Judging from the flurry of venture-capital deals, big oil company investments, and attention from politicians on startups creating biofuels from algae, it might seem like the world has fallen in love with the technology to power vehicles with pond scum. But after all of the algae euphoria this summer, we’ve started seeing a few signs of an algae fuel backlash, with several prominent investors publicly questioning the economics of algae fuel.
At the AlwaysOn’s GoingGreen conference, outspoken cleantech investor Vinod Khosla said his firm has aggressively been looking at algae technologies, but hasn’t found one viable plan after looking at “maybe two dozen.” “The economics of algae don’t seem to work,” he said.
(You can watch the video here by clicking on “Renewables at Scale.”)
In contrast, Khosla has been investing millions into biofuels made from cellulosic biomass. His sentiments also seem to be a change from the rhetoric just last year, when Khosla said at the Algae Biomass Summit that algae could “be a solution” and play a significant role in replacing oil.
Khosla isn’t the only one warning against too much optimism where algae fuel is concerned. At the EmTech conference this week, Jim Matheson, a general partner at Flagship Ventures, said he doesn’t think the costs calculate out either. “We just don’t believe in the economics,” he said, and added that he isn’t sure that “algae is going to come down the cost curve,” according to Technology Review.
At the same event, Technology Review also reported that David Eyton, head of research and technology at BP, which has invested in algae startups Synthetic Genomics and Martek Biosciences, questioned the viability of different types of algae technology, and more specifically the kind that Exxon Mobil recently invested $600 million in. “We don’t think that [technology] will ever reach the kind of cost or supply that we think people are prepared to pay,” he said.
Is the algae-fuel backlash snowballing into a full-on trend? Well, algae has always had its skeptics. As far back as three years ago, companies like Imperium Renewables were stating that producing significant amounts of algae for biodiesel was further away than cellulosic ethanol. “It’s not about whether algae can produce oil, but about whether it can meet a standard quantity needed for fuel,” then-CEO Martin Tobias said at ThinkEquity’s Greentech Summit in San Francisco back then. “It’s going to take longer than anyone wants to say at an investor’s conference.”
Nobody so far has been able to produce algae cost competitively in large quantities, and – in spite of all the promising ideas — it’s still unclear whether that will happen. Matt Horton, CEO of Propel and a principal at @Ventures, said his view of algae hasn’t changed in the last few years. “It’s one of the most promising opportunities in the liquid fuels arena, but the timelines for true commercialization are still years down the road,” he said. It’s tough for a company like Propel to work with algae companies at this point because it’s difficult to predict – with any certainty – when algae-based fuels might realistically be delivered.
When a technology like algae fuel gets as much attention as it has this summer — with politicians visiting algae fuel startups on a weekly basis — it becomes an easy target for the skeptics. What the industry needs right now is less hype and more proof that the pond scum can really come down in cost to reach mass commercialization.
Image courtesy of NREL.