Scores of firms, startups and Fortune 500 companies alike, are working on algae-based biofuels.  Hundreds of millions of dollars have been invested.  And so far, maybe a few thousand gallons of algae oil have been produced.

The question is: Can algae be economically cultivated and commercially scaled to make a material contribution to mankind's liquid fuel needs?  The jury is still out.

Ghosts of NREL Algae Programs Past

The basement of the marine biology department at the University of Hawaii has a hallway lit by a dim incandescent bulb.  At the end of the hallway is a cardboard sign with the faded letters "ASP" written on it.  A creaky door leads to a dank-smelling room crowded with beakers and algae scientists, milling aimlessly.  They share the same slightly green tinge and defeated look.

This is the last remains of the Aquatic Species Program or ASP. These letters are spoken in hushed reverence by today's crop of phycologists, NRELians and algae-fuel entrepreneurs.

The Program identified hundreds of algae species that could potentially be farmed and cultivated for their lipids – lipids that could be converted to biodiesel and used to wean the U.S. from its dependence on foreign oil.

The Aquatic Species Program was launched in 1978 by president Jimmy Carter to explore the potential of algae as an energy source. About $25 million was put into the program until it was shelved by the Clinton administration in 1996.  They never found the "lipid trigger."

The echoes of that program reverberate in today's algae fuel renaissance.

Why Algae?

On paper, algae is perhaps the perfect feedstock for biofuels. It grows in a wide variety of climates. It can be used to mitigate carbon dioxide. The liquid fuels produced by these single-celled creatures are only one of their byproducts, and potentially not even the most valuable. Cosmetic supplements, nutraceuticals, pet food additives, animal feed, and specialty oils for human consumption may well fetch higher per-gallon prices.

The tantalizing quality of algae is that some algal species contain up to 40 percent lipids by weight.  And therefore, according to some sources, an acre of algae could yield 5,000 to 10,000 gallons of oil a year, making algae far more productive than soy (50 gallons per acre), rapeseed (110 to 145 gallons), mustard (140 gallons) jatropha (175 gallons) palm (650 gallons) or cellulosic ethanol from poplars (2,700 gallons).

More optimistic data from less informed people indicate the theoretical biodiesel yield from microalgae is in the range of 11,000 to 20,000 gallons per acre per year.

But according to Dr. John Benemann, a cantankerous algae consultant whose research is widely cited in the field, the realistic potential production level (despite claims to the contrary) is about 2,000 gallons of algal oil per acre per year.

VCs and Algae Farmers

"VCs cannot come in here and just harvest ripened fruit, this is not shovel ready technology," said  Dr. John Benneman.

Considering the immense technical risks and daunting capital costs of building an algae company, it doesn't seem like a reasonable venture capital play.  And most if not all of the VCs I've spoken with categorize these investments as the longer-term, long-shot bets in their portfolio.  But given the size of the liquid fuels market, measured in trillions of dollars, not the customary billions of dollars, it makes some sense to take the low-percentage shot.

These firms are going to continue to need capital.  According to Jennifer Fonstad of VC investor, Draper Fisher Jurvetson: "The current strategy of many of these companies has been to turn to the government stimulus plan - this is the risk capital we can rely on today."

A Few Conclusions

We need lots more time and more money

Technologists tend to overestimate what can be accomplished in two years and underestimate what can be accomplished in ten to twenty years.  Algae as biofuel looks more like a ten to twenty year project.   DARPA is betting on three to five years, VCs are betting on three to five years, the algae roadmap from DOE takes a decade.

The scope of the algae to large-scale biodiesel effort is more along the lines of the Manhattan Project or the Apollo moon shot, which cost $24 billion and $360 billion respectively.  A $25 million Aquatic Species Program or $300 million in venture capital is not going to get it done.  It will take tens of billions of dollars and decades.

All of the process steps need to be addressed

In the words of Courtney McColgan of DFJ, "There are many pieces to the algae puzzle that seem like afterthoughts, but are actually crucial to the economics - co-products, nutrients, harvesting, drying, and conversion technology. System design and algae strain (which seem to be the focus of most discussions) are important, but not the only components."

Algae producers admit that there's a massive difference between growing large, consistent quantities of algae versus growing it on a fish tank wall. Standards for growth, strain selection, breeding, genetic modification, water extraction, oil extraction, and oil refining have yet to be established.

Set realistic expectations for the technology

Exploit near term, intermediate technology deployment opportunities such as wastewater treatment. Cost constraints restrict consideration to the simplest possible devices, which are large unlined, open, mixed raceway ponds.

And finally a word from our favorite curmudgeon...

"Engineering studies do not conclude that we can or will actually be able to produce algal oil/biodiesel. They conclude that the R&D to develop such processes can be justified, at least until it can be demonstrated to be impossible," said Dr. John Benemann.

  • This is a small excerpt from the April issue of the Greentech Innovations Report which dives deep into the algae pond.  You can subscribe to it here.