50 Hottest Companies in Bioenergy: Special Voter’s Report on Algae

Algae, algae, algae.

Open up an industry magazine or a website, and there doesn’t seem to be an end to the hope, the hype, and the coverage.

What’s the big deal?

The background

Microalgae is a fast-growing organism that is highly efficient in converting sunlight, CO2 and micronutrients found in water into simple sugars. So efficient, that it stores a lot of energy in the form of lipids, or fats. A microalgae cell can be as much as 70 percent fat content, by weight. Microalgae can double in mass by as much as 100 percent in 24-48 hours.

The combination of high yields and high lipid content has attracted energy developers for decades. A 17-year US government program to explore algae as a biofuels feedstock – the Aquatic Species program – was shut down in 1996 after researchers concluded that algal oil could not be competitive with fossil fuel oils in the near-term. A few ventures, such as Erathrise, CyanoTech and Martek continued to pursue and commercialize microalgae as a feedstock for nutraceuticals such as THC and spirulina powders.

The rise of concerns over emissions, energy security and rising oil prices revived interest in algae by 2004. Though early ventures such as Green Fuel were generally unsuccessful, a new generation of algal developers have developed new paths that promise to make algal fuels, chemicals and algae-based feed a reality in the next few years.

The story

The Obama administration has increased government funding and mandates in support of renewable energy with many billions of dollars of new R&D funds. This government aid in the form of grants, subsidies and tax credits has created a tremendous opportunity to accelerate the development of algae-to-energy technology and grow the production of algae-derived oils from a infant industry to an actual one, with potential growth on a massive scale.

Huge markets for algae products exist in liquid transportation fuels, animal feeds, bio-plastics, renewable chemicals, and food-grade oils. According to the US Department of Energy, the long-term commercial potential of algal fuel and other high-value co-products is as high as $3 trillion, if and as algae replace fossil oils and oilseed crops as a platform for fuels, feed, fertilizers, chemicals and nutraceutical products.

In 2007, the US Energy Independence and Security Act mandated the blending of 36 billion gallons of biofuels per year into the United States fuel supply by 2022. Advanced biofuels, which include algal fuel, are mandated to supply 21 billion gallons of that demand. Energy Information Administration data indicates that biofuels currently sell for between $2 and $3.50 per gallon, depending on fuel type and grade. We expect the advanced biofuels market to be between $42 billion and $73 billion in annual sales by 2022, based on such mandate and fuel prices. Today, the market is less than $100 million.

President Obama’s policy to replace up to 60 billion gallons of imported fossil fuels per year with renewable fuels by 2030, creates a massive market for potential renewable fuel producers. America’s new energy directive, together with the European Union’s 20% renewable fuels target by 2020 and similar fossil fuel replacement policies by governments around the world, leads us to the conclusion that renewable liquid fuels could replace up to 200 billion gallons of fossil fuels globally by 2030, with a resulting retail revenue base ranging from $600 billion annually to as much as $1 trillion.

According to Greener Dawn Research, residual algal biomass can also be marketed as a high-protein concentrate (or higher-purity isolate) for animal or human consumption. There is an established market for these protein supplements. In the U.S. alone, according to Greener Dawn, the protein ingredient market in 2007 was valued at $3.9552 billion.

Soybeans sell for approximately $0.12 per pound, whereas soy protein isolate sells for approximately $1.92 per pound. Studies contained in the Journal of Nutrition (volume 95) provide that the biological value (BV) of algal protein (BV of 70 to 80) was comparable to heated soybean meal, with a BV of 75. (Biological value measures the degree to which the body can absorb and use the protein, with a higher number suggesting greater absorption and utilization.).

A burgeoning market for algae for use in bio-plastics and renewable chemicals is also emerging. Most recently, Dow Chemical invested approximately $70 million in Algenol Biofuels, Inc. to build a demonstration plant creating ethanol from algae (in lieu of natural gas, as Dow Chemical currently does) for use as an ingredient in plastics, according to the companies as reported in Biofuels Digest and other media.

Demand for algal-based fuels, chemicals, and feed is not only driven by the desire for lower cost, but also a smaller carbon footprint. A sustainable advantage of algae over traditional crops and fossil fuels is the carbon savings achieved by using algae as a feedstock. According to Sapphire Energy a lifecycle assessment of algae showed a 60% drop in CO2 production, compared to fossil fuels. Based on a carbon cost of $15 per ton (the projected carbon cost in 2012 under the post-Kyoto Treaty), the algal advantage is a sustainable $0.20 per gallon, and carbon costs are expected to rise until at least 2050 because of increasingly-high carbon reduction targets.

According to a recent article from Biofuels Digest, more than $1 billion US dollars have been privately invested into the development of algae technology companies in the past 24 months by companies like ExxonMobil, Shell, Chevron, Valero, Dow Chemical, ARCH Venture Partners, Wellcome Trust, Cascade, Venrock, Roda, Harris and Harris, Braemar Energy, Lightspeed, VantagePoint, Biofields, Valens, Laurus, Oak Investment Partners, Noventi Ventures, Gabriel Venture Partners, Valero, Shanghai Alliance Investment, Southern Utes, Infield Capital, I2BF, Bohemian Asset, and Quercus.

According to Greener Dawn Research, “Algal oil offers a direct potential replacement for petroleum and plant derived oils. This is a vast market opportunity. Most of the media attention goes to the potential displacement of petroleum-based gasoline and diesel fuel, as the transportation industry relies almost entirely on petroleum and accounts for roughly 70% of the total consumption of petroleum in the U.S”.

Advantages of Algae

There are more than 100 known feedstocks for biofuels, but algae are believed to have the highest known yields on a per-acre basis, owing to its fast reproduction rate. In addition, algae can be grown without requiring the use of land that could be used for food or feed production using terrestrial crops, and can be grown using brackish or saline water. According to Oilgae, “Market analysts and producers consider algae an especially promising feedstock, as it can be grown virtually anywhere and, by some estimates, can yield 2,000 times more oil than soybean feedstocks.”

Evolved from ancient times, more than 30,000 different species of microalgae have been described and catalogued to date. As members of the Phylum Chlorophyta, microalgae all share seven characteristics that make them potential powerhouses in the production of renewable fuel:

1. Carbon-Neutral. Like nearly all plant life, microalgae absorb carbon dioxide from the atmosphere in their formation, making them a “carbon-neutral” source of biomass for conversion to liquid fuel. That is, the CO2 they emit when burned or otherwise converted to mechanical energy has been previously taken from the atmosphere in their formation, creating a cycle of carbon absorption and release. This contrasts starkly to fossil fuels, which simply emit previously stored carbon and add to the greenhouse gas buildup in the atmosphere.

2. Readily Convertible to Fuel. Like nearly all forms of biomass, microalgae can be readily converted to renewable transportation fuels such as green gasoline, green diesel, ethanol or biodiesel, or otherwise burned or consumed for power generation. In fact, the scientific consensus today believes that fossil oil and gas was created from ancient microalgae that fell after death to the sea floor and were converted through time and pressure into crude oils and methane (natural gas).

3. Low-Cost, Low-Input Feedstock. Microalgae reproduce from a simple combination of energy sources: sunlight, CO2, a small dose of nutrients such as nitrogen, phosphorus and iron, and a body of water in which to bloom.

4. High Oil Content. Microalgae are composed of three types of biomass: algal oil, starch and protein, all of which can be used to create biofuels, and the first two of which are the primary sources of biodiesel and ethanol, respectively. Oil content ranges from as little as 5% in some species, up to over 50% in others, and can be stimulated by denying certain nutrients (usually nitrogen) up to 5% of the biomass by weight.

5. Rapid Reproduction, Highly Energy Efficient. Microalgae reproduce rapidly. In fact it is not uncommon for biomass, in a laboratory or commercial production facility where algae are not competing with other organisms for sunlight, to double in biomass daily.

6. Microalgae are the second-fastest growing form of biomass, converting as much as 7 to 8% of the Sun’s energy to biomass. Because of this efficiency, algae in scientific tests have been shown to produce as much as 6,000 gallons of fuel per acre of growing space per year, almost six times the next most efficient source of biomass for liquid fuels, (which is palm oil), 7.5 times the productivity of sugarcane, 15 times that of corn, and 100 times more efficient than soybeans.

7. Produced On Nonarable Land. Microalgae, because they are cultivated in water rather than directly from the land, can be cultivated on nonarable land using a minimum of inputs. It does not compete with other uses of arable land such as food or feed production. As observed from massive algal blooms in the Gulf of Mexico and along the Adriatic and Chinese coasts, algae can bloom rapidly without any inputs from farming at all, drawing its nutrients from the water, CO2 from the atmosphere and light energy from the sun. Commercially, it is more efficient to supply CO2 from sources such as power plants, adding nitrogen, phosphorus and iron directly as well, but in either scenarios microalgae grow rapidly without the input-intensive agriculture that we are accustomed to with land-based plants.

Competition in Algal Biofuel Industry

More than 50 algal fuels and chemicals companies have started up in the past 60 months and are in current early-stage operations. At least 16 closed-system photobioreactor companies have started up, although to our knowledge no closed-system photobioreactor company has yet reached commercial-scale production. Of these 50 companies, twelve leading algae-to-fuel competitors are highlighted below, including their investors and commercialization target dates, as applicable.

The DOE is also currently funding two programs aimed at developing algal fuel, with a target of $3.00 per gallon fuel by 2012, led by General Atomics and SAIC. Neither group has yet reported that they are on track to reach this cost-level, indicating that, meeting all the timelines and cost goals in its plan. Meanwhile, our small yet resourceful Company could have the first commercially available system with a cost of under $3 per gallon when it has completed its SES project in month 24 of our plan. Aquatic Energy, LiveFuels and Aurora Biofuels are also making noted progress, among many others.

Latest News on Some Key Players