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Algae Biofuels Must Soon Show They Can Make It on the Market

ECONOMICS OF ALGAE

Minimal land use: Algae require much less land than traditional row crops, such as corn. In addition, algae can grow on nonarable, nutrient-poor land that won’t support conventional agriculture.

High yield: Algae grow quickly at a large scale and can potentially generate up to 50 times more the amount of oil per acre than row crops, like corn and soybeans, which produce vegetable oil.

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Not competing with agriculture: Production of algae for biofuel doesn’t require arable land needed for food production, fresh water for irrigation or application of petroleum-based fertilizers. Algae farms can thrive and expand without taking land that’s needed for crops.

Renewable energy: Sunlight is the original source of all liquid fuels. Algae use photosynthesis to capture sunlight energy to produce oxygen and carbohydrates, creating a natural biomass oil product.

Source: San Diego Center for Algae Biotechnology

San Diego’s biggest players in the algal biofuel space have already proven that oil derived from algae can be used for fuel that works in the gas tanks of today’s cars, boats and jets. But there’s still a major question looming: Is it possible to produce this type of biofuel at a scale that makes it price-competitive with gas at the pump?

“We’ve shown that the biology works; that’s no longer the debate,” said Steve Mayfield, director of the San Diego Center for Algae Biotechnology at UC San Diego. “Now it’s about the cost and the economic viability. I don’t want to say this is a make-or-break year, but I think that by the fall of 2012 the answers will be more obvious.”

That’s because some of the biggest players in the algae biofuel industry — notably, Sapphire Energy Inc., General Atomics, and Synthetic Genomics Inc. — are getting very close to finding out just what it will take to get their products to market at a price consumers are willing to pay.

Recipe for Success?

Algae are promising sources of feedstock for biofuels and biochemicals in part because they grow in salty, nonpotable water, use land not suitable for agriculture and require only sunlight and carbon dioxide to grow.

San Diego-based Sapphire, in a partnership with the U.S. Department of Energy and the U.S. Department of Agriculture, is developing a 300-acre algae production center in Columbus, N. M. The project is still three years away from completion, but a third of the center will be up and running by next year at this time.

“After it’s operational for a while, we’ll be able to prove out the techno-economics,” said Jason Pyle, CEO of Sapphire Energy. The plan is that the center will be large enough that “we’ll get to a point where it’s scaled.”

Sapphire’s seeking to produce “green crude” that sells for about $75 to $85 per barrel, Pyle said. “Our goal here is to be competitive with a marginal barrel of crude oil,” he said. In three years, with the Columbus plant in full swing, the company hopes to achieve that goal, he noted.

Sapphire also has a 22-acre research laboratory in Las Cruces, N. M., where it’s testing new methods for growing algae and extracting oil. Those are two of the other critical elements in determining the price of the end product.

Meanwhile, Synthetic Genomics is working with ExxonMobil Research and Engineering Co. to turn algae into a commercial-scale biofuel. ExxonMobil has invested $600 million in the project. And General Atomics is focusing on algae-based oil that will be used as a replacement for petroleum-based diesel fuel.

The big push to commercialize algal biofuel comes at a time when the investor community is getting more selective about where it puts its money — and as the pool of biofuel companies nationwide grows, boosting competition for government grants. Sapphire has been able to secure more than $200 million in venture funding and grant money, but not every company is so lucky.

Going in a New Direction

As a result, more and more companies that started in algae for biofuel are now moving to aquafarming or algae byproducts.

“We recognized very early on that it would be decades before (algal biofuels) would be commercially viable,” said Jack Van Olst, president and co-founder of Kent Bioenergy Corp. in San Diego. “You’ll never get more than $2 a gallon for the raw lipids that come out of algae. That’s about 25 cents a pound for your products. To be profitable you need to be able to grow algae for 2 cents a pound.”

Kent continues to hold a number of biofuel-related patents, but its main focus is now on using algae for pollution control. The company cleans water that’s been polluted by nitrogen and phosphorous from landfill and farm runoff. The water eventually is fed into trout streams. “Algae are just wonderful at sucking that stuff up,” he said. And the best part is that it’s a revenue generator.

Despite his decision to refocus his business away from oil, Van Olst said the need for algal biofuels is still as strong as ever. “The hope and promise is still there,” he said. “But it’s just going to take a lot of time. Companies like ours need to make money now.”

With tough business conditions, the education and nonprofit research institutions in San Diego are playing an ever-important role in furthering the development of commercially viable algal biofuels and ensuring that local firms have access to the talent they need.

A collaboration of local nonprofit groups including CleanTech San Diego, Biocom and the Center for Algae Biotechnology has secured a $4 million grant from the California Labor & Workforce Development Agency. The money is being used for a green economy workforce training program called the Edge Initiative.

A 2010 analysis by the San Diego Association of Governments shows that the algae sector alone provides the San Diego region with 410 direct jobs, $56 million in direct economic activity and $108 million in total economic activity annually.

“San Diego is a world leader in algal biofuels research,” said Jason Anderson, vice president and executive director of the CleanTech San Diego Education Foundation. “We are looked on by not just the country but the world for what we’re doing there.”

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