Not So Fast: At UC Berkeley, Biofuel Research Takes Hit as BP Oil Company Backs Away

By Erik Neumann

Eight years ago, UC Berkeley struck a historic but controversial deal with the British oil company BP: Berkeley would benefit from the oil giant spending $350 million to create a new Energy Biosciences Institute on its campus, and BP would reap the benefits of that institute’s research into biofuels.

Now, with almost $100 million still unspent, the road to cleaner biofuels has just hit a big speed bump.

BP is exercising its contract option to pull nearly a third of its funding for 2015, and more in the remaining two years. At Berkeley, that means ending some key research, the early elimination of up to 20 current post-doctorate positions, the layoff of more than half the support staff—and a search for other energy companies to fund its biofuel research.* The decision is a troubling setback for biofuels, which advocates are pursuing as a promising alternative to climate-harming fossil fuels, but which skeptics have long regarded as a dubious investment.

The explanation for BP’s change of heart: plunging oil prices, not to mention what BP will have to pay for the mounting costs of the company’s disastrous 2010 oil spill in the Gulf of Mexico. Yes, in a rather ironic twist of fate, the largest oil spill in history and the current bargain-basement prices for oil are taking a toll on the development of cleaner, renewable biofuels.

Since the Energy Biosciences Institute was started in 2007, the partnership between BP, Berkeley, the University of Illinois at Urbana-Champaign and the Lawrence Berkeley National Lab focused on two main areas of biofuel research. Institute director Chris Somerville sums up the goals: Figuring out which plants are optimal to use in the formulation of biofuels, and figuring out what kinds of fuels to make them into.

Today’s biofuels often are made from corn, sugarcane juice or wood pellets, but newer biofuel research has focused on algae, seaweed, grasses and waste byproducts such as corn cobs and fibrous cane stalks.

Weeks ago, after the Berkeley-based institute said it was poised to shift more from the basic science research phase into actual engineering, it learned that it would lose $10 million in BP funding in 2015, and unknown amounts in the next two years—forcing it to pull the plug on some of its work.

“In science funding, nothing lasts forever,” Somerville says. “Even with a big company with lots of resources, we could not get it to the point where it was a slam dunk to commercialize it.”

BP’s decision targets one area of research in particular—lignocellulosic (LC) biofuel technology—which aims to convert plants’ biomass into fuel. In fact, BP announced a company-wide policy to shift away from research in LC fuels, while consolidating its efforts to “build on the profitability and scale” of its existing sugarcane biofuels business in Brazil.

“While we believe there is good value in the LC technology, the current challenging external business environment is resulting in tough strategic choices having to be made by businesses across BP,” company spokesman Jason Ryan said via email. He went on to acknowledge that the company’s decision to stop investing in LC ethanol technology development “has had an impact on the viability of the Energy Biosciences Institute’s research portfolio,” but added “BP values the remaining parts of (the institute’s work), as well as the nature of our collaborations, and is in discussions with our university partners to create the right framework for the future.”

BP’s cuts to the institute come as the oil giant has laid off hundreds of employees and enacted wage freezes in response to the global free fall in oil prices. Since June 2014, prices have dropped by more than half as production in the United States and abroad continues to increase. BP is also before a federal court in New Orleans to determine how much the company must pay for the 2010 Deepwater Horizon oil spill, which sent more than 3 million barrels of oil gushing into the Gulf of Mexico. BP faces a maximum fine of $13.7 billion.

“All renewables are going to have to weather the storm,” Somerville says, speculating as to when enthusiasm for biofuels will rebound. “We may have to wait it out until oil gets expensive again.”

Prices aside, skepticism about the viability of commercial biofuels persists. A new report from the World Resources Institute, an environmental think tank, claims that the benefits of biofuels have been dramatically exaggerated. Instead the report found that the large amount of plant-based materials needed to make biofuels would consume valuable agricultural land that would be put to better use growing crops to feed the planet’s surging population.

“Even assuming large increases in efficiency, the quest for bioenergy at a meaningful scale is both unrealistic and unsustainable,” the report states. It goes on to suggest that other renewables would better meet the world’s energy needs with fewer greenhouse gas emissions—and without conflicting with global food security.

It also did acknowledge that certain biofuels could be worthwhile, particularly those made from plant waste, but that even their potential is limited.

But others take issue with the suggestion that cellulosic fuels are not commercially viable. “In fact there were five commercial-scale plants brought on-line in the past year,” notes Heather Youngs, a senior fellow at the Berkeley-based institute. “It was 136 years between invention of the solar cell and the first commercial solar panel. It took another 30 years to drop the price from $77 per watt to under $1 per watt. Compared to that timeline, cellulosic fuels are ahead of the curve.

“We should not give up on the goal just because one company is have unrelated financial woes and has decided to scale back their entire research program.”

Somerville says that while the Berkeley institute’s work of converting plants to fuel has now stopped, it’s continuing other bio-research, including converting sugar into diesel and jet fuel, breeding yeast for ethanol production from sugar cane, and developing renewable lubricants. And in the meantime it’s looking for other funders to replace BP, which Somerville says includes “all the big companies in renewable liquid fuels and chemicals.”

From the beginning, the partnership between a historically liberal university and a multinational oil company stirred student protests and criticism from some in the media and other professors. Among them was associate professor of ecology Ignacio Chapela, who “forced the discussion” about what it means for a company like BP to be a major funder at Berkeley. The supposed justification for the relationship, he noted, was that it was “the only way forward to have a stable source of revenue” for research into biofuels.

“When they opened the building, I wanted to see (inside) and I couldn’t pass the front desk,” Chapela says. The institute is one of the few buildings on the Berkeley campus besides the U.S. Department of Energy-supported Lawrence Berkeley National Lab that isn’t readily accessible to the general public. Anyone who wants to visit or tour the building needs to make an appointment, Youngs says, adding that the institute last year hosted several hundred visitors from around the world.

“I continue to be really upset and sad that we create these areas of private domain,” Chapela says, “ruling over our public interest and our public agenda.”

The research agreement between BP and Berkeley included a clause that allowed the contract to be broken with six-months notice. Somerville says the advanced notice allowed the institute to create a “gentle phase-out” so that graduate students’ work will be finished and post-doctorate researchers’ work will be eliminated in the coming months. Although more graduate student and post-doc research positions that BP was anticipated to fund in the next two years will now be lost will unless the institute secures replacement funding, no one at the institute could say how many. In addition, 13 of 21 support staff are losing their jobs.

“Estimates of how large the contribution of bioenergy could be are inherently uncertain,” Somerville and Youngs recently wrote. “What is certain is that large amounts of unused biomass are available today that can contribute substantially toward creating employment, reinvigorating rural economies, and achieving energy and climate security.” But they also acknowledged plenty of scientific and engineering challenges.

“The 50-year slog toward the recent historic achievement in commercial-scale lignocellulosic biofuel production is an example of how hard some problems in the field are.”

Nonetheless, they added, “Since plant biomass is likely to be the main source of renewable fixed carbon far into the future, anything we can discover about how to utilize biomass is important.”

*This corrects an earlier version of the story.

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“Yes, in a rather ironic twist of fate, the largest oil spill in history and the current bargain-basement prices for oil are taking a toll on the development of cleaner, renewable biofuels.” Sorry, this is a misuse of irony. This is exactly what most people would expect.

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