The biofuel market is turning into a diverse romp of venture-backed companies auditioning different microbes, catalysts and feedstocks, all with the same goal: to quickly, efficiently and cheaply transform renewable, non-food products (ranging from sugar cane to switch grass to carbon dioxide) into viable forms of fuel that can work in today’s gas tanks.

The problem is, almost all of these players hit the same ceiling: they can’t figure out a way to inexpensively scale with the technology they have. But biofuel startup LS9 may have just changed that.

The company’s scientists have published a paper, academically titled “Microbial Biosynthesis of Alkanes,” claiming that they can now implant genes into E. coli that allow the bacteria to directly churn out alkanes — otherwise known as the hydrocarbons in car and jet fuel — in one step. This is a major breakthrough for the field, one that has been chased for years.

The discovery could eliminate the need for other, pricier methods to derive alkanes. It could also jumpstart the green sector’s focus on biofuels as a viable business. Before now, many of the companies in the industry, including Codexis, Synthetic Genomics and others, were focusing on creating more lucrative, renewable chemicals to replace petroleum in plastics, pharmaceutical development and other processes.

LS9 itself has been pursuing the low-volume chemical market for a while, teaming with Proctor and Gamble last spring to jointly develop chemicals to be used in consumer goods.

Because the new LS9 process consists of only one step, it also requires less feedstock to begin with, lowering costs and increasing efficiencies across the board. Prior conversion technique entailed dangerous inorganic catalysts, hydrogen, high pressures and temperatures, and a lot of intermediate steps.

In addition to being renewable, biofuels also burn cleaner than traditional fossil-fuel sources. Because they can be used in standard, internal-combustion engines, biofuels seem to have a bigger market ahead of them than electric vehicles — the other strategy to achieve cleaner, greener transportation. It’s going to take a while for plug-in cars to catch on, and very little roadside infrastructure exists today to support them. If biofuel companies can successfully scale, they have the potential to slash emissions more significantly.

These advantages have attracted the attention of venture capitalists interested in incremental clean energy innovations, rather than radical changes. For example, Khosla Ventures, one of LS9’s backers that also invests in biofuel makers Coskata and Amyris Biotechnologies, is major proponent of this category of startups.

Based in South San Francisco, LS9’s investors include CTTV Investments, Flagship Ventures, and Lightspeed Venture Partners in addition to Khosla.

Tags: biofuels

Companies: Ls9

Now we know: The first two plug-in cars from major manufacturers will go head-to-head on warranties and lease prices: $350 a month for the 2011 Chevrolet Volt, $349 for the 2011 Nissan Leaf.

Now the choice shifts to other measures, including electric and overall range, as well as the plug-in perks that states like California offer to early adopters to encourage them to opt for electric cars.

This is where it gets interesting. While California loves the Nissan Leaf, current regulations deny Chevy Volt buyers two significant perks: a $5,000 rebate, and permission to drive solo in HOV Lanes.

Federal credits yes, CA rebate no

Both the 2011 Leaf and the 2011 Volt are eligible for the maximum $7,500 federal tax credit that goes to buyers of plug-in cars with battery packs of 16 kilowatt-hours or more.

Some states add their own incentives as well. Georgia and Oregon, for example, offer state tax credits ($5,000 and $1,500 respectively).

California offers a tax rebate instead, a measure considered more powerful than tax credits because the rebate check that comes in the mail effectively cuts the car’s purchase price within weeks, rather than making buyers wait until they file their taxes.

Are you an AT-PZEV, little car?

The highest California rebate of $5,000 goes only to zero-emission vehicles, those cars with no tailpipes. The all-electric Nissan Leaf qualifies, but the Volt–whose range-extending gasoline engine switches on to provide electricity when the battery is depleted–does not.

California’s EV buyers had expected the Volt to qualify instead for a reduced rebate of roughly $3,000, says EV advocate Chelsea Sexton.

But that hope was quashed when the Volt didn’t qualify as an Advanced Technology Partial Zero-Emissions Vehicle (AT-PZEV), a specific category of clean vehicle in the California’s complicated taxonomy of emissions classes.

In the eyes of California regulators, the plug-in 2011 Chevrolet Volt is no cleaner than the 2011 Chevrolet Cruze compact–despite its ability to run solely on grid power for up to 40 miles, including at freeway speeds.

The 2012 Toyota Prius Plug-In Hybrid, on the other hand, does qualify as an AT-PZEV and will get a partial rebate, even though it must run its gasoline engine at freeway speeds.

No HOV perks either?

The other major plug-in perk is single-driver access to California’s high-occupancy vehicle lanes, greatly prized in congested San Francisco and Los Angeles traffic. But current legislation won’t extend that to the Volt either.

A bill before the California Senate, SB-535, is intended to let plug-in cars with a sole occupant into the HOV lanes. It’s similar to a law that expires at the end of 2010 giving 85,000 lucky drivers of three specific hybrid models that privilege.

Come January, just a few thousand all-electric, natural-gas, and hydrogen vehicles will qualify for that access unless SB 535 passes.

That bill has taken “lots of twists and turns,” says Jay Friedland of Plug-In America, an advocacy group that works to support and encourage plug-in vehicles. See, for instance, the strike-throughs in the amended version of SB 535.

Twists and turns

The California Air Resources Board has proposed amendments to the latest revision that enhance AT-PZEV eligibility for HOV lane access.  The original bill had required a threshold of 65 miles per gallon for eligibility, which Plug-In America supports.

The problem is that the EPA still hasn’t decided how to rate the fuel economy of plug-in vehicles that have gasoline engines too, since their effective gas mileage depends entirely on how they’re used.

Gas on freeways good, electricity bad ???

Even worse, Sexton notes, is a bizarre paradox created by the AT-PZEV requirement: A car that must use its engine on the freeway will get HOV-Lane access, while the Volt–which can run on battery power at highway speeds–will not.

So a Chevrolet Volt that does less than 40 miles a day may never burn a drop of gas, for instance, but will still be banned from the HOV lanes.

Whereas the 2012 Toyota Prius Plug-In Hybrid that’s being flogged down the freeway at 85 mph will consistently burn gasoline at its highest rate, and yet it will be able to do so from the HOV lane.

No word yet on whether various other electric-car perks–like free parking in the closest lots at Los Angeles International Airport, worth at least $30 a day–will be extended to the Volt.

Cold starts a problem

Part of the challenge lies in a clause of California’s Enhanced AT-PZEV definition, says Friedland. It requires zero evaporative emissions, which is hard to design into a vehicle whose gasoline engine may not be run regularly.

Friedland says he understands that the Prius Plug-In Hybrid uses a coolant thermos bottle to keep its catalytic converter warm. (Catalysts must warm up before they clean exhaust emissions effectively.)

Future Volts might have to use battery power to keep their catalytic converters heated to several hundred degrees, which would likely reduce their electric range–even if the engine attached to the converter never switched on.

It’s “an area CARB has to consider in the future,” says Friedland, “especially when the benefits” of providing the same incentives for plug-in Volts “are so large.”

CARB may yet tweak its definition of what qualifies as an AT-PZEV to reflect the variations in vehicle technology represented by vehicles like the Volt. Unless that happens, the 2011 Chevrolet Volt won’t get the love from California that the 2011 Nissan Leaf does.

Written by John Voelcker, this article originally appeared on GreenCarReports, one of VentureBeat’s editorial partners.

Tags: advanced transportation, electric vehicles

Companies: General Motors

The U.S. Department of Energy announced today that it has finally closed its $117 million low-interest loan guarantee to Kahuku Wind Power, developer of a 30-megawatt wind power project slated to keep the lights on in 7,700 homes in Kahuku, Hawaii, and to create 200 jobs on the island of Oahu.

Renewable sources of energy are of particular interest in Hawaii, where gasoline prices are inflated by the need to import oil supplies. Funding wind and solar projects could wean the islands off this dependency, dramatically slashing their carbon footprints.

The Kahuku project, a subsidiary of independent developer First Wind Holdings, broke ground halfway through July. It will help the state meet its goal of generating 70 percent of its energy for electricity and ground transportation from renewable sources by 2030 — one of the tenets of the Hawaiian Clean Energy Initiative.

The Hawaiian Electric Company is the only utility operating on Oahu, and has set lofty alternative energy goals for itself. At the same time, it has been unable to integrate as many solar and wind energy resources as it would like because they remain intermittent and unreliable. The Kahuku project has set out to remedy this problem.

The company is also what the Energy Department is looking for in its loan recipients. Not only will Kahuku create more local jobs close to the wind farm, it is also boosting revenues for other American companies. Each of the 2.5-megawatt wind turbine generators installed at the site was built by Clipper Windpower, based in Carpenteria, Calif.

The development is also unique because it includes a 10-megawatt storage system — ensuring energy consistency — built by Xtreme Power, headquartered in Kyle, Tex. The battery system will allow the utility to serve customers with uninterrupted wind energy regardless of fluctuations in wind speed. Kahuku marks the first time Clipper and Xtreme have paired their technologies.

First Wind Holdings already operates a 30-megawatt wind facility in Kaheawa on Maui, which fulfills 9 percent of the island’s power demand every year.

The corporation struck a power purchase agreement with the Hawaiian Electrical Company in early May, dictating that the company will sell the wind power as it becomes available to the utility at pre-determined prices over the next 20 years. The deal insulates the utility from paying increasingly higher oil costs and hiking rates for its customers accordingly.

Tags: wind

Companies: Clipper Windpower, First Wind Holdings, Kahuku Wind Power, Xtreme Power

The Energy Department followed up its pledge today to invest $122 million in converting sunlight into fuels with another announcement: $106 million in new stimulus funding for six projects working to convert carbon dioxide emissions into plastics, fuel, cement, fertilizer and other products. The idea is not only to eliminate harmful emissions from the atmosphere, but also to put them to good use.

Carbon sequestration is still a huge question mark. While efforts are currently being made to bury emissions from power plants and factories indefinitely, it’s a solution that can’t work everywhere, and may not last as is. Trapping carbon emissions in the form of usable products may increasingly supplement other carbon capture methods.

The recipients of the stimulus money were chosen in October 2009, as part of a $1.4 billion initiative to productively re-purpose the carbon emissions released by the growing number of fossil fuel power plants equipped with capturing technology.

Here’s a look at the six projects that were selected and what they are working on:

Alcoa ($12 million) — Working to convert carbon dioxide contained in flue gas into a soluble bicarbonate and carbonate that can then be turned into construction fill material, non-toxic fertilizer and soil treatments.

Novomer ($18.4 million) — Developing a process that converts waste CO2 into a diversity of plastic products that can be used in the packaging business, like bottles, films, laminates, coatings, cans, and more.

Touchstone Research Laboratory ($6.2 million) — Pilot-testing an algae-based process that absorbs 60 percent of the carbon dioxide in flue gas released from a coal-fired power plant and then turns it into biofuel and other high-value chemicals.

Phycal ($24.2 million) — Developing a conversion system to turn captured carbon dioxide into liquid biocrude fuel that can then be processed into gasoline additives, biodiesel and jet fuel.

Skyonic Corporation ($25 million) — Developing an alternative to scrubbing technology that turns carbon dioxide into carbonate or bicarbonate solids while also eliminating sulfur oxides, nitrogen dioxide, mercury and other toxic chemicals from plant emissions.

Calera Corporation ($19.9 million) — Based in Los Gatos, Calif., this company is transforming carbon dioxide into carbonates that can be recycled as construction materials, like cement.

You can find more information on each of these projects here.

Tags: carbon capture

Companies: Alcoa, Calera, Novomer, Phycal, Skyonic Corporation, Touchstone Research Laboratory, U.S. Department of Energy

The U.S. Department of Energy announced today that it has awarded $122 million to a team of scientists in California to establish an Energy Innovation Hub focused on converting sunlight into different types of liquid fuel.

An interdisciplinary effort spanning the California Institute of Technology and the Lawrence Berkeley National Laboratory, the Hub will work on artificially simulating photosynthetic processes, which can be harnessed to produce innovative sources of energy, the Department says. The ultimate goal is to commercialize resulting technology.

Several other companies have made a name for themselves trying to achieve similar feats. Venture-backed operations like Joule Unlimited are trying to derive fuels from chemical processes that combine sunlight, water and carbon dioxide — usually CO2 emissions from power plants and other sources of greenhouse gases.

Being able to produce fuel this cleanly would be game changing. So many biofuel startups and even oil and gas giants are chasing the same goal: to produce clean, affordable fuel at scale that could replace gasoline in existing automotive and jet engines. Companies like Coskata, Codexis and LS9 are all engineering microorganisms and catalysts to convert feedstocks ranging from corn to municipal waste into usable fuel. But so far, none of thee businesses have been able to gain serious traction.

There is room in the market for a bold new idea in this arena. Making fuel out of sunlight, CO2 and water would avoid some of the major hurdles — including money, time and scale — that have prevented many of the other ongoing fuel projects and companies from achieving broader adoption.

The newly-funded center, to be called the Sunlight Energy Innovation Hub, is one of three such projects to get funding from the federal government this year. One of the other hubs focuses on simulating nuclear reactor technology.

Companies: Codexis, Coskata, Joule Unlimited, Ls9