Algae's big moment is coming.
The Department of Defense has ordered over 20,000 gallons of algae fuel from Solazyme to see if algae fuel can replace F-76 Naval Distillate, the primary shipboard fuel used by the Navy. The contract calls for Solazyme to deliver the fuel over the next year.
In the overall fuel market, 20,000 gallons in a drop in the bucket. The U.S. consumes 20 million barrels of oil a day, and a barrel contains 42 gallons. But 20,000 gallons in the algae world is like the Atlantic Ocean. Most companies have only produced token amounts of oil and even early leaders like Solazyme (which has actually produced quite a bit of oil) have not moved into commercial production yet.
Expect to see more deals like this in the future as algae companies move toward commercialization. The Department of Defense will likely test the fuel from several vendors: It has a self-imposed mandate to reduce fossil fuel consumption (in part because fossil fuels often come from countries the DOD is required to guard) and it has a sizeable budget for experimentation. Last year, Solazyme said it was about two to three years away from showing how its algae fuel could begin to supplant conventional fuels. Other names to keep an eye out for: Synthetic Genomics, Sapphire Energy, OriginOil, Aurora Biofuels, Solix. Still waiting for someone to name a company Scum Power.
Solazyme, by the way, is one of the iconoclasts of the industry. Rather than grow algae in big ponds, it cooks it in big vats with sugar. This adds raw material costs, but Solazyme doesn't have to separate its algae from water to press it for oil, a key consideration.
If you want more on how to rate the 57 or so algae companies in the world today, take this quiz.