By Sam Lines
The biofuels industry is undergoing a fairly large transformation after the debacle of corn-ethanol subsidies in the U.S., and there is a new class of feedstocks at the forefront of this movement. Algae is one of the most promising of these second- and third-generation feedstocks, and as such has been attracting many new companies and significant amounts of new investment. An initial look at the process and energy metrics of growing algae and converting it to biofuels sheds some light on the promise that this new feedstock holds. There are also other strategic advantages that algae hold over traditional terrestrial row crops. This paper will take a look at the current state of, and trends in, the industry.
Current trends and the future of the algae-based biofuels industry
For longer than most people are probably aware, algae have been considered an incredibly promising feedstock for a number of uses. Even the fledgling algae-to-biofuels technology has been under research for a number of years. In 1976, the Department of Energy started funding a program called the Aquatic Species Program which was established in the wake of the first of the oil shocks of the 1970’s as the U.S. sought to find some sort of security in its liquid fuel supply. This program established the scientific basis for the fledgling industry that is quickly growing today. In a sense, it is surprising that we have not heard of this sooner.
Algae are microorganisms that vary in many ways from other traditional biofuel feedstocks. And as much as they differ from other terrestrial plants, they differ even more in-and-amongst themselves. Different species of algae possess different qualities that have a profound effect on their viability as a feedstock. The vast majority of current commercial-scale algae production systems are not focused on its use as a feedstock in biofuels, but rather on what some consider the “by-products” of algae growth. These by-products are, in fact, very high value nutrients, proteins and other substances that are used by the chemical, pharmaceutical and nutriceutical industries. For instance Omega-3 oils, which are produced by a certain strain of algae, are high quality nutrients used in baby food. But production of these nutrients does not require the production of large amounts of biomass (compared to that needed for biofuels). The total current production of commercial scale algae only totals 10,000 tons (dry weight) per year. Most of the facilities are located in the relatively developed Asia countries (China, Japan, India), Australia and the U.S. This is all about to change however, as the companies have begun to realize that there may be profit in utilizing the other part of the algae that had previously gone mostly unused and undeveloped.
In the most general terms, the current algae-to-biofuels industry is still in its developmental stages. There are currently a couple dozen firms that are active in this space, but as of yet, none of them has started production at commercial scale. This is not to say that they are not progressing however. On the contrary, even though the algae-to-biofuels idea spent the last quarter of the 20th century plodding along slowly, it looks as though it is finally gaining some momentum and entering a high growth phase. In fact, despite the economic downturn, venture capital firms poured $176 million into algae startups in 2008, $84 million of it in Q4, a record. Several firms have also taken the route of entering into joint-venture agreements with larger oil and gas companies or utilities, allowing them to maintain funding certainty while they develop the technology. Suffice it to say that the algae market is starting to explode. Without delving too deeply into the basic science of algae, it is worthwhile to investigate why these investors and business leaders see so much promise.
There seem to be three main advantages that algae have over traditional terrestrial feedstocks such as corn, soybean, palm oil and others. First and foremost is the advantage in land-use. Figure 1.1 outlines the land-use requirements of biofuel from various feedstocks if they were to provide for half of the current transport fuel demands of the US. The energy density of algae blows the other crops out of the water, even at the low end of the potential oil-by-volume estimates. This percentage will vary depending on the strain of algae, and there certainly may be scenarios under which using the strain that is only 30% obv may make more sense, or is the only feasible option those strains may work better in certain environmental conditions. The point is, even at this low bound, the numbers are very enticing from a simple density standpoint. This is due mostly to the growth rate of algae per unit volume, a direct result of its better photosynthetic efficiency as compared to row crops and its simple volumetric density. Algae have been observed to achieve photosynthetic efficiencies of up to three times that of corn and almost four times that of switchgrass.
Another advantage is the diversity of products that come out of algae production. This paper deals primarily with the production of biodiesel from the lipids produced as part of the biomass of the algae. But there are other “by-products” developed in the production process which may turn out to be just as important, if not more important as biodiesel to the future of the algae production industry in general. Below is a partial list of some of these “by-products”.
- High-Value Protein and Nutrients – These products, which used to be the main target of algae production, can still be harvested from the algae and sold to pharmaceutical and nutriceutical companies.
- Jet Fuel – Perhaps the most promising product coming out of the industry, jet fuel is fermented from residual algal biomass that is left after the proteins and lipids are extracted. Aerospace companies have begun to look heavily into this.
- Animal Feed
- Biomass for Co-combustion in power plants
This list if by no means exhaustive, and is merely meant to convey the diversity of products that the algae industry has at its disposal. This protects it from price fluctuations in any one product.
A third advantage of the algae over the traditional crops is the degree to which it mitigates the issue of competition with food crops. The lessons of the corn-based ethanol disaster have intensified the need to find feedstocks that do not compete with, and exert price pressures over, food supplies. The generous subsidies given to the corn industry to produce corn for conversion into ethanol exerted upward pressure on food prices (the degree to which this had an effect is disputed however) and incented farmers to convert land used for other crops and activities into more corn fields, which compounded those price pressures. Algae is not a food product, except when used for animal feed, so it should not affect this space.
This also created negative consequences in terms of atmospheric carbon release due to land-use change. The same is true of soybeans in the U.S. and sugar cane in Brazil. Algae production methods (both open and closed systems, which will be discussed shortly) do not need arable land, which largely mitigates the land-use change issue. Given the current global focus on CO2 emissions and global warming, this is aspect of algae production is immensely important to the industry, and often overlooked. Without going too far off topic, the effect that algae-based biofuels have on the global carbon cycle deserves some treatment. Their effect on the carbon cycle is complex, and out of the scope of this paper, but will be developed in a publication being developed concurrently with this, authored by Niels Zellers. In short, the effect that algae production has on the carbon cycle directly impacts the industry. If a carbon price is established, as is currently in place in Europe and under consideration in the U.S., this will change the cost metrics, providing a secondary income stream apart from the initial products developed out of the algae.
There are other advantages that algae has over terrestrial feedstocks, such as metabolic and ecological diversity, which hedges the production systems against risks associated with monocultures and allows various strains of algae to be adapted to local environmental conditions. The feedstock also largely avoids the issue of recalcitrant biopolymers as algae contain no lignin, cellulose or hemicelluloses, which takes many costs out of the refining stage.
Algae are grown in either open ponds commonly called raceway ponds or in closed systems called photobioreactors. Currently, open raceways dominate the commercial scale production methods at 98% of total production. This is mainly due to the fact that previous methods had not sought to maximize biomass, but merely to minimize costs. This is the central debate in the algae industry. Where open raceways allow for much lower capital costs, they also have much lower efficiencies. Closed photobioreactors, on the other hand, can control the temperature, salinity, pH, CO2 concentration and most other environmental factors that affect the growth rate of the algae, but are much more expensive to implement. The main question facing the industry is “can these companies get enough efficiency gains out of the process to offset the extra capital costs”? For most startup companies, this is the main question that they need to answer. As a result, most of the R&D right now is being directed towards improvement in growth rates.
Closed systems have other drawbacks relative to open systems such as greater difficulty in filtration/extraction of algae biomass from the “broth” and crowding within the system, leading to decreases in photosynthetic efficiency. Generally speaking however, closed systems are going to dominate the landscape going forward due to the potential for innovation in augmenting growth rates. Most industry experts and business leaders agree that the filtration and crowding issues can be overcome through innovation.
There are many other hurdles facing the industry that are outside of the production process such as difficulty in product separation and isolation. A lot of innovation is also going into developing specialized centrifuges and other devices to effectively separate the products within the biomass. This is another area where companies are distinguishing their business model.
It can be very difficult to perform quantitative analyses of current companies using the most current data, since those companies tend to hold those data very close. However, there are some more hypothetical analyses that can be done using certain claims of new technology that lead to interesting meta-analyses. One very recent breakthrough came from a company called Bionavitas. The company has developed a system called Light Immersion Technology through which a light source (both artificial and natural) is inserted through the center of the algae culture. This particular company actually uses the technology in open ponds, and claims that it increases the productivity of those ponds by an entire order of magnitude, tenfold. Let’s take a look back at the land use requirements and see what that might mean in terms of land use if these were hypothetically used in the closed system to get a sense of what innovation can do to the numbers. The final number is misleading since there will be energy losses in lighting the Light Immersion Technology, the cost is certainly not considered here due to lack of available data, and it is obvious that not every vehicle can run on diesel fuel, but it gives one a sense of the order of magnitude. One plot of non-arable land 2 miles on side could potentially fuel the transport needs of the US. Even if it is five times that much, or ten times that much, it still shows why innovation is so important to the industry. These breakthroughs get very little press, but drastically change the cost and production metrics of the whole system, so it behooves us to watch more closely.
In conclusion, the algae-based biofuels industry seems to be on the cusp of a series of technological breakthroughs that will put it on equal economic and strategic footing as other biofuels, and eventually even petroleum products. This would be a boon for environmentalists, industry leaders and drivers alike.
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