Making Algae Biofuels Pay

BD: What about other geographies and projects?

RS: We have active discussions in Brazil. In this project at Bayswater we won’t stop at 2000 modules. Consider that project one. With the amount of CO2 out of Bayswater, we could go up to 20,000 modules.

BD: What about the US market?

RS: At one stage we had some discussions with Xcel Energy in Texas, but in the current climate we couldn’t get them to first base. Obama’s statement on climate change may ultimately prove important in this market.

Editor’s Note: [Xcel Energy Inc. is a utility holding company based in Minneapolis, Minnesota, serving more than 3.3 million electric customers and 1.8 million natural gas customers. It consists of four subsidiaries: Northern States Power-Minnesota, Northern States Power-Wisconsin, Public Service Company of Colorado and Southwestern Public Service Co.]

BD: An Australian federal election is coming up, in which the opposition parties are pledged to a repeal of the carbon tax. How do schemes like a carbon tax play into your financial calculations?

RS: The project is justified to ourselves strictly on a commercial basis, and our figures do not include any impact from carbon tax. If there are any benefits, that would be a freebie. There’s no doubt that the carbon tax has helped get partners to the table. In addition, projects like these give partners additional credibility on environmental issues.

BD: Which incentives work better for you, ongoing ones like carbon taxes or tax credits like the kind you are employing to help you build the first plant?

RS: Incentives like the carbon tax give an emphasis for the power company to talk to us, more than than the other way around. So, they open their doors.

if you look at the US and the [production incentive] support to ethanol and biodiesel industries, those kinds of supports are never assured. And they become problematic when they are switched on and off. Government financial incentives can be very fickle; they hand out and take away, and it is not good economic practice to rely on them to provide viability for a project.

With the [capital tax credit rebate], there’s total certainty, because the systems is in place. It’s very real. At one stage there were changes in the rules and government took the cap off. So, now there’s no [set] cap in place, and for us, with he first project, $140 million at 45 cents on the dollar is $60 million, and that is very real money. That becomes the equity component of the project. Now, that’s not cash flow, and as far as cash flows that is where a carbon tax comes in, or a carbon credit.

But look at the EU. The carbon price got up to 18 euros, now you’re lucky to get 6 or even 4. If you were relying on that number…well, it’s just not good policy to rely upon it.

BD: Carbon prices are designed to send a signal to the marketplace to innovate and provide funding for renewable energy projects in the early-stage of their commercial trajectory, but they are not sending a signal to you, as an innovator, nor are you directly deriving any benefit from it.

RS: As I said, the signal it sends is really to the emitter, and they derive a benefit from working with us. But it’s true, here in Australia the practical impact is that money is being taken off the emitters, and is being used to buy votes with the lower income section of public. But, internal revenue is internal revenue, and that’s government’s decision. And they have other programs in place which benefit renewable energy, and they are, in the end, iall funded through internal revenue.

BD: How do you want Algae.Tec to be seen, globally?

RS: I think we are seen as a company that has the first mover with a project focused on commercially-viable algae based fuels. There are other companies out there doing good work – but wither they are behind us on the timelines or they are focused on nutraceuticals and other products.

I think we are also seen as a company that can catch carbon and grow fuel in Australia, which has increasing energy imports, and we provide jobs in Regional Australia.

As for ourselves, I think we’d like to be seen as a profitable company that happens to do all those good things like job creation and growing fuel domestically. Also, one that is capable of “punching above its weight” when it comes to building projects with large partners that have real growth potential.