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Algae Interests Align

By Jerry W. Kram
Biodiesel Magazine
November 2008

After decades of study and millions of dollars in investments, using algae as a feedstock for alternative fuels seems tantalizingly close. However, several hurdles remain, prompting the cooperation of those interested in the economical development of algae oil as a biodiesel feedstock.

Algae has been the feedstock of the future for a long time, dating back to the National Renewable Energy Laboratory’s Aquatic Species Program that ran from the 1970s until its demise in the 1990s. When virgin vegetable oil began its ascent from 20 cents a pound to 50 cents and more, algae started to attract even more attention. Some industry watchers say there are more than 200 companies pursuing plans to grow algae or process it into biodiesel. Major energy companies such Royal Dutch Shell and Chevron have partnered with some of the algae startups as have companies looking for a stable fuel supply, including Boeing and several airlines. The federal government has provided many grants for basic and applied research to further the pursuit of algae-based fuels.

But what has been the result of all this interest and activity? Despite all the promising technology and money invested, there is no current commercial production of algae for energy. Is algae, as the saying goes, five years from success and always will be? Major players in the industry say 2009 could be the year when algae finally starts living up to its potential. Algae producers are starting to band together to share knowledge and educate investors. Two national organizations have started giving the industry a forum to spur these communication efforts. The National Algae Association is based in Texas and the Algal Biomass Organization was organized on the West Coast.

Several groups are getting ready to move their technology out of the labs and break ground on pilot- and demonstration-scale facilities. With multiple companies pursuing various technical solutions, perhaps the biodiesel industry is finally closing in on a solution to feedstock supply programs.

The biodiesel industry has high hopes for algae’s potential, but that is grounded in an appreciation for the difficulties ahead. “We are very excited and very enthusiastic about the long-term prospects for algae to produce significant volumes of oil,” says Joe Jobe, chief executive officer of the National Biodiesel Board. “That being said, we want to be realistic about expectations. I think it is easy to get excited and enthusiastic about something that offers significant volumes of feedstock to our industry long term. But we also want to manage expectations so it’s not oversold. We don’t want people to be discouraged that we don’t have 10 billion gallons of algal oil available two years from now.”

Hurdles Remain

One of the main hurdles facing companies looking to profit by turning algae into fuel is that, despite what we believe when filling up our gas tanks, fuel is actually a low-value product, says Thomas Byrne, chief executive officer of Byrne and Co. Ltd. and secretary of the ABO. There are a number of companies successfully growing algae for the lucrative nutraceutical market where products can sell for hundreds if not thousands of dollars per gallon. “Biodiesel is really the lowest value product of algae,” he says. “Some of the initial algae production plants will likely fill other areas. They could be designed to produce animal feed, omega three oils, aviation fuel-there are a number of uses for algae beyond just biodiesel.”

It is still an open question as to which production method will successfully scale up and be able to provide the vast quantities of oil the biodiesel industry needs. “There are a number of things needed to move algae from the labs and pilot plants to commercial facilities,” Byrne says. “But they are being worked out and a lot of good people are working on them.”

Producing the algae is only the first step in the process of creating an economically viable feedstock. Although algae cultures may look thick and green, a liter of water typically only contains a few grams of algae-less than one-half of 1 percent by weight. Algae has to be harvested and concentrated into a thick paste, which is still mostly water, before the oil can be extracted. Extraction methods also have yet to be developed and perfected. “The biggest issues are basically harvesting and dewatering on a large scale,” Byrne says. “Those processes still need to be proven out on a commercial scale. I think a number of pilot plants out there can be scaled up to a commercial size for growing algae, but those other processes still need to be proven on a commercial scale.”

There were some well-publicized early attempts by industry pioneers to scale up their technologies rapidly that didn’t fare too well. Byrne says that with capital costs for algae production facilities ranging from $25,000 to $500,000 an acre, the industry has become more cautious about how companies do their development. “A couple of companies went out and were very visible and kind of crashed and burned,” he says. “Everybody else stepped back and said, ‘Let’s make sure everything works.'”

Barry Cohen, founder of the NAA said the biggest challenge for his members has been educating investors about the complexity of creating an algae production system. “It’s not so much a barrier because we are seeing two or three producers being funded on a quarterly basis,” he says. “We are looking at a $100 billion market, which is huge. We have land (for locating facilities) literally being thrown at some of our members because guys are looking at the potential profits per acre.”

One aspect of the algae industry that will help overcome many of these challenges is the sheer diversity of algae species. Whether the algae production system uses open ponds, covered ponds, photobioreactors or even uses algae to ferment sugar into oil, there is probably a species that can be optimized for that purpose. “The industry is large enough to support different technologies in different environments,” Byrne says. “It will depend on your feedstocks, your availability of carbon dioxide, your availability of nutrients and exactly what you are growing the algae for. Are you growing it for oil? Are you growing it for feed? Are you growing it for nutraceuticals? Are you growing it to sequester carbon dioxide?”

Promise for the Near Future

Even though the potential for algae has been studied for decades, as an industry it is still in its infancy. Byrne says most firms are still at the pre-venture capital stage. However, a few firms have received significant amounts of money from far-sighted investors, so 2009 should be the year algae makes its commercial debut. “There are a couple of companies that have received a fair amount of money-in the $30 million range-that have taken the lead,” Byrne says. “To my knowledge there are at least two commercial plants under construction. They’re not large but they will get to a scale that will prove the concept. So by 2009 there will be some commercial production. It won’t be enough to make any big mark in the fuels industry but it will be enough to start proving what works and what doesn’t work on a larger scale.” Byrne says it will probably be five years before algae makes a significant impact on the biodiesel industry.

Individual biodiesel companies who are working directly with algae producers may start producing biodiesel from algae within two to three years, Byrne says. But it will be at least four to five years before there is enough oil to sustain a competitive market where producers will be able to go out and buy oil for their plants.”

The NAA and ABO are holding regular meetings to bring developers, academics, investors and potential customers together to accelerate the development of the industry. Both groups say they have experienced rapid growth because of the high level of interest in algae. Cohen says the interest in algae is growing worldwide. The NAA has signed a contract to create a sister organization in Great Britain. The group is also starting a state-level chapter to cover California. “We’ve tripled in size in just the past three months,” he says. “All of the biodiesel companies are contacting us. In our opinion, we are trying to save the biodiesel industry.”

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