The long, long (long) road for algae fuel


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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