Ceres, a Thousand Oaks-based energy crop firm, is getting into the seed business.
The biotech company has developed high-yield varieties of switchgrass, sorghum and other plants needed to produce cellulosic biofuels. It’s ramping up a division called Blade Energy Crops, which will sell seed to farmers to be sown in spring 2009.
Orders should start flowing next month, when Blade will launch a campaign targeted toward growers. But, “if people call us at this point, we’re not turning them away,” said Anna Rath, Ceres’ vice president of commercial development.
Ceres employs about 125 workers and last year secured $75 million venture capital investment from Warburg Pincus, a global private equity firm. It was the largest single venture investment made in a tri-county company in 2007. At the time, it was likely the largest deal of its kind, according to data gathered by New Energy Finance, a London-based research group that follows venture funding in renewable energy.
While corn-derived ethanol has drawn a sharp backlash and accusations of energy inefficiency and raising food prices, Ceres doesn’t face the same problems.
The process for retrieving fuels from Ceres’ plants is more efficient than corn, and they can be grown on land that is either fallow or unsuitable for food crops.
Rath said it’s too early to say how much revenue Blade’s seed business might generate for Ceres. “It will be determined by a lot of factors that are beyond our control,” she said, but with federal policies calling for 36 billion gallons of biofuels by 2022, “we think it’s a pretty sizeable opportunity.”
Blade’s first energy crop seeds will be for switchgrass and high-biomass sorghum.
Its switchgrass will come into two varieties, one adapted for the South and Southeastern United States, and one adapted for climates slightly farther north.
Other climates will follow. “We also are including in our switchgrass products some additional varieties that are suited to the more Northern areas of the United States, so that we’ll have something for everybody,” Rath said.
The switchgrasses can withstand dry climates, which is important to growing them in proximity to energy-consuming areas.
“It will be the case that both of these varieties could do well in parts of California,” Rath said. “Even if they need a little irrigation in dry areas, it will be less irrigation than traditional row crops.
“There are some sort of ultimate limitations on plants needing some water,” Rath continued. “But we understand that water availability and the increasing costs of water are going to be one of the major trends in agriculture in the next decade. As a result, we have picked crops that are already advantaged.”
In its initial rollout, Blade will also introduce two varieties of sorghum tailored as energy crops.
“These are improved proprietary varieties that have been bred to have higher biomass, which means more gallons of biofuels to the acre and a better return for the grower,” Rath said. “The next one we’ll be bringing to market after this year will be sweet sorghum.”
Blade’s seed business will be slightly different from that of companies such as Monsanto, which sells new corn and soybean seed to farmers each year. Those crops must be replanted annually, while plants such as switchgrass are perennials that come back each year after being harvested.
Blade has two revenue plans to counter that.
“The new things we bring out will be so much better from what we put out five years previous that growers will find it more economical [to buy new seed],” Rath said.
he second revenue source is an annual trait fee. “If you purchase a seed that has a trait in it, you’re not only planting the seed but signing a license agreement to use that trait,” Rath said. “We are going to try to offer all of the different kinds of payment options that are standard in the industry so that we can make our seed as accessible as possible.”
So far, many of the biorefineries that would convert Blade’s crops into fuels haven’t been built. “It’s not so far away, but there’s not a critical mass yet,” Rath said.
Some facilities will come online near the first harvest of Blade’s crops in late 2009, and a host of federal programs are set to encourage farmers and refineries alike. In the meantime, coal-fired power plants can use Blade’s crops to produce energy with few or no upgrades. The plants release fewer toxins when burned, and Ceres sees a huge market opportunity in bioenergy.
“This can actually happen much more rapidly, we believe, than even cellulosic biofuels,” Rath said.
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