Sapphire Energy, among other hardy survivors, press forward, as others melt away or re-focus on higher-value, smaller-market products.
You remember algae biofuels, don’t you?
The Summer of Algae
2009 was the ‘summer of algae,” when it seemed that every other day, there was another Mom-and-Pop, or even international behemoth, announcing that it was heading up biofuels’ Chilikoot Pass and the untold fortunes that awaited in the bio-based equivalent of the Yukon. It was a gold rush, it was a green rush, and there was excitement in the air.
Exxon’s partnership with Synthetic Genomics, Shell and Cellana, Solix, Solazyme, Sapphire Energy, Aurora Biofuels, just to name a handful.
The cautionary voices in the wilderness
A couple of voices expressed caution, prominent among them, algae’s Doctor No, John Benemann of Benemann Associates, who wanted at the time, “if algae looks good [for fuel], we’re all in trouble.” LiveFuels CEO Lissa Morgenthaler-Jones was early on the cautionary bandwagon, suggesting that most ventures were working off the wrong hypothesis and would never shake enough cost out of growing algae to go after the fuel markets.
Even Solazyme’s gold dust twins, CEO Jonathan Wolfson and president and CTO Harrison Dillon, cautioned that open-pond technology, or closed photobioreactors using CO2 and sunlight as feedstocks, were not a knock over when it came to working out a scalable, affordable technology. They openly reflected on the lessons learned at a venture with “Sola” in its name, but which proceeded to scale-up using grow-in-the-dark algae.
Back in 2009, you could hardly scan a golf broadcast for 30 minutes without seeing a message from ExxonMobil crowing about its algal biofuels research. Today, at best it is a much lower profile project, if in fact it is continuing in its original structure at all. Rumors have flown around the industry for weeks that the Exxon-SGI partnership has shut down and that Exxon is going it alone – tribute, if nothing else, to the Cone of Silence that has descended around the project.
Aurora pivots away from fuel-centric strategy
Far off on the remote northwest shores of Australia, a zone so forbidding that after William Dampier discovered it, no European bothered to show up for 200 years excepting marooned sailors escaping shipwrecks, Aurora Algae is proceeding to scale, and still talks up its biodiesel-producing chops. But the focus at Aurora, reflecting the name change from Aurora Biofuels to Aurora Algae, is definitely shifted to nutraceuticals and nutrition-based products under the A2 brand.
Sapphire stays the course
The algal biofuels landscape may feel like a a desert these days, but like an open pond once loaded with hopeful swimmers eager to claim their share, hardy survivors are pressing on. At the head of the pack in the chase for fuels, then as now, there’s Sapphire Energy.
Their demonstration facility is scheduled to open in 2014. There are skeptics. But you can see the Columbus facility in Google Earth these days, dominating the landscape of the southern New Mexico town, just a few miles north of the border.
Over at Sapphire, they have, from the start, been warning everyone that, to get algal biofuels done, you’ll need a very large war chest and a whole lot of time. One risk of an algal biofuels venture is that you never quite get to a low-enough cost to go all the way on fuels. The risk for all the other ventures is that the technology gets close enough to have a transformatively low cost of production, and eventually pivots towards “everything else” and mows every other technology down.
But those are the macro concerns, years away, and the pool of fuel demand is so large that it is hard to believe that Sapphire, if it unlocks the secret for algal biofuels at scale, would bother any time soon to launch a second project to shake down, say, the competition for the astaxanthin market.
Things that proved true, things that proved harder
Two things that have proven and remained true throughout Sapphire’s chase, according to outgoing CEO Jason Pyle, who announced last week that he is stepping down in favor of president and chairman Cynthia (C.J) Warner. Pyle will remain on the Sapphire board.
According to Pyle, a key fundamental assumption that has proven out, is the hypothesis that algal oil is sufficiently similar to petroleum-based oil, that there is a credible path to drop-in replacement fuels made from algae. “It’s one thing to assert that, another to prove it out.”
Two, that the concept of large-scale agriculture was the right technical solution in producing affordable fuels, by reaching a volume and cost structure that worked.
“Remember,” Pyle recalled, “just a few years ago how many hypotheses were out there on how to make algal biofuels work. Bioreactors, paddle-wheel ponds, floating pontoons. 2008-09 was an endless conversation for us with investors and others, about whether we had the right technical solution. We were pretty sure. Our VP of Business Development had done such an in-depth analysis and it became utterly clear to us that there was only one way.
“So what you see in Columbus [New Mexico] is really the very first real effort to grow algae at low-cost and at scale.”
What changed? I asked Pyle.
“We learned just how much knowledge there has been accumulated in traditional agriculture. I mean, it looks simple, right, to grow wheat, corn or rice. But there’s so much knowledge there. When to plant, how much water and when, when to harvest, how to defend against pests. We have to catch up really fast and create a similar body of knowledge for algae, and that’s hard. What we are learning and acquiring is all the agronomic data.
“That’s why people see things at, say, our pilot facility in Las Cruces, and get confused. For example, they see paddle-wheel ponds that look similar to what everyone else is doing, and they wonder what we are up to. But we are testing on the most minute aspects of the process. How much nitrogen, for example. It helps to have a controlled system that allows us to test right down to, say, a single element.”
For a couple of years, Sapphire has offered rice as a useful proxy for growing algae at scale.
“Conceptually,” said Pyle, “its quite useful, because rice is almost aquaculture. There’s a lot of the same infrastructure needed, for example, to move water, because you have to flood and drain a rice field. There’s pest control in an aqueous environment.
“But there are important differences. Algae has to be directly wet-harvested, and even though we believe we have a great harvesting technology, its a completely non-trivial difference.”
So, why have so many companies backed off on fuels, or backed off the sector altogether. “We started with a different hypothesis,” Pyle said, that with PBRs or fermentation you would struggle to ever reach the cost structure for fuels. The math isn’t working now for some, it may never work for them. So its a case of companies being attrition out of the field because their technology doesn’t have costs that are suitable for transportation fuel.
The Game-Changer as Attractor of capital and talent
Why stay with fuels at all? I asked Pyle. Why not dovetail into one of those easier niches? “One of our strengths,” he reflected, “has been in raising sufficient capital and attracting great talent. One of the reasons for that its that certain people will invest money, or their time, if you are going after the really big problems. You can’t attract this kind of capital or talent if you are making plastics. Fuels – they are the single largest problem on the planet, and the chance to do something really game-changing is the attractor.
“And at a practical level, there are a lot of speciality chemicals out there, and bio-based technologies may well succeed in making them directly. But for a lot of chemicals, they are made using crude petroleum oil, refined into basic building blocks. And the crude oil replacement is going to undercut a lot of the other technologies on cost.”
But the conversation around algal biofuels, and biofuels in general, has become more difficult to manage, over the years. How does one maintain momentum with capital, with people, with supporters in the government?
“The conversation hasn’t become all that much harder around the topic of drop-in, renewable transport fuels. It’s only when the technology is umped in with all of renewable energy that you get lots of opposition.”
“President Algae” and fantasy fuels
But what about the skepticism expressed in terms like “President Algae?
“A lot of that is election-year rhetoric. On both sides of the congressional aisle and in the departments, there are lots of sober-minded people who recognize that algae is one of the best options for long-term economic growth. The idea that you can just drill your way to energy security, it’s more than ludicrous, its totally untrue, and most of that is coming out of the DC echo chamber, and the people we are having dialogue with, and who we seek dialogue with, are generally outside of that echo chamber.”
What about the oil majors. Why isn’t Sapphire announcing relationships with them. Why are they still not committed to algae as a platform?
Sapphire’s point man in DC, Tim Zenk, chimed in. “The big guys are always interested in technologies that plug and play into what they already do [at the refinery]. There was a flurry of partnerships in 07 to 09, when algae was the flavor of the day, but we continue to have dialogue with them.”
One goal, many ways to get there
What about geography and the limitations of having to have a major source of, for example, CO2?
“Well, yes, algae can work with added CO2,” Pyle said, “but there are economic strategies where it can work with only atmospheric CO2. There are projects will work because they provide a beneficial use for CO2, a mix of environmental and economic goals. There will probably be projects with the sole goal of CO2 remediation. It’s like saying that there are places where corn can work without irrigation, or wheat can work without nitrogen. It’s not everywhere, every way.”
Still on track with the timelines in New Mexico – 2014 for completion of the demonstration of the company’s technology?
“Still on track,” said Pyle. “our timelines are long, but we have major customers like the DOD that are interested in quality, and recognizing that changing the energy mix takes years. It took years to convert to oil. The timelines are long, but the prize is the one people want.”
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