrey Sears, who heads a real estate firm called Wareham Development, leases offices to many biotech labs, and his clients now include two large biofuels ventures, Amyris Biotechnologies and the federally funded Joint BioEnergy Institute (JBEI). Sears says the economic downturn has not hurt rentals in Emeryville. The biofuels labs have held firm, and "more and more money is flowing" into existing biotech and pharmaceutical companies. "Our occupancy is 97%. We are planning some new buildings," which should be ready by 2011, he says.

Kleiner Perkins Caufield & Byers and Sun Microsystems (JAVA) co-founder Vinod Khosla are among the principal investors in Amyris, a synthetic biology company that occupies a 90,000-square-foot laboratory in Emeryville. Jeri Hilleman, chief financial officer of the company, says Amyris is still pushing toward producing commercial volumes of biodiesel and chemicals in 2011 or 2012. The company is developing a way to re-engineer yeast to make biodiesel. As with all the alternative fuels, however, the biggest challenge has been competing on price in a world of relatively cheap oil. Amyris' yeast-based process, which once yielded the equivalent of liquid gold at $3,000 a barrel, can now churn out biodiesel that could go for about $100 a barrel, says Hilleman. The goal Amyris is shooting for by the end of this year is fuel and feedstock that could bring the company 30% gross profits even with oil at $50 a barrel. "We set out aggressive plans," Hilleman says.

Government Initiative

Upstairs from Amyris is JBEI, which locals call JayBay. The Energy Dept. is funding the institute, a 65,000-square-foot laboratory that hopes to produce an enzyme capable of breaking down cellulose in nonfood plants used as biofuel feedstocks. One idea is to produce butanol, a form of alcohol that could be mixed directly with gasoline. The lab employs 125 researchers, 35 of whom work directly on this "deconstruction" project. "If anything is to come out of this, we will need a lot of patience," concedes Harvey Blanch, JBEI's chief scientific and technology officer. His vice-president in charge of deconstruction, Blake Simmons, figures the lab may be "multiple decades" from its long-term goals. But Jay Keasling, the head of the lab, is a bit more optimistic. He sees a solution in as little as 15 years. "We have to deliver on the energy. The resources fortunately are in place," Keasling says.

President Barack Obama's alternative energy stimulus could yet trigger the biofuel rush that Emeryville seeks. Just next door to Emeryville, at the University of California, Berkeley, British oil giant BP BP is spending $500 million on a lab called the Energy Biosciences Institute. Emeryville residents would love to attract a few more companies of that size. And if not, there's always the Oaks Card Club. It's still the city's mainstay, says the owner, Tibbets: "I'm still Emeryville's biggest taxpayer."

LeVine is a correspondent in BusinessWeek's Washington bureau.

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