While venture capitalist Vinod Khosla has been backing biofuel startups for years, 2010 could be the first year that he stands to generate returns from his biofuel bets. Two of Khosla’s biofuel portfolio companies have filed for IPOs in recent weeks and the investor’s influence is still clearly felt across the sector. But how well will the firm actually make out?

Synthetic biofuel maker Gevo filed its S-1, last week in an effort to raise up to $150 million in an IPO. According to Gevo’s S-1 Khosla Ventures owns 40.6 percent of Gevo’s shares.

Amyris Biotechnologies, a startup that develops synthetic organisms to make chemicals and biofuels, filed to raise $100 million in an IPO in April. The company raised a total of $244 million in funding and Khosla Ventures, along with Kleiner Perkins, each own 15.4 percent of Amyris’ shares.

While Khosla’s dozen other biofuel firms — which include Range Fuels, Coskata, Mascoma, LS9, and KiOR among others — don’t seem to be aiming for the public markets just yet. But if you look at who Gevo refers to as a competitor, Khosla’s influence over the industry still stands out. Out of two dozen firms that Gevo lists as competitors, a quarter of them have been supported by Khosla.

But Will He Make Money?

So, some of Khosla’s biofuel investments are “coming of age,” so to speak, but will they make Khosla Ventures much money? Well, they definitely won’t be home runs and no, the firm probably won’t make a ton on these two investments. At this point it’s unclear if Gevo or Amyris will have successful IPOs (or will IPO at all), given the companies are both in pre-commercial states, don’t generate much revenues, and certainly aren’t profitable.

Gevo has accumulated a deficit of $50.3 million, and for 2009 generated $660,000 in revenues and lost $19.89 million. As of December 31, 2009, Amyris had accumulated a deficit of $120.4 million, and for 2009 generated $64.61 million in revenues and lost $64.80 million.

Khosla has mostly lost money on biofuels before. As Robert Rapier pointed out in this article in February, Khosla wrote about a company called E3 Biofuels in an article for Wired back in 2006 entitled My Big Bet on Biofuels — Rapier says that E3 Biofuels went out of business shortly after the article came out. Another Khosla-backed firm Range Fuels has been hit with delays and has scaled back its production. Khosla-backed AltraBiofuels has been forced to change courses several times, despite over $400 million in investments and six years in business.

Cello Energy is a (now infamous) company that the EPA once relied upon to generate 70 million gallons of cellulosic ethanol production for a federal mandate (that has since been cut dramatically). Cello was backed by $12.5 million from Khosla, and has since been sued in a fraud case and has been hit with production delays.

Rapier has never been shy of his assessments of Khosla and biofuels:

I felt like he [Khosla] came into the energy industry without a very good comprehension of if, but felt that he would apply his golden touch from Silicon Valley to show the dinosaurs how Silicon Valley innovates. I also felt like he was attracted to people who made grandiose claims, but didn’t have the proper historical perspective to determine when something was truly novel (and really worked).

Learning Curve

But as happened in computing, software, the Internet and telecom, investors can learn from their failures and often keep investing despite the  misses. Khosla seems to be using some of his newer biofuel investments to help with some of the problems of the first generation biofuels.

Gevo has a low capital-intensive business model that’s directly tied to the first-generation of corn ethanol, and the company sells retrofit technology for corn ethanol plants to help them produce and sell isobutanol, a renewable fuel and chemical. The retrofit process takes about 14 months and is estimated to will cost about $22 to $24 million, for a 50-million-gallon-per-year ethanol plant, and $40 and $45 million a 100-million-gallon-per-year ethanol plant, the company estimates in its S-1.

KiOR seems to be the latest biofuel startup that has Khosla Ventures excited and has gotten the latest round of funding from the firm. KiOR raised a whopping $110 million from backers namely Khosla Ventures, for its technology called a “biomass catalytic cracking process,� based on technology derived the traditional oil industry. KiOR’s President Fred Cannon described KiOR’s technology as being able to crunch into seconds the millions of years that it takes to carbonize biomass (turn it into fossil fuels) in nature. That’s the kind of breakthrough that could help bring biofuels back into vogue.

For more research on cleantech financing check out GigaOM Pro (subscription required):

Cleantech Financing Trends: 2010 & Beyond

Norway’s StatoilHydro (NYSE: STO), the largest offshore energy company in the world, is fighting the bad public relations besieging its sector peer BP (NYSE: BP) with $3 million in funding for algae-based biofuel research in the U.S.

The College of William and Mary is the oldest American institution of higher learning besides Harvard, and its environs in Williamsburg, Virginia are as important to U.S. history as any spot in the former British colonies.

Right next to the William and Mary campus sits Lake Matoaka, part of the Chesapeake Bay watershed less than five miles from Jamestown, the first permanent English settlement in what became the United States. Despite tourism and shipbuilding-related economic activity and the palpable sense of history throughout the region, Lake Matoaka has become polluted in recent years with agricultural and industrial runoff that threatens plant and animal life.

Specifically, high levels of nitrogen and phosphorous are causing the runaway growth of algae on the lake’s surface. When massive algae blooms die, they sink and leech oxygen from the water. The result is high numbers of fish and reptile deaths that university officials say puts the lake “a day or two away from a fish kill.”

To avoid the ghastly scene of all Matoaka’s wildlife someday floating on the lake’s surface, W&M physicist Karl Kuschner is using $80,000 of grant money administered through StatoilHydro’s Chesapeake Algae Project to build a flume.

That flume–an artificial water channel–was floated out onto Lake Matoaka in early July to begin collecting nitrogen and phosphorous and other nutrients. That way, those normally beneficial fertilizer components can foster algae growth on the flume instead of on the water.

Kuschner tells the Hampton, VA area Daily Press that 6-8 gallons of dry algae can be gathered from the flume every two weeks.

While that amount isn’t enough to drive an algae-based biodiesel revolution in the former British colonies, William and Mary researchers can join other local colleges like Old Dominion and the Virginia Commonwealth in looking for ways to optimize the algae-to-fuel conversion process.

StatoilHydro is hoping that its grant money pays off in technological advances and in preventing more “dead zones” in Lake Matoaka where algae hurts rather than helps.

The website for ChAP, the Chesapeake Algae Project, points out that the regional initiative will not limit itself to one or a couple of high-yield algae strains but instead will work with blooms that grow naturally in the area.

That approach should bring down startup costs and give a more realistic picture of how polluted local ponds and lakes can be turned into biofuel feedstock with little more than a collector and a conversion station.

-Chris Hunter

While biofuel maker Amyris unveiled that it had scored some major partnerships and investment earlier this week, the good news doesn’t distract from the fact that Amyris is generating the majority of its revenues from selling ethanol produced by other companies.

Amyris says:

Our total revenue increased $11.6 million to $13.7 million in the three months ended March 31, 2010 compared to the comparable period the prior year. The increase was primarily the result of the increase of $8.4 million in sales of third party ethanol. We sold 4.9 million gallons of ethanol in the first quarter of fiscal 2010

Amyris hasn’t yet commercialized its next-gen biofuel product, and accumulated a deficit of $136.6 million as of March 31, 2010. The company plans to start producing its synthetic organism-based biofuel at commercial scale in 2011.

So why would a company resell ethanol purchased from third parties? Biofuel guru Robert Rapier pointed out to me that before ethanol company Xethanol went bankrupt, it had the same reselling tactic (Rapier has followed the chronicles of Xethanol closely). The reasons a company will resell others’ fuel before producing its own can include an attempt to demonstrate that it can produce revenues somehow, as well as to develop a sales organization familiar with the ethanol markets.

I contacted Amyris to learn more about its ethanol suppliers and how long it expects to be dependent on third-party sales, but the company is in silent mode and refused to comment.

For more research on cleantech financing check out GigaOM Pro (subscription required):

Cleantech Financing Trends: 2010 and Beyond

Updated: Can a new high-profile backer and new funds help biofuel startup Amyris avoid the fate that befell other recent greentech IPO hopefuls, like solar maker Solyndra, which earlier this week pulled its IPO? Amyris disclosed in a filing this week that it has hooked up with French oil giant Total, which bought a 17 percent stake in the biofuel developer and could help deliver a lot more confidence with investors for its upcoming IPO.

Amyris also disclosed that it’s raised a total of $138.6 million, and recently inked partnerships with a variety of firms including Cosan, M&G Finanziaria, Soliance, Procter & Gamble Co. and a subsidiary of Royal Dutch Shell. Seven-year-old Amyris, which previously raised more than $244 million from a long list of investors, including Khosla Ventures and Kleiner Perkins, now counts Total as its largest investor.

Like Tesla’s recent deal with Toyota, Amyris’ connection to Total could help investors feel like some of the risk of the company has been mitigated in its IPO. Total is a massive oil company and says it’s the “fifth largest publicly-traded integrated international oil and gas company in the world,” according to marketcap. The issue with biofuels is reaching mass scale and commercialization — something with which Total has a lot of experience.

Amyris filed to raise $100 million in an IPO back in April, despite the fact that it has never turned a profit on a quarterly or annual basis. The company, which plans to start producing its synthetic organism-based biofuel at commercial scale in 2011, saw a loss of $16.3 million in the first quarter of 2010, up from $12.4 million in the same period a year earlier. Revenues for the quarter climbed to $13.7 million — including $2.3 million recognized from the DOE grant — during the first three months of this year, up from $11.6 million in revenue a year earlier.

Amyris says it sold 4.9 million gallons of ethanol (Update: to be clear this is other companies’ ethanol) in the first quarter of 2010 — more than it sold during all of 2008 and upwards of six times the 700,000 gallons it sold during the same period in 2009. According to Amyris the uptick stems from a growing customer base and the addition of new storage terminals in its network for distributing third party ethanol to wholesale customers.

Amyris represents one company in a flood of firms working under the banner of greentech that are hoping to go public in 2010. In total, at least 19 companies aim to raise some $9.6 billion worldwide in 2010. In April Codexis, a Redwood City, Calif.-based developer of biocatalysts for drug and biofuel production, debuted on NASDAQ at the low end of its offering and has dropped several more dollars in price since then.

Photo courtesy of DOE

Related research on GigaOM Pro (subscription required):

Cleantech Financing Trends: 2010 and Beyond

Amyris Biotechnologies has taken one more step toward the long sought after goal of commercial scale next-gen biofuel production. Amyris filed last month to raise $100 million in an initial public offering, and this week the company’s latest filing with financial regulators shows it has collected its first revenue from a $24.3 million federal grant, awarded on a conditional basis late last year. But amid rising revenues, the IPO hopeful’s losses have also grown.

Backed by more than $244 million from a long list of investors, including Khosla Ventures and Kleiner Perkins, 7-year-old Amyris reports in its latest filing that its net losses now total $136.6 million. The company, which plans to start producing its synthetic organism-based biofuel at commercial scale in 2011, saw a loss of $16.3 million in the first quarter of 2010 alone, up from $12.4 million in the same period a year earlier.

Amyris, which has never turned a profit on a quarterly or annual basis, reports that revenue climbed to $13.7 million — including $2.3 million recognized from the DOE grant — during the first three months of this year, up from $11.6 million in revenue a year earlier.

Amyris attributes the rise in revenue primarily to an $8.4 million increase in sales of ethanol that Amryis buys from third party producers — the company has yet to commercialize any of its own products. Amyris says it sold 4.9 million gallons of ethanol in the first quarter of 2010 — more than it sold during all of 2008 and upwards of six times the 700,000 gallons it sold during the same period in 2009. According to Amyris the uptick stems from a growing customer base and the addition of new storage terminals in its network for distributing third party ethanol to wholesale customers.

That’s a significant jump, but as Synthetic Genomics founder (and artificial life creator) Craig Venter put it earlier this year, biofuel companies are “just playing” and “wasting investors’ money” unless they can generate billions of gallons of fuel (Venter referred in his comments specifically to algae fuel).

The DOE grant comes through a program funded by the Recovery Act to support demonstrations of “integrated bio-refinery operations.” The DOE has agreed to reimburse Amyris for up to $24.3 million out of a total of up to $34.9 million in expenses for research activities undertaken as part of a pilot project in Emeryville, while requiring Amyris to share up to $10.6 million of project costs.

Amyris opened its first pilot plant in Emeryville in 2008 and the following year it opened a pilot plant and a demonstration plant, in Campinas, Brazil. The DOE grant is meant to help Amyris expand its existing Emeryville plant to produce a diesel substitute by fermenting biomass from sweet sorghum (up to 1,370 gallons per year), and secondarily, have capacity to churn out substitutes for petroleum-based products like lubricants and polymers.

Amyris represents one company in a flood of firms working under the banner of greentech that are hoping to go public in 2010. In total, at least 19 companies aim to raise some $9.6 billion worldwide in 2010.

Photo courtesy of DOE

Related research on GigaOM Pro (subscription required):

Cleantech Financing Trends: 2010 and Beyond

While I knew biofuel startup KiOR, which is backed by Vinod Khosla, was working on an innovative process to create renewable crude, I hadn’t heard KiOR’s “official pitch” until this week. The company, which was founded in 2007, has largely been in stealth. At the Khosla Ventures limited partner event on Monday, however (where the venture firm announced that it had signed on former UK Prime Minister Tony Blair as a Senior Advisor), KiOR’s President Fred Cannon described KiOR’s technology as being able to crunch into seconds the millions of years that it takes to carbonize biomass (turn it into fossil fuels) in nature.

Cannon said the company’s catalyst — a fine white powder that he showed to me in a tiny see-through vial after his talk — can turn any feedstock, including non-food cellulose, into a biocrude that has 92 percent lower carbon emissions footprint than fossil-fuel based crude. It can also act as a dr0p-in replacement for fossil-fuel based crude, said Cannon, and KiOR is already making it in volumes of 15 barrels per day at KiOR’s plant in Houston.

“We scaled over the last year from a few liters a day to a few barrels a day. Even on the more expensive feedstocks we use, we’re already competitive on oil prices at this scale,” said Cannon on a panel of execs of Khosla Ventures portfolio companies in response to a question from Tony Blair about how expensive the KiOR process is.

Vinod Khosla is so confident in the company that he said at the event that Cannon’s competitors aren’t other biofuel companies. Rather, Khosla sees KiOR going up against no less than the heads of major oil exporting nations like Venezuela President Hugo Chavez and Iranian President Mahmoud Ahmadinejad. KiOR, on its website, names Khosla as its main backer and back in November it was disclosed that KiOR had raised a $1.4 million Series A round. According to an SEC filing from April 2010, KiOR raised another $40 million earlier this year as part of a whopping $95 million round (not sure how I missed that one last month).

KiOR’s CEO back in 2007, Rob Van Der Meij (who isn’t listed on the management page anymore) told me in an interview in November 2007 that the company’s hope was to license its catalytic process to customers like oil refineries and feedstock owners. Cannon told me at the Khosla Ventures event that KiOR is currently in talks with oil companies, but plans to talk more about oil deals and how its technology works later this year.

KiOR was formed in 2007 as a joint venture between Khosla Ventures and Netherlands-based biofuel startup BIOeCON. While I won’t pretend to fully understand KiOR’s technology, the company calls it a “biomass catalytic cracking process” — a thermochemical process that produces biocrude from grass, wood and plant waste that can then be refined. The process was derived from the traditional oil industry, by Bioecon’s founder, Paul O’Connor, who started BIOeCON in early 2006 after developing catalysts for the petroleum industry, according to MIT’s Technology Review.

Van Der Meij told Technology Review back in 2007 that he expected the company’s production levels to scale up to hundreds of kilos per day in 2009, and for refined versions of its biocrude to be commercially blended into gasoline or diesel by 2010. We’re not sure if KiOR is at that level quite yet, but if not, startups commonly overestimate how fast they can scale.

For more research on cleantech financing check out GigaOM Pro (subscription required):

Cleantech Financing Trends: 2010 and Beyond

At a meeting on May 6 in São Paulo, Brazil, industry stakeholders formed ABRABA to spearhead development of aviation biofuels. The effort signals a growing concern for the growth of the industry within a carbon and oil constrained future.

Earlier this month, aviation companies, biofuel producers, and the sugar cane, algae, and jatropha industries came together to form the Brazilian Aviation Biofuels Alliance (Aliança Brasileira para Biocombustíveis de Aviação, or ABRABA).  As the aviation industry continues to feel the crunch from rising fuel costs and price volatility, ABRABA represents the latest multi stakeholder effort to ramp up biofuel production in the commercial aviation sector (see CAAFI).

Among the aviation companies involved: Azul Líneas Aéreas Brasileñas, Embraer – Empresa Brasileña de Aeronáutica S.A., GOL Líneas Aéreas Inteligentes, TAM Líneas Aéreas, and TRIP Líneas Aéreas.  The Brazilian Association of Jatropha Producers (Associação Brasileira dos Produtores de Pinhão Manso – ABPPM), the Sugar Cane Industry Union (UNICA), The Brazilian Aerospace Industries Association (AIAB), and the biotechnology companies Algae Biotecnología and Amyris Brasil join them.  The mission: “promote public and private initiatives to develop and certify sustainable biofuels for aviation,” reduce carbon emissions, and boost energy efficiency.

According to a statement released by the alliance, ABRABA argues:

The use of sustainable biofuels produced from biomass is key to maintaining the growth of the aviation industry within a low carbon economy.  The proven ability of Brazil to develop alternative energy sources, combined with its knowledge of aviation technologies, will result in a significant gain for the environment by minimizing the impact on economic development.

As is necessary with efforts of this complexity, the alliance will promote public and private stakeholder initiatives that seek to develop and certify sustainable biofuels for aviation.  The goal will be to spearhead favorable public policies that will lead to biofuels that are price competitive and achieve the same level of safety as petroleum derivatives.

The worldwide concern about climate change and oil supply uncertainty has led to a growing demand for renewable sources of energy.  The aviation sector has few options given its reliance on liquid forms of energy.  Further, emerging regulations around greenhouse gas (GHG) emissions as well as price uncertainty around fossil fuels, are driving investment in alternatives.

While civil aviation only produces around 2% of the world’s anthropogenic emissions of carbon dioxide (CO2), increasing demand for fuel supplies threaten to impede growth in the aviation sector.  As demonstrated by the ABRABA alliance, the use of sustainable biofuels produced from biomass is a necessary precursor to sustained growth in the sector (see Aviation Boom in Asia Intensifies Global Competition for Fuel).

Brazil’s recognized capability for developing alternative energy sources, allied with its knowledge of aeronautical technology, put ABRABA in a favorable position to spearhead the development of aviation biofuels in the world economy.  Its success will depend in large part, however, on the availability of cheap sugar, which in a land and water constrained world, may be difficult to find as countries struggle to dedicate agricultural land to energy feedstock production.

For more information on the aviation sector’s pursuit of biofuels, check out Biomass Intel’s Aviation 2.0 section.

Camelina Aviation Biofuels: a Market Opportunity and Renewable Energy Report examines the market drivers behind the shift to biofuels in the aviation sector.

Mackinnon is Editor & Publisher of Biomass Intel, a law and policy resource for sustainable energy, and co-author of Camelina Aviation Biofuels: Market Opportunity and Renewable Energy Report.

photo: Todo-Juanjo

Related posts:

• With Aviation Biofuel Deals on the Rise, Camelina in the Spotlight
• Aviation Industry Hangs Its Future on Biofuels
• Aviation Biofuels: Caught Between a Rock and Hard Place
• Aviation Boom in Asia Intensifies Global Competition for Fuel
• Algae Biofuel Industry Seeks Tax Incentive

President Obama chose the White House Rose Garden as the spot to sign an executive order establishing the first-ever vehicle emissions standards for big rigs and other heavy trucks beginning in the 2014 model year. The emissions directive also calls on the automotive industry to promote development of plug-in hybrids electric cars and other vehicles that utilize biofuels and natural gas.

“The disaster in the Gulf only underscores that even as we pursue domestic production to reduce our reliance on imported oil, our long-term security depends on the development of alternative sources of fuel and new transportation technologies,” the president said.

It was exactly one year ago that Mr. Obama, flanked by car company CEOs, announced the first Corporate Average Fuel Economy (CAFE) standards for cars and light trucks that took into account greenhouse gas emissions as a factor. Hailed as a revolutionary step by environmentalists, that move ordered a 30 percent increase in fuel efficiency by 2016, totaling a 35.5 miles per gallon average for both cars and light trucks. Friday’s directive ordered federal agencies to begin development of even more stringent standards for 2017 and beyond.

The memorandum on freight trucks is a significant victory in the fight against vehicle emissions. Though big rigs represent less than five percent of all vehicles on U.S. highways, they consume more than 20 percent of the total of transportation fuels utilized. Averaging only 6 miles per gallon, they are the second largest consumers of oil, burning more than 2.4 million barrels per day.

The signing of Friday’s order brought a swift reaction from the environmental community.

“We applaud President Obama for this historic announcement to improve the fuel economy of trucks,” said Carl Pope, president of the Sierra Club. “We urge the administration to set the strongest standards to drive us towards an oil-free energy future.”

photo: mediageek

Related posts:

• New Sheriff in Town: DOE Enforces Energy Conservation Standards
• EPA to Curb Ship Air Emissions
• EPA Launches Updated Motor Vehicle Emission Simulator
• Europe Charts Route for Massive Electric Car Roll-Out
• Obama’s win: Bright future for CleanTech?

J. Craig Venter, the genome pioneer, has created a “synthetic cell” by synthesizing a complete bacterial genome and using it to take over a cell. Venter’s breakthrough, reported in the online edition of Science, represents a preliminary step toward the goal of creating microbes from scratch in the lab and using them to make biofuels, vaccines, and other products.

Venter’s achievement could one day lead to a technology where, though engineering the genome, individual cells could be turned into their own miniature refineries for harvesting carbon dioxide and generating hydrocarbons.

In 2005, Venter — one of the first people to sequence the human genome, doing it faster and cheaper than government scientists — set up a company, Synthetic Genomics, to create synthetic cells, and the advance reported in Science represents a milestone for the company and for so-called synthetic biology.

Synthetic Genomics has a contract with Exxon to generate biofuels from algae.

Although some experts hailed Venter’s breakthrough, others said his approach is unpromising because it will take years to design new organisms to produce biofuels, while progress toward making biofuels is already being achieved with conventional genetic engineering approaches.

Click here to view the embedded video.

Article appearing courtesy Yale Environment 360.

Related posts:

• Betting on Algae and Big Oil?
• Algae Biofuel: Big Partnerships = Big Possibilities?
• UCLA Develops Synthetic ‘Gene’ to Capture Carbon Emissions
• Major Airlines Sign Agreement to Buy Biofuels From Two Producers
• Video Game Teaches Biology Lessons

The father of genomics and the founder of synthetic biology startup Synthetic Genomics, Craig Venter, is now officially god. Well, he and a team of researchers at the J Craig Venter institute have successfully created the first synthetic bacterial cell. While the team has been working on this for years, this is the final step in the process that has created the first cell in the world to be controlled completely by a synthetic genome.

Yes, folks, that means it’s the first artificial life form. Here’s how it works: The researchers built a synthetic chromosome and inserted it into a living bacterial cell, where it — for the first time and published in the journal Science today — took over the cell and became a new life form. The researchers had been able to create the synthetic chromosome since 2008, but hadn’t been able to activate it in the cell, until now.

Steve Jurvetson, managing director of Draper Fisher Jurvetson, which is an investor in Venter’s Synthetic Genomics, talked about this process and how the startup has been using IT to help create artificial life at our Green:Net conference (see video clip here). Frickin’ crazy stuff.

Venter has spent the last 15 years on genome sequencing and as he said at a talk I saw him give back in 2007, he’s been trying to “bring biology into a digital world.” He previously jump-started the race between the government and his company Celera to produce the first full transcription of a human genome. He then sequenced his own genome and wrote a memoir about it.

No doubt the media will be exploding shortly (the press conference just ended) on the biological, ethical and legal implications of this work. So for now I’ll just stick to how this breakthrough could effect climate change.

Synthetic Genomics was founded back in 2005 to commercialize Venter’s work, and has been focusing on a variety of applications for its genetic technology, including creating algae-based biofuel. Synthetic Genomics has raised money from investors including venture capital firm Draper Fisher Jurvetson and oil giants BP and Exxon Mobil.

Dr. Ari Patrinos, president of Venter’s bioenergy startup Synthetic Genomics, explained to me back in 2007 that a synthetic life form could be uniquely suited to help fight climate change and aid in uncovering new energy sources. The idea is that a designer organism can be developed to only perform certain tasks, like converting sugar to ethanol, which would result in a very efficient process. Natural microbes have other life priorities, like replication, Patrinos said back then, but a synthetic organism can be created to just perform one function only.

So Synthetic Genomics could theoretically create an algae strain that could be the most efficient in the world at consuming CO2 and also at being used as a transportation fuel. Synthetic Genomics CFO Chuck McBride told me about two years ago that the startup could possibly be able to deliver a biofuel that turns carbon dioxide into octane in as little as 18 months, so Synthetic Genomics commercial biofuel could be getting pretty close to actual production. Venter said last year that the startup had successfully engineered algae to secrete hydrocarbons similar to “intermediary strains in a [oil] refinery.”

A year ago ExxonMobil said it had plans to invest more than $600 million in a new photosynthetic algae biofuels program with Venter, including more than $300 million for Synthetic Genomics itself. The idea behind the R&D program with Exxon, which will be based in a greenhouse facility in San Diego, Calif., is to collect and test thousands of strains of algae to find the most efficient and economical strains for production of transportation fuels. While Venter’s team will focus primarily on microengineering, Exxon will help with the macroengineering for production systems and integration needed for commercialization.

As Venter is well aware — and has repeatedly stated — the major hurdle for his algae fuel project will be scale. If algae fuel companies can’t generate billions of gallons of fuel, then they are “just playing” and “wasting investors money,” he said at the Fortune Brainstorm Green conference earlier this year.

While at one point Venter had a habit of saying he would overturn the oil industry, his startup needs the oil companies to help reach those sheer massive scaling needs.

But clearly he’s gotten the oil partners to sign on, and with this breakthrough announcement today, the oil firms are probably pretty glad they got on board. Other companies that are trying to deliver algae fuel for transportation include Sapphire Energy, Solazyme and Aurora Biofuels (here’s 15 Algae Startups Bringing Pond Scum to Fuel Tanks).

For more research on cleantech financing check out GigaOM Pro (subscription required):

Cleantech Financing Trends: 2010 and Beyond