Green Crude: Can Algae End Our Oil Addiction?
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The Fiscal Times
March 8, 2011

This is the first in a series of columns that will report on 100 great ideas for innovation in America and around the world — how they are being funded and by whom, or whether the idea will pay off. This series comes as a debate rages in Washington and across the nation about whether the government or the private sector should fund the research and development of these ideas and turn them into economic growth engines. At the end of each column the idea will receive a letter grade for:

  • Scientific or Technical Viability
  • Commercial Viability
  • Investment Requirements
  • Launch Timetable
  • Impact Benefits

Think of all the U.S. Navy ships trolling seven seas right now, from the shores of Tripoli to the pirate-infested waters off the horn of Africa: battleships, aircraft carriers, missile cruisers and submarines.
Now imagine those same ships fueled not by petroleum, but by algae.

The $10 Difference
While you’re pondering that possibility, also consider that every time the price of a barrel of oil goes up by $10 — as it has done in the past few days — it costs the U.S. Navy an additional $300 million to fuel the U.S. fleet. In the Navy’s fiscal 2012 budget just sent to Congress, they have asked for an additional $900 million to buy fuel based on an expected price rise to $131 a barrel.

Adding 10 bucks to the price of a barrel of oil reduces the growth of America’s GDP by half a percentage point within two years. And according to economist James Hamilton, a professor at UC San Diego, an increase of “$10 more per barrel for crude will leave consumers with about $35 billion less to spend each year on other items, consistent with a decline in consumption spending on the order of 0.2 percent of GDP in a $15 trillion economy.”

The federal government has reacted by pumping as much as $2 billion into R&D for plant-based fuels like algae since 2008 — not including subsidies and loan guarantees for ethanol — with most of these funds coming from the Department of Defense and the Department of Energy.

Biofuel plants on the fed’s R&D list include corn, switch grass and sugar cane, although none of these churn out oil like algae. In some algal species, half the volume of each little green cell is oil. By the barrel, algae also provides three to four units of energy for every one unit used to make it, a ratio that approaches petroleum’s golden 5-to-1 level of efficiency.

Corn, which is used to make ethanol, has a ratio of only 1.2 to 1, while cellulosic plants like switch grass have a 2.5 to 1 ratio (this ratio is being improved with bioengineered varieties of plants). Algae also can be refined and shipped in existing factories and pipes, and can be burned by current engines in cars, planes and naval destroyers.

So far, the 30 or 40 mostly small companies now developing algae fuels in the U.S. have produced thousands of barrels of green crude, a far cry from the 7 billion barrels of oil consumed each year in America. Producers also face the daunting task of scaling from demonstration projects to what amounts to a vast new infrastructure for growing and maintaining algae in either fermentation tanks or in open ponds, and in providing feedstock for the plants, which grow best when fed sugars and other carbons in the form of plant waste or CO-2.

Green crude from algae is not a new idea. The federal government first started researching algae and other plants as alternative fuels at the National Renewable Energy Laboratory (NREL) in Golden, Colorado, after the first oil shocks in the 1970s. The program, however, was shut down in 1996 when oil dropped down below $40 a barrel.

The feds got interested again during the sudden spike in oil prices in 2008, when the price per barrel hit $147. President Obama devoted $800 million of stimulus funds to R&D for algae and other biofuels, on top of hundreds of millions more spent by the armed services.

Private investors also have provided funding to companies such as San Diego-based Sapphire Energy, which has raised over $100 million from Bill Gates and other investors, plus $100 million in government loan guarantees and grants. Another San Diego Company, Synthetic Genomics, has been promised up to $600 million in funding over the next few years from ExxonMobil to develop bioengineered varieties of algae and other plants — one of several investments in algae made by Big Oil. Dow Chemical, Unilever and other large companies are also dipping a toe into algae.

San Francisco-based Solazyme is gearing up to produce hundreds of thousands of gallons of algae fuel using a fermentation process similar to making beer. The company is on track to deliver 150,000 gallons of ship fuel to the U.S. Navy this year. Solazyme and other companies are also introducing algae-based cooking oil, supplements and cosmetics.

David Ewing Duncan, The Fiscal Times
is chief correspondent of public radio's Biotech Nation, a contributor to Fortune, and a columnist for MIT Technology Review. He is also the director of the Center of Life Science Policy at UC Berkeley. The author of seven books, he's written for Wired, Discover