August 20, 2009

Coming Soon: $2 a Gallon Diesel From Algae?

Rapidly growing algae and streamlined processes could mean $2 diesel by 2011 or 2012. But hurdles await.

Aurora Biofuels says it has a species of algae that breeds like a rabbit.

The Alameda, Calif.-based company has identified and optimized a genetic pathway in a species of wild algae that effectively turbocharges the growth and breeding cycle of the single-celled creature. As a result, the company says it will be able to double the oil production, and ability to sequester carbon dioxide, of its algae ponds.

"This gets us to 5,000 gallons per acre a year, which we think is economically viable," said CEO Bob Walsh in an interview.

Just as important, the algae can grow in open air racetrack ponds – arguably the cheapest environment for growing algae. The company has been breeding the strain in two ponds about the size of Olympic swimming pools in Florida and harvesting about a gallon of oil from each pond a day. Roughly half of the algae is harvested a day and the lipid, or oil, content of the algae in a normal, un-starved state is around 25 percent.

Aurora is now negotiating leases to build a 50-acre pond that could produce 100 gallons a day by the second quarter of next year. If all goes well, and further optimizations arise, Aurora could have a 2,000 acre pond by 2011 or 2012. Such a pond set up with Aurora's algae and equipment could produced lipids for around $1.75 a gallon, which would translate to $2 gallon diesel. he said.

Besides selling fuel, Aurora would also garner revenue by sequestering carbon dioxide, selling carbon credits and selling the leftover algae protein for $350 a ton to fish farms and pet food makers.

The algae market has exploded in the past two years, growing from a handful of companies to at least 57. It sounds easier than it is. Not only has optimizing the growth of algae bedeviled researchers, scientists have struggled with devising a cheap, energy-efficient way to separate the algae from the water. A stocked pond might only contain one to three grams of harvest-able algae per liter. While some claim 50,000 gallons an acre might be possible, most algae backers talk about 2,000 to 5,000 gallons an acre per year with 8,000 to 14,000 gallons as an ideal, but distant, goal.

Some, such as Aurora and Biolight Harvesting have links with major research universities while Solazyme, Solix and Synthetic Genomics are working with large petrochemical producers. Most, however, are struggling to get much past square one. And one major one – Greenfuel Technologies – died after burning through around $70 million in money from investors.

A 2,000 acre pond would produce the metaphorical drop in the bucket for even a small trucking company. The key is that Aurora's processes can be scaled up. The rapid growth effects do not fade out in new generations and Aurora did not have to insert genes from other species to goose the growth rate.

"It won't revert in three months," he said. "A lot of times you find [genetic] improvements but they don't want to stick."

The genetic pathway is likely present in other species as well, he added.

Walsh further added that Aurora has come up with optimizations for racetrack pond designs to reduce the amount of energy required to circulate carbon dioxide in them.

"The pond itself is now cookie cutter," he said.

While Sapphire Energy says it can grow transgenic algae in open ponds, most companies are trying to avoid that tricky combination by growing their transgenic species in closed bioreactors or fermentation kettles.

Naturally, Aurora has patent applications in the works.

Although Walsh is a former Shell exec, Aurora currently does not currently have a development deal with a large oil company. The first customers will likely be carbon dioxide emitters who need to sequester their gases. Aurora will sell its oil to fuel producers at first and later explore the chemical market. These kinds of companies will likely be the ones that will pay for Aurora ponds in the future.

"Realistically, we are not out to do this ourselves," he said.

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