Are biofuels doomed without subsidies?

A molecular biologist (turned biofuels entrepreneur) made a stark prediction Tuesday:

Famed genomics researcher J. Craig Venter, who is working to develop biofuels from photosynthetic algae, acknowledged this week that alternate fuels are “dead” unless the federal government mandates their use with a carbon policy.

Venter’s strongly worded statement came Tuesday night at the annual Stem Cell Meeting on the Mesa, after he was asked when synthetic biology might have a meaningful impact on the country’s energy production.

Without strong government intervention, Venter said, that day will never come. He works on biofuels, human health and other issues at Synthetic Genomics, the La Jolla company he co-founded. It partnered with ExxonMobil in 2009 to develop algae biofuels.

“It doesn’t matter what the scientific breakthroughs are, there’s no way to ever beat oil,” Venter said. “In fact, oil’s not even an issue right now because of all the new natural gas discoveries.

“So there’s no way economically for a new fuel made out of renewables to ever be able to compete with something an oil company can do, without sharp federal regulations and a sharp carbon policy that says, you can’t keep just taking carbon out of the ground, burning it and putting it in the atmosphere. Until we do that, there is no biofuel industry.”

Venter is no stranger to big bets (or government intervention). His Celera Genomics raced the NIH (and its Human Genome Project) to sequence the first human genome, which cost several billion dollars.

Now Venter is hoping for government intervention — implying a carbon tax on natural gas and other fossil fuels — to raise their cost enough to support synthetic biofuels.

However, the story by life sciences reporter Bradley Fikes suggests that the key problem is not subsidies (or taxes on competing technologies) — in part because taxes on oil would reduce demand and thus prices. Fikes quoted Berkeley energy economist Severin Borenstein:

Regulatory mandates to compel adoption of biofuels probably wouldn’t work, Borenstein said.

“It may work for the United States, and even that seems a political stretch, but it doesn’t really matter if it doesn’t work in the developing world,” he said. “The idea that the developing world is going to forgo cheap gasoline to use much more expensive biofuels, I think is fairly implausible for the near term.”

Science may provide answers in the long term, he said.

“I’ve come around to the view that we need to put a lot more into research and development and pursue every possibility, whether it’s biofuels or electric vehicles, in order to find something that could be cost-competitive,” Borenstein said.

The latter point suggests one of the major disconnects in the biofuels world, between the energy industry veterans who work in the market and the university molecular biologists who are used to NIH and NSF funding all their research. Is it time for biofuels to go back to being a series of university science experiments rather than being the basis of publicly-traded high-tech startups?