Market Value pivoted Algae biomass productivity for oil to other high value products – is oil still on the horizon, somewhere?

By Dr. Anju D. Krivov, Lee Enterprises Consulting, Inc.

Special to The Digest

Neil DeGrasse Tyson’s vision of an algae oil machine fed with a bucketful of algae soup from a pond at one end spits out oil at the other – that must have amused the NOVA Science television viewers back in 2009 – sparking a thought provoking, super charged new vision to drive, fly and sail on engines fed with algae oil churned out from only a few of over 30,000 algae species.

As a matter of fact, the algae oil market took off about that time and a little after with the much needed investments rolling in: the Chevron backed Solazyme’s (now TerraVia) integrated biorefinery project with $22 million Department of Energy (DOE) support to deliver marine (renewable F-76) diesel fuel to the US Navy; Bill Gates supported Sapphire Energy raised over $100 million for algae-based crude oil production to start with; Heliae based in Arizona took off with $80 million raise from two $20 billion food conglomerates including the Mars family, Exxon Mobil invested $600M in Synthetic Genomic initiative; and several other initiatives jumped into the race for oil that started out as a sprint after Massachusetts based Greenfuel Technologies ceased its operations of more than $70 million in investments, and slowly the race for oil turned into a marathon for others.

The algae oil story took a different turn. In the late 1990s, the low oil prices of less than $20 a barrel brought down the Algal Species Program’s initiative started in the 1970s oil crunch environment, whereas the recent below $50 oil environment pivoted the algae companies to high value markets, especially nutraceuticals. The 2015 $1,800B Biofuels & Biocrude market saw algae oil shifting into the background, when most of the profit and cash flow conscious algae oil companies diversified into promising expanding markets in several different lines of businesses including $11B Nutraceuticals (protein, carotenoids, pigments, bioactive compounds); $560 Food (ingredients for food, oil/fat replacement); $380B Feed ($370B livestock feed, $9B+ feed for aquaculture); $560B Agro Industry (waste treatment, soil enhancement, fertilizer); $80B Cosmetics. Several other markets increasingly became interesting for algae companies such as bioplastics, chemicals and other algae related products.

Nutraceuticals including Health Food protein and Astaxanthin have been the hot go to markets for most of the oil-focus algae companies, but markets are whispering something unexpected. Heliae’s memorandum of understanding with SkyNRG, an Amsterdam-based renewable aviation fuel partner apparently fell to backdrop – instead the main focus boosted production of algal astaxanthin, a powerful antioxidant nutrient and coloring agent from an alga with quite a mouthful of a name – Haematococcus pluvialis that took off with the joint venture partners in Japan. On the other hand, serving the high value protein nutraceutical market did not work out that well for Terra Via (formerly Solazyme) – that recently filed chapter 11 and entered into a “stalking horse” stock and asset purchase agreement with the Netherlands-based company, Corbion N.V., which is currently rescuing TerraVia’s assets to extend its own product portfolio into algae-based fatty acids and proteins. Sapphire Energy’s green crude integrated with nutraceuticals didn’t go too far either – the company was originally backed with a $144 million Series C investment funding built on a vision to make the algae crude competitive with petroleum by 2018 at the rate of a minimum of 5,000 barrels of production a day – expected to be feasible combined with nutraceuticals production by integrating a spirulina strain (a flagship algae strain of Earthrise Nutritionals) into its cyanobacteria and other algae strains for diversifying the product portfolio and risk minimization. However, a few months ago, the Algae World News boldly stated – since the beginning of this year, Sapphire Energy no longer exists – it was bought by a farmer for pennies on the dollar – nothing to do with biofuels anymore, only farming.

Apparently pivoting to nutraceuticals has not been enough to absorb business risk. The risk reduction approach might lay in the unexplored territories as undertaken by Cellana, which is among the companies that started out in the algae oil space, served the nutraceuticals space, and now pursuing new emerging markets built on a new venture into the $20B natural ink market worldwide. Some are into bio-plastics market.

There was a time when the algae biofuel world had its eyes set on the R&D rush for finding new strains of oleaginous algae, and genetic modifications initiatives geared up to the top toward breaking the oil accumulation and biomass productivity barriers of promising algae strains. Solazyme claimed to extract over 80% of oil content from their genetically modified patented algae strain, another mouthful of name – Chlorella protothecoides. Fast forward, the company actually delivered jet fuel to the US Navy boosting the algae oil industry and making good case for the other players in the industry.

What is happening in the background now, given that the quest for algae oil still retains R&D appeal driven by the researchers worldwide even in this low cost oil environment? At the beginning of this year, Craig Venter’s Synthetic Genomics and Exxon Mobil extended their agreement to conduct joint research into advanced algae biofuels based on the progress made in understanding algae genetics and the growth characteristics for increasing oil production. To top that, after about six months, SG announced they doubled the oil content (from 20% to 40%) of an algae strain Nannochloropsis gaditana, that is projected to produce up to 1600 gallons per acre per year of lipids based on a proof of concept for low-carbon fuels.

Algae biomass productivity for oil is at the forefront of R&D supported by the US Department of Energy (DOE) as validated by the recent request for proposals – BETO clearly stated its area of interest is not focused on engineering, but on algal strain improvement for increased areal productivity for biofuels in outdoor conditions with a focus on productivity, robustness, and composition. Los Alamos National Lab’s biotechnology and bioengineering activities are focused on molecular tools, technologies, and resources for strain improvement; improved strains; for increasing algae biomass productivity and the energy-efficiency of algae processing steps. PNNL researchers have figured out why the Synechococcus strain of algae triples in size to accommodate a rapid expansion and flourishes under intense light by using the energy to keep growing. PNNL and Sandia researchers are on top of the $6 million Development of Integrated Screening, Cultivar Optimization and Validation Research (DISCOVR) project, designed to determine the toughest and most commercially viable algae strains, with a hope to identify four promising strains from at least 30 initial candidates.

Despite the slow algae oil market, algae productivity for oil continues worldwide. For instances, breakthroughs by Japanese scientists at the Tokyo Institute of Technology in understanding the mechanisms underlying microalgae’s oleaginous trait by investigating lipid metabolism in Nannochloropsis oceanica, while German scientists at the University of Cologne are trying to trap microalgae in biofilms to cultivate algae in suspensions, for reducing water usage by a factor of up to one hundred, while improving algae productivity.

The challenge of technologies built on genetically modified algae strains and technological advances. Advancements in genetic engineering have not been easy. First complete algae genome sequencing of an alga, Chlamydomonas reinhardtii took about nine years after the human genome project was completed in 2003, and nine years prior to that the the first complete genome of bacteria was introduced during the late 1990s. Lo and behold, this year in the month of May, the Texas A&M AgriLife Communications announced the genome of the fuel-producing green microalga, Botryococcus braunii has been sequenced. Craig Ventor, famed for beating the human genome project by three years, and his group at Synthetic Genomics made a news by doubling the fuel content in a wild algae strain without inhibiting algae growth.

Although it is true most of the algae biofuels related R&D has been and is focused in the open ponds systems area due to the cost efficiency of growing algae at larger scales. As far as efficacy of the closed systems and the line of businesses involving photobioreactors are being served by the innovations in the LEDs area showing good potential for growing genetically modified biomass in a closed environment provided by the photobioreactors that have been cost prohibitive in the past due to all the bells and whistles needed for maintaining the algae culture, until now when the cost of artificial lighting has significantly come down (think of getting LEDs 10 years ago and now). Years ago most of the algae researchers were skeptical about using high cost lighting, except for companies like OriginOil that right from the start built their systems on the artificial light for growing algae. Today, groups like Scotland based Algal Solutions for Local Energy Economy (ASLEE) consortium are actively working on the UK’s largest facility to deliver a 40,000 LED photobioreactor for investigating novel products at industrial scales. LED’s potential in running photobioreactors can’t be ignored anymore with all the innovations in this area.  Likewise, sensors have emerged tremendously equally for the photobioreactors and open systems – giving tremendous time saving controls in the hand of algae growers, for instance the recent technological advances in the sensors area requiring no calibrations.

For a very long time, the norm has been to grow genetically modified algae in closed photobioreactors to avoid messing up natural ecosystems. The latest new development defies that – bouncing back Sapphire Energy has recently completed the first outdoor field trial of genetically engineered alga, Acutodesmus dimorphus for fatty acid biosynthesis and green fluorescent protein expression – in collaboration with its University partner, and most importantly with an approval from U.S. Environmental Protection Agency. The conclusion based on the 50-day trial is that that genetically engineered algae can be successfully cultivated outdoors while maintaining engineered traits, and, without adversely impacting native algae populations.

The best direction is growing algae in open or closed systems – the argument could be made either way. In the end, if something out there turns out to be super advanced, it is disruptive in terms of oleaginous algae productivity rate feasibility and can beat the existing algae production technologies – it would eventually take over the low performing options in the long run – as for algae oil, it may be not right today in the  recently fluctuating $50 oil environment where algae oil companies are serving other markets – protein/animal feed, omega 3, and biofuel may be last on their list – all of them are expanding the market for algae!

While the algae oil industry is waiting in the wings for the oil prices to bounce back – a big question that remains is about feeding the massive algae growth. There is great merit in the Synthetic Genomics effort, but the big question not addressed in their story or other stories such as claiming to triple the algae biomass production is – what they would feed their algae with – commercially available nutrients? Solazyme’s oil producing algae was thriving on sugars in fermenters, and fuel pathway was the way, but their concept or business-model got hit by “oil below 50″ and feeding sugars for oil didn’t make sense – hence they shifted from oil to mainly protein – leading to unfortunate recent bankruptcy. Would the genetically modified algae be capable of bulking up oil over 80% of its weight in fermenters, or doubling its oil content or tripling its biomass in photosynthetic operations, and be engineered to efficiently grow on waste feedstocks without worrying about long term negative impact on the environment? Would that be realistically possible? To make sense for the algae companies to refocus and regroup, and while R&D is still focused on improving the algae biomass productivity, with or without manipulating genetic makeup, the big question is, and should be, how to cost efficiently feed massive algae growth with the dirt cheap throughput feedstocks. Because even if the technological advances in the open ponds or photobioreactors make them super-efficient in growing faster – the big question is – the throughput feedstock to grow algae biomass at massive scales.

Revisiting the Neil Tyson’s algae oil machine scenario – that machine may have to be filled with the algae not from that natural pond, but may be from the algae grown with other resources, such as, immense amounts of wastewater ending up in the municipalities, the runoff from agricultural waste otherwise creating algae blooms in the bays, rivers, and lakes and other such sources. One thing is for sure – we have certainly come a long way from the 1970s ASP’s algae oil initiative, and an outcome worthy of notice is – the oil market may have slowed down the algae oil industry, overall algae oil cost has come down –the DOE cost model showed a downswing from $240 in around 2010 to around $5 in 2016 projected to go down to $3 in 2022. In the long run, the diversion and diversification in other markets might in fact help develop the algae oil market and may be revive the vision of driving, flying and sailing powered by algae molecules. Now would that be with subsidies or without – that is another matter to deal with. Will we ever get there? Time will tell.

About the Author: Dr. Krivov is President of GSR Solutions. She is a member of Lee Enterprises Consulting, the world’s premier bioeconomy consulting group, with more than 100 consultants and experts worldwide who collaborate on interdisciplinary projects, including the types discussed in this article.  The opinions expressed herein are those of the author, and do not necessarily express the views of Lee Enterprises Consulting.