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Algae Holds Promise as Renewable Fuel — Just Not Yet

Algae is fast becoming a promising renewable biofuel because it can grow nearly anywhere, be b

Lumian AGS4000
Source: Solix Biosystems
Lumian AGS4000

lended with, or replace most traditional fuels, and can't be used as food.

But algae is far from a perfect solution. Industry observers say it will take anywhere from five to 15 years for algae to be produced on a scale that would be meaningful to the nation’s fuel needs.

“There’s a significant amount of capital required for algal oil producers to scale up to commercial meaningful quantities,” says Jim Rekoske, general manager at Honeywell’s UOPdivision, which provides technologies to the gas processing, refining and petrochemical industry.

Still, several privately held companies as well as academic institutions are actively pursuing practical, cost-effective methods of developing algae for use as a fuel. Several major energy companies—including Valero, ConocoPhilips and Chevron — are working with university research efforts, providing financing for small companies, or both.

That’s because maybe, someday, big oil companies can consider algae a fuel source for their existing extensive networks of refineries and pipelines, industry sources say.

Today, the U.S. uses about 150 billion gallons of gasoline a year, and 50 billion gallons of diesel and jet fuel, says Philip Pienkos, acting group manager of the applied science group at the National Renewable Energy Laboratory.

Algae could be used to address all those fuel needs as a stand-alone fuel, or if it’s blended with other fuels, depending on the refinery process used, Pienkos says.

Unlike corn-based ethanol, the most common biofuel, algae production does not contribute to rising food prices by diverting production away from consumption.

“It has the potential to impact our entire petroleum-based fuel portfolio,” he says.

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But at the moment, efforts to understand what strains of algae are best, or what methods of converting it to fuel are the most practical, are largely in pilot stages, and the real financing to scale up operations through demonstration and commercialization stages won’t come until investors see longer-term results, Pienkos says.

Early efforts

To spur those results the U.S. Department of Agriculture and the U.S. Department of Energyawarded grants and loan guarantees in December 2009 to three algae companies with different technologies to create so-called biorefineries, refineries using biological solutions.

Algenol, based in Bonita Springs, Florida, has what it calls a direct-to-ethanol process to make ethanol from hybrid algae, carbon dioxide, water, and sunlight in closed systems (instead of outside in open ponds). For the USDA/DOE project, the CO2 comes from industrial emissions and is created in a pilot-biorefinery plant in Lee County, Florida.

Solazyme, which filed to go public in March, makes biofuels by growing algae in fermenters, which speed the ability of algae to make lipids, or oils. And Sapphire Energy, based in San Diego, is using a more conventional approach by growing algae in ponds, using sunlight, CO2 and saltwater in deserts. Sapphire extracts lipids from the algae and turns that into fuel.

Solix BioSystems, which did not get the USDA/DOE funding, uses yet another approach by growing algae in contained systems called photobioreactors,which let in light. The photobioreactors are made into panels that float in water, which allow the algae to grow rapidly, says Joanna Money, vice president of business development.

“Our focus is on engineering systems that enable algae to be cultivated at a large scale,” Money says.

"We are Americans, we are concerned about the world we are leaving for our children. If we can get costs in the right ballpark, more people may be interested." -assistant professor, University of Arkansas, Jamie Hestekin

At a demonstration planton three-quarters of an acre owned by the Southern Ute tribe near Durango, Colorado, Solix BioSystems uses waste water from coal-bed methane produced near the site, and CO2 from a mine scrubbing plant to create algae in the photobioreactor panels.

The plant produces about 3,000 gallons per acre per year of lipids, and has done so now for three years. While 3,000 gallons a year is a lot for the fledgling industry, it does speak to the challenge of making a difference in the nation’s 200 billion gallon a year oil appetite.

Making “green” diesel

Once oils are produced from algae, then what? One answer comes from Honeywell UOP’s renewable fuels business: green diesel.

UOP doesn’t grow, collect and process algae or other plant oils (tallow and camelina are the main ones), but it devises the technology for what they say are “drop-in” fuels that by themselves can replace diesel and fuel oil, he says. UOP then licenses the technology for others to use.

CNBC Investing In Green Tech 2011
CNBC Investing In Green Tech 2011

Green diesel is Honeywell’s trademark name for this drop-in technology. Green diesel is better than other biodiesels, industry sources say, because they work the same as petroleum diesels do at lower temperatures.

The business has grown by a factor of 20 since UOP created a separate renewable fuels unit in 2006. “This year we’re projecting 40 to 50 percent growth relatively easily,” Rekoske says.

Among companies using their technology is Eni , an Italian refining company, and Galp Energia, a conversion facility in Portugal.

Another is Diamond Green Diesel, a joint venture between Valero and Darling International to create a renewable biodiesel facility in Norco, Louisiana. Once operational, Diamond Green is expected to produce about 137 million gallons a year.

Source: Solix Biosystems

The hurdles

For algae to move into commercial production more quickly, the industry needs more start-up financing, and regulatory certainty, such as existing federal renewable fuels standards.

Legislation providing tax credits to the biodiesel industry passed last December, but legislation to broaden the definition of the cellulosic ethanol producer tax credit to include feedstocks like algae didn’t make it.

”The challenge is making sure there are long-term incentives or mandates provided by government and regulatory bodies, and to make sure those don’t change on a yearly basis,” Rekokse said.

One reason Valero’s Diamond Green Diesel project is moving ahead is that the joint venture received a $241-million loan guarantee from the U.S. Department of Agriculture and the Department of Energy, he said.

Another hurdle is cost. Tallow and camelina, the two non-food plant oils available in the highest quantities, cost between $4 and $5 a gallon, he said, while algae costs far more.

One reason Solix is using wastewater to make algae at its demonstration plant is to see if it can help bring the costs down.

“We have a clear road map toward driving down the cost, and each year to show technological improvements and yield improvements,” Money says.

Butanol from algae

Another strategy for converting algae to fuel is to start small. The University of Arkansas is working on a project converting algae — with low levels of lipids, but high levels of sugars — into butanol, an alcohol-based fuel (like ethanol), which could be used in automobiles.

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The project came about after the university began working with companies who were using algae to clean up nitrogen and phosphorous from the Chesapeake Bay tributary system, says Jamie Hestekin, assistant professor of chemical engineering at the university, who is leading the effort.

Hestekin and his team of students have developed a more efficient means of fermenting the algae, and separating out the sugars that can be converted to butanol.

One group of honors students has created a small unit that can take dry algae and convert it to fuel-grade butanol, Hestekin says. The idea is that a farmer can grow algae on up to an acre of land, turn that algae into fuel (one acre of algae would make about 10 gallons of fuel), and then use the fuel to run farm equipment. The algae waste that’s not turned into fuel can be used as fertilizer, he says.

“What’s 10 gallons a week, really?" Hestekin asks. "There are two million farms of 100 acres or more. What if 10 percent made 10 gallons a week?”

CNBC Investing In Green Tech 2011
CNBC Investing In Green Tech 2011

The real impact of the technology, however, will come about if algae can be used to power automobiles. But how do you get from small-scale, single-units that power farm vehicles to passenger cars?

“If you can get the costs right, you could build a plant to do this,” Hestekin says, estimating it would take five to 10 years to achieve that. “We are Americans, we are concerned about the world we are leaving for our children. If we can get costs in the right ballpark, more people may be interested.”

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