SAN DIEGO ---- Scientists have proven that algae can be turned into fuel. Planes and cars have traveled on it without a problem. But can this can be duplicated on the vast industrial scale required if algae is to replace oil in any significant quantities?
Answering this question will require billions of dollars, along with expertise from farmers, engineers and fossil fuel companies, according to participants in a panel discussion Friday at the Algae Biomass Summit in downtown San Diego.
The concept of growing fuel from algae has gained considerable momentum over the last few years, and it has been warmly endorsed, and funded, by the Obama administration.
However, to become a true competitor to fossil fuels, algal fuels will eventually have to stand on their own as commercially viable projects. And that requires a melding of advanced scientific knowledge with megascale engineering that hasn't been necessary so far.
Because algae fuel plants haven't been operated at a commercial scale, banks will be very wary of lending money to build them, said panelist Mark Warner, vice president of Harris Group Inc., an engineering company.
"You've got to sell your process to a financial community," Warner said.
Banks are more comfortable lending money for projects using proven commercial technology, such as making ethanol from corn, Warner said. That enabled the industry to commercialize rapidly.
"There were physical plants you could go into, or send an engineering team into, to verify how much corn they used, natural gas, electricity," Warner said. "When you built a (corn ethanol plant), it was based upon actual operation, not projected operation. So when a bank went to fund that venture, there was a higher level of certainty."
Moreover, banks could typically get a loan guarantee for the corn ethanol plant from a big industrial partner with plenty of money, Warner said.
"There is no substitute for what we call in the industry a big pile of cash," Warner said.
From the venture capital side, Tyler Kruzfeldt of Mont Vista Capital said algae fuel companies seeking venture funding need to show they understand where they fit in the vast process of commercialization.
Companies also need to explain how they will work with others at different stages of production, be they farmers, distributors, or anyone else in the industrial chain, Kruzfeldt said.
Arama Kukutai of Finistere Ventures made a similar point, saying that companies needed to show they understood they know how to focus their efforts, select an appropriate financial partner and meet the needs of their ultimate customers.
"We're less interested in science projects than in commercial technologies," Kukutai said.
The federal government has promoted algae-based and other biofuels, directly through funding and indirectly through environmental policies that encourage renewable energy sources, said Joe Panetta, chief executive of Biocom, a San Diego-based biotechnology trade group.
In May, the Obama administration announced $787 million in stimulus funding for biofuels. This included $50 million for an algal biofuels consortium to speed up their development.
"The entire clean energy sector is the darling of the federal government these days," Panetta said.
That's quite a change for San Diego County's biotech industry, which is mostly focused on health care, Panetta said.
"We don't get any attention anymore on the health care side of biotech," Panetta said. "I say that facetiously, but in some respects it's true. This is really where all the action is on the federal side."
The Algae Biofuels Summit ended Friday. It was sponsored by the Algal Biomass Organization, a trade group that promotes commercial development of algae for fuels, foods and other purposes.