According to a new report from Pike Research, algae biofuels production will grow rapidly over the next decade, reaching 61 million gallons per year and a market value of $1.3 billion by 2020. While barely a drop in the bucket for biofuels, Pike says, this represents a compound annual growth rate (CAGR) of 72%, roughly on par with early development in the biodiesel industry.
Pike Research anticipates that, with 50% of all algae activity, the United States is poised to ramp up production the earliest among world markets. Pilot- and demonstration-scale facilities are beginning to break ground across the country. The European Union (EU) market, which is home to about 30% of algae activity, will be limited initially by the industry’s focus on university research, and later by insufficient access to water, land, and nutrient sources.
Latin America and Asia Pacific, which are home to fewer projects in operation today, are set to gain significant market share in the long run. projects in operation today, are set to gain significant market share over the long run. Both regions will benefit from rapidly expanding biofuels markets, ample land and water resources, and cheap labor, Pike suggests.
Although the Middle East and parts of Africa are potentially ideal candidates for algae production given the availability of desert areas, persistent political instability, infrastructure challenges, a commitment to petroleum production, and lack of access to capital will limit growth in those regions over the next decade.
The first commercial-scale facilities with a potential production capacity of 1 million gallons will likely come online in the 2014 to 2016 window, Pike forecasts, although construction delays, a lack of capital, and lingering investment risk could potentially obstruct growth. A commitment to cellulosic ethanol and other advanced biofuels options will also divert much-needed capital away from early algae projects, further hampering widespread commercialization over the next decade.
Ultimately, algae potential is greatest in regions where there is an abundance of land, water, and sunlight. Secondary considerations include favorable regulations around biofuels mandates, greenhouse gas (GHG) emissions, wastewater treatment, and livestock operation, as well as potential co-location opportunities (wastewater remediation and carbon recycling).
Approaches that rely on molecular biology to achieve breakthroughs (e.g., the Synthetic Genomics Inc. and Exxon Mobil Corp. partnership) are promising, according to the report. However, such approaches face the threat of GMO regulations and may take more than a decade to reach commercial viability. Countries with significant dependence on foreign imports of oil will likely show increased interest in algae-based biofuels if oil prices continue to rise over the next decade.
Algae’s ultimate threat is over-hype. The industry has been both bolstered and hurt by scale-up claims derived from ideal laboratory conditions. It lacks the metrics and large-scale projects to substantiate claims. Since most companies have pivoted away from a fuels-first approach to focus on securing revenue streams from co-products, it will take significant investments of money and time for algae-based biofuels to reach widespread commercialization. If early-mover companies and pilot projects run into serious setbacks, expect a retrenchment among private capital interests.—“Algae-Based Biofuels”
Ultimately, suggests Pike, the algae-based biofuels market will be characterized by regional collaborations and partnerships that are able to capitalize on efficiencies through in situ expertise related to unique environmental conditions, co-location opportunities, and access to end markets. This horizontal organization will result in significant consolidation within the market over the next decade.
Pike Research’s study, “Algae-Based Biofuels”, examines the key growth drivers behind the algae-based biofuels market and outlines unresolved supply challenges. It compares advantages and disadvantages of algae production pathways, leading cultivation technologies, and end-market opportunities. The report includes detailed 10-year market forecasts, segmented by world region, along with analysis of market conditions in key countries and profiles of key industry players that are shaping the emerging algae biofuels business.