Fermentation Needs Public Investment to Transform Protein Production

Behind plant-based meat’s rise to fame, novel protein sources produced via fermentation, such as Impossible’s “heme,” have generated substantial private sector interest. Rather than using traditional fermentation practices to produce foods like tempeh or kombucha, companies are formulating new fermentation techniques that harness the rapid growth rate of microorganisms such as yeast, fungi, and bacteria to produce protein-rich foods like mycoprotein or high-value ingredients like non-dairy whey.

By introducing a new suite of approaches to product development, fermentation is driving the next wave of alternative protein production. Fermentation processes can use a variety of host organisms, feedstock sources, and cultivation processes, offering an unprecedented opportunity to decouple protein production from demand for land, freshwater, and other natural resources. Due to the high resource use efficiency of fermentation systems and the rapid growth rate of microorganisms employed in the fermentation process, innovative fermented proteins could have lower environmental impacts than animal, and even plant sources of proteins.

To scale the production of a diverse set of fermentation systems, the industry needs public sector investment in manufacturing expansion. Although a few well-established fermentation companies have financed the construction of their own commercial production sites, existing domestic manufacturing facilities are insufficient at meeting the capacity and design required by early-stage companies to commercialize their products. Many companies are now pioneering various approaches to product development that existing manufacturing facilities do not have the equipment to support. To further these efforts, the fermentation industry requires public investment to construct manufacturing sites to commercialize their products and transform alternative protein production.

Key Takeaways

• Fermentation technologies can produce proteins at a fraction of the environmental footprint of animal-and even plant-derived proteins.
• Existing domestic manufacturing facilities are insufficient for meeting the capacity and design required for early-stage companies to scale production.
• Early-stage companies need both commercial-scale (200,000-500,000 L) and intermediate-scale facilities (10,000-100,000 L) to bring their products to market.
• There is a financing gap and a lack of a clear capital provider for constructing novel manufacturing sites for fermentation companies.
• The public sector can provide financing to construct or expand manufacturing capacity for fermentation using past models of funding that advanced other manufacturing sectors.

The Environmental Impacts of Fermentation Processes

Fermentation technologies can produce proteins at a fraction of the environmental footprint of animal and even plant-derived protein products (Figure 1). Microorganisms, like bacteria or fungi, are fed nutrients and sugars to make them grow and produce protein in tanks called fermenters. Since microorganisms have a fast growth rate, at several kg per m3 per hour, they can produce large quantities of protein. Quorn’s fermentation process produces approximately 3-10 times more protein per unit glucose as compared to animals.

Though fermentation is more energy-intensive than conventional livestock production, it has a smaller carbon footprint that can be further reduced by using low-carbon energy (Figure 1). The carbon footprint associated with fermentation heavily depends on the energy source mix available at the manufacturing site. Electricity consumption typically contributes around 40% of the greenhouse gas emissions associated with production, assuming an average US electricity grid. However, the carbon footprint associated with fermentation is generally lower than animal protein sources and can be reduced significantly to levels lower than plant protein sources if production is located near a low-emissions grid or if the energy mix powering production is decarbonized. The carbon footprint of Perfect Day’s whey protein could be reduced by about 39.6%^{EIA data on state-level electricity generation and related CO2 emissions were used to determine the most efficient grid in the US, which is that of Vermont (VT). Electricity consumption contributes about 40% of the greenhouse gas emissions associated with Perfect Day’s production and it is assumed that production is powered using electricity with the national average carbon intensity. The carbon intensity of the US’s and VT’s grids were multiplied by the electricity usage per kg protein for Perfect Day’s whey protein, 13 kwH per kg protein, to calculate the emissions footprint associated with each kind of grid. The percent difference in emissions footprints, approximately 39.6%, is assumed to be the emissions reduction possible with a more efficient grid.}when powered by the most carbon-efficient grid in the US.

Fermentation systems also have a small land-use footprint, and the growth environment within a fermentation tank can be controlled to avoid excess nutrient runoffs (Figure 1). Due to the low land occupation requirement, the fermentation systems can also be selectively located on non-agricultural land to avoid competition with crops and livestock for fertile soil and freshwater.

Figure 1

Some novel fermentation processes, particularly precision fermentation, are more emissions-intensive than other fermentation processes. Precision fermentation uses microbial hosts like yeast to produce highly specialized ingredients, such as Impossible’s heme protein, to improve the taste and texture of plant-based meats and dairy. Unlike biomass fermentation, precision fermentation uses much more energy to produce smaller quantities of protein. The co-products from fermentation can be used in other products like high-protein pet food, to improve the sustainability of fermentation. However, the carbon footprint of precision proteins should be evaluated with all of the other ingredients in the final product that it is actually in. Perfect Day’s whey protein has a 62 to 97% smaller carbon footprint than cow milk whey,^{The large range in carbon footprint reduction is due to whether co-products produced during the fermentation process are treated as waste or turned into other high-value ingredients, like for pet food.}but an ice cream pint with Perfect Day’s whey has only a 34% smaller carbon footprint than a traditionally produced ice cream pint. Despite the larger carbon footprint, precision fermentation plays an important role by creating novel ingredients that otherwise could not be produced using biomass fermentation or other plant-based production processes.

Opportunities to Improve the Sustainability of Fermentation Processes

The choice of fermentation, host organism, and feedstock source, also impact the sustainability of fermentation-derived proteins. Certain kinds of fermentation, such as solid-state which can be used in biomass fermentation facilities, and other highly specialized system designs use less water and energy and are more efficient. Choosing host organisms that grow quickly and require less energy would maximize production efficiency. Glucose is widely used as a cheap and reliable feedstock for microorganisms, but its production is relatively energy-intensive. Alternative feedstock sources, like sugarcane molasses or other agricultural waste side stream residues, could replace glucose and reduce the carbon footprint of inputs used in fermentation. Companies and researchers are developing bacteria and other microorganisms that use gases rather than sugars as a feedstock which would also improve the sustainability of fermentation, but more research is needed to determine the viability of these processes at commercial scales.

Barriers to Scaling Fermentation Production in the United States

Domestic fermentation companies are at the cutting edge of research and development efforts, but currently face significant challenges toward commercializing their products. To scale-up production, early-stage companies need more manufacturing sites with intermediate- (10,000-100,000 L) and commercial-scale fermentation capacity (200,000-500,000 L). While commercial-scale capacity is necessary for companies to return a profit, intermediate-scale fermentation capacity is needed immediately for early-stage companies to test and optimize unique fermentation system designs and production processes at a larger scale beyond the “proof of concept” phase. Intermediate-scale manufacturing can generate valuable production data and cost estimates for early-stage companies to understand how their fermentation processes would translate at commercial scales, and also provide product samples needed to obtain FDA GRAS approval.

Available manufacturing sites to scale fermented protein production beyond a “proof of concept” scale is limited globally, but especially in the United States where the vast majority of companies have been founded in the past few years. Existing manufacturing sites with fermentation systems that can be retrofitted to test and scale specific fermentation processes tend to have lengthy lease terms and do not have enough capacity to support the size of the industry’s demand. Recent projections by industry experts predict that existing domestic manufacturing sites with fermentation systems suitable for fermented protein production will be completely consumed by the end of this year.

There is little private or public capital available for companies to develop their first commercial-scale facilities. Although venture capitalists have provided critical support to the industry’s R&D efforts, they frequently adopt“asset-light” investment models which prioritize investing in intellectual property over physical assets like infrastructure. Existing capital providers from more well-established manufacturing sectors are currently hesitant to support the fermentation industry due to the novelty of the field and tend to lack experience with food fermentation manufacturing. As a result, the industry is experiencing a manufacturing “valley of death” in which novel technologies either get stuck in the lab or manufactured abroad due to the lack of capital to expand manufacturing for technically complex products. Early-stage companies seeking to scale production may be forced to accept contracts with undesirable terms that constrain their ability to test and optimize their fermentation processes at intermediate scales before being expected to commercialize and return a profit.

The Federal Government Is Suited to Fund Fermentation Manufacturing

The public sector can accelerate the industry’s development by filling the financing gap for the construction of novel manufacturing sites. The federal government has a track record of advancing novel manufacturing for other sectors like biofuels, electric vehicles, and nanotechnology and can apply the same funding models to fermentation. As a result, the government would support an industry capable of improving the sustainability of food production while generating low-emissions jobs in the domestic manufacturing sector that generate additional jobs throughout the food supply chain.

I. Commercial-Scale Fermentation Manufacturing Sites

The federal government can support the construction of commercial-scaling manufacturing with loan guarantees and bonds. Federal loan guarantees help borrowers, such as fermentation companies, receive privately financed loans by having the government assume the risk of the borrower’s debt obligation. They are particularly effective at increasing the loans given to companies developing new technologies that lenders would otherwise deem too risky to lend to. Loan guarantees have bridged the financing gap for the nation’s first utility-scale solar PV projects and were recently issued to Tesla for the construction of its first manufacturing facility. Alternatively, tax-exempt industrial revenue bonds with deferred payouts require the accrued interest to be paid back only once the bond matures, and would enable fermentation companies to borrow at lower interest rates normally reserved for state and local governmental entities.

II. Shared-Use Intermediate Scale Manufacturing Sites

Addressing the need for intermediate-scale manufacturing sites requires a more innovative approach. The private sector is not incentivized to construct intermediate-scale manufacturing facilities because fermentation companies only need intermediate-scale fermentation capacity temporarily to generate representative production data, and do not reach profitability at intermediate levels of production. Existing publicly supported shared-use sites support the pilot-scale (2-1,000 L) development of some precision fermentation products, but they are not capable of supporting many forms of biomass fermentation or intermediate-scale levels of production. The biophysical constraints of fermentation processes materialize differently at an intermediate-scale than at a pilot scale, and intermediate-scale facilities are needed to optimize production processes so they can reliably translate to a commercial scale.

Due to the diversity of product development approaches, there is no “one-size fits all” intermediate scale manufacturing model that would serve a wide range of fermentation system design needs for the industry. Nonetheless, developing shared-use intermediate-scale manufacturing sites, akin to those used by the biopharmaceutical industry, would allow companies to scale faster. These facilities could be modeled on existing shared-use fermentation manufacturing sites with pilot-scale capacities, such as the Advanced Biofuels and the Berkeley-based Bioproducts Process Development Unit (ABPDU) and the Manufacturing USA Institutes, which enable private companies and experienced on-site staff with expertise in trouble-shooting, prototyping, and optimizing the fermentation process to collaborate. Shared-use manufacturing sites are adaptable to multiple fermentation processes and allow companies to take turns using space and equipment to improve production efficiency. Public sector support for financing intermediate-scale facilities would also ensure that fermentation technologies and job opportunities are not outsourced abroad in the commercialization process.

The Department of Energy (DOE) has constructed shared-use advanced manufacturing facilities which have supported the development of pioneering fermentation processes, but continued support from the Small Business Association (SBA) and greater involvement from the US Department of Agriculture (USDA) is needed. Through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, the SBA can provide support to companies as they explore the technological potential of their fermentation process and begin the process of commercialization. The fungi protein fermentation company Meati benefited from receiving an SBIR grant to accelerate its R&D efforts prior to commercialization, and other companies would significantly benefit from similar grants, especially if intermediate-scale fermentation sites are concurrently funded to enable the generation of production data. Within the USDA, the National Institute of Food and Agriculture (NIFA) which focuses on advancing agricultural biotechnology, could also identify grants that could be used to specifically fund intermediate-scale manufacturing sites.

If successfully coordinated, an interagency initiative guiding manufacturing efforts that address the need for intermediate-scale fermentation capacity would be transformative for the industry. The 2000 National Nanotechnology Initiative (NNI), which invested in research, education, risk management, workforce development, and public outreach, could serve as a model. The NNI established a network of advanced technology user facilities and centers similar to the shared-use intermediate-scale manufacturing sites critically needed for fermentation. As a part of its goal of fostering the commercial and public benefits of nanotechnology, the NNI coordinated efforts and fostered collaboration between academia and industry.

Conclusion

Fermentation is a cutting-edge protein technology that offers a way to meet rising demand for nutritious protein sources while mitigating the environmental impacts of agriculture. By enabling a variety of product development approaches and applications, fermentation has the potential to transform protein production and can be made even more sustainable than some forms of plant protein production. To unlock fermentation’s potential, the industry needs to expand its manufacturing capacity to scale up and commercialize a diverse range of products. Unfortunately, a clear capital provider is lacking to support the buildout of novel manufacturing facilities. The federal government can fill the financing gap for constructing these facilities, as it has for other industries like electric vehicles and biofuels, with loan guarantees and shared-use facilities where companies can test and optimize production processes at scales closer to commercial levels. Supporting fermentation could simultaneously lead to technological spillover effects that would advance other sectors such as cellular agriculture and pharmaceuticals. As a climate mitigation tool capable of generating new manufacturing jobs, fermentation warrants strategic and timely public support.

Acknowledgments: The authors wish to thank the following experts for interviews that aided in the research for this report: Liz Specht (Good Food Institute), Mark Warner (Warner Advisors), Zak Weston (Good Food Institute), Rosie Wardle (Synthesis Capital), David Welch (Synthesis Capital), and others.