"This generation is a regeneration generation" – voices from the Algal Biomass Summit

In Arizona, the 4th annual Algal Biomass Summit finished, with plenary panelists from Boeing, Phycal, UOP, BIO and NREL opining that, despite the challenges of creating the technologies, financing, policy and infrastructure for algal biomass, the platform continues to draw the attention of top companies and individuals. Why? For the panelists, it remains the most promising platform for replacing, rather than extending, the era of fossil-based fuels, chemicals and materials.

In contrast to the “irrational inexhuberance” of the 2009 Summit, in which so many speakers tried to downplay “algae hype” that the overall effect was described by several participants as “depressing”, the 2010 Summit featured a mood of increasing optimism, though tempered by the challenges of taking algae through such a rapid development towards scale during an era of tight credit. A reason for optimism: noted by speakers and participants was the increasing sophistication of the consortia and collaborative partnerships that were strategically attacking technical barriers, as well as the continued entry of more large-scale companies into the field.

Voices at this year’s ABO Summit included:

Rear Admiral Philip Cullom, the Director of the U.S. Navy’s Energy and Environmental Readiness Division as well as the Navy’s Task Force Energy: “Our generation’s legacy so far is that we’re pretty good consumers. But we can be a different generation – and that generation is a regeneration generation. I think all of you in this room can help capture that….for the nation and for the world.”

Retired Vice Admiral Dennis McGinn, a leading expert on the link between energy, climate change and international security. “With the right kinds of clean energy technologies, we will have a stronger economy….and a much more secure world. I am saying that we need you for our national security. The United States armed forces need this industry to succeed…we need to recognize that the potential that algal biofuels have for the future is fantastic.”

Chris Cassidy, USDA: “Everything comes down to money, and that comes from leveraging partnerships.” Cassidy also highlighted the importance of the now-emerging discussions for the 2013 Farm Bill, which will carry rural economic policy – and energy policy via a proposed energy title – through 2018, and said that it will cover the bulk of the 40 programs, totaling $114 billion in assistance, that focus on rural development. “Hybrid projects that combine different types of renewable technologies score higher [for USDA assistance], as well as cutting down on fees, permit issues,” he added.

Jim Long, board director of Aurora Algae and a VC with Gabriel Venture Partners, said “Debt used to be party city thanks to Alan Greenspan, but he didn’t use a breathalyzer on all the people borrowing money. Emerging companies in algae, he predicted, “Will not get project finance on the first facility. The key to project finance is cash flow, and traditional project financing has taken a big hit.” Long predicted that investors for the bulk of financing needed for commercial scale will respond to creative strategies, such as taking ten percent ownership but ninety percent of the cash flow, or taking equity not only in the first project but also the company as a whole to protect against the risk that the technology succeeds but the first project fails.  Long suggested that strategic investors and government grants are keys to financing first commercial plants with first-of-kind technologies, and said that Colocation partners eg cement companies with CO2 exposure, may want to get a jump on the competition by associating with an algae project, and also that sovereign wealth funds might prove a source of the large amounts of capital needed for algae’s commercial deployment.  Long added that the Aurora ALgae pilot project cost more than $10 million, our of corporate equity. In looking at the IPO market as a source of financing from institutional investors, he described the recent spate of IPO filings as “buckle your seat belt IPOs. I have got to believe that some of those will not see the light of day.”

Gary Feldman of Lockheed Martin emphasized the interest his company is taking as a systems integrator in algal development, saying that as a global security company with a focus on energy security that algae is strong opportunity. He said that large-scale systems integratos bring experience, systems engineering rigor, and manufacturing skills to the field. He added that large scale utilities, banks and other players being asked to partner on algae projects want to see companies that are bankable, and “have skin in the game” to provide the faith in execution that will bring commercial scale engagements. But he warned in question time that systems integrators like Lockheed Martin should not be considered as potential strategic investors in algal technologies, focused instead on a fee-based performance model.

Chris Eck of Raytheon said that he was impressed that consortia with as many as 30 members have developed, and that the best approach is through cooperation. He said that there were misperceptions of big companies in terms of being agile enough to work in fast-developing technologies, and that they can be effective partners in development. He suggested that algal development partners take into account that large companies control huge amounts of money deploayed all around the globe through a series of controls, process, brand and culture. “Don’t fight the culture, use it.” He highlighted cooperative efforts between large companies such as Raytheon, smaller companies such as A2BE and Bionavitas, and research organization such as PNNL and Battelle.

Mark Warner of Harris Group said that in emerging technologies, more than 10 to 1 in a scale up step makes banks nervous, but said that while banks will suggest strong, traditional EPC contracts that involve a guarantee of the process technology from the selected engineering firm, that these sorts of contracts could drive up the project cost by 50-100 percent, and could rob technology developers of the freedom to make changes during the project’s construction. He said that, as a rule of thumb, projects generally will cost 3-3.5 times the cost of the equipment for the core technology.

On the technology front, Professor Shulin Chen of Washington State detailed a hybrid system, designed for northern climates, that would have closed and open elements and would take advantage of the mixotropic growth capability of certain algal strains. Mixotropics can grow by using sunlight when available, and also can utilize cellulosic sugars and grow without sunlight by utilizing sugars as an energy source. Chen said that while desert or ocean areas were highly promising for algal development, it is also important to “start where the agricultural infrastructure, labor and expertise already exists, in states in the north.” Chen said that their research showed that using heterotrophic approaches for seed development, and then open ponds and sunlight for accumulating biomass, worked better than open ponds alone. He  also noted that heterotrophic approaches made it feasible to seed ponds so heavily with preferred algal strains that it was possible to overwhelm other species and control against contamination.

Loy Wilkinson of Coastal Biomarine, highlighting a new low-cost closed bioreactor system, said that their research had shown that it would require algae lipid yields of more than fifty percent or greater to make algal systems work on a commercial basis, and said that photobioreactor cost had to be less than four dollars per square foot in the field.

Professor Dave Brune at the University of Missouri, highlighting nearly two decades of work at Clemson, warned that algal systems were not likely to support “business as usual” energy consumption, and that no renewable energy could overcome the fact that energy consumption in the US is incompatible with the solar footprint.

Brune highlighted systems that grew algae as a food source for catfish and tilapia, concluding that using algae as a fish feed had allowed catfish pond yields to triple, but that eventually so much algae is produced that systems had to start to pioneer uses for algal sludge that need to be removed from the ponds. As an oil-producing strategy, he highlighted the success of systems that used low-lipid algae as a food source for high-lipid brine shrimp, that could then be harvested for oil.

Ross Youngs, of Algaeventure Systems, introduced commercial lab equipment for separating microscopic solids from dilute liquids. The new equipment is based on technology funded by ARPA-E.  The new Solid-Liquid Separation Lab Model will provide researchers with a tool to evaluate processing possibilities for separation of materials into valuable products and by-products. This advancement is important to researchers in the pharmaceutical, nutraceutical, algal, food, waste, and chemical processing industries. Large-scale processing equipment is scheduled to be introduced  by June 2011.