The Potential of Pond Scum

Stephen DeAngelis

January 24, 2008

The confluence of high oil prices and global warming has more and more people thinking green. One of the things receiving a lot of attention is bio-fuel. An unintended consequence of this attention, is rising food prices. Corn, for example, is selling for record prices. When the price of corn goes up, the price for other grains also rises. The solution to both conundrums would be a non-food source of bio-fuel — all the better if it also helps remove greenhouse gases from the atmosphere. Some people think they have found the perfect plant — algae — according to an article in BusinessWeek [“Here Comes Pond Scum Power,” by Gail Edmondson, 3 December 2007].

 

In a world spooked by global warming and thirsty for nonpolluting fuel, lowly algae hold a potent appeal. The plants sop up large quantities of carbon dioxide, a greenhouse gas, and produce tiny globules of fat that can be collected and turned into biodiesel fuel for trucks, cars, and trains. The oils might even be processed into aircraft fuel. One of algae’s great virtues is that the plant has so little in common with other sources of fuel. Unlike cornfields that are harvested to produce ethanol, algae farms don’t require huge volumes of freshwater, nor do they tie up land that could be used for food crops. Algae flourish in saltwater or even wastewater and grow up to 40 times faster than other plants. Compared with current energy crops, algae have ‘the potential to deliver 10 or 100 times more energy per acre,’ says Ron C. Pate, a technical expert at Sandia National Labs. That’s why industrial giants ranging from Chevron to Honeywell to Boeing are starting up algae business units.”

If that sounds too good to be true — well … it is. Edmondson admits algae biodiesel isn’t practical yet.

Bringing down the cost of producing algae oil in commercial volumes—billions of gallons—is still a big challenge. ‘The scale required to grow algae to a meaningful dimension is staggering,’ says Bill Green, managing partner at VantagePoint Venture Partners.”

 

Edmondson points out, however, that bio-fuels from other sources are already in production around the world, but are based on other plants.

 

Biodiesel from other plants is already a robust market. In Europe, refiners are producing 1.4 billion gallons a year from rapeseed, soy, and other plants. In all, the world consumed $1.7 billion worth of biodiesel last year. That should grow to $26 billion by 2020, says market researcher Global Insight. In the U.S., demand for such plant-based oils is quickly outstripping supplies.”

 

It is that predicted growth in demand (coupled with assumptions that crude oil prices will remain high) that is spurring investors to look at algae as a source of bio-fuel.

 

Algae’s mystique [has] attracted the attention of energy entrepreneurs such as Martin Tobias, CEO of Imperium Renewables in Seattle, which is armed with $145 million in venture capital and private equity funding. Imperium buys practically every drop of oil U.S. algae startups are producing. So far it has sold just a few hundred gallons of finished fuel. But Tobias has dedicated a 5 million-gallon refinery to algae oil, and by 2011 he expects startups to be making 100 million gallons a year. At that point, Tobias reckons, the price per gallon will fall to $1.70, from as much as $20 today. ‘The only thing missing is the farms,’ he says. ‘I prefer not to operate a large-scale farm myself, but I may have to do it.’ Extracting oil from algae is currently a cumbersome affair that involves drying and processing the plants. But some of the world’s top genetic engineers want to create improved algae strains that will produce oil continually, eliminating the most difficult processing steps.”

 

As the construction and operation of coal-fired power plants continues to create controversy, entrepreneurs are looking to the power generation sector as natural partners in this venture.

 

Startups in the U.S. and Europe are turning to power companies and local governments to back larger trials, selling the idea that algae can offset some of the power plants’ CO2 emissions. On Nov. 2 [2007], German energy group E-On Hansa said it would build a $3.2 million pilot algae farm at its Hamburg power plant with support from the city government. Portuguese biodiesel maker SGC Energia is investing in a $3 million pilot algae farm next to a power plant. It will be up and running in 2008.”

 

According to Edmondson, recent projects have stumbled because dealing with algae is difficult. Anyone with a backyard pool or who lives next to a pond understands how quickly such bodies of water can be overgrown by algae. Algae’s rapid growth is both its beauty and its challenge. If algae can be grown and turned into fuel profitably, it will be a great advance in helping ease oil and food prices — and maybe even help save the environment.