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(originally published by Booz & Company)


Algae at a Pump Near You?

Physicist William Cooke discusses the potential for algal biofuels to become the next big alternative energy source.

The promise of using algal biofuels as a substitute for petroleum has been bandied about for several decades. During that time, the political and commercial appetite for achieving it has waxed and waned with the price of oil and the demands of national security. But today, calls for oil independence and alternative energy sources have placed renewed focus on algae.

Many species of algae are rich in lipids—fat molecules that are easily processed into biodiesel. Others are rich in carbohydrates, which can be fermented into alcohol-based biofuels such as ethanol and butanol. Theoretically, an algae farm could yield as much as 10,000 gallons of oil per acre annually; palm oil offers the next-highest yield at 650 gallons per acre per year. And algae thrive on waste, consuming the carbon dioxide, nitrates, and phosphates thrown off by agriculture, power generation, and other commercial endeavors.

So why isn’t algal oil flowing from gas pumps everywhere? Because despite algae’s many benefits, neither scientists nor entrepreneurs have found an efficient way to cultivate and harvest algae, or to convert it into oil at scale, and at a price that matches conventional oil. These challenges—and the powerful potential benefits of algal biofuels—captured the attention of William Cooke, a physics professor at the College of William & Mary and co-leader of the Chesapeake Algae Project. As Cooke sees it, algae are already a primary source of oil. Before the evolutionary emergence of bacteria that cause decay, algae sank and their oils were preserved. Thus, much of the conventional oil that we pump out of the ground today comes from very old algae.

For the past three years, you would have been as likely to find Cooke on the York River near the mouth of the Chesapeake Bay as in the classroom. There, he and his colleagues have been cultivating microalgae in open waters. He recently spoke with strategy+business about the industry’s prospects.

S+B: What does the algal biofuel industry look like today?
It’s a young industry, with a lot of different models. At one end, there’s a company called Sapphire Energy that’s building a huge facility to cultivate algae out in the New Mexican desert. It starts by growing a seed crop in a bioreactor, puts it into outside circulating ponds, and then harvests and processes it. Sapphire, which is run by a woman named C.J. Warner who came from the oil industry, is going for lipids. The company wants “green crude” and is taking the most direct path to make biodiesel.

At the other extreme, there’s a guy named Paul Woods who runs Algenol, which is probably today’s most productive algae-based fuel company. Algenol doesn’t want to harvest algae at all. Instead, it’s growing a genetically modified alga in ponds covered with plastic, like a hothouse. The algae breathe out ethanol, which is pumped out and condensed. That could be used to replace corn-based ethanol, which is a pretty big market. And if you had more ethanol, you could imagine cranking up the ethanol content of gasoline.

Somewhere in the middle are companies like Solazyme, which is run by Jonathan Wolfson. Solazyme is using algae to process carbohydrates into biodiesel. It keeps algae in the dark and feeds them sugars. The alga eats the sugars and generates lipids from that.

S+B: What is the main obstacle to the industry’s growth? Is it processing?
No. Processing is really important, but it’s fairly straightforward, even though it’s not clear exactly how it will be done at scale. You squeeze algae, or dry it and crush it, or condense it. It’s the cultivation that’s tough. The National Research Council [NRC] recently released a techno-economic analysis [TEA] that nails the problems. The trouble with farming algae is that you need sunlight. You need flat land and water to grow it in—saltwater or brackish water provides a more robust environment. You need nutrients—nitrates and phosphates. You need carbon dioxide.

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