Ken Silverstein | Mar 17, 2011

 

 

Tired of rising oil prices? Try something new, say those companies that can grow algae and then transform it to make transportation fuels. All it needs is a little sun, water and carbon dioxide.

 

But while the ingredients to make algae may be simple, it is still an open question as to whether current pilot facilities can attract private investors that will enable the industry to gear up. Beyond the financial, environmental worries persist. It involves taking carbon emissions from power plants to grow the algae before converting it to something that would cars, trucks and airplanes. Critics maintain that the recycling of carbon would then lead to the use of more coal.

 

“The idea is to combine the principles of agriculture with the ability to generate a liquid transportation fuel ... so that we can offer a scalable, low-cost technology in the form of green crude that can be refined directly into gasoline, diesel and jet fuel,” says Tim Zenk, vice president of corporate affairs for Saphhire Energy, in a talk at the EnergyBiz Leadership Forum.

 

Algae can be converted into liquid hydrocarbons a couple different ways: One is to use sugar to feed the algae and the second is through photosynthesis. Sapphire relies on the latter, which it says is able to convert sunlight into chemical energy, which has resulted in the fossil fuels used today.

 

San Diego-based Sapphire got its start in 2007. Today, it is a $200 million organization and has received $105 million from the federal government to help facilitate its technology. Zenk says that the company has more than 80,000 hours of pilot data at its Las Cruces, New Mexico operations -- a campus that is involved in everything from cultivating the algae to producing the oils.

 

He also says that the company has a large-scale commercial demonstration project that will break ground in the coming months. That facility will produce one million gallons a year and be finished by year-end 2012

 

"The United States must find effective ways to hasten the development of technologies for advanced biofuels made from algae and other renewable resources to reduce our need for foreign sources of oil,” says Cathy Zoi, who recently left her position as under-secretary for energy efficiency at the U.S. Department of Energy.

 

Cost Hurdles

 

While algae biofuels production will remain a sliver of all transportation fuels, its growth rate is expected to be spectacular. Pike Research is predicting it to be 61 million barrels a year with a market value of $1.3 billion by 2020. That’s a compound growth rate of 72 percent, it adds.

 

To put that in context, 83 million barrels of oil are consumed each day around the globe. Of that, this country uses about 18 million a day.

 

“On paper, algae could displace worldwide petroleum use altogether, however, the industry has yet to produce a drop of oil for commercial production,” says Pike Research president Clint Wheelock.  “Although the algae-based biofuels market will grow rapidly once key cost hurdles are overcome, widespread scale-up will be hampered by a number of difficult challenges including access to nutrients, water, and private capital.” 

 

Eventually, Sapphire says that development of the fuel source will be cost competitive with other unconventional fuels such as those that produced from Canadian tar sands. Those energy forms, incidentally, have not bypassed the scrutiny of environmentalists, who acknowledge the potential but who fear that that the total production cycle is ecologically harmful.

 

The utility sector is also interested in algae. The ultimate fuel form could either be used on conjunction with fossil fuels or possibly to displace them. Take Germany’s RWE: It is converting the carbon from one of its coal plants into algae.

 

“Our algae project shows yet again that we at RWE have the energy to lead in climate protection,” says Juergen Grossmann, chief executive of RWE. “In contrast to others, we do not simply want to store carbon underground. We’re looking for ways to make use of this substance for other forms of power generation.”

 

The utility is emphasizing the need build more coal facilities, saying that not only will they be made to be more efficient but that the carbon created will be used to make algae. That, of course, hits a raw nerve with environmentalists.

 

The algae-based transportation fuel industry, however, has other hurdles to overcome, namely proving their technology at scale and winning the financing to go forth. Companies like Sapphire say that it can be done and when that happens, it will help ease price spikes in oil resulting from global tensions.

 

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