Ken Silverstein | Apr 15, 2011

 

 

Most people have heard of ethanol. Most folks are not familiar with algae. Those in the business of growing algae as a replacement to petroleum want to change that and they want to start by getting Congress to give them parity in the existing tax code. 

 

Algae offers promise as not just a transportation fuel but also as a carbon sink that lessens the environmental impact on such things as coal-fired power. While algae-to-biofuel is beginning to gain some traction, the industry says that it will need government support so that it can mass produce. 

 

The algae biofuels sector is asking U.S. lawmakers to treat it the same way as they do other advanced biofuels such as cellulosic ethanol. And that means including algae in the tax incentives given to advanced biofuels as well as including it in the Renewable Fuels Standard that sets alternative fuel targets. When the code was written, algae was a nascent concept that never wound up on anyone’s radar. Now, the industry says times have changed. 

“This legislation would send a strong signal to the investment community that the federal government is behind algae biofuel and that it sees it as a strategic part of the nation’s energy future,” says Chris Beaven, senior director for Origin Oil. “Right now, we are in trials and the enactment of this bill could get us into the market. It would let Wall Street know we are an industry worth investing in.” 

 

Legislation has been introduced in both the U.S. House and U.S. Senate. According to Beaven, the measure has bipartisan support and the industry hopes that it would be included in a comprehensive energy bill where it would be signed into law. The measure previously passed the House and fell one vote short in the Senate, he says, noting that the primary obstacle is that the “ethanol” detractors may wrongly link the two and thereby deliver a knock-out blow. 

 

Between 2005 and 2009, the algae biofuels sector tripled to the point that more than 100 such companies exist today. Already, that industry accounts for 20,000 jobs in 40 states -- if one includes all of the ancillary businesses that crop up around it. Advocates say that this could increase 10-fold in the coming years if Congress gives it parity with other advanced biofuels. 

 

Pending Legislation

 

What exactly are they asking for? The pending legislation would give algae-based biofuels the same tax benefits as those that are provided to cellulosic biofuels, which is $1.01 per gallon production tax credit and a 50 percent bonus depreciation for biofuel plant property. It would also be included in the Renewable Fuel Standard mandate. 

 

Beaven says that the production tax credit would allow algae-growing businesses to become commercially viable by helping drop the cost of production; right now, that cost is considered to be double that of petroleum-based fuels, although he quickly cautions that such a comparison is difficult because of a variety of factors: location, technological platform and whether the cost can be defrayed by co-locating next to existing power plants or oil refineries.  

 

“One of the single biggest benefits of algae-based biofuel is that it is the chemical equivalent to petroleum,” says Beaven. “We are looking to replace petroleum drop for drop. We are creating fuels that are fully fungible with the existing refining infrastructure and petroleum-based engines. That can’t be said for cellulosic ethanol, which is a supplement to petroleum.” 

 

What’s the oil industry think of all this? According to Beaven, all the major companies have investments in algae, notably ExxonMobil that has committed $600 million to it. Algae is highly synergistic with the established oil and gas industries, he says, noting that algae can be refined on the same site as oil. For oil companies to get involved generally means they think the pursuit will pay off. 

 

Meanwhile, the utility industry is also interested in algae. By using the waste carbon emissions from power plants to grow algae and converting that to energy, power companies are effectively recycling those releases. That cuts their carbon dioxide emissions in half. Germany’s RWE, for example, is converting the carbon from one of its coal plants into algae. 

 

Members of the algae-to-biofuels sector are quietly roaming the halls of Congress trying to get lawmakers to give their industry some tax incentives that would be included in a broader energy bill. If they succeed, the algae-biofuels field may move out of obscurity and into the fast lane. 

 

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energybizinsider@energycentral.com.

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