Future Energy

An Algae Fuel Future? Not for a While yet.

Source: Sustainable Design Update

In October 2007, I looked at algae based biodiesel and several start-up companies that were attempting to establish commercially viable algae to biodiesel technologies (see A View to the Future: Algae-Based Biodiesel?).  At the time, algae based fuels looked to be on the bleeding edge of biodiesel development.  Two years later, has there been any progress towards something like a commercially viable product?  Based on recent commentary its tough to know. 

Last week the Wall Street Journal's Environmental Capital blog highlighted an announcement by Solazyme Inc. of a contract with the US Defense Department to supply 20,000 gallons of algae based biodiesel (see Green Force: US Military's Interest in Algae Fuel Grows, September 8).  Solazyme is a privately held company that as far back as June 2008 claimed that it had  developed an algae fuel that met the specifications of the American Society for Testing and Materials for diesel fuel.  The contract is only for US$8.5 million but several articles I've read commenting on this announcement hint that with DARPA support, a viable fuel source is just a matter of time.

Robert Rapier, writing recently in his R-Squared Energy Blog, has a less optimistic viewpoint.  Writing in a post he entitles "Biofuel Pretenders", he has this to say ...

 "Like many, I was initially enchanted by the possibility of weaning the world away from fossil fuels by using fuel made from algae.  Proponents wrote articles suggesting that we could do just that, provided the necessary investments are made.

Sadly, the story is much more complex than that. The U.S. DOE funded a study for many years into the potential of algae to produce fuel. (For an overview of where things stand from John Benemann, one of the men who co-authored the close-out report of that study (see Algal Biodiesel: Fact or Fiction?) The problem is again one of needing to surmount multiple technical hurdles, and the close-out report states that reality.

While it is a fact that you can produce fuel from algae, the challenges are such that John has written that you can't even buy algal biofuel for $100/gallon.  He said that if you want to separate the reality from the hype, just try to secure a contract with someone to supply you with algal fuel."

(The DARPA/Solazyme contract looks to be valuing algae based biodiesel at $425 a gallon - well north of the $100 level cited by Mr. Rapier)

Noteably, Mr. Rapier, who appears to know more about the difficulties and economics of producing biofuels than I ever expect to, ranks algae based biofuels with the "biofuel pretenders", i.e. those technologies unlikely to provide economic fuel sources anytime soon.

Despite R-Squared's scepticism, there remains lots of interest in algae biofuels.  PG&E's Next100 blog indicated last week that at least 57 firms are competing to develop algae fuels and they are joined by Exxon, BP and Chevron as well as the USDE and Bill Gate's Cascade Investments (see Algae: The Original Solar Cell, September 8).  (It looks like Next 100 gets the number 57 from a GreenPoint Media article entitled How to Rate an Algae Company, August 19).

And last but not least, Greg Breining, writing in Yale's Environment 360 blog, highlights a research project which looks at algae used to produce biofuel and at the same time cleaning sewage wastewater - two products in one process (see From the Sewage Plant, the Promise of Biofuel, July 1)  Maybe that's one way to side-step the difficult economics of algae.

I started my career as an aquatic biologist and I would dearly like to see an algal future at the gas pump.  However, with natural gas at US$3.20/MMBtu today (Henry Hub Spot - Bloomberg.com) and fields like B.C's Horn River likely to remain undeveloped for a while (see In a Glut, Encana's Big Find Untapped, Globe and Mail, September 12) I have a hard time seeing how algae fuels (and most other biofuels) can hope to reach commercial viability in the foreseeable future.  I have to agree with Mr. Rapier on this one.

Dirty Brown Grease

In a world of peak oil, growing population and even faster growing demand for energy, it seems self-evident to me that we will cast in increasingly wide net in the search for new sources of energy.  If that is indeed the case, we'll see much more variety in our future fuel sources, with many niche technologies and materials emerging in the years to come.

Not too long ago I cam across a small company that epitomizes this shift to me.  Originally called Philadelphia Fry-o-Diesel, the company recently changed its name to BlackGold Biofuels, although, they remain in the same business - converting grease to biodiesel.  And not just any grease, BlackGold specializes in converting restaurant trap grease.  By their own admission, trap grease is "gross, it smells terrible ... an undesireable material". 

Source: BlackGold Biofuels

Captured in traps in commercial kitchens, the grease must be regularly pumped out for disposal before it can escape into sewer lines and clog them.  BlackGold appears to have started out with an interest in manufacturing biodeisel and has evolved to supplying its self-developed technogy to others across the U.S. who want to be in the business of converting a polluting waste into a useful energy product.

Source: BlackGold Biofuels

Sustainability doesn't get much better than this.

BlackGold appears to be a co-op based company and they are actively trying to license their technology but they do have some competition.  CNET ran a story in February about a venture sponsored by the City of San Francisco.  I've also been told that there is a company manufacturing biodiesel from trap grease here in Vancouver (Canada).  However, I haven't been able to find any information on that.

Looking More Closely at the Biofuel Bubble

R-Squared Energy Blog Tackles Biofuel Politics

In his post today, Robert Rapier of the R-Squared Energy Blog provides an excellent review of the politics behind the current surge in biofuels (see Unintended Consequences: The Politics of Biofuels, February 14th).

Criticisms of the current push for biofuels, particulalrly food crop based ethanol and biodiesel, include:

• No real environmental (i.e. carbon emissions) benefit when looked at on a full-life cycle basis and potentially even an increase in carbon emissions relative to petroleum sources;
• Significant increases in food costs world wide; and
• Clearing and cultivation of grasslands and tropical forests (leading to more carbon in the atmosphere and loss of biodiversity).

Mr. Rapier provides a good assessment of the differences between the European and American approaches to biofuels.  To whit, Europe, relying primarily on external sources of biodiesel is, at least potentially, in a position to be more objective.  By comparison, the principle focus of his post is that U.S. domestic politics will trump any reasoned analysis of the pitfalls associated with a headlong rush into ethanol.

"while the world wakes up to the overall social and environmental ramifications of a broad expansion of ethanol policy, the U.S. is unlikely to deviate from the current policy. If there was a major Midwestern drought that caused the corn crop to fail, it might cause a reevaluation of the policy as corn supplies disappeared. But barring some sort of catastrophe that impacts ordinary Americans, the policy of turning food into fuel will continue unabated in the U.S."

Stretching this line of thought (but not too much of a stretch), Harper's Magazine concludes in its current issue that U.S. policy and hype on ethanol and alternative energy in general may be taking the U.S. to its next investment bubble after the dot.coms and housing (see The Next Bubble: Priming the Markets for Tomorrow's Big Crash, by Eric Janszen, February, 2008). 

Both R-Squared and Harpers are both well worth a read (unfortunately, the Harper's article can only be accessed on the newstand or as a subscriber).

Why Cellulosic Ethanol?

                              

The cover of last week’s Economist trumpeted “The End of Cheap Food”.  Inside the magazine, a briefing on food prices (see Cheap No More, Economist, December 8^th) outlines the link between U.S. ethanol policy (and subsidies) and the rising price of food worldwide. 

While ethanol subsidies aren’t the only cause–increasing demand for meat in China and India as those countries become wealthier is also important–the Economist states that:

“America’s ethanol programme alone accounts for over half of the world’s unmet need for cereals.  Without that programme, food prices would not be rising anything like as quickly as they have been.”

To illustrate the connection, the article cites a World Bank statistic that the grain needed to fill up an SUV would feed a person for a year.

These concerns harken back to a mid-November interview in Renewable Energy Access (see Biofuels: Could the Cure Be Worse Than the Disease?, November 19^th). 

Steenblik, Director of the Global Subsidies Initiative and co-author of an OECD report critical of biofuels, claimed that only Brazilian sugarcane ethanol, cellulosic ethanol and biodiesel from animal fats and used cooking oil provided any significant GHG mitigation benefits.  He also suggested that the oft used argument, that 1^st generation (i.e. corn-based) ethanol infrastructure is paving the way for 2^nd generation technologies, is not realistic.  First generation facilities are unlikely to be upgraded or otherwise useful for cellulosic ethanol production.

The OECD report in question (Biofuels: Is the Cure Worse Than the Disease?, OECD Round Table on Sustainable Development, September 11-12, 2007) raised two concerns regarding 1^st generation biofuels:

·         Can they be produced without compromising world food production;

·         Are they a cost effective way of using biomass resources.

The OECD’s conclusion was that the rush develop Biofuels threatens food shortages and damage to biodiversity with only limited benefits and that while 2^nd generation biofuel technologies hold promise, they depend on technologies that are not yet available.  Overall, the OECD found that current government policies in support of 1^st generation ethanol and biodiesel are inefficient.

How inefficient?  The following table provides a summary.

Units	Ethanol		Biodiesel
	Low	High	Low	High
Support per litre of fossil fuels displaced	$0.66	$4.98	$0.38	$1.54
Support per tonne of CO2 equivalent avoided	$244	$4,520	$165	$1,300

Clearly a bit more than the approximately €22.50 ($32.33) that a tonne of carbon is going for on the EU-Emissions Trading System these days.

Despite the high costs, it doesn’t seem like the support for corn-based ethanol production is going to end any time soon.  In the U.S., all of the current crop of presidential candidates appears to support continued subsidies.  Even John McCain, a long-time sceptic appears to have come around on this issue (MSNBC Columnist Domenico Montenaro highlights McCain’s flip flop in this regard, see More on McCain and Ethanol, December 12^th).

And it much to the frustration of the Brazilians, it doesn’t look like the U.S. is going to let the more efficient sugarcane ethanol into the country anytime soon (see Brazil chides U.S., Decries Ethanol Barriers at Climate Meeting, Bloomberg.com, December 13^th).

All of this suggests to me the wisdom of moving sooner rather than later to 2^nd generation ethanol technologies, i.e. cellulosic ethanol production.  While Mr. Steenblik, cited above suggest the technologies are someways off, a number of companies appear to be making good progress in this area.  For example:

·         Iogen

Started in the 1970’s, this Canadian company is currently operating a cellulosic ethanol demonstration plant.  The company intends to commercialize its process by licensing turn-key plants and providing the necessary enzyme mixes.  The company is privately held by shareholders that include Shell, Petro-Canada and Goldman Sachs.

·         POET Energy Inc.

Based in South Dakota, POET is a privately held producer of corn based ethanol.  With U.S. federal government support, its Project Liberty, it will convert an existing corn-ethanol bio-refinery into an integrated corn to ethanol and cellulose to ethanol refinery.

·         Range Fuels Inc.

A privately held company (Khosla Ventures is one prominent shareholder) based in Colorado, Range Fuels recently began construction of a plant in Georgia (see Wood-Based Ethanol Plant Slated for Georgia, Renewable Energy Access, February 8^th, 2007).  The plant will employ a thermo-chemical conversion process, replacing the need for enzymes.

·         Novozymes A/S (NA: NZYMA)

A Denmark based supplier of enzymes and micro-organisms for industrial processes, currently supplies enzymes for grain based ethanol production and is developing enzymes for cellulosic ethanol production.

·         Sunopta Inc. (NASDAQ: STKL)

Through its Supopta Bioprocess Inc. division, this Ontario based company specializes in the design, construction and optimization of biomass conversion equipment and facilities.  The company’s process is the basis for what its website claims is the world’s only commercial cellulosic ethanol facility, belonging to Abengoa Bioenergy in Salamanca, Spain.

And I’m sure there are others.  On the optimistic assumption that sooner or later, the fiscal and environmental realities of corn-based ethanol will come home to roost, these companies seem to be worth watching.

On the other hand, you could skip the whole transformation to ethanol and follow the lead of British Columbia which is preparing to develop electrical power generation facilities which simply combust timber and logging wastes (see B.C. Looks to Tree Debris for Electricity, Globe & Mail, December 16^th).

A View to the Future: Algae-Based Biodiesel?

Photo: Valcent Products Inc algae culture system.

The bleeding edge of biofuels development has to include development of algae based biodiesel.  Today, there are a number of companies, both publicly listed and privately held that are following in the footsteps of an early U.S. government alternative fuels program.  Between 1978 and 1996, the Office of Fuels Development (U.S. Department of Energy), funded National Renewable Energy Lab's Aquatic Species Program. The program investigated high-oil algae that could potentially support wide-scale biodiesel production.

This week the Houston Chronicle profiled two Vancouver based companies that are developing technology for algae-based bio diesel (see Could West Texas algae curb oil dependence?, October 8^th, 2007).  A joint venture between Valcent Products Inc. (OTCBB: VCTPF) and Global Green Solutions Inc. (OTCBB: GGRN) has developed a system using algae filled plastic bags to grow algae.  Vegetable oil can be extracted from the algae to produce biodiesel.  Calling it Vertigro Energy, the joint venture’s algae-to-biofuel technology cultures algae in 10-foot-long water-filled plastic bags suspended in a greenhouse-like setting in El Paso, Texas.

Algae BioFuels, a wholly-owned subsidiary ofthe oil field services company Petro-Sun (OTC/PK: PSUD) and Solix Biofuels, a privately held company, are in the process of developing similar technologies.

Privately held GreenFuel Technologies Corporation (highlighted in the National Geographic article referred to in my last post) is taking algae based systems one step further, using the algae cultures for scrubbing power plant emissions.  In the Company’s own words:

GreenFuel's high yield algae farms recycle carbon dioxide from flue gases to produce biofuels and feed, reducing net carbon dioxide production as waste becomes profit.  Harvesting algae for biofuels enhances domestic fuel production while mitigating CO_2.  Why expensively sequester CO₂ when it can be profitably recycled?

(The Energy Blog provides a good review of GreenFuel and its technology in its June 17th, 2005 post: Biodiesel From ALgae is Here!.)

The attraction of algae based biofuels is based on the potential yields a commercial system could produce. National Geographic suggests that corn can produce 300 gallons of ethanol per acre every year while an acre of soybeans can produce 60 gallons of biodiesel.  By comparison, estimates of yields for an algae-based system range from 5,000 gallons (National Geographic) to 100,000 gallons (Valcent Products Inc.) of biofuel per acre per year. 

To the best of my knowledge, none of the above companies is yet in commercial production.  However, for those who like lots of risk, it could be an interesting ride.

Comparing Biofuels

For those of you that want to better understand what’s what in biofuels, National Geographic magazine’s October issue provides an brief but informative backgrounder by Joel K. Bourne Jr. (see Green Dreams, October 2007). 

The article does a very good job of illustrating the different sources of ethanol and bio diesel and their potential costs and benefits.  Overall, it reinforces the need to move beyond corn based ethanol and food-crop based biodiesel.

(While the on-line version does not provide all of the text of the print version, it does showcase interactive information boxes for each fuel together with the authors audio commentary.)

Enjoy.

Biofuel Bubble?????

Have you ever noticed that when you start to shop for a new car, once you get interested in a particular make or model you suddenly begin to notice them everywhere you go?  I think the same thing is happening for me following my previous post concerning indications of deflation in the bio-ethanol investment boom.

Since writing the post I've come across a number of articles and opinion pieces that suggest caution is in order for those wanting to invest in bio-fuels.

Jennifer Kho writing for Greentech Media gives more examples of a pull back in investment in the corn-based ethanol sector (see Ethanol Margins Suffer, October 2^nd, 2007).  In addition to Verasun’s (NYSE:VSE) postponement of a 100-million gallon ethanol facility, she identifies five other firms that have halted work on a total of six plants accounting for more than 370 million gallons of proposed capacity (versus 4.86 billion gallons of production in 2006). 

These reversals are attributed to declining margins as the sector gets squeezed between a 50% rise in corn costs over the past two years and a significant decline in ethanol prices. 

Articles on Planet Ark (see Many Biofuels Have More Climate Impact Than Oil, September 28^th) and Globe-Net (see The Environmental, Economic and Policy Aspects of Biofuels, October 3^rd, 2007) raise concerns that environmental and social costs (or lack of benefits) associated with biofuels may be greater than has been generally acknowledged to-date.   Each citing a different research study, the articles suggest that the greatest concerns may lay with bio-fuel feed stocks that are also food crops. 

The issues identified by Planet Ark relate to use of nitrogen fertilisers, resulting in nitrous oxide emissions, a potent greenhouse gas. 

Globe-Net, discussing a World Bank report, notes that:

“there is a bewildering array of policies - including energy, transportation, agricultural, trade, and environmental policies - is influencing the evolution of biofuels. But the policies and the level of subsidies do not reflect the marginal impact on welfare or the environment.”

Finally, Peter Nelson compares the current biofuels to the dot-com bubble (see Are There Lessons For Biofuels From The Rise & Fall Of The Dot-Com Bubble?, October 3^rd, 2007).  In an article posted on Renewable Energy Access, Mr. Nelson concludes that while there will be a shakeout in the biofuel sector:

“There will be some exciting companies that materialize from the coming shakeout as true powerhouses in genetics, biotechnology, enabling technology, logistics, processing and downstream value-added products.”

Biofuels clearly have an important role to play as we move into the future.  However, the direction that can be taken from all of these articles is for investors to tread cautiously and begin to look beyond ethanol and food-crop feed stocks.

Ethanol Deflating

The gold rush into ethanol, or at least corn based bio-ethanol, looks to be coming to an end. This past Monday, the Wall Street Journal reported that the industry’s “frenzied growth over the past year is coming to a halt” (see Ethanol Boom Running Out Of Gas, October 1st, 2007). The U.S. price of ethanol has fallen from U.S.$2.50 per gallon at the end of 2006 to U.S.$1.50 in recent weeks. The report attributes this slide in fortunes to excess ethanol production with more being produced than oil refiners can currently blend into gasoline.

The WSJ suggests that while the largest ethanol producers such as Archer Daniels Midland (NYSE:ADM) will be able to ride out this particular storm, smaller producers may be sunk by it. In his post today, Jim Fraser (The Energy Blog) highlights evidence that this winnowing out is already underway (see Verasun Suspends Construction of Refinery, October 3rd, 2007). Briefly, falling prices are forcing one pure-play ethanol company, Verasun (NYSE:VSE), to pull-back on an expansion that was already underway.

Meanwhile, the Economist’s current issue discusses how ethanol’s inherent limitations are driving the development of new bio-fuels (See Ethanol, Schmethanol, September 27th, 2007). Despite the extensive subsidies to farmers and incentives for ethanol’s use, the article highlights two problems with its use as a fuel.

• Ethanol has a relatively low energy content of ethanol (1/3’rd that of gasoline); and
• It's affinity for water can cause corrosion problems for pipelines carrying the fuel and engines using it.

In response to these shortcomings, the Economist identifies a number of companies that are working on higher energy-content bio-fuels, including:

Dupont (NYSE:DD) and BP (LSE:BP) are in a joint venture to produce bio-butanol.

Biotechnology companies, several of which were previously focused on pharmaceuticals, are each seeking bio-processes capable of producing more complex hydrocarbons similar to gasoline and diesel. The identified companies, including Codexis, Amyris Biotechnologies, LS9 and Synthetic Genomics, are all privately held.