September 23, 2009

Algae as Fuel of the Future Faces Great Expectations -- and Obstacles

SAN DIEGO -- Tim Zenk is surrounded by green. In a lab near California's coast, shades of emerald, lime and chartreuse fill petri dishes, beakers, 14-foot plastic bags and long swirling pools.

When Zenk looks around, he also sees gold.

Inside the 70,000-square-foot lab sit thousands of strains of algae, the slimy substance that grows in swamps and dirty swimming pools. Sapphire Energy, the entrepreneurial company where Zenk works as vice president of corporate affairs, wants to turn the green liquid into fuel for cars, trucks, jets and potentially far more. Algae could someday shift the country's energy mix, Zenk said, blunting some of the need for oil and helping to limit climate change.

It is a big bet with high stakes. Venture capitalists, including Bill Gates' financing arm, infused Sapphire Energy with a combined $100 million. Exxon Mobil Corp. this summer invested $600 million in a research partnership with San Diego biotechnology company Synthetic Genomics Inc. That investment could swell to billions of dollars, Exxon Mobil said.

Now Congress is taking a look. One of the most basic organisms, algae grows quickly, eats carbon dioxide and produces fats that can be twisted into fuels. It can make that fuel without using land needed for crops, or using crops needed for food.

That makes algae hot in a warming world.

"Algae biofuel is the most promising liquid replacement fuel on the horizon," said Kenneth Green, resident scholar with the conservative American Enterprise Institute. "The chemistry will be cracked, and the ability to grow liquid fuel all over the country will be a game-changing event."

It could be years, however, before it is clear whether algae can meet expectations. The ability to get research out of the lab and into the marketplace is about a decade away, Green and other analysts said. Before that can happen, entrepreneurs must find a way to bring down the cost of turning algae into fuel.

Researchers and entrepreneurs are working to speed that process. The challenge is finding, nurturing and even creating algae strains that can be grown and harvested cheaply at a worldwide scale, said Stephen Mayfield, one of Sapphire Energy's founders and head of the Mayfield Lab at the Scripps Research Institute in San Diego. That kind of engineering already is used, he said, to make corn and other food crops cheap enough to feed the world's population.

"It's like we're at the stage of the first automobile," Mayfield said. But he is confident advancements will come quickly. With algae fuel estimated to cost about $10 a gallon right now, Mayfield said, he only needs to make algae three times more efficient to compete economically with gasoline. "That's pretty easy to do," Mayfield said.

To make research happen faster, Mayfield earlier this year brought together algae researchers in a consortium called the San Diego Center for Algae Biotechnology, or SD-CAB. It unites experts from the University of California, San Diego; the Scripps Research Institute; and the Scripps Institution of Oceanography.

Mayfield hopes those scientists will soon be working with other algae experts. SD-CAB this week applied for a Department of Energy grant that would provide $50 million over three years. In filing the submission, SD-CAB teamed with Lawrence Berkeley National Laboratory; the University of Nebraska; Johns Hopkins University; Rutgers University; Princeton University; Cornell University; the University of California, Davis; and Brooklyn College in New York. Winning the grant would trigger significant contributions of money from nine corporate partners.

But there are political challenges that could dwarf the scientific ones. Ethanol became the biofuel darling because senators from Corn Belt states backed it, Mayfield said. Algae can grow in many places but has no official home.

"There are no senators for algae-growing states to go back to Congress and say, 'Stop giving money to corn and give it to algae,'" Mayfield said.

Sapphire and SD-CAB are trying to build political allies. Zenk and Sapphire President Cynthia Warner frequently visit Washington, D.C., to talk to lawmakers and policy advocacy groups. Both will be in town today to promote a cross-country trip by a plug-in hybrid van that uses algae fuel.
Algae research ultimately needs billions of dollars to build demonstration projects testing algae fuel's commercially viability, Zenk said. And that money might not come without a political landscape that supports making fuel from algae.

"One of our policy objectives here is to create a national interest in algae," Zenk said. "If there isn't a national interest, it just doesn't happen."

Algae moves to center stage

Up until a few years ago, As Mayfield and Zenk tell it, algae research was mostly hidden in labs, the province of what Mayfield -- describing himself -- called "nerdy science guys." Mayfield has been studying algae genetics for about 25 years.

A combination of events pushed algae into the spotlight, Mayfield said. Many people began to realize that climate change was already happening. Then oil prices spiked.

"People then said, 'Oh my God, we've got to get green technology going,'" Mayfield said.

Sapphire Energy was born in a coffee shop in San Francisco about three years ago, when a group of friends who also were scientists and entrepreneurs talked about the perils of ethanol and debated which biological organisms might best be turned into fuel, Zenk said. They considered everything from bacteria to yeast to algae.

The trio perused research on industrial uses of algae and found that Mayfield had written a large number of the academic papers, Zenk said. The entrepreneurs talked to Mayfield, settled on algae, and set up shop in San Diego.

The fledgling company snapped up patents. When they started, the intellectual property field was fairly wide open, Zenk said, but Sapphire now has more than 200 patents in the area. Sapphire, Zenk said, erected a "white picket fence" around its technology.

After preliminary work to prove what they suspected about algae's potential, Sapphire about a year ago announced its existence and its $100 million in venture capital funding. The company said that it had developed a proprietary technology to engineer algae so that the oils it produces are molecularly similar to crude oil.

Then President Obama took office and Congress began pushing to deal with climate change.

"You can see kind of this alignment of the stars," Zenk said. In addition to climate concerns, he said, "we do have energy security issues. We do have geopolitical things that we have to address as a nation to get us out of the messes that we're in. We do believe now as a nation we have to find an alternative supply of crude oil in order to continue to grow and develop our economies of the worlds."

"That really is right in algae's sweet spot," Zenk added. "There really isn't any other technology that really can claim that."

Exxon Mobil bankrolled algae research in July, picking a company led by J. Craig Venter, who worked on sequencing the human genome (Greenwire, July 14). Exxon Mobil in its partnership agreement set up a series of milestones that, if met, would lead to the infusion of potentially billions of dollars, said Exxon Mobil spokesman Rob Young.

The oil company sees fuel made from algae as a product that eventually could be processed at its refineries and sent to gas stations, not requiring the development of new infrastructure. Young concedes that is probably 10 years off and "there are some hurdles still to be overcome."

"The whole design of this program is to produce something cost-effective," Young added.

Exxon Mobil's $600 million investment is not a large amount for a company of its size, said Green with AEI. At the same time, he said, "they're not a company known for throwing money away."

Exxon Mobil's entry into the algae arena increases the optimism of those like Zenk and SD-CAB researchers.

"They've decided that algae is a viable technology," Zenk said. "It validates what we believe to be true."

Exxon Mobil won't talk about its production goals or timeline for algae fuels. Sapphire has announced aggressive timing estimates. The company said it will produce 1 million gallons of diesel and jet fuel per year by 2011, an amount Zenk concedes is still tiny and reflective of a research and development company. The United States consumes 378 million gallons of gasoline a day in vehicle usage.
Sapphire said that by 2018 it will make 100 million gallons, a level that Zenk said is equal to a small refinery. By 2025 it plans to produce 1 billion gallons of fuel per year. The company released its timeline in April in part to get the attention of Congress and the Obama administration, Zenk said.

"We wanted policymakers to understand that the timeline is narrower," Zenk said. "It's not 10 to 20 years away."

Making 'designer algae'

There is a treasure hunt at Sapphire Energy's lab, where about 100 people work late into the evenings.

Researchers there are creating new strains of algae by modifying their DNA. Every day, they look at 8,000 new strains.

The work is meticulous. Researchers place droplets from 92 different strains onto petri dishes and load those into machines that run 18 hours every day, searching for strains where new DNA has survived. Those strains then move through a series of tests to determine how hearty they are, whether they can flourish outdoors in salt water, whether they are resistant to attack from predators and how easily they can be harvested. A high lipid content also is important.

The best strains end up in a sort of greenhouse, a room at the back of the lab with an open roof and San Diego sunlight pouring in. Algae fills large plastic bags that when folded in half stand about 7 feet tall. On a recent day, Zenk grabbed a bag and pointed to the green oil inside.

"This one is pumping it out, churning it out," Zenk said.

In a UCSD lab about 2 miles away, molecular biology professor Susan Golden and her researchers work with a portfolio of mutant algae strains, each one missing one of the genes normally found in the organism. The library holds 2,451 strains, capturing 88 percent of the genome, Golden said. Studying those strains could reveal ways to make algae grow fuel more efficiently. The trick, Mayfield said, is identifying the most important genes, such as ones that could make algae produce more fat or grow faster.

Other UCSD research involves moving genes into the algae in order to force it to make the exact chemical building blocks needed for fuel, Golden said.

"You need a different mixture of fuel chemicals for a jet engine than you need for a truck than you need for some passenger cars," Golden said. "You could come up with a mixture that was a bio-gasoline, another that's a bio-diesel, another that's a jet fuel. You could actually get the cells to make the mixture that you want."

"At that point we are making designer algae," Golden added.

Lab work is tested in the field. Sapphire Energy takes its results out to algae ponds in Las Cruces, N.M. That state works well as a testing ground because of a number of nearby coal-fired power plants that belch carbon dioxide that algae need. UCSD researchers use pools of algae in California's Imperial Valley, about 120 miles east of San Diego.

"We already know about strains that produce tons of oil," said Steve Kay, dean of the Division of Biological Sciences at UCSD and another founding member of SD-CAB. "My lab has identified new strains of algae that grow specifically really well in the Imperial Valley, like we never imagined. This is like up-to-your-knees thick algae sludge."

Congress plays key role

The science needs a more favorable policy environment to really advance, Sapphire's Zenk said.

With the Senate taking up climate legislation, algae fuels backers are working to influence policies that will buoy the research. Because they do not have the established political allies that coal, oil, natural gas and other industries have, the strategy, Zenk said, is to talk about fairness.

"You can't have these other energy technologies having better incentive than us," Sapphire's Zenk said. "What we're looking for is parity."

The other strategy is to find allies among other industries, stressing that algae is "just an above-the-ground oil field" that does not compete with ethanol or any of the other renewable fuels, Zenk said.

Algae also has linked up with coal, forming partnerships "with a large number of coal power plants," Zenk said. He did not say which ones. Because algae eats carbon dioxide, algae pools could be located near coal-fired utilities and swallow part of their carbon emissions, Zenk said.

"We're a good story for them," Zenk said. "We green their power up."

The Senate Environment and Public Works Committee is writing a climate bill but has not said yet what will be in it. The committee's chairwoman, Barbara Boxer (D-Calif.), has mentioned algae at recent hearings, including one July 30 in which she said that "the steps we take to address global warming, including incentives for the development of clean energy, such as wind, solar, geothermal, and algae fuel ... will lessen our dependence on foreign oil."

At an early July hearing on transportation's role in climate change, Boxer said that "in my own state, entrepreneurs are already making great strides in developing highly efficient clean electric and hybrid vehicles, and advanced renewable fuels based on algae." Boxer also invited Sapphire President Warner to testify at a May committee hearing on business opportunities and climate change.

There is new money for algae. The Senate bill that funds the Energy Department for fiscal 2010 includes $35 million for a "comprehensive research, development and deployment strategy focused on algae biofuels." That came about largely because Sens. Byron Dorgan (D-N.D.) and Bob Bennett (R-Utah), chairman and ranking member of the Energy and Water Appropriations Subcommittee, support algae, said Tim Peckinpaugh, partner with K&L Gates and a lobbyist for Sapphire Energy.

Dorgan has toured an Arizona algae project that uses carbon from a coal plant, and at a May hearing on beneficial reuse of carbon dioxide talked about how the algae ate some of the plant's carbon gas.

"Algae are the fastest-growing plants in the world," Dorgan said at that hearing. "They can double their bulk in a very short period of time. They can grow in wastewater and convert CO2 into a liquid fuel that's compatible with our existing fuel structure."

Money came through the House version of that Energy Department and water spending bill, as well. Reps. Brian Bilbray (R-Calif.) and Susan Davis (D-Calif.) secured $750,000 in funding for SD-CAB.

"Algae are widely seen as the most promising source of renewable alternative transportation fuels," Davis said in her request. "Algae can be grown on land that will not compete with food production, as do traditional row crops such as corn when used as a biofuel source."

Bilbray in his request said that "algae-based fuel has the potential to supply billions of gallons of auto and jet fuel that is clean, renewable and can be distributed using existing fuel infrastructure."

There are bills in the House and Senate to extend to algae fuels tax credits that exist for other renewable power sources. There is also talk, Peckinpaugh said, about changing a 2007 energy law that mandated an increase in the production of biofuels from non-food crops, such as cornstalks and switch grass. Called the renewable fuels standard, it mandated that the amount of biofuels in gasoline grow to 36 billion gallons by 2022 from 4.7 billion gallons in 2007. Of that total, 21 billion gallons must come from plants other than corn or sugar. Algae does not qualify as a biofuel under the law as it was written, and some lawmakers want to change that.

Another political goal might prove challenging to obtain.

If Congress creates a cap-and-trade system in which businesses buy and sell carbon pollution credits, Sapphire and SD-CAB want businesses to be able to invest in algae fuel projects in lieu of paying for greenhouse gas emissions. That option, called the offset program in the House climate bill, allows businesses to fund efforts that reduce carbon dioxide at levels equal to what the company is emitting.

Under the language in the House bill, neither Sapphire nor SD-CAB work qualify as an offset. In that legislation, offset projects must be new, starting after the cap-and-trade system begins in order to qualify.

But the Senate, Peckinpaugh said, "is a whole new ballgame."

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