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(JavaScript must be enabled to view this email address) August 18, 2009 4 Comments

Coming Soon: $2 a Gallon Diesel From Algae?

Rapidly growing algae and streamlined processes could mean $2 diesel by 2011 or 2012. But hurdles await.

Aurora Biofuels says it has a species of algae that breeds like a rabbit.

The Alameda, Calif.-based company has identified and optimized a genetic pathway in a species of wild algae that effectively turbocharges the growth and breeding cycle of the single-celled creature. As a result, the company says it will be able to double the oil production, and ability to sequester carbon dioxide, of its algae ponds.

"This gets us to 5,000 gallons per acre a year, which we think is economically viable," said CEO Bob Walsh in an interview.

Just as important, the algae can grow in open air racetrack ponds – arguably the cheapest environment for growing algae. The company has been breeding the strain in two ponds about the size of Olympic swimming pools in Florida and harvesting about a gallon of oil from each pond a day. Roughly half of the algae is harvested a day and the lipid, or oil, content of the algae in a normal, un-starved state is around 25 percent.

Aurora is now negotiating leases to build a 50-acre pond that could produce 100 gallons a day by the second quarter of next year. If all goes well, and further optimizations arise, Aurora could have a 2,000 acre pond by 2011 or 2012. Such a pond set up with Aurora's algae and equipment could produced lipids for around $1.75 a gallon, which would translate to $2 gallon diesel. he said.

Besides selling fuel, Aurora would also garner revenue by sequestering carbon dioxide, selling carbon credits and selling the leftover algae protein for $350 a ton to fish farms and pet food makers.

The algae market has exploded in the past two years, growing from a handful of companies to at least 57. It sounds easier than it is. Not only has optimizing the growth of algae bedeviled researchers, scientists have struggled with devising a cheap, energy-efficient way to separate the algae from the water. A stocked pond might only contain one to three grams of harvest-able algae per liter. While some claim 50,000 gallons an acre might be possible, most algae backers talk about 2,000 to 5,000 gallons an acre per year with 8,000 to 14,000 gallons as an ideal, but distant, goal.

Some, such as Aurora and Biolight Harvesting have links with major research universities while Solazyme, Solix and Synthetic Genomics are working with large petrochemical producers. Most, however, are struggling to get much past square one.  And one major one – Greenfuel Technologies – died after burning through around $70 million in money from investors.

A 2,000 acre pond would produce the metaphorical drop in the bucket for even a small trucking company. The key is that Aurora's processes can be scaled up. The rapid growth effects do not fade out in new generations and Aurora did not have to insert genes from other species to goose the growth rate.  

"It won't revert in three months," he said. "A lot of times you find [genetic] improvements but they don't want to stick."

The genetic pathway is likely present in other species as well, he added.  

Walsh further added that Aurora has come up with optimizations for racetrack pond designs to reduce the amount of energy required to circulate carbon dioxide in them.

"The pond itself is now cookie cutter," he said.

While Sapphire Energy says it can grow transgenic algae in open ponds, most companies are trying to avoid that tricky combination by growing their transgenic species in closed bioreactors or fermentation kettles.

Naturally, Aurora has patent applications in the works.

Although Walsh is a former Shell exec, Aurora currently does not currently have a development deal with a large oil company. The first customers will likely be carbon dioxide emitters who need to sequester their gases. Aurora will sell its oil to fuel producers at first and later explore the chemical market. These kinds of companies will likely be the ones that will pay for Aurora ponds in the future.

"Realistically, we are not out to do this ourselves," he said.

Comments [4]

  • FDDoty 08/23/09 10:33 PM

    This algae hype gets tiring, but I’ll keep trying to educate you and your readers at least a while longer.

    GreenFuel went bankrupt a few months back after spending $70M and after showing that it was probably possible to make algae oil for $200,000/gal.

    HRBP failed before that after showing algae oil could probably be made for $40,000/gal.

    There have been just four good studies published on the subject of algae oil costs and environmental impact in the past 2 years that I’m aware of:

    L Lardon, A Helias, B Sialve, J-P Steyer, and O Bernard, “Life-Cycle Assessment of Biodiesel Production from Microalgae”, Environ. Sci. and Tech., July 2009.
    http://pubs.acs.org/doi/pdfplus/10.1021/es900705j

    T Bruton, H Lyons, Y Lerat, M Stanley, MB Rasmussen, “A Review of the Potential of Marine Algae as a Source of Biofuel in Ireland”, Seambiotic, 2009
    http://www.seambiotic.com/News/scientific-white-papers/

    Krassen Dimitrov, “GreenFuel Technology:  A Case Study for Industrial Photosynthetic Energy Capture”, 2007,  http://www.nanostring.net/Algae/CaseStudy.pdf .

    PM Schenk, SR Thomas-Hall, E Stephens, et al, “Second Generation Biofuels: High-Efficiency Microalgae for Biodiesel Production”, BioEnergy Research, 2008, 1:20-43.

    Three other (lesser) independent studies in the past 18 months have concluded algae oil will cost over $25/gal.

    The above listed outstanding article by Lardon et al shows that the total input energy (not including solar) required by a scaled-up process based on best available technology would be 2.3 times the energy in the biodiesel produced. 

    And yes, I’m aware that dozens of companies have made outlandish claims of breakthroughs over the past two years that will lead to enormous price reductions.  I’ve looked at most of them and have seen nothing of real significance. 

    So Aurora can produce “about” 1 gal/day of lipids from an Olympic-sized pool.  That would be “about” 1000 gal/acre/yr if the rate can be sustained continuously, which it can’t.

    Seambiotic has probably exceeded 80 gal/acre/month (total lipid production, not fuel) for a month or two.
    The best algae lipid production thus far over a 2-year period is probably 350 gal/acre/yr.
    If you know of anything better, I’d love to hear about it.
    The upper practical limit of sustained oil production is probably 800 gal/acre/yr.

    I’ll be posting an update on the windfuels site in a few days showing that algae oil is unlikely to cost under $50/gal even 10 years from now.

    P.S.  Glad you keep putting up with me, and sorry for my somewhat rude comment on a previous post.

     Reply
      • Eric Wesoff 08/23/09 11:30 PM

        FDD,
        VCs typically do some manner of due diligence on their investments.
        What is preventing them from reaching your seemingly logical and well-documented conclusions?
        Do the new “biofarming” ideas from Synthetic Genomics or Algenol represent a sea change?  How about the recent “bioconversion” offered by LiveFuels?
        Eric
  • FDDoty 08/24/09 2:39 PM

    The technical expertise in most VC groups is extremely shallow, and the last 2 years have proven that most people operating in the world of high finance have questionable ethics, to put it mildly.

    Synthetic Genomics is expecting to achieve cost savings by developing algae that will secrete lipids. This has the potential to reduce costs associated with dewatering and oil extraction, but the more dominant costs would be greatly increased.  The most competitive algae production to date (by far) uses open ponds rather than closed ponds or photo-bioreactors (PBRs).  Even with open ponds, their costs would dominate in scale-up.  PBRs are 4 to 10 times more expensive than open ponds per area – at least over a period of a decade or more.  Only a few types of high-oil algae are robust enough to work satisfactorily in open ponds.  Getting a new type to achieve high efficiency, secrete lipids, and be able to fend off invasions in open ponds is a very tall order.  Synthetic Genomics expects to use PBRs.  They will almost certainly be required with new, fragile, genetically modified algae.  I don’t see any way for fuels from the most efficient algae in PBRs to ever be able to be produced for under $100/gal – mostly because of the interest on the PBRs. 

    (Remember, the operating costs of current commercial algae production, in race-track open ponds, will need to be brought down by an order of magnitude to allow algae oil to be produced for $50/gal.)

    I suspect Exxon invested in Synthetic Genomics because they saw potential for products other than biofuels, but the hoopla is about biofuels because the DOE is throwing a lot of money at any sexy-sounding biofuel project now.

    Algenol expects to get algae to secret ethanol.  This will require PBRs or closed ponds – otherwise, all the ethanol would be lost to the atmosphere.  Again, it really doesn’t matter how efficient the algae are, the interest charges on the PBRs (or closed ponds) will keep the cost of the fuel above $100/gal – probably much higher.  PappaDaddy has a lot more to say about Algenol.

    The idea by LiveFuels of feeding algae to fish and extracting the oil from fish to fuel vehicles is the sickest I’ve heard yet from a humanitarian perspective.  I regularly ingest fish oil.  I buy about the cheapest I can find, as do hundreds of millions of others.  I pay about $150/gal.  If LiveFuels can bring the price of fish oil down, maybe more people can have better health, but fish oil will never fuel our vehicles.  The world switched from whale oil to petroleum 150 years ago, and that saved the whales.  We won’t go back.
    David

     Reply
  • Steve 09/22/09 4:50 PM

    FDD,

    Thanks for your detailed explanation behind your point of view.  I found your comments on the capital & interest costs on the PBR’s interesting as most analysis I’ve seen is long on science and short on finance.  Could you please elaborate a bit on your statements by sharing the following:

    1) What capital cost per gallon of biodiesel capacity are you assuming?  (To clarify my wording, a PBR plant making 1M gallons per year for a total construction cost of $5M would have a capital cost of $5/gallon).

    2) What’s your assumed financing on a plant.  Debt/equity split, loan terms, etc.

    3) What’s your take on Origin Oil’s model they just released at the Houston algae conference?  Their claim was a modest 4% ROI baseline scenario and 20% ROI if they co-locate with a wastewater facility to offset some costs.  http://www.originoil.com/company-news/originoil-execs-unveil-new-algae-productivity-model-at-national-algae-association’s-quarterly-conference.html if you haven’t seen it.

    4) My company has been exploring this area in conjunction with a sustainable farming initiative we’re pursuing.  Making biodiesel cost effectively on-site or nearby would go a long way to ‘greening up’ the average farm community, along with biochar, no till methods, organic fertilizer, etc.  One newer PBR company claims they can make it for about $1.30/gallon (plus a royalty TBD) based on scale up of a pilot plant.  Total capital cost (excluding land) of around $4/gallon.  I can make these numbers work for us IF IF IF they’re real.  Is this more ‘wishful thinking’ or does it pass a reality check from those with more experience?

    Thank you!!

    Steve

     Reply

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