Algstralia: the land of Gold from Green

Are the reports of an algal biofuels revolution in the Back of Beyond true? The Digest takes a look (or, a Captain Cook) at Algae.Tec, Aurora Algae and more.

What do you do with a country that is basically a desert, cut off from the global biomass trade by a tyranny of distance, with a carbon emissions problem, a wealthy population, a stumbling rural economy, and the occasional political will to do something about climate change?

As the saying goes: if life gives you lemons, make lemonade; if life won’t even give you lemons, make algal biofuels.

Well, that may not yet be a household saying, but it will be soon enough if Australia has anything to do with it. These days, it feels sometimes as if titer, rate and yield are right up there with “mate”, “G’day” and “she’ll be right” in the Aussie lexicon.

It’s been a giddy couple of years of development, all right.

Projects a-go-go

Solazyme teaming up with Qantas for a renewable jet fuel project. A Dunaliella salina plant at Hutt Lagoon in Western Australia. The South Australian Research and Development Institute (SARDI), which has developed the NCRIS Photobioreactor Facility in Adelaide and is pursuing nannochloropsis and chaetoceros, and participating in an Algal Fuels Consortium with Flinders University and CSIRO to develop a pilot and pre-commercial scale facility on Torrens Island.

But there’s more.

The CSIRO Australian National Algae Culture Collection, with 300 species (1000 strains) of marine and freshwater microalgae. The MBD Energy project with OriginOil in Queensland, with R&D funded by Advanced Manufacturing Cooperative Research Centre and MBD Energy, including a test of the quantum fracturing and single-step extraction systems developed by Origin Oil. There’s the University of Queensland’s Institute for Molecular Bioscience, developing low-cost, high productivity microalgal photo-bioreactors. ANU has a project underway on algal biomass to hydrogen. The Australian Institute for Bioenegineering and Nanotechnology is participating in the Queensland Sustainable Aviation Fuel Initiative.

One of the most advanced to date is the Muradel project at Kurratha, Western Australia, which received more than $3 million in funding from the Australian government and other sources, and has completed construction of its pilot. More on Muradel here.

Whew! So that’s some flavor. But two companies exemplify the trend.

One, Algae.Tec, is backed by 700 investors after floating on the Sydney and Frankfurt exchanges, and is pursuing a closed photobioreactor system which is expects to complete in demonstration form in 2012. It features a collaboration with Southeastern US-based researchers in a technology play being deployed in association with the Manildra ethanol complex on Australia’s southeast coast.

The other, Aurora Algae, is backed by a handful of powerful venture capitalists, and is pursuing an open-pond solution, and will complete construction and inoculation of a 6-acre demonstration complex by the end of this quarter. It’s technology was initially spun out of Berkeley, on the US West Coast, and the project is being deployed in an industrial park on Australia’s west coast.

Aurora Algae

The news from Aurora this week? It has achieved several significant construction and financing milestones in its path toward commercializing its algae-based platform for sustainable product development.

The company received an initial A$750,000 of a total Australian government LEED grant of up to A$2 million for hitting key development milestones in the construction of its Western Australia demonstration plant. Aurora Algae has completed construction of the new plant, commissioned algae production and will be fully operational within 30 days. Overall,  $1.85M of the grant was related to the demo facility, and $150K for the first commercial facility, so the company expects to receive most of the funds by the end of April.

The company has also completed the build out of a new 35,000 square foot HQ in Hayward, California, moving the company from its Berkeley roots more towards the hot job base of Silicon Valley.

The site in Western Australia, at Karratha on the northwest coast, was acquired in 2009 from the failed Aquacarotene venture for $2 million and a 2 percent royalty on future revenues, capped at $18 million.

The next milestones? After completion of the demonstration facility, which will initially contain 6 one-acre ponds, four 400 meter ponds, four 50 meter ponds, and 38 micro ponds – a five-acre pond will ultimately will be built upon which the company expects to roll out its commercial design. After that, the company goes into fundraising mode – and is considering both public and private options for raising its equity stake, which it hopes to complete in 2011.

The first commercial facility would then take 12 months to construct, and initially open in Q1 2013 before reaching full-scale production by Q3 2013. They haven’t announced their CO2 sourcing yet, but it will come from one of the industrial tenants in the Karratha industrial complex.

Aurora’s secret sauce? From the point of view of time, its long-running, stable pilot system gives it perhaps the best chance of any company of gaining first-mover advantage in commercial-scale open ponds. From the point of view of technology, its their use of seawater and saline-friendly algae, solving a host of problems related to water usage at scale, and also the sourcing of some critical micronutrients, such as phosphorus.

At what cost or yield is Aurora producing its algae at present? The company is keeping its lips sealed, for now. Also they are not talking much about how much they will be raising for their first commercial facility, though CFO Scott McDonald told the Digest that the Amyris, gevo and Codexis’ capital raises from their IPOs “are in about the right range”, and confirmed that the capital raise “will not be a project finance deal – like in a scenario where you are doing an ammonia plant, and you kind of know all the elements – this is first of a kind, so equity and or a combination of some debt layered on that as well is probably what will be raised. The IPO option is not out of the realm of possibility, although what we do will depend entirely on the size of the facility we build. McDonald added that the company is looking at several size configurations for the first commercial plant to scale the development to match the financial community’s appetite.

Algae.Tec

Unlike Aurora, which has appeared frequently in the Digest over the years, Algae.Tec roared right out of stealth mode and into the public markets via a successful flotation on the Australian Stock Exchange this year. The company is the result of a partnership between the Australian financier and environmental entrepreneur Roger Stroud and former Foster Wheeler and Dow technologist Earl McConchie. Following Stroud’s departure from the Natural Fuels biodiesel venture, the two paired up to pursue a closed photobioreactor system after trying and rejecting the open pond route.

“We had three or four light bulb ideas,” recalled Stroud, “on how to develop a closed system that worked economically.” Two key innovations dealt with the build up of oxygen in a closed system, as the algae respirated, and the build up of heat which has plagued many a closed system by triggering either a loss of productivity in the algae or costly requirements in cooling down the system. They’re keeping quiet about the nature of the breakthroughs they achieved, and the nature of their algal extraction system.

In another way they are wildly different than Aurora Algae – they are far less coy in terms of talking through the economics of their system, and the capital they are raising. In their pilot, they say they have achieved 32,000 gallons per acre per year (keep in mind, this is a closed system, where yields can be far higher than in conventional open ponds), and are projecting a basic cost of $40 per barrel. That’s based on yields of 250 tons of dry algae produced per year, per module, with a 500-module system producing a total of 125,000 tons of algae per year. Ehnough there, with a 25 percent lipid content, to produce around 35 million gallons of biofuel and around 90,000 tons of algal protein and carbs, suitable for feed.

Those economics? That’s light years away from what, for example, Solix had been discussing a few years back when they said they were looking at costs of $33 per gallon.

Even more remarkably, they are discussing an installed capital cost, about $2 per gallon, according to an interview that McConchie gave to AI’s Bob Brooks, here.

Can it be true? Skeptics will be in abundance. But we won’t have long to wait to see their progress. They’ve commenced the process of installing an entirely modular system, assembled in the US and delivered to the Manildra ethanol plant in Nowra, NSW, two hours south of Sydney, source of a lot of free carbon dioxide as well as an industrial setting.

They expect to have the “Shoalhaven One” demonstration plant completed by Q1 2012 for a total project cost of $2.5 million. That’s a fraction of what any other major algal venture has been projecting for its demonstration, but they say they expect to have validation of their model within two to three years.

From there? “China has a five-year plan to reduce carbon emissions,” noted CEO Stroud, “and we have developed contacts through Perth and into China.” There, they are looking at using flue gas for their CO2, noting their expectation that it only need go through basic scrubbing to remove toxins such as mercury to be usable for their algae.

Their markets? Selling algal oil as a commodity product, and a high-value protein feed – so, unlike Aurora Algae, no biodiesel production bolt-on. If they reach their yield and economic targets, they will have no shortage of customers, for sure.

Algstralia

So, there we have the latest from Algstralia.

Takeaways? It’s moving fast, excitement is high, and there’s a broad enough proliferation of technologies that, in essence, Australia is getting the benefit of a portfolio approach to developing advanced algal biofuels, with the economic burden lessened by international investment.

We’ve heard the claims before, the optimistic timelines, the commercial developers talking in 3-5 year terms and the academics using phrases like “in the next decade…”.

Is it a case of “no worries, mate, she’ll be apples”, “bloody hard yakka”, or “a complete furphy,” (translated: fine, a tough slog, or impossible)— for sure, we’ll know by the end of 2012 which lens to use.

Next year? That’s not all that long to wait.