Algae as a fuel could skew corn's role

Washington, D.C. — The corncob could be losing its special place in the nation's energy future.

The 2007 energy bill required that refiners start using biofuels made from cobs, wheat straw, grasses and other sources of plant cellulose by 2010, with the mandate growing annually to reach 16 billion gallons by 2022.

But now there is an effort in Congress to expand that mandate to include fuels made from algae and microorganisms. A climate bill the Senate is considering would replace the requirement for use of cellulosic biofuels with a broader mandate for "advanced green biofuels."

The change could encourage investors to put more money into developing algae fuels. Until now, companies focused on turning cellulose into ethanol have had the mandate, and the powerful investment incentive it represents, all to themselves.

"Algae fuels are going to get more investment regardless, as they're already doing quite well in that regard," said Kenneth Green, who follows energy policy for the American Enterprise Institute, a Washington, D.C., analyst. "But certainly, if algae fuels are part of a mandate, you have even more certainty regarding your potential investment."

Kevin Book, an analyst with ClearView Energy Partners, said the new definition could hurt cellulosic developers while aiding the algae sector. The fact that the Senate bill includes the expanded definition shows there is growing support for expanding the 2007 mandate beyond cellulosic fuels, he said.

Robert Brown, director of Iowa State University's Bioeconomy Institute, said he believes the mandate is big enough to accommodate algae- and cellulosic-based fuels. "There is plenty of room for biofuels developers of all stripes," he said.

Senate Energy Committee Chairman Jeff Bingaman, D-N.M., is leading the effort to open the biofuel mandate to algae. The mandate "needs to be more technology- and feedstock-neutral," he said in an article in Politico last summer. "Congress generally creates problems for the industry it aims to support - not to mention itself - when it picks winners."

An ethanol trade group, Growth Energy, is OK with expanding the mandate so long as it still covers cellulose.

"We're going to need all these fuels - corn, cellulosic and algae - if we're going to have an energy policy that helps make the country more energy independent, cuts greenhouse gas emissions and creates U.S. jobs," said Chris Thorne, a spokesman. The group's founding members include Poet LLC, which plans to produce ethanol from corncobs at Emmetsburg.

Algae — called "green crude" by supporters — consume carbon dioxide, a greenhouse gas, and produce fats that can be refined into gasoline, diesel or jet fuel. There is no need for the large amounts of land or the vast transportation and storage systems required for production of cellulosic fuels. Algae can be grown in ponds or even in vertical columns.

ExxonMobil Corp. last summer invested $600 million into algae fuel research with Synthetic Genomics, a San Diego company led by J. Craig Venter, a pioneer in mapping the human genome. Officials with another San Diego firm, Sapphire Energy, participated in a news conference where the Senate climate bill was unveiled and said they will have small amounts of diesel and jet fuel available by 2011.

At least one ethanol producer has shown interest in algae, Green Plains Renewable Energy at Shenandoah. It has a pilot project producing algae with the carbon dioxide emitted by the plant.

The airline industry has shown interest in algae. The Air Transport Association is a member of a new trade group, the Algal Biomass Organization, pushing Congress to expand the definition of biofuels. Continental Airlines tested algae fuels in a plane last January.

Airlines are worried about the volatility of oil prices and potentially higher costs for jet fuel as nations act to cut greenhouse gas emissions. While algae fuel hasn't been identified as the alternative of choice, "it has great promise," said Nancy Young, vice president for environmental affairs at the Air Transport Association.

Algae fuels are many years away from being commercially available, analysts said.

There are signs that the young industry is making headway in an area where its ethanol rivals have had a long head start: Clout with Congress.

PHILIP BRASHER • pbrasher@dmreg.com • November 8, 2009