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Summary:

Algae fuel startup Sapphire Energy is in the process of raising $144 million to build out its first commercial demonstration plant in New Mexico. It’s impressive, but it’s also about three years behind its original projections. Why does algae fuel take so long to scale?

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Earlier this week algae fuel startup Sapphire Energy announced that it’s in the process of raising a whopping $144 million from private investors, which will be used to build out its first commercial demonstration algae farm in New Mexico. That farm could be able to produce 1.5 million gallons of Sapphire’s green crude per year by 2014, says Sapphire’s VP of Corporate Affairs, Tim Zenk.

That might sound impressive, but it’s a far cry from the company’s previous projections. Back in 2009, Sapphire was hoping its algae farm would be able to produce 1 million gallons of green crude per year by 2011, followed by 100 million gallons per year by 2018, and 1 billion gallons per year by 2025. When Sapphire made those projections, the sheer volume was so much more than any of their competitors were putting out there, that I asked if Sapphire was going to be “the gorilla of algae fuel?

Well, turns out, nope, at least not yet, but they are still out in front of — or on par with — much of the rest of the algae fuel industry. The algae fuel sector is just taking a really long time to scale and reach anywhere close to being economic with gas and diesel. As Synthetic Genomics and genetics guru founder Craig Venter said at an event in 2010: The real bugaboo for everyone in the algae fuel industry is reaching the scale at which the oil companies currently operate to be competitive.

Venter and Synthetic Genomics opened its own algae test lab in conjunction with oil giant Exxon in San Diego in the Summer of 2010. But more recent reports say that that project has stalled a bit as Venter wants to work on synthetic algae cells (yep, one’s they full design and create in a lab) and Exxon’s deal is reportedly for naturally occurring algae. Venter now says he doesn’t even think that algae fuel that can replace oil will come from nature.

Oil scale

In 2010, Pike Research predicted that by 2020, the algae biofuel industry would only likely be able to produce about 61 million gallons per year globally and Pike estimated that the world wouldn’t see its first commercial algae plant with capacity of at least 1 million gallons per year until 2014 at the earliest (more likely 2016).

Contrast that 1 million gallons per year — which Sapphire’s Zenk notes is “a commercial demonstration plant, and on the energy scale is small” — with the amount of fuel that the U.S. alone consumes every year: nearly 138 billion gallons of gasoline in 2009 were consumed in the U.S. according to the U.S. Energy Information Administration.

Not all the algae companies have been trying to tackle the fuel space head on. Some companies like Solazyme have decided to focus first on personal care products and green chemicals, before tackling the fuel industry. Nine year old Solazyme went public last year and before that raised at least $125 million from investors including Chevron’s VC arm, Morgan Stanley, Richard Branson, food and personal product giant Unilever.

If it’s taking so long, why even bother? Well, algae is one of the most promising fuel stocks partly because it can produce 2-20 times more oil per acre than other energy crops, and it can live in freshwater, seawater and wastewater. In theory, it’s a perfect fit for a biofuel.

Sapphire’s Zenk says that the company was delayed a bit while it was finalizing a loan guarantee from the USDA, which it secured at the end of 2011. Sapphire broke ground on its New Mexico farm last June.

Images courtesy of Sapphire, and Synthetic Genomics.

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  1. michael kanellos Thursday, April 5, 2012

    Solazyme is the gorilla of algae fuel. Sapphire is the howler monkey. Synthetic Genomics is the golden marmoset.

  2. DOE BIOMASS PROGRAM AND ALGAE RESEARCHERS NEED TO BE INVESTIGATED!

    Solydra story is opening a huge can of worms at the DOE LOAN GURANTEE LOAN PROGRAM. Its not just about the Solar loan guarantee program. Look at all the millions in fees collected by the DOE LOAN GUARANTEE PROGRAM with algae projects less than 20% completed. An audit needs to be done on all DOE Biomass Program Grants to algae researchers.

    The US taxpayer has spent over $2.5 billion dollars over the last 50 years on algae research. To date, nothing has been commercialized by any algae researcher.

    The REAL question is: Does the DOE BIOMASS PROGRAM really want the US off of foreign oil or do they want to continue funding more grants for algae research to keep algae researchers employed at universities for another 50 years?

    In business, you are not given 50 years to research anything. The problem is in the Congressional Mandate that says the DOE can only use taxpayer monies on algae research, NOT algae production in the US. So far, algae research has not got the US off of foreign oil for the last 50 years!

    A Concerned Taxpayer

    ARPA-E halts algae project, citing missed milestones
    Jim Lane | February 16, 2012
    Share”In Washington, the DOE has halted a research project at Iowa State University funded by ARPA-E to develop biofuel feedstock from an aquatic micro-organism for failing to reach research milestones. About 56% of the $4.4 million grant was used. Politicians against increasing APRA-E funding as proposed by President Obama’s new budget are using it and other halted ARPA-E projects as examples to reject the program.”

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