BELMONT, CA – Volkswagen, the only non-luxury auto maker selling passenger-car diesel engines in the U.S., is redoubling its market initiatives by expanding its TDI offerings and has announced a partnership with two biotechnology companies that have developed unique sources for clean, renewable diesel fuel.

During a media tour of VW’s new Electronics Research Laboratory here in Silicon Valley, the auto maker discloses its budding relationship with Solazyme and Amyris. Both companies will receive a ’12 Passat TDI and Jetta TDI to examine the impact of each company’s fuels on the vehicles during a 1-year research program.

Based nearby in Emeryville, Amyris converts plant-sourced sugars into renewable hydrocarbons for fuel and chemical applications. Solazyme, based in San Francisco, pioneered a technology that harnesses the oil-producing ability of microalgae to develop renewable oil products.

Petroleum-based diesel fuel contains more energy than gasoline, and representatives of the two companies say their formulations are even more energy-dense than conventional diesel.

Neither fuel is available yet in high volume, but both companies are building production facilities in Brazil that are expected to be operational late this year.

Amyris, founded in 2003 and the recipient of a 2004 grant from the Bill and Melinda Gates Foundation, employs contract manufacturing to produce its chemicals in Spain and Brazil.

In Decatur, IL, Amyris leases space in a Tate & Lyle plant to produce chemicals using corn sucrose, says Fernando Garcia, senior director-fuels certification for Amyris.

Amyris says its “No Compromise” fuels are made from pure, renewable hydrocarbons and eliminate the performance challenges of first-generation biofuels while cutting in half greenhouse-gas emissions compared with petroleum-based diesel.

The fuel also contains zero sulfur and has demonstrated its ability to reduce tailpipe hydrocarbon emissions such as oxides of nitrogen, particulates and carbon monoxide. Other benefits include superior cold-weather performance and faster ignition in the combustion chamber, Amyris says.

Brazil’s largest city, Sao Paulo, is using Amyris renewable diesel in more than 150 buses.

Garcia says a truck manufacturer testing fuels in Brazil found soy-based biodiesel, when burned in heavy-duty transit buses, provided 621 miles (1,000 km) of range. Ethanol, combined with diesel fuel, improved the range to nearly 4,350 miles (7,000 km), based on the same unit of feedstock per hectare, he says.

Meanwhile, Amyris renewable diesel produced from the same unit of land generated 5,593 miles (9,000 km) of range for the transit buses, Garcia says.

Solazyme uses proprietary algal oil to derive its renewable SoladieselRD, which is compatible with the existing fuel infrastructure and can be used with factory-standard diesel engines with no modifications and no harmful impact to internal parts or seals.

The company says the fuel’s chemical composition is identical to that of standard petroleum-based diesel and can reduce lifecycle greenhouse-gas emissions up to 77% when used for road transportation.

Soladiesel RD has demonstrated a cetane rating above 74, which is more than 60% higher than standard U.S. diesel fuel, the company says. The fuel releases fewer particulates and meets federal ultra-low-sulfur diesel standards.

Solazyme has a plant in Peoria, IL, in addition to the full-scale production facility under construction in Brazil.

Graham Ellis, Solazyme vice president-business development fuels and chemicals, says he expects the fuel will be commercially available in the U.S. by early 2014 and priced competitively with conventional diesel fuel.

Diesel prices have been especially volatile in the U.S., sometimes costing $1 per gallon more than regular unleaded gasoline in recent years. Currently in metro Detroit, diesel goes for $4.15 per gallon, compared with $3.95 for regular unleaded.

Whether these renewable diesel fuels would allow auto makers to eliminate expensive urea-based exhaust aftertreatment remains unclear.

“To completely get rid of it would be complicated, but to reduce it could be a goal,” says Torsten Karnahl, general manager-product strategy at VW’s Electronics Research Laboratory. “We tested the fuel in normal series-production vehicles and saw a benefit.”

Amyris’ Garcia says a Colorado research program with the fuel used in a Cummins turbodiesel using urea aftertreatment proved successful. “Even with that clean system, we reduced smoke-out by 7%, NOx by 2% and improved brake-specific fuel consumption by 2%.”

VW says it is banking on commercial availability of Solazyme and Amyris fuels as part of the auto maker’s advances with clean-diesel engines.

“Over the next several years, we assume that type of fuel will play a major role in reducing CO2 emissions,” says Christoph Maume, VW project engineer-U.S. powertrain research.

“Together, we want to assess and evaluate the emission and performance of our vehicles when powered with these renewable fuels,” he says. “We are confident our engineers will collect real- world data during the trial, which will help us develop more-efficient and cleaner-burning engines in the future.”

VW has been selling diesel vehicles in the U.S. since 1977 and launched its turbocharged TDI moniker in 1993.

Since then, high-pressure common-rail fuel delivery and advanced electronics have made turbodiesels even more efficient and a perfect application for compact cars in Europe, where the diesel penetration rate in new vehicles has hovered near 50% for the past decade.

The redesigned ’13 Beetle, which goes on sale this summer, becomes VW’s sixth vehicle offered in the U.S. with 2.0L 4-cyl. or 3.0L V-6 diesel engines.

During test drives along winding roads through the woods near Half Moon Bay here, the 140-hp Beetle TDI provides plentiful low-end torque. This same versatile engine effortlessly powers the all-new (and much larger) VW Passat sedan, so its application in the Beetle makes the inimitable coupe downright sporty.

Along the way, one Beetle TDI, after a day of thrashing by several auto writers, reported average fuel economy of more than 30 mpg (7.8 L/100 km).

VW engineers equate the improved fuel economy and torque of diesels with their growing penetration rate within the auto maker’s U.S. vehicle portfolio.

In 2011, TDI models accounted for 21.6% of the brand’s U.S. sales, a significant increase. February sales of VW’s diesel vehicles were up more than 54% from the prior month.

VW’s most popular diesel model is the Jetta SportWagen, 90% of which sells with the 2.0L turbodiesel, says Serban Boldea, product manager-midsize sedan for VW of America.

In the ’11 model year, 3.8% of new light vehicles in the U.S. were sold with diesel engines, up from 2.7% in ’10, according to WardsAuto data.