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In the quest to find the best types of tiny algae for biofuel production, Big Oil is teaming up with Big Government. Chevron (CVX) and the National Renewable Energy Laboratories announced yesterday that they are joining forces to select and develop algae that can be processed […]

In the quest to find the best types of tiny algae for biofuel production, Big Oil is teaming up with Big Government.

Chevron (CVX) and the National Renewable Energy Laboratories announced yesterday that they are joining forces to select and develop algae that can be processed into biofuel. Chevron Technology Ventures will fund the project. CTV also has an investment in the solar company, Konarka.

It’s the second large collaboration between an oil company and a scientific institution aimed at developing biofuel from sources beyond the corn used in most ethanol. BP (BP) and UC Berkeley unveiled a $500 million, wider-ranging pact back in February.

For algae biofuel startups, like Live Fuels and Solix, the big-name investments could be seen as confirmation of what they’ve been saying all along – that biofuel yields from high-lipid (i.e. oil) algae strains are much higher than those of competing technologies. And with Chevron and BP interested in the technology, it seems likely that other oil companies will follow suit. Firms playing catch-up like to buy their way ahead and that could mean early cash-outs for algae biofuel investors.

On the other hand, if you have a couple million dollars on hand, it can’t be unmitigated good news to know that a company with over $500 million a day in revenue is moving into your space.

A lot of challenges remain for algae biofuel production. The step Chevron is working on – finding the right algae – is just the first one. Once a properly high-oil algae is found, “farmers” have to figure out how to grow it in industrial quantities. Algae needs the right amount of nutrients and sunlight; and much like that half-dead houseplant browning in your office’s corner, keeping algae happy is harder than it looks.

The other major hurdle for algae production is extracting the oil from the algae. Bioextraction processes, like those we talked about yesterday, are going to have to improve to get the most out of algae’s high per-acre production.

  1. [...] generation biofuels, technologies that offer a happy middle ground are also emerging. Some people think algae-based biofuels could turn out to be more eco-friendly than many first generation biofuels. Others think marginal [...]

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