NLACM leads to changing times at Bio Architecture Lab

We noted earlier this week the changes at Bio Architecture Lab, including a change in CEO and strategy.

The story attracted a report in Bloomberg, citing that “Bio Architecture Lab has given up on the technology [and] is seeking to sell Chilean operations including a 20-hectare (49-acre) seaweed farm in a bay near the island of Chiloe and a team of 20 employees.”

Bio Architecture Lab announced last week that it is shifting business strategy to add Contract Research Organization services. BAL has bio-engineered its key microbe to digest all resident carbohydrates in brown seaweed and produce economically efficient renewable fuels.

However, the company will soldier on in developing products and projects — though apparently, not in Chile. “We will continue to focus our product strategy on the scale-up of renewable products from seaweed biomass and other carbohydrate sources,” said Ric Lucien, BAL CEO. “Now we’re offering our services to a wide range of industries to further expand the impact and reach of our technical staff.”

NLACM revisited

The Digest would point out that what BAL fell afoul of is NACLM. That’s what Aemetis CEO Eric McAfee once described to the Digest as the immutable “Natural Law of Alternative Commodity Markets”.

At the time, we first wrote about NLACM (here in “The Solyndra Effect”) we noted, “NLACM is hard to pronounce, and in fact sounds like a dog trying to get peanut butter off the roof of its mouth. But it is important to understand. NLACM states that “the value of any intermediate products produced in any process must be significantly exceeded by the value of the end product, or the end product will not be produced.”

McAfee used Solyndra as an example.

1. Produce valuable, capital intensive thin film solar panel material that captures 100% of the available light on a flat surface and converts the light energy to electricity.

2. Roll the thin film material into a circle using an expensive process, thereby reducing the capture of direct light by 50% and capturing indirect light only from white rooftops.  White industrial rooftops comprise 3% of the market, thereby eliminating 97% of the available target market.

3.  Repeat at high production volume to achieve “economies of scale” to compete with thin film and silicon crystal flat panels.

4.  Shut down the company and wonder why it didn’t work as well in real life as it did on spreadsheets.

The fallacy? “The production of thin film solar panels,” McAfee says, “is actually the highest value activity in the process, after which every process step reduced economic value and eliminated available markets.”

BAL and NLACM

In the case of BAL, the highest value activity in the process was raising seaweed, worth $1.30 per kilo, not finishing into $0.75 per kilo ethanol. As with Solyndra, every process step reduced economic value and eliminated available markets.

That’s what happened to Bio Architecture Lab’s seaweed-to-ethanol effort.