📉 California’s Cleantech Crisis: Inside the Biofuel Bets That Drove CalPERS’ Fund to a –71% Return
California’s experiment with large-scale clean-energy investment was supposed to be a success story. Instead, the state’s main pension fund, the California Public Employees’ Retirement System (CalPERS), lost roughly $371 million on a series of clean-energy and biofuel bets that went sideways.
According to a The Center Square report, CalPERS’ Clean Energy and Technology Fund (CETF) has returned –71% since inception, transforming what was meant to be a showcase of green leadership into a cautionary tale about how not to invest in emerging energy markets.
The story of these losses sheds light on which biofuel investments have worked—and why so many early-stage, venture-backed clean-energy projects burned through taxpayer-backed capital.
✅ What Worked: Mature, Infrastructure-Compatible Biofuels
The successful biofuel investments shared one critical trait: they utilized proven technology and existing industrial infrastructure.
Renewable Diesel (RD) Success Stories
The standout performer in California’s clean-fuel portfolio has been renewable diesel (RD)—a chemically identical substitute for petroleum diesel made from used cooking oil, animal fats, and other waste feedstocks. Unlike ethanol or biodiesel, RD can flow seamlessly through existing pipelines, tanks, and engines, making it a true “drop-in” fuel.
California’s Low Carbon Fuel Standard (LCFS), launched in 2011, rewards fuels that emit less carbon across their life cycles. RD producers have thrived under that system, using their existing industrial scale:
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Phillips 66’s Rodeo Renewed refinery in the Bay Area now ranks among the largest renewable-diesel facilities in the world, converting a traditional crude refinery into one powered by fats and oils.
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Marathon Petroleum’s Martinez Renewable Fuels plant has reached full commercial scale, producing hundreds of millions of gallons per year.
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Chevron’s acquisition of Renewable Energy Group (REG) in 2022 allowed it to integrate RD production and dominate LCFS credit generation.
Together, these facilities represent billions in private-sector investment that works because the technology is proven, feedstocks are available, and infrastructure already exists.
Renewable Natural Gas (RNG) From Waste
A second bright spot has been renewable natural gas, captured from landfills, wastewater, and dairies. RNG enjoys high LCFS credit values and has proven especially effective for California’s heavy-duty truck fleets, municipal buses, and logistics companies. According to the California Air Resources Board, RNG use has grown more than 40% in the past five years, avoiding millions of tons of CO₂ emissions annually.
RNG is popular with investors because the technology is mature and the environmental benefits are measurable. Unlike speculative “next-gen” fuels, these projects rely on consistent feedstock and clear monetization pathways through carbon credits.
🛑 What Failed: CalPERS' Costly "Moonshots"
The massive losses incurred by CalPERS’ CETF were overwhelmingly linked to investing at the wrong time and backing high-risk, unproven technologies that became capital-intensive money pits.
The CalPERS Catastrophe: $371 Million Lost
In 2007, at the height of the first “cleantech boom,” CalPERS launched the Clean Energy & Technology Fund (CETF), committing hundreds of millions to private-equity managers specializing in renewable fuels, battery startups, and green infrastructure. The timing was poor, immediately preceding the 2008 financial crisis.
By 2025, CalPERS had poured about $468 million into the fund, but only $138 million remained in value—a loss of roughly 71%, or about $371 million. Fund managers also collected more than $20 million in management fees along the way.
Key Failures Highlighted by the Loss:
| Investment Type | Status/Result | CalPERS Lesson |
| Early Cellulosic Ethanol | Pilot programs failed to reach commercial scale due to tech complexity and high cost. | Technology was not mature enough for institutional capital. |
| Algae & Jatropha Ventures | Failed due to scaling challenges, poor yields, and water scarcity issues in California. | Over-reliance on exotic feedstocks and unproven agricultural models. |
| Waste-to-Fuel (e.g., Fulcrum) | Fulcrum BioEnergy filed for Chapter 11 bankruptcy in 2024 after years of delays and cost overruns at its Nevada facility. | High-risk engineering projects can become black boxes of capital expenditure. |
The SAF Struggle: Unproven Technology Risk
Sustainable aviation fuel (SAF)—a high-profile target of federal subsidies and venture capital—has proven difficult to scale. Even experienced refiners have struggled. The Paramount, CA, project run by World Energy, once heralded as a breakthrough for jet biofuel, suffered major setbacks when costs ballooned.
For investors, projects relying on unproven conversion processes or exotic feedstocks carry enormous technical and policy risk.
🔑 Lessons From the Winners and Losers
The CalPERS experience has crystallized four clear mandates for public pension funds and investors in the energy transition:
1. Bankability Beats Novelty
The clear winners—renewable diesel and RNG—succeed because they rely on proven technologies and established infrastructure. The more moving parts and complex chemical conversions involved, the greater the failure risk.
2. Policy Is a Factor, Not a Business Model
Many early CalPERS investments assumed perpetual, high-value subsidies. Successful investors, however, build resilient projects that can survive the inevitable policy and LCFS credit price swings. Success must be viable beyond incentives.
3. Scale With the Industrials, Not the Startups
Most real biofuel profits have come from industrial conversions led by major refiners (Phillips 66, Marathon, and Chevron). These established companies utilized their existing infrastructure to transform fossil-fuel assets into renewable-fuel assets.
4. The Fee Machine Problem and Transparency Gap
Private-equity funds like the CETF typically charge high fees regardless of performance. The fund managers collected millions while the underlying assets lost 71% of their value. Taxpayers and beneficiaries deserve detailed public reporting on fund-level returns, fees, and company names to ensure accountability.
The Road Ahead for Biofuels
Despite CalPERS’ painful lessons, the broader biofuels industry remains essential to California’s decarbonization goals. Federal and state incentives continue to support growth, but success will depend on careful execution, transparent governance, and a focus on real industrial output rather than speculative returns.
Final Takeaway:
CalPERS’ $371 million loss isn’t just a spreadsheet error—it’s a reminder that good intentions aren’t enough in clean energy investing. The winning biofuels delivered tangible, bankable results. The losers relied on hype, heavy subsidies, and blind faith. As California pushes forward with ambitious climate policies, investors must prioritize sustainability and accountability.