Media-savvy Richard Branson seems to have caught on to the green agenda, and he sounds quite serious: ‘going green makes smart business sense‘. His latest company, Virgin Fuels, is investing heavily in carbon efficient alternatives to oil, such as biofuels. If the oil price stays high, investing in biofuels should produce good returns - and Virgin is known not to go near new business unless it stands to make atleast 40% on capital invested.

Today biofuels only accounts for 1% of the world’s energy consumption, but analysts say the capacity to grow is immense, and ‘now is the best time to invest‘ (Frost & Sullivan). I remember a bold announcement last September that Branson will be pumping all profits from Virgin Air and Virgin Rail over the next 10 years (an estimated $3 billion) to Virgin Fuels. It all kicked off last year with $60 million into a refinery in California that makes bioethanol from corn, and apparently there are plans to construct seven more refineries by 2009.

But where will the demand for biofeuls come from? Well, Virgin Trains has already switched its diesel-powered trains to biodiesel, and today, at a seminar about engaging the private sector in the struggle against climate change, Jill Brady, General Council of Virgin Atlantic Airways, explained how the group also plan to develop biofuels for its planes! Of course the energy density of biofuels means that current biofuels would not be practical, but she sounded optimistic that by creating a demand (they have a fleet of 100 aircrafts) they will inspire the necessary innovation in the biofuels sector.

There is a danger of overrating the environmental credentials of biofuels. It is considered ‘carbon neutral’ because plants absorb carbon dioxide while they grow, and then when burnt they only release that same amount. However, land needs to be deforested to grow crops; it takes a lot of energy to make the fertilisers and pesticides needed; and more energy is needed to turn it into fuel. But, there’s plenty of room to innovate… for example, ethanol can be made from organic waste too, including sawdust.

My view is that biofuels must represent atleast part of the solution to energy security, and climate change. So my skeptical hat is off to Branson, who actually appears to be putting his money where his mouth is:

We at Virgin believe 100% that we owe it to our customers and our staff to ensure that our future economic growth is built on firm, ethically sustainable business models. Businesses need to be bold and creative, to develop radical new products and find alternative ways of doing business. Since innovation and creativity are at the heart of the Virgin culture we feel that our group of businesses are well placed to take advantage of the opportunity this presents.”

Richard Branson’s statement about Virgin’s Project Aware