Algae As Alternative Fuel Source

Image: Sue Tallon

1 of 2 NEXT

In one of the most memorable moments in cinema, a middle-aged businessman whispers to a young and perplexed Dustin Hoffman one word of advice: “Plastics.”

In a 21st-century remake, the word might one day be algae.

Plastic was the new gold when The Graduate was filmed in the 1960s. In the summer of 2008, as oil prices soared to frightening levels, dozens of little companies managed to bring in a sudden gusher of funding for a technology that has long been relegated to the fringe of alternative energy: turning the green scum that grows in ponds and waterways into fuel.

In just six months, investors pledged more than $1 billion to 30 or 40 algae-fuel companies, many of them new. Now with oil prices less than half of what they were in the summer, the fledgling algae industry isn’t likely to see more big investments anytime soon, and the credit squeeze will also hamper development. But the companies hope they’ve raised enough cash to move the technology to the next step and prove that the watery weed can be a viable alternative to petroleum.

The fact is, algae contains an abundance of natural fatty oils that don’t need much refining to power cars and jets. Nevertheless, making algae into a cost-effective fuel source remains a highly speculative venture. The process has been tried only on a small scale; so far, just a few thousand barrels of fuel have been made from algae. Large-scale cultivation takes place in huge metal tanks or open ponds. According to a 2004 University of New Hampshire study, the pond method would require 30 million square acres—an area equal to the size of South Carolina—to grow enough algae to satisfy the U.S.’s transportation needs. Whatever process is used will require the building of massive new infrastructure for water management, feedstock supplies, nutrients, and transportation, even if algae oil can be refined at existing facilities. If algae companies can’t increase production while maintaining prices that can compete with petroleum’s, they will fail.

Still, the prospect of replacing petroleum with a plant-based fuel that has a high energy yield compared with other plants has led some major investors to take the algae plunge—including Bill Gates, whose venture fund Cascade Investment pledged a reported $50 million to Sapphire Energy, a San Diego startup, in a financing round completed in September 2008. The Rockefeller family’s Venrock Associates fund has also made a substantial investment in Sapphire, and the company has attracted other blue-chip venture funds, including Arch Venture Partners and the V.C. arm of Britain’s huge life-science nonprofit the Wellcome Trust. “We are investing in this because algae is basically the most efficient photosynthetic process on the planet,” says Arch’s Kristina Burow.

In the fall, the U.S. Department of Energy’s National Renewable Energy Laboratory in Golden, Colorado, launched a $200 million effort to fund innovative biofuel technologies and projects, including some using algae. Barack Obama mentioned algae several times on the campaign trail, and his advisers expect algae will play a role in his administration’s plans for a massive infusion of federal money into alternative fuels. If it does, the money might come just in time to offset the recent fall in oil prices and credit crunch, which could otherwise imperil algae’s prospects. Meanwhile, GreenFuel Technologies of Cambridge, Massachusetts, is developing a system that would use a coal plant’s carbon dioxide emissions as a carbon source to feed algae that would be converted into fuel. Near South Padre Island, Texas, PetroSun is converting a shrimp-research facility into an algae pond. Big oil companies like Chevron are also committing resources to pond scum. “Algae still needs to be proven at scale,” says Chevron spokesman Alex Yelland, “but we have a real sense that this will seriously augment the world’s biofuel supply in the future.”

One sunny afternoon in South San Francisco, I find myself investigating the nascent algae revolution from behind the wheel of a Jeep running on biodiesel made by Solazyme, an algae-fuel company founded in 2003. The ride and feel are no different from those of a gas-powered car—no green smoke from the exhaust pipe. In the passenger seat is Harrison Dillon, Solazyme’s co-founder and chief technology officer. Before we start the engine, the other co-founder, C.E.O. Jonathan Wolfson, shows me a liter of algae fuel—a clear, slightly viscous liquid that he says is the first algae diesel to meet the highest standards of ASTM International (formerly the American Society for Testing and Materials) for use in engines. The company also recently had its algae jet fuel ASTM-certified.

1 of 2 NEXT