New Government Program Develops Future Fuels

Andy Sotirou | Photodisc | Getty Images

New financing from the federal government may help biotech companies develop fuels of the future, helping reduce America's dependence on oil.

One such company is Agrivida, a small, agricultural biotech outside Boston. Until recently, most of its funding came from venture capitalists. The new government financing will ensure Agrivida can continue its ground-breaking work developing crops into biofuels.

"We're engineering plants so that they can be turned into fuels and chemicals more easily," says Michael Raab, Agrivida’s President. "We're working primarily on the green tissues of plants —leaves, stalks, cobs from corn."

From corn to cellulosic ethanol and biofuels, Agrivida is one of only a handful of small companies to receive funding from the U.S. Department of Energy’s Advanced Research Projects Agency, Energy (known as "ARPA-E"); the Obama Administration funded ARPA-E with $400 million from the federal stimulus package last year.

Modeled after a similar program at the Defense Department known as DARPA, ARPA-E funds "high-risk, high-reward" research. "We're investing in five or six or seven different ideas and we don't know which one's going to win in the end," says ARPA-E Director Arun Majumdar. "But hopefully if one of them does, the private sector can take it up and scale it."

Yet, hope alone will not help develop projects like Agrivida’s into large-scale, commercial enterprises. Agrivida needs to raise capital too. Thanks to a new council of corporate heavyweights—including General Electric CEO Jeffrey Immelt and Microsoft Chairman Bill Gates—more companies like Agrivida may get the funding boost they need.

The American Energy Innovation Council is urging the government to triple its investments in clean energy technology to $16 billion a year (including $1 billion a year for ARPA-E). The group says a serious investment will not only protect the environment, but is imperative to ensure our national and economic security.

"There's going to be a good export market here," says Chad Holliday, Bank of America Chairman and Chair of the American Energy Innovation Council. "This is a time when we can really be a leader again, like we have been in the past."

For an in-depth look at the development of alternative sources of energy, watch a CNBC special presentation, "America's Crude Reality,"Wednesday, June 30 at 8pm ET, hosted by Melissa Francis.