Top 11 Algae Biofuel and Biochemical Trends From 2011-2020

Will Thurmond, Emerging Markets Online and author, Algae 2020
March 29, 2011 | 15 Comments

The following article is an excerpt from a technology, investment, and market study titled Algae 2020, Vol 2 (2011 update) from market research firm Emerging Markets Online. The excerpt provides a summary of findings and highlights 11 key trends for the algae industry from 2011 to the year 2020.

Renewable Oils for Biofuels and Biochems

The “brewery” model in algal biofuels ventures is known for low-cost, high tech production using standard industrial fermenters. Solazyme is leading the charge in the algae-based brewery/fermentation model, followed by veteran algae producer Martek with support from BP. We expect to see companies similar to Solazyme emerging in 2011-2012 worldwide using the microbial brewery model to produce “Renewable Oils” via fermenting sugars as seen with Amyris (green crude and renewable diesel from yeast), Virent (green diesel), LS9 (renewable diesel from bacteria), and others emerging in this space.

Where there is cheap sugar, and cellulosic sugars from ag and industrial waste, these commercial ventures will find advantages. Where lower-cost, economically advantaged sugars are available in the U.S., EU, China and India, expect increasing military use for collaborative R&D deployment tests.

Biofuels and Drop-In Fuels

In the biggest markets in Europe, the U.S., Brazil, China and India, government mandates are requiring large oil and gas refiners to blend biofuels into their existing infrastructure. Most oil and gas companies facing blending mandates, military suppliers, and auto manufacturers and transport companies considering fleet-wide upgrades to higher biofuels blends wish to find fungible fuels that are compatible with existing engines, pipelines, storage systems and petrol stations.

Algae 2020, Vol 2 finds a common theme among algae leaders that have progressed into pilot and demonstration-scale projects. In addition to biodiesel and ethanol, these organizations are able to produce drop-in replacement fuels from microalgae, and blue-green algae also known as cyanobacteria and other microbes. Military, aviation, government, and petrochem organizations all demand fungible, drop-in fuels and prefer to work with advantaged producers with scalable technologies for R&D and deployment.

Green Chemicals and Polymers

In the capital markets, investors have far more confidence in market demand as a measure of long-term opportunity in transport fuels and petrochemical derivatives. For this reason, the early leaders in advanced algal and microbial fuels are diversifying and targeting existing petrol, diesel and aviation markets, as well as related biofuels markets for green chemicals, polymers and power generation. The diversification of biofuels companies beyond one fuel — ethanol and biodiesel — to include a portfolio of advanced biofuels represents a wise long-term strategy to inspire investor confidence.

Oleochemical Consumer Products

Algae 2020, Vol 2 observes an emerging trend in commercial and privately funded algae projects. Increasingly, the focus among start up and VC-backed algae ventures is on high-value products including: livestock and fishmeal, omega 3s, health products, cosmetic and pharmaceutical uses. Most algae farmers seek these highest value products for key addressable markets first, and then plan to scale up operations over time for commercial biofuels production.

Many ventures will pursue these high-value, addressable markets to develop cash flow for operations, resources and staff, and establish early brand identity. Analyst contributors to Algae 2020, Vol 2 see the high value, small market focus as the short-term strategy on the pathway to the mid to longer-term commercialization of biofuels. The longer-term strategy for producing algal biofuels closer to petroleum price parity improves significantly as algae producers reach larger economies of scale in industrial, deployment-stage algal biomass production systems.

Scalability

Why are some algae companies attracting capital, and scaling up their enterprises while others continue to peer into the “valley of death” from the laboratory to the pilot phase? Of the 100+ or so companies involved in the algae space, less than 25 have moved from the laboratory to the pilot phase during the economic recession. Few have been able to convince investors to risk placing $10 million USD or more to make this necessary transition.

If an algae venture is not (a) able to demonstrate and prove its technology works on a small scale or (b) produce more than 1000 tons of algal biomass or at least 100 gallons of algal oil with its partners, it is unlikely investors will take serious notice. Notably, some companies have been able to attract investment based on initial proof of concept at the lab/bench scale via strategic partnerships, early-stage VC money, and government grants.

Seaweed

Seaweed has gained favor with petrochemical majors Statoil, Dupont, ENAP because it grows faster than terrestrial crops, has a high sugar content for conversion to ethanol and advanced biofuels, absorbs more airborne carbon than land-based plants, has no lignin, can be easily harvested compared to microalgae, requires no pretreatment for ethanol production, and can be harvested up to six times a year in warm climates. Seaweed biofuels include ethanol, methanol and biobutanol. BP-Dupont’s Butamax will collaborate with BAL, a leader in the field to produce biobutanol for drop-in fuels and chemicals.

Emerging Markets Growth

U.S. and EU-based algae producers and licensors of technology are increasingly looking to the Emerging Markets in Latin America, Asia, Africa and the Middle East for faster economic growth, increasing market demand, and more supportive government and regulatory climates for accelerated commercial growth. This follows a key trend by Shell and BP, who invested $12 and $8 billion, respectively in sugar-based conglomerates in Brazil to produce ethanol, bio-butanol, drop-in fuels, and bio-based chemical products.

Government R&D

Governments in the U.S., EU, Brazil, China, India, Canada, and other worldwide regions are funding algae R&D collaborative initiatives at universities and laboratories, public-private partnerships, pre-commercial demonstration stage enterprises, pilot and prototype-stage endeavors.

The most funded or awarded ventures bring together clusters of industry, government, academia, cleantech investors, and producers to share and collaborate on key challenges and opportunities. Some government algae R&D ventures are now phasing into pre-commercial, deployment-stage algae ventures using pond, photo-bioreactor, and fermentation based production systems. Government R&D, deployment, and commercialization support continues to expand into new countries and territories worldwide.

Capital Light, Global Exports

Many pre-commercial, VC and angel-backed ventures are increasingly pursuing a two-pronged strategy. The first strategy seeks to license technology to partners with capital to develop and scale up the pre-commercial enterprise to commercial levels. This is also known as the capital light strategy. The second strategy is for producers to export technology to local partners in global geographies with advantaged environments for sunlight, operating expenses, market growth, and government support.

Strategic R&D Partnerships

Suppliers and buyers are forming early stage R&D relationships in the algae space. Some algae producers now have collaborative R&D partners with big industry players, such as the Exxon-Synthetic Genomics $600 million collaborative for green crude development, the Algenol-Dow for bioproducts, BP-Martek for algae fermentation, Shell-HR Biopetroleum for hybrid PBR-pond development, Chevron-Solazyme for green crude and drop-in fuels and Dupont-BAL for biobutanol from seaweed.

Global Deployment Partnerships

Current economic and regulatory tradewinds in the northern countries of the U.S. and EU are shifting algae technology exports southward and east to Central and South America, Africa, and Asia. An increasing number of partnerships are forming and leveraging advantages in technologies, economies, and geographies.

Long-term tradewinds favor large-scale production supplies of algae from the Americas, the Middle East and Asia with increasing demands for algal biofuels, products and technologies from China and India.

This article was written by Will Thurmond, CEO of market research firm Emerging Markets Online, keynote speaker, author of Algae 2020 Vol 2 (February 2011) and Biodiesel 2020 studies, and market trends columnist for Biofuels Digest and Biofuels International.

15 Comments

Organic Mechanic
January 26, 2012

CONS:

Scale - difficulty replicating lab results into larger volume of production

Growing - using open ponds can be easily contaminated, PBR's (photobioreactors) can be expensive

Processing - challenges to harvesting and extracting the oil

Carbon Capture - is it really feasible? Can the algae keep up with the output of the factory? What about during the night when algae is not active? Can the waste be reliably transferred into the algae? Are the right growing conditions and enough land there to cultivate the algae? ("to fully use the emissions from a 50 MWe natural gas fired power plant land would require 2200 acres of algae.") Additional nutrients are still required, such as N, P, or K, which must be added in precise amounts and typically come from chemicals like ammonia or nitrate and phosphorous. Taking into consideration all of the processing, is there really a net reduction or capture of CO2? Also, capturing the emissions it is not true sequestration, as it will be burned again as fuel.

Differing results from strains, environmental conditions, and growing systems

If chemicals are used to extract oil or process fuel, exhaust can be toxic

Environmental Concerns - if major cultivation takes place, especially of GM (genetically modified) algae - what if it gets out and seriously disrupts the ecosystem?

This is a great direction for us to take, however there are still challenges. The Algae Revolution is upon us, and I think we will be seeing amazing breakthroughs.

To learn how to make algae biofuels:
Algae to Biodiesel: http://www.organicmechanic.com/algae-to-biodiesel/
Algae to Ethanol: http://www.organicmechanic.com/algae-ethanol/

For a look at the broad range of goods possible from algae and considerations for scaling them into entrepreneurial pursuits, check out: http://www.organicmechanic.com/algae-business/

Let me know if there are questions about algae, or any of the equipment to cultivate and use biofuels.

Chris

Organic Mechanic
January 26, 2012

Excellent analysis in your article, and discussion. Thank you!

To help summarize, here are some pros and cons to algae as fuel:

PROS:
Algae grows in all directions
Single celled with no superstructure required for algae (roots, trunks, leaves)
Growth speed: 140 days for land crops; algae grows year round in just 1-2 days
Algae weathers extreme conditions, so resistant to drought, wind, rain, insects
Grows 30-100 times more oil per acre than corn or soybeans
No sulfur, non toxic, biodegradable
Can mix with existing fuels in existing vehicles
Can produce fuel, bioplastics, medicine, nutrition, animal feed, fertilizer, more
Can absorb CO2 and other pollutants from coal power plants, cement manufacturing, fossil fuel extraction and refining, fermentation based industries, ethanol production, etc

(Cons on next post - 2000 character limit)

Glenn Doty
April 28, 2011

Phototroph,

Fair enough. However, your stipulate that "you cannot know what kind of advances will be made"... but my response would be that I CAN know the limitations of those advancements: mechanical efficiencies are very well clarified, and the cost of mechanical components are very well understood. While I can very easily say that I don't know if the costs of separating, drying, crushing, filtering, refining, filtering, and shipping the goop from very dilute concentrations in water will drop by half... I can tell you with absolute certainty that the costs will not reduce by 99% or more. There's just no potential for that level of improvement within the system.

As for your second stipulation: "as long as there is demand", you are assuming that the demand isn't satisfied by other projects that are in the works. As I am quite certain that we won't see the price of algal oil dropping to 1% or 0.1% of its current costs, I can assume any number of technologies that are perfect crap in today's market will be viable long before algae, which cuts off further development of algae.

I of course have a dog in the hunt, as I'm working on a revolutionary carbon recycling technology which uses renewable electrical energy to reconvert CO2 into liquid fuels:
www.WindFuels.com

I think we'll win, and gasoline prices will average ~$4/gallon (we're projected to be quite profitable at less than half that).

But if we cannot get investment and the price of gasoline climbs to ~$8/gallon, the electric cars will become viable... If that doesn't happen then at ~$10/gallon then CNG and LNG cars become quite interesting...
Nothing is going to push this into the $100+/gallon where algae oil starts making sense.

Levi Lowder
April 28, 2011

Glenn-doty,

You make an intelligent point and I agree that my analogy is weak at best. So let me be clear about my point and omit any analogies: over the next 20 years, technological advancement will decrease the cost of producing algal biofuels/feedstocks at large scales. Simultaneously, fossil fuels will become more expensive as they are slowly depleted. Thus, with technological advancement algal biofuels will become competitive with traditional fuels.

Algal fuel production and culturing in the future will look entirely different than today and you cannot know what kind of advancements will be made. As long as algal R&D continues and there is demand for energy, advancement will be made.

Keep in mind that a bushel of corn in the 90's was so cheap because of technological advancement in agriculture. Before the green revolution a bushel of corn was much more expensive relative to average individual income. This is why the percent of income spent of food in the US decreased from 24.2% to 9.5% from 1930 to 2005 respectively. Many complicated economic and political factors are also involved but there is no doubt that technological advancement over time decreases the relative cost of agricultural commodities (and computers).

Glenn Doty
April 28, 2011

Prototroph,

Algae oil is not a circuit that is stamped out in mass production. It's an agricultural commodity that involves the processing of wet and dry mass solid feedstocks.

In 1990 I could have bought a bushel of corn for less than $0.40. Now it costs over $7.00. There will never be a point when algae oil will be even remotely competitive at any scale for any purpose.

Computers and digital technology are the only things that have seen a drop in price in the last 20 years. There will be no rapid price reduction for mechanical processes. In fact, there will be an increase in price for these due to rising materials costs. If you question that, look at the amount that an average vehicle has "dropped" in price since 1990.

Levi Lowder
April 28, 2011

As a molecular biologist and as someone who is actively involved in algae based biofuel/feedstock research I can tell you that algae based energy production, in the long term, is inevitable (assuming no breakthroughs in fusion research over the next 20 years…a safe assumption). How can you skeptics be so short sited? Do you really think that genetic and conventional engineering developments cannot radically reduce the high costs associated with algal cultivation? Every aspect of algal cultivation and processing can be enhanced and refined. Over the next 20 years, expect algal fuels to become cheaper and cheaper as conventional fuel becomes more and more expensive. I remember purchasing my first computer back in the early 90's for around $2 grand; my current mp3 player has more computing power than that old IBM and only set me back $50. With ample time and investment, the same will happen with algal biofuels.

Steve Frazer
April 1, 2011

Interesting comments, though most do not reflect a good understanding of the current status of the biofuels industry.

We have been working hands-on with micro algae and 2nd generation feedstock crops for over 5 years. We are planting 2nd generation feedstock orchards that will produce biodiesel at $38 barrel equiv. Micro algae is another story. The capital investment for an acre of land is still almost $1M. Even with 50 year commercial capitalization financing, this ROI is poor. However, the work that Joule Unlimited is doing looks very promising.

Our 2nd generation feedstock orchards have an 85% infrastructure overlap to micro algae or synthetic photosynthesis operations.

I spent years working in university laboratories and often we found solving complex problems economically was only accomplished by what any business savvy person would recognize as secondary or coat-tail capitalization.

This is how Velcro, Teflon, ..., a thousand other common products were developed. Embrace the concept - it has a success rate that cannot be discredited.

http://etcgreen.com Popular: Are you driving your last gasoline powered car?

ANONYMOUS
March 30, 2011

Jkshurt has provided a credible assessment. The high capital cost of photo-bioreactors, the vulnerability of single cell organisms in open ponds, the high energy and other costs of separating low value commodity chemicals and fuels from aquatic media, the cost of protecting the algae from invasive organisms and species, the low conversion efficiency of photosynthesis, etc., make this technology too expensive for fuels and commodity chemicals no matter how many billions of dollars the government prints so it can throw it down the drain on photosynthetic algae. Instead of R&D grants and loan guarantees, a smarter and less corrupt government would simply offer to procure algae Biofuels from companies at decreasing prices over time starting at no more than $5.00 per gallon. They would soon discover that most of the companies would disappear overnight. There is a reason why evolution has allowed terrestrial plants to rule the earth.

Glenn Doty
March 30, 2011

Jkshurt:

As one who has studied this area in more detail, I ask that you please read this:
http://www.dotyenergy.com/Markets/Micro-algae.htm

and follow the referenced links.

There has been billions invested in algae... this isn't lab scale investment here. If it still costs thousands of dollars/gallon, then it's not a good idea. A better analog for the algae is fusion power - which tends to get ~1 month closer to viability for every decade that is spent funding R&D.

Kevin Shurtleff
March 30, 2011

Anyone who categorically states that algae-to-biofuels will never be commercially viable is wrong. Pointing at the early results from a new industry and saying it won't work is extremely short sighted, just like those that saw the first transitor and said it wouldn't amount to anything or those that proclaimed oil from the first oil well good for nothing.

As one who has studied this area in detial, photosynthetic algae-to-biofuels is the only renewable fuels approach that has a chance of producing cost competetive fuels on a large scale. However, it is in the earliest stages of commercialization and has not obtained any economies of scale. It needs time and money to reach the status of the current semiconductor industry or the oil & gas industry. It will happen, because the demannd for transportation fuels will not subside.

ANONYMOUS
March 30, 2011

If we want to reduce consumption of oil and high carbon fuels, then the best policy would be a revenue neutral $.50/gallon gasoline or carbon tax, where individual and corporate income tax rates are reduced to compensate for the additional government revenue thereby silencing the anti-tax lobby on the right. However, given the cowardice and corruption of our politicians, the next best policy would be aggressive new vehicle efficiency standards that target gasoline and diesel consumption per passenger mile traveled, and allow the industry to figure out the most cost effective way to achieve the standards, whether it be with biofuel blends, hybridization, all electric vehicles, or compressed natural gas.

Glenn Doty
March 30, 2011

Joanne,

We agree on the complete stupidity and non-performance of fusion research grants... and that fusion research grants should end - or at the very least be dialed back to support a small team and a supercomputer.

But we are not currently replacing 10% of our imported fossil fuels with renewables. We have, until recently, had a 10% blending maximum on the percentage of ethanol allowed in gasoline.
In 2009 (2010 data not available yet), the total biofuel production of the U.S. was ~746,000 bbls/day... of which 713,000 bbls/day were ethanol (~91 MJ/gal), and 33,000 bbls/day were biodiesel (~130 MJ/gal).

We are currently importing ~8,770,000 bbls/day of crude oil (~140 MJ/gal). So overall we're only achieving ~5.6% of our petroleum imports with biofuels (just over 2% of our total usage), almost all of which is corn-based ethanol, with a very little bit of soy-based biodiesel.

Cellulosic ethanol is contributing only a few thousand bbls/year, and algal-based oils are contributing a few thousand gallons/year.

That's all we're getting for our massive investment in biofuels.

Joanne Ivancic
March 30, 2011

No, Steven Chu's love affair is with electric vehicles and nuclear--the subject area in which he received a Nobel Prize. And, only when the amount of public funds put into biofuels and advanced biofuels research exceeds the amount we have put into nuclear fusion research should anyone complain. Fusion research has given us NOTHING--no power, no co-products. Read the above again and many other articles about biofuels and advanced biofuels. We are replacing 10% of our imported oil with renewable fuels--that's real renewable energy replacing fossil fuels. And, we haven't come close to spending fractions of what has been spent on fruitless fusion research.

ANONYMOUS
March 30, 2011

I would tend to agree with respect to photosynthetic algae, that this will be niche space restricted by high costs to nutraceuticals and other high value specialty chemicals. However,I disagree with regard to the algae fermentation companies. They will be successful in animal feed, and specialty and commodity chemicals as the supply chain places a premium on more sustainable products,and genetic engineering simplifies downstream processing and purification. As the prices of cellulosic sugars from waste feedstocks decline and supply expands, initial beach head markets in biomaterials will lead to economies of scale and market acceptance. Despite foolish government subsidy programs directed at ethanol fuel, dark algae biorefineries will have far more profitable product mixes than cellulosic ethanol plants, and therefore will capture an increasing percentage of the cellulosic sugars produced.

Glenn Doty
March 29, 2011

Has any of these companies produced in excess of ~10,000 gallons of fuel? Even with tens of millions of dollars, has any single algae company exceeded 4 orders of magnitude? No? That means that these investors are spending (wasting) literally thousands of dollars/gallon!

How much money has to be flushed into this before people realize that there's no hope for anything here? It COSTS TOO MUCH to ever be viable.

I will point out to the readers that not one single dollar figure was used or alluded to in the above article... That is the last thing anyone in the algae oil industry wants anyone to think about.

This is Steven Chu's love affair, so the DOE is going to continue wasting money by the billions on it... but there is no real chance that this idea will ever be viable.

Add Your Comments

To add your comments you must sign-in or create a free account.

William Thurmond

Will Thurmond is the founder and CEO of Emerging Markets Online, a market research and consulting services firm serving the needs of clients in biofuels, oil, gas, government, R&D, and economic development initiatives. Emerging Markets...