strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
(originally published by Booz & Company)


Algae at a Pump Near You?

It seems laughable, but obtaining carbon dioxide is a major constraint for the industry. C.J. Warner said that you have to think about carbon dioxide as the feedstock for algae. As soon as you start isolating algae into circulating ponds and bioreactors, you’ve got to put in the carbon dioxide. If you have to truck your carbon dioxide more than 20 kilometers or so, it’s a losing proposition. The idea that we have to import carbon dioxide to make a biofuel that’s supposed to reduce carbon dioxide is a little mind-numbing.

In any case, if you’re trying to do this on land and add up all the costs, pretty soon there’s no profit left. That’s essentially what the NRC report says: There’s nothing that definitively rules out the development of a viable algal biofuel industry, but we’re not there yet.

S+B: Are there strong alternatives for cultivation?
The Department of Energy is funding some work at [California Polytechnic State University], where they were growing algae in raceways with wastewater from treatment plants. The hope is that the productivity of the algae can be increased and other costs reduced.

I’m completely convinced, however, that the solution we are working on in the York River is best. We went where the sunlight is, which is mostly on the water, and there’s plenty of carbon dioxide. So we eliminated the need for land and carbon dioxide. And in the Chesapeake, we’ve got the nutrients, too, in all that agricultural runoff.

But like every other approach, open water has its own set of problems. The engineering is harder; working on water is not like working on stable land, and you have to worry more about the weather. Another con is that the naturally occurring algae may not produce the biofuel you want. In the York, we had algae with high ash content and low lipids. It was better for producing butanol than biodiesel. And the final big issue is that different algae grow at different times of the year, and that creates quirky harvests.

S+B: If algal biofuel overcomes its challenges, can it disrupt the oil industry?
It depends on how the algae industry develops. If it developed along the Sapphire model, the oil companies would just buy crude from New Mexico instead of Saudi Arabia. That’s one of the beautiful things about that approach: If it wins out, it would be good for the oil companies because they can start talking about sustainability and renewable fuels and local fuels and all the other benefits of algae. Eventually, the oil companies would be out of the exploration business. So they’d have to scale that down. But they would still be in the refining and delivery businesses.

S+B: Is the algal biofuel industry financially sustainable at this point?
Not really. Most of the activity to date has come from the U.S. government. Solazyme had a couple of contracts to provide algae-derived jet fuel to the U.S. Navy for test purposes, but they are pretty far from being a major source for the aviation industry. The U.S. Department of Defense has made investments in algae research in its search for non-interruptible fuel sources and green fuel. But it’s paying much more for algal biofuel than for conventional fuel, and that’s not sustainable at scale. The industry also received a [US]$1.01 tax credit per gallon in the U.S. “fiscal cliff” legislation, which brought algal fuel producers to tax parity with other producers of biofuel.

The environmental benefits of algae could enhance the TEA, for example, with the possibility of tax credits for remediation. Our algae were sucking excess [harmful] nutrients out of the York River and Chesapeake Bay. At the rates we were seeing, if you had about 60 square kilometers of algae farms, you could clean up the Chesapeake Bay. That benefits the ecosystem, and could also bring increased financial stability if rewarded by the state.

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store


Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.