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Algae Biofuels Offer Enormous Promise, Face Tough Production and Cost Challenges to Scale

The 2008 Algae Biomass Summit (23-24 October), organized by the Algal Biomass Organization, drew more than 600 algae producers, scientists, engineers, investors and policy-makers from more than a dozen countries to Seattle to pitch, listen and network on emerging algae-based solutions to global energy, environmental, and economic issues.

Amid the tremendous enthusiasm was a recognition that the field, while extremely promising, also faces difficult technical and economic challenges if it is to scale to be a significant component of a global energy solution. Algae have the potential to help keep humanity from going over the cliff, said Dr. Mario Tredici, Professor of Microbiology, University of Florence, Italy, in his opening talk at the conference, “but there is a necessity to identify the limitations of the technology and establish its true potential.”

The first main limitation, said Dr. Tredici, is the low actual photosynthetic efficiency (PE) (which he suggested to be around a high of 5% currently—about the same as C4 terrestrial plants) and volumetric productivities of algae in mass cultures.

The second limitation is not acknowledging that there are limitations. Algae do not make miracles...they obey the laws of thermodynamics.

—Mario Tredici

Among the subsequent sessions on topics such as research directions, open algae ponds, photobioreactor design, strain optimization, harvesting, and lipid extraction technologies, the conference placed a panel of three venture capitalists—two who have taken positions in algae companies, one who has not—and a keynote from Vinod Khosla, who also has yet to take a position in an algae company.

Khosla has invested in a number of cellulosic ethanol companies (Mascoma, Range, Coskata, Lanza) and companies making other advanced biofuels (Amyris, LS9, Gevo and KiOR).

Khosla said that his venture group had looked at “maybe 100” different plans on algae over the last few years, and had passed on all the opportunities. However, he said, he continues to believe in the potential, and was convinced algae will work, “but it will be a different, out of the box approach. I am convinced somebody here will break the code.

One of his main messages was that the successful algae company(ies) will not be competing against other people in the algae companies; rather, everyone is competing in the fuel business. Khosla outlined his five rules for investing in a company, and explained why he had yet to select an algae company.

  1. Attack manageable but material problems. Building algae refineries is manageable and material, Khosla said. We have enough land and sunlight. (Hydrogen, he added by way of example, is not manageable from this perspective.)

  2. Is it a technology that achieves unsubsidized competitiveness? Khosla said that they only invest in things that within 5-7 years can obtain unsubsidized market competitiveness. Based on a reference baseline of $50/barrel of oil, algae fails that test, he said. (Despite the upswing in oil prices that has since deflated, Khosla said they have kept their reference price at $50 for two years.)

  3. The technology has to scale.

  4. There must be manageable startup costs and short innovation cycles.

  5. There must be declining costs.

There is not enough money in the world to subsidize any energy technology and have it be the dominant technology...The issue [with algae] is that we don’t believe that the current set of technologies can achieve unsubsidized market competitiveness.

—Vinod Khosla

The venture panel comprised Josh Green, Partner, Mohr Davidow Ventures, who moderated; Robert Nelsen, Co-founder and Managing Director, Arch Venture Partners; and Jim Long, Venture Partner, Gabriel Ventures.

Green, who has yet to invest in algae, said he was “agnostic” about the potential. Nelsen has a stake in algae company Sapphire Energy, which has raised more than $100 million (earlier post). Long has algae company Aurora Biofuels as a portfolio company.

Nelsen said that he thought there will be many winners in the algae space—some making fuels, some providing technology to people making fuels. A successful algae company, Nelsen said, will have something that can’t be easily integrated out by a large competitor.

From a fuel perspective, it’s cost and scale. The idea that people will pay more for cute fuels just doesn’t work. [The algal fuel] will have to compete on a dollars per gallon basis. There are government interventions—either direct subsidy or indirect [e.g. a carbon cap] that effects the equation. Since we don’t know that, we assume no subsidy and no carbon tax at all. We have to be able to exist in a world that doesn’t provide anything.

...Sapphire is going for scale. We’re talking 1 million [barrels] per day, 5 million targets. we don’t want to be in this business unless can fundamentally impact the transportation fuel mix in the world. It’s a grand goal...but that is a different business plan from someone who wants to make a lot of biodiesel.Robert Nelsen

Long and Nelsen both agreed that eventually genetic engineering will likely be part of a successful company’s approach.

If it [the company’s solution] is just process engineering, and there is not some element of biology in strain selection...then little companies will lose. Big companies are really good at process engineering.

—Robert Nelsen

(Along those lines, Cellana, the joint venture between Shell and HR Biopetroleum, and Eni each presented their work in the algal area at the conference.)

Long noted that it is getting late to begin a startup in the algae arena for fist-generation algal fuels, and that the bar for differentiation for such a latecomer has been raised as well. All agreed that the current financial environment has created additional strains—that will likely last for several years—on the nascent industry.

It comes down to building value. What’s the single most important thing you can do in next 12 months to have breakthrough, file a key patent, that’s what you do first. Raise money to lower the risk in your project to increase your value, so you can go out and raise some more. You’ve got to size the money to the market opportunity as well as to the key milestone you need to reach, to focus on the one or two key things, to focus on as little money as you can to get to those. That will make the most interesting investment.

—Jim Long



These are communists at work trying to figure out how to write a patent in algae biofuel technology then protect their 'investors' and impede someone else to enter this easy production technick.


Where are Sapphire Energy and PetroSun Algae with their Algae biofuel plants?

Will they be in production soon?


Hopefully some of these startups are looking at saline/ocean algae. Algal farms on coastal inlets would eliminate the land use and fresh water issues. Some species show very high production rates of lipids. In southern climes e.g. (Baja Cali)there is very good sunshine lengthening reproductive hours.

Good to see solid attention being paid to this area. Algal appears to be the only large scale non-fossil oil replacement at the moment. Someone has to make the heavy lifting liquid fuels to replace jet and diesel fuels. Electrification will not apply to those sectors for a long while - if ever.

@ a.b.

"These are communists at work trying to figure out how to write a patent in algae biofuel technology then protect their 'investors' and impede someone else to enter this easy production technick."

Only the communists? What are you smoking?


I think what is going to happen is our global economy is going to continue to go down the tubes--and socialistic government tinkering is only going to make things worse and stifle creativity, innovation and growth. We seem to want an absolute level playing field for everyone in the public and private workplace...and we try to tear down the overachievers/superachievers (read Harrison Bergeron by Kurt Vonnegut). When the climate is right for talented people to emerge and to be compensated fairly for all of their toiling, we will see real innovation and growth in the economy again. I have been in government and the private sector and have been an overachiever and underachiever....the deck is NOT staked in favor of those who work hard in this world in anticipation of being rewarded fairly. It is going to take a lot of time and very difficult hard labor to establish new sustainable renewable energy industries and people are no doubt going to get hurt in the process just like every other industry that has gone through this process ...ejj...


Well said, AB...
How is it 'getting late to begin a startup in the algae arena'? There's only a couple (small) examples of companies even making an attempt. This is a virgin industry, the game hasn't even started, the best time to try, the best time to be inventive & entrepreneurial... The folks at the ABO are only interested in one thing: protecting Intellectual Property rights.


Bad timing with this financial crisis and oil price collapse....just when we need high oil prices to spur new directions.
Whoever is elected must place a national sales tax on gas that fixes a minimum price..say, $3/gal. If price falls below that level, the feds collect the difference and the $ goes to (hopefully) paying off the nat. debt or further investment into fossil fuel replacements.
well, i can dream....

Henry Gibson

Solar cells are far more efficient than algae. Solar cells are more expensive. There are many places where there is not enough space for each person to have a car powered by solar energy even with unlimited money. Many people could have nuclear heated homes tomorrow at far lower costs than oil.

There would be some reduction in the use of oil if solar heat collectors were used to heat water in places where oil and even gas is used for solar heat. Capital funds or government subsidies are far better invested in vacuum solar heat collectors than in solar cells. In fact, it would be logical to require the combination to always be used.

Bubble Action Pumps extend the use of solar heat to many places where electric pumps may be too expensive. Three or more storey houses can have hot water stored in the cellar from solar heat collected on the roof with such devices with no need for electricity. Antifreeze solutions also work in such systems for cold nights. Hawaii now requires solar water heaters.

The Copper Cricket was a similar device that pumped solar heated water into the cellar with no electricity, but few knew how to deal with or understand the simple maintenance required.

The parabolic collector may the most economic collector of heat or light, and even simple bellows involving refrigerants can keep such devices pointed at the sun. Cheap modern $1 micro-contollers with motors can calculate the positioning needed for the next billion years or simple sensors can be used. With them parabolic mirrors can be programmed to point at the position of the sun just before it rises over the horizon.

Parabolic mirrors with stirling engines and larger ones with Capstone turbines are more efficient than solar cells and lower cost. There should have been a parallel initiative called the one Parabola Per Child. A heat pipe system could heat a vacuum insulated cooking chamber on these hundred watt electric free piston solar generators. LED lights will save more energy than solar cells will ever produce. CFLs already have.

There is a way to operate a Nickel Cadmium cell so that it has a very long life of even thirty years. It must be remembered that even nickel and iron are poisons. A guy died recently from eating too much fast food in one day. Some high efficiency solar cells have arsenic in them as do many high speed electronic circuits whilst lead solder is being banned. In all countries of the world, the use of cadmium will prolong peoples existance more than if it it banned as a poison.

If algal oil is considered art, then funding for it can be justified as it could be if it were considered scientific demostrations. As an energy investment, buy CANDU reactors instead. Even with old inefficient electrolysis electrolysis, the hydrogen equivalent of a gallon of gas can be generated at lower cost than gasoline. Hydrogen and captured CO2 can make new gasline and may be cheap enough.

Imagine liquid CO2 tankers from Europe powered with Nuclear reactors that deliver gasoline or methanol upon arrival. The largest diesel in the world can be replaced with an equal horse power but less efficient far smaller steam turbine and nuclear reactor. This does not even consider the space required for fuel. A pebble bed reactor is safe enough for use almost anywhere. Piracy is far more dangerous not to even consider ship sinkings.

Nuclear reactor production of liquid fuels will be used, and it can start with reactors at large ethanol plants and large refineries and then at tar sand extraction facilites. There may be no reason to deliver anything but methanol from tar sand facilities. ..HG..

Jay Tee

@ henry gibson:
Thanks for your speech, no one is impressed, and there will always be a need for liquid fuels because of their energy density.

"if algal oil were considered art..." STFU you fukin loser.


Jay Tee, now, now... i disagree with some of henry's comments too, but you are the one who looks like loser.

Cyril R.

Heh, Obama and McCain would do well to wait with that gas tax announcement till AFTER the elections.

Rocket Scientist

As one who uses solar cells day in and day out, I can assure you that soar cells are not feasible for energy production any time in the near future ( 20 to 50 years out - maybe). Production costs are enormous for solar cells and they have a limited lifetime for use. If you are willing to pay $30 to $40 per gallon for gas, then, of course by all means, pay a comparable rate for your electricity by using solar cells.

The problem that all alternative fuels will have is that oil prices are, in large part, controlled by dictatorships. As soon as an alternative starts to become feasible simply drop the price of oil until the alternative goes out of business. The only way around this is to fix the price of oil through the use of tariffs. With oil at $100 per barrel alternatives, such as oil from algae, are economically viable. Ordinarily I would be against tariffs but this is a national security issue. We must not be dependent on dictatorships for our energy needs.



You make a point. But what happened to "peak oil??" If as the pundits have been screaming - we are AT peak oil or NEAR the tipping point of peak oil - then oil prices will rise continuously until demand flat lines it.

There is now a huge momentum for electrification. Since oil comes from the "enemy" in foreign lands, the incentive to speed electrification is huge. Dropping oil prices will get the cartels one thing - less oil revenue. Thanks, Sheik Yer Bootea!


"If Algae were considered art."
High praise indeed.

There will always be a market for liquid fuels.
There will always be a market for liquid feedstocks in industrial process.
There will always be market for solid fuels incl fossil, and bio wood etc.
Some algae expire Hydrogen while still retaining oil and cellulose production.

No maket can continue to increase forever even if hubris remains blind.
Slowing consumption by reversing the growing no f consumers is one factor n sustainability. Another is efficiency.

2 areas of concern for algae development are:

"The second limitation is not acknowledging that there are limitations. Algae do not make miracles...they obey the laws of thermodynamics."
—Mario Tredici

My take on this aspect is that the required surface area and exposure time could be modeled or integrated (sensitively) with natural systems.

For instance there are any thousands of acres of natural and man made water systems that receive (or could) sunlight.
UV also acts as an antibacterial sterilizer.
From Crappers days and Victorian England, our waste water disposal has been underground, denied access to UV rays.
This has underpinned the health benefits responsible for a near doubling of life expectancy and the eradication of several important disease.

A new approach could see sunlight and biological organisms better deployed with algal production.
This approach could provide an answer to the the challenge that of cost amortization.
There is a high cost in building dedicated systems infrastructure. It makes sense however to obtain extra benefits from necessary plant.
If this is implemented as part of upgrade or scheduled replacement as indicated by measure of success, then the
costs can be so low as to be negligible and as he technology matures we should expect this resource stream to be commercially viable.

We have not been able to adjust to an appropriate model in these regards yet.

The one aspect humans have shown a talent for is finding or adapting to new resources. We seem happy if we can replace one behavior with another.

The way we value objects, goods or tools has always changed to meet the market.As the market has adapted to satisfy demand.

Science math and logic inform us to what we need to do well before we have the real tools to achieve these changes. In contrast to the inventive mind that seeks new markets, our challenge is to meet or satisfy an existing existing market.
Many can see how adjusting the demand side of the market through the usual efficiency / demand /supply chain can bring substantial solution.
In contrast, the challenge to bringing an expansionary economy into the equation seems somewhat futile.

Right now, from what I gather from the ecological innovation news, it is the advanced countries that are producing the innovations. If you check with this link on the 15 algae startups to watch, they are in the US, Israel and New Zealand. I have yet to encounter any algae gizmo of an idea from those communist countries let alone some bright patent. On the contrary, their kind of goverment might be better in implementing big algae projects.
Our capitalist democratic system may not work all the time. Just look no further than our financial mess wrought by unbridled monetary policies, which will inevitably slow down the alternative and renewable energy projects. Ironically, what the governments are doing to solve the crisis are exactly socialist.

There is no need to be dogmatic. Accept what is best. Forget about ideology.


Why doesn't some company simply put a 4 foot pipe in the ocean in Southern Califorina and extract the alge and plankton and process that into fuel, the current would keep the intake supplied with new water so there would be a constant supply, and the ocean is a bigger pond than could be made on land. The side effect would be the return water would actually be clean because so much material would be removed.

I'm sure that I'm not the only one that has thought of this.


"Ironically, what the governments are doing to solve the crisis are exactly socialist."

Where in global economics does a loan guarantee equate to government nationalization of industry?



What are the costs to pump 1 sq m of water through your extraction plant? And how much algae do you think i possible to extract from the same amount of water?

If you get 20 grams, of which 25% are oil, you're lucky!


At what point do the demands of saving earth from global warming exceed the demands of market? Considering that oil use is rapidly killing us, why do we worry about the ruminations of the vcs? Subsidize cetain renewable technologies that show potential to save us in the short term, spend whatever it takes to achieve salvation (think $700 billion shovelled into the troughs of masters of the universe financial systems). Electricity generation from the sun's heat seems a low cost approach that is technically feasible today, ramp up production to achieve necessary levels, change the electrical transmission systems required (which will probably always be needed). Then, excluding non renewable fuels, let all other potential energy sources try to compete. Ideological purity at this point is stupid.


For your consideration:

Strip away the ideologies.

jeff klingenberg, Ph.D.

very interested in starting a company in the SE/Ma region of the US for Algae bio-fuel production!


A company called Algenol are using salt water, carbon dioxide, and algae to create ethanol.
The first facility using this process is scheduled to begin commercial production next year. The plant is located in Mexico in the sonoran desert. The production costs are estimated at $1.00 per gallon.....
I hope they are successful.

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