$500/BOE Profit from Algae? Yes We Can!

February 9, 2015 |

By Stafford “Doc” Williamson

 

The Biofuels Digest is a little treasure trove of goodies. I just found one that helps make the case that algae derived biofuels are closer than you think. I mean, economically viable algae-based biofuels.

In an article published recently (Jan 12, 2015) in the Biofuels Digest  with the unlikely title of “Gorilla Sized Opportunity Blindness” I spoke of an instance in my own experience of the challenges in convincing anyone that a great leap forward in the production of biofuels from algae was even possible in the short term. The US Department of Energy’s Office of Energy Efficiency and Renewable Energy has a plan. Specifically it has a 5 year plan known as the Multi-Year Program Plan (and with the typical zeal of most governments to pepper us with acronyms, this is known as the EERE MYPP). The 5 year plan sets out goals for 2030. No shame in being cautious with a grand ambition to change world.

The latest revisions to this MYPP happened in November 2014, in which it now states, “By 2030, validate demonstration-scale production of algae-based biofuels at total production cost of $3/GGE (2011$), with or without co-products.” (Just in case any of you have not encountered that particular proliferation of acronyms, GGE stands for “Gallon of Gasoline Equivalent”.) Indeed some companies that have had a firm target of producing biofuels for years, are now softening that stance into a transitioning to biofuels after attempting to produce alternative products which are already a financially survivable strategy.

Clearly if the DOE’s expectation is that it will take until 2030 to get to $3/GGE (which they estimate, at the time, will be reasonable expectation of market rate for retail gasoline) it seems likely that few if any of today’s algae focused companies will survive crossing the financial desert of not making $3/GGE fuel until then since some recent reports are that most firms have barely reached $13 cost basis.

I noticed, too, that one of the reported discussions in the “Proceedings from the Algae Biofuels Strategy Workshop” of the EERE that took place in Charleston, South Caroline on March 26–27, 2014, said, “If it doesn’t make money, it’s not going to get funded privately. To operate a business and to build an industry, one has to generate profits at small, medium, and large scale.” So the EERE can’t plead ignorance on the importance of bridging the funding gap by some means or other.  Another topic arising at the same workshop that appears in the proceedings was, “There is a need to find ways to disseminate success publically as an industry without jeopardizing intellectual property.”

So, I am going to take that as a personal challenge, right now. I will tell you how I would create an integrated algae fuel and co-product facility, that minimizes wastes and should be close to financially viable (and I’ll get around to telling you why I think so in a minute). There are several distinct components to an “integrated” algae to biofuel operation that will maximize the efficiency of the whole chain of processes. It may well be that the best way to assure that this complex set of interactions is profitable would be to have a corporate structure of a single corporation or entity. It might (more likely) be best if each separate phase it operated by a company that it already experienced, preferably expertly so, in the operation and management of the process as a separate business.

What I am proposing then, in effect, is a consortium or joint venture of experienced companies although a set of COO’s or operational Presidents might seem a viable alternative, the capital requirements of this as yet untried combination would almost preclude such a barebones startup, regardless of the experience of the individuals. Here then, in a nutshell is how this integrated process would work.

Sunshine is input as energy, carbon dioxide is drawn from nearby industrial processes or the flues of several apartment buildings.

Algae processes carbon dioxide and Sunlight into oils and a set of proteins, starches and sugars (and some leftover water, preferably salt water so this process does not draw upon fresh water supplies) as they grow rapidly. Algae species is chosen for rapid growth rate at 2 biomass doublings per day, not for high oil content (30 – 35% would do handsomely, 20% is still workable, and perhaps even preferable if that species is heartier). Notice that a fast growing algae species quickly outpaces the lipid production of high lipid content species that only reproduces its biomass 1 time a day. (Botryococcus braunii is a great example of this. Very high oil content, very slow growth.)*

Algae is harvested, thickened and broken apart by electromagnetic forces.

Gravity based sedimentation separates the components (which have already been dewatered).

Resulting oils receive hydrotreating and differential distillation to become renewable diesel and renewable jet fuel.

Protein, starch and sugar mixture is partially dried.

Fish heads and other offal from fish processing are ground fine and mixed with the algae protein/starch/sugars compound (Note that with 30% oil content in the algae, for every gallon of oil produced, there is about twice the weight in the other compounds which is one gallon of algae oil extracted matches about 20 pounds of protein/starch/sugar mix.)(If it is just 20% oil/lipids one gallon algae oil equates to also providing 30 pounds of the protein/starch/sugars).

The output fish/algae protein/starch/sugars mixture is pelletized.

Pelletized output is fed to fish (from whence the fish heads) (note at this point that the protein/starch/sugar mixture still contains a small percentage of algae oil as well).

Fish farm is part of this complex, on same property (No transportation costs for the fish food, nor for the fish heads used above). It also uses the same saline water as the algae, so ocean fish are raised.

Fish farm pens “sweep” fish from one tank (Tank #1) to another tank (Tank #2) using screening, while water is still flowing into the prior tank.  Once fully separated, access to the new (Tank #2) is closed. The old tank is “flushed” into holding tanks for distribution of the feces and urine of the fish to feed the algae. Tank #1 is then scrubbed clean and sanitized before being refilled gradually by allowing water from Tank #2 to flow through diverting it from the recycling pumps. Of course this process includes supplemental water enough to keep both tanks filled until all the fish are swept back into Tank #1, or moved on to the next tank as they grow to the next increment in size.

The scale of the fish farm (no pun intended)(okay, a little bit intended) is a delicate balance between the output of the algae as fish food, the output of the fish feces and urine as nutrients to sustain healthy growth of the algae, and the best volume of fish to provide to the market to operate profitably. As noted above, you need an expert operator for this part of the overall operation.

Mature fish are cleaned and processed on site. Fish heads and offal are recycled into the feed process. Fish heads also contribute fish oils to the nutrient mix. To the extent possible fish are sold fresh into local population center(s) (obtaining premium prices), otherwise frozen for national distribution (Freeze processing could be internal to this complex but probably more profitable to sell to an experienced company already in the fish freezing business).

Hydrogen for hydrotreating is obtained on site by electrolysis of water, the oxygen is used to supplement dissolved oxygen in the fish farm water. Oxygen supplementation could be used on the algae growth medium if necessary, too. This process, while in itself is not very efficient, is probably cheaper than purchasing these gases, and also makes the gases available “on demand”.

So the bottom line here is with 30% oil content and ordinary growth rates of biomass doubling about once per day, when you get to a barrel of algae oil,  which  weighs somewhere in the range of 315 pounds, you also get approximately 840 pounds of the protein/starch/sugars compound. With the 20% oil content, for each barrel of algae oil you extract, you also produce about 1250 pounds of our fish food base.

Now, as I hinted at back in the first paragraph of this article, here is the nugget from the treasure trove.

This nugget was provided by Jim Lane, Editor and Publisher of the Biofuels Digest in an article he wrote back in December of 2014 (not that long ago). His article was called “The DOE’s shifting worldview for biofuels deployment, now through 2030”. Contained therein was something that set my mind’s wheels in motion. Jim talked about how both the DOE and the NAABB are drawing an equivalency between algae biomass and soybean meal. Jim suggests that we look elsewhere because soybean meal is valued at a little less than $400 (or $300 according to NAABB).  The elsewhere that Jim points to is exactly where I derived my plan for an integrated algae operation (as described above, though the original idea was born several years ago talking about feeding algae to Tilapia in Africa).  What I didn’t know was how highly fish food meal was prized, and priced. My little brain cells were clapping their hands (okay, clapping their little axons and their tiny dendrites were positively aquiver) when Jim dropped that pearl at my feet (okay, okay, mixed metaphor, pearl and nugget, sometimes I can’t help myself).  The article pointed out that properly processed, and I think with some refinement the above description covers most of that, the protein/starch/sugars complex from algae can be considered to be fish food, which has a market value of at least $1300/ton, and as high as $2388 just last December 31, 2014. (Market information provided by FAO of the United Nations available  here,  also see end notes for more information.)

Let us take a conservative estimate and use the number mentioned in Jim’s article of $1800/ton.  That means if we attribute sales of a barrel of oil at $3/gallon (not necessarily GGE, but algae oil) a subtotal of $126 is received. Then we take the fast growing 20% lipid algae which, in addition to that 315 pounds of oil, has also produced about 1260 pounds of the protein/starch/sugars (ignoring the fish heads for now, since these are the algae is the main ingredients in our fish meal) which is theoretically “sold”/valued as fish meal at $1800/ton, therefore this is an additional $1134 co-product of that $126 of oil. Therefore our 42 gallons of oil plus co-product earns a grand total of $1260 revenue. So taking DOE/NAABB’s assumption that current costs to produce a single gallon of GGE is $13, of which we will attribute $1.50 to refining and transportation costs, so we call that “just” $11.50 real algae oil production cost. In that case our $11.50 times 42 gallons is $483. But even though we only received $126 for the oil itself, our revenue was $1260, so gross profit per barrel of oil produced is $777.

If that isn’t impressive enough, remember that the value of the fish meal was really just an intramural substitute calculation replacing externally acquired fish meal as fish food for our own fish farm and that our fish farm is run by expert, experienced fish farm operators. It is not unreasonable to expect that even charging (internally) the full wholesale price for fish meal, that the fish factory will also return a profit on the fish sold (fresh or frozen). Therefore the above calculation is a bit conservative, too.

Now, of course, this kind of “integrated” algae production and revenue generating system is not cheap to leap into creating.  It might be necessary for the Department of Energy to provide the services and financing from within their Demonstration and Deployment division of their Biomass office. The good news on that front is the DOE and USDA have been offering grants for development of an “integrated” algae production and processing system in the past. But even then might “choke” on the billion dollar price tag of this kind of a complex. I hope it can be done for less, but the concept is certainly financially viable. Of course how to maximize this opportunity will take a collection of the experts from each of the fields that make up the elements of this integrated concept.

If you are the first to put together such a team, I will be glad to help in any way I can.

 

 
ENDNOTES:
*I did promise above that it would be a “nutshell” version so, for those who are interested, here is the math on high oil content (at 50% in this example) versus low oil content but fast growth/reproduction cycle of 2 times a day.  Doubling each day, for the 50% oil case looks like this. The first day is a doubling of 1, so day one produces 2 times the original biomass, day 2 doubles 2 for total of 4 times, and so on (remember, the lipid/oil content is only 50% here) so 5 days gives us 2 to the fifth power ( 25 ) = 32 times the original amount which at 50% lipids/oil is 16 times as much oil as in the starting quantity of algae. With fast growing algae of 20% oil content, but 2 doublings of biomass per day, we get 4 times the first day (but only 20% lipid/oil), double twice on  day 2 for a total of 16, and so on. In this case we get 1024 times the original biomass by the end of the fifth day we have 10 doublings of biomass over those days which is 2 to the tenth power) ( 210 ) = 1024 times the original biomass. Of that, 20% is lipid/oil so we get about 204 times the original amount of oil, which is certainly impressive in itself. But the other important number in this example is that we get about 820 times the original amount of protein/starch/sugars mixture which goes into the fish food.
Further research references:

More about Fish meal.

More about Fish meal prices (this is a paid market information site, but you get one screen for free, and an offer for a free trial).

Fish meal prices have been above 1300 since month end of 2009, and frequently far above, including December 2014 where they ended at $2388.57 according to this web site.

Tags: , ,

Category: Producer News

Comments are closed.