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Friday, December 2, 2011


How are algae to biofuels companies doing?  It all depends on who you ask.  There are companies actually producing fuels from algae.  Here is BFS Blue Petroleum in Sevilla, Spain (above).  This is  exactly what we were doing in the mid-1970's with funding from the Electric Power Research Institute, but using raceways.

However, the Enhanced Ocean Upwelling (EOU) workshop this week at the University of Hawaii gave me the impression that a shake-up of companies is occurring.  I asked one of the speakers if $3/gallon ($126/barrel) algae biofuels could someday be possible.  Her answer came in three parts:

1.  99% of algae biofuels companies will go bankrupt.  I'm not sure if this was a pointed exaggeration, meaning her number was inflated and she was just trying to say that things were not going so well, but #2 offers one reason.

2.  Some companies (and even, once, DARPA) suggested that $1/gallon ($42/barrel) was possible, and maybe even soon.  The EOU speaker said their calculations show that just the cost of pumping fluids at terrestrial based (all these companies are on land) facilities would cost the equivalent of $50/barrel ($1.20/gallon), so clearly $1/gallon algae biofuel is not possible.

3.  Her company is now focusing on co-products, not the end fuel, as the revenue foci.  If you analyze the early DARPA analysis, you will note that the biofuel itself was secondary to some value for wastwater treatment and a slew of possible co-products.  However, at the volume necessary to make a difference, these higher value commodities would flood the market. There is not any ultimate reality. This all confirms what David Kyle, formerly of Martek, keeps telling me.  Don't!  He pronounced at a University of Hawaii campus seminar two years ago that biofuels from algae could be produced at large scale for perhaps $500/gallon ($12/gallon).  This stunned the audience, but no compelling evidence was offered to contradict him.  I still think science and technology will someday bring these costs down to $4/gallon ($168/barrel), but, then, oil would need to be at $200/barrel, and stay there for decades, for any profits to be made.  In short, "it's the co-products, stupid."

Incidentally, I kept pressing the EOU speaker about that $3/gallon cost, and she eventually, and weakly, said, this might someday be possible.

So why are all those airlines proudly announcing that they experimented with some exotic biofuel in their flights?  The best as I can determine, for PR points.  Now, Richard Branson, founder of Virgin Group, is trying, and actually announced converting carbon monoxide-rich gas steams from steel mills into jetfuel, and to use this fuel in their flights from London to Delhi and Shanghai within three years.  This concept, while not using any algae, makes sense to me, and should be economically in the ballpark.  But I worry that one of my dreams from the 70's that algae could someday produce biofuels for aviation might well have been fanciful.  I haven't given up yet, as marine algae is two to five times more efficient than any land crop in converting sunlight into biomass, and who knows where science will go with genetic engineering and human ingenuity.  But in most things sustainable these days (including my sense now that intermittent sun and winds, plus all that biomass, will not be sufficient to maintain current lifestyles for 7 billion people), my optimism is gaining a darker shade of pessimism.

Yet, on the plus side, there are more and more assorted biojetfuel activities popping up.  Even the Federal Aviation Administration is passing out money for cleaner, more sustainable jet fuel.  This from Advanced Biofuels today.  That United aircraft to the right was the first to fly commercially with a blend of biofuels and jetfuel last month.  This was in Houston, and I just happened to be there.

Another possible development is if the world suddenly mandates a 10 cent/pound carbon dioxide tax, which would be equivalent to a $2/gallon tax on oil.  This differential would equivalently drop $4/gallon ($168/barrel) algae biofuel to $2/gallon ($84/barrel) and make this option competitive.  However, Hawaii is trying to add a $1/barrel (only 2.4 cents/gallon!!) barrel tax for petroleum, and this will probably not make it.  Can you imagine our U.S. Congress today agreeing on an $84/barrel tax on oil?  The politics and reality of business are such that most of our sustainable options will struggle, especially biofuels from algae companies.

To close, from, switching back to my mood of today, a disheartening dialogue on this subject entitled:

The person asking the questions is Jim Lane (right), Editor of Biofuels Digest.  If the RMN (Raise Money Now) factor is the only reason why some algae companies still exist, and their CEO is merely the Cash Extraction Officer, where potential commercial competitiveness is not a particularly important factor, there should be great concern for the future of this field.  If petroleum skyrockets to $200/barrel, David Kyle notwithstanding, I think they will succeed.  But if the price of oil remains at $100/barrel when the absolute best their factories can do is to produce a biofuel product for $126/barrel, you got to be concerned.  The Chicago Mercantile Exchange has oil at $94.60/barrel in December of 2020.  If oil remains under $100/barrel for another decade, those algae companies still surviving will only be producing high value bioproducts.

The Dow Jones Industrials remained largely unchanged today, slipping 1 to 12,019, with world markets mostly mixed.  Gold rose $2/toz to $1744 and oil remained somewhat stable, the WTI at $101/barrel and Brent at $110/barrel.


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