Algae As Alternative Fuel Source

PREV 2 of 2

Wolfson and Dillon won’t say how much their green crude costs to make or how the company—which recently closed on a $50 million funding round and cut a major deal with Chevron for an undisclosed amount in January 2008—plans to go from the few thousand gallons in its warehouse to the millions needed to satisfy even a tiny fraction of the U.S.’s yearly oil habit of 7 billion barrels. “The problem with algae isn’t so much the science,” says David Kurzman, an independent biofuels analyst, citing the challenge confronting most alternative fuels. “It’s developing what has to be a major industrial process and whether this is cost-effective.”

When Wolfson and Dillon co-founded Solazyme, oil was selling for $25 a barrel, and the company struggled to find investors. A few years earlier, the Department of Energy had abandoned an algae-fuel program because it expected the fuel to cost consumers more than $4 a gallon. “We were sure we could make oil more cheaply than this and that algae would be big one day,” Wolfson says.

The impact of plunging oil prices on the viability of algae fuel is unknown. Wolfson believes that his company will hit its goal of producing a barrel of algae oil for between $40 and $80 in the next two to three years. (At press time in mid-December, petroleum crude was at $44 a barrel after rising to more than $147 in the summer.) “Unless oil falls to under $40 a barrel, we think we will be competitive,” he says. Jason Pyle, C.E.O. of rival Sapphire, says he’s aiming to make a barrel of algae oil that could be priced at about $60. The truth is, no one really knows what’s possible.

Algae is only one of many crops that entrepreneurs hope will challenge petroleum, which remains subject to fluctuations in both price and supply as cartels talk of cutbacks and oil-producing regions remain politically volatile. Money has also poured into ethanol and biodiesel made from so-called first-gen biofuels such as corn, soy, and sugarcane. In fact, $1 billion in private investment for algae is small change compared with the billions of dollars in investments and congressional subsidies that have been aimed at these terrestrial biofuel sources, from which more than 9 billion gallons of ethanol were produced in 2008, an increase of 28 percent from 2007.

But most scientists contend that algae fuel—from cultivation to consumption—has a smaller carbon footprint than other biofuels, though no one will know for sure until algae-fuel production is ramped up. By the barrel, algae fuel provides three to four units of energy for every one unit used to make it, a ratio that approaches petroleum’s golden 5-to-1 level of efficiency. Corn’s ratio is a mere 1.2 to 1, according to some studies. That’s a paltry net output for a crop that, given the spike in global food prices this past summer, is already a controversial energy source. Cellulosic plants like switchgrass also score better than corn, having a 2.5 to 1 ratio.

In the wake of the energy crisis in the 1970s, the Department of Energy spent hundreds of millions of dollars investigating the fuel potential of algae and other plants, but it dismantled the program in 1996. Since then, scientists have continued to work with algae to better understand its genetics and how it produces oils. “It’s hard not to get excited about algae’s potential,” Paul Dickerson, chief operating officer of the Department of Energy’s Office of Energy Efficiency and Renewable Energy, told the first Algae Biomass Summit, which was held in San Francisco in 2007 and attracted 350 scientists, technologists, entrepreneurs, investors, oil company representatives, and policymakers.

In Solazyme’s headquarters, Wolfson shows me labs filled with flasks of goo ranging in color from lime to forest green. The company’s scientists are testing different species of algae in search of optimal ones, both natural and bioengineered, for extracting oil. More than 30,000 algae species exist, but only a few hundred have been studied. Solazyme produces its raw algal material in huge metal fermentation tanks through a process that Wolfson says can rapidly generate large amounts of biomass. Inside the vats, algae is bathed in sugars in a pressure- and heat-controlled environment. It’s a little bit like making beer, Dillon says. To produce millions of barrels of algae crude, however, this method would require heaps of sugar and cellulosic material as well as a vast area to house the vats, which themselves could be challenging to build and maintain.

About 500 miles south of Solazyme’s headquarters, San Diego-area startup Sapphire Energy—the algae firm that won Bill Gates’ backing—is betting on the open-pond method, taking advantage of sunlight, which is directly converted into lipids, algae’s oily store of energy. The company claims that it can refine its open-pond algae into not only diesel but also high-grade gasoline—an industry breakthrough. Sapphire executives are staying mum about this method. Pyle says only that it makes use of sunlight, algae, and bioengineering. Sapphire is building a 20-acre pilot farm in New Mexico to experiment with scaling up, he adds.

The open-pond system is currently more expensive than one using fermentation tanks, says Department of Energy biofuels expert Fred Gerdeman. And expanding production from a few greenhouses and pilot ponds to the millions of acres of ponds required to make even a modest dent in the world’s consumption of fossil fuels would pose a considerable challenge for Sapphire and other open-pond advocates. Gerdeman believes that both enclosed-tank systems and open ponds will be part of the mix in a future algae-fuel industry. Within five years, Sapphire aims to be producing 10,000 barrels of algae oil a day. By 2022, it hopes to reach 200,000 barrels a day—about what an offshore oil platform produces. By comparison, Chevron’s worldwide operations produce about 2.5 million barrels a day. Sapphire aims to raise $1 billion to fund the expansion. “We want to build an oil company,” says Sapphire backer Burow. “This is not just a short-term play.”

PREV 2 of 2