Monday, November 30, 2009

Algae oil: just a niche, in time

In my last two posts about the probability of commercial algae production, I've gone from having optimistic hunches to reporting facts by people well-versed in the sector. Despite their pessimism (and now mine), everybody seems to unanimously wish it wasn't so that competitive algae fuel is maybe 10 or more years down the road. Maybe their gloom is not quite so warranted. After all, Exxon did invest $600 million into an algae fuel deal with Synthetic Genomics in July 2009. There have been other big deals with traditional oil companies as well as venture capitalists.

Katie Fehrenbacher of Earth2Tech seems to hold out hope that technological breakthroughs, scalability and commercial production can be eased on down the road with Big Oil's big money. Contrary to what many say, I think this may be an area where throwing money at the problem can solve it. Her reasoning is more rational.

Commercializing algae fuel technology is very expensive, Fehrenbacher writes, can the only companies with that much money and an infrastructure which can be used by the new industry is Big Old Oil. And with commercial algae fuel plants estimated at a cost of over $100 million, scaling up also becomes the domain of Big Oil. If algae fuel is for real, then Big Oil isn't going to care whether the fuel coursing through its refineries, pipelines, trucks an ships comes from biomass trapped underground eons ago or microalgae.

So that's one possibility. The second set of possibilities comes from Robert Rapier. He posits three situations in which he believes algae fuel could find a profitable niche. The first is the case in which "the oil is produced as a by-product." Algae, for instance, can be used in pet food or as a base ingredient in cosmetics. If a company begins business primarily to cultivate algae to produce products like these, and the oil is simply a by-product of the main production process, then we may have something profitable. The reason is that the costs of production would be mainly covered by the consumer product.

The second situation is what Rapier calls the "wild card," the approach being used most notably by Solazyme. First, the company plays around with the genetics of algae to get better oil yields. Then, it uses a fermentation method in which the algae is raised in closed tanks and fed sugar. In my last post, I mentioned a study by the British Columbia Innovation Council in which they reported that fermentation as a means of algae oil production topped bioreactors and open raceways by coming in at $9.03/gal for the costs of production. That was 10 times cheaper than bioreactors and five times cheaper than open raceways. According to Earth2Tech, venture capitalists and Chevron have invested $76 million in Solazyme.

The third situation, reports Rapier, is one in which algae oil production is just one step in a more complex flow chart of energy processes. He notes as an example an integrated approach where polluted or waste water is used to feed and grow the algae. The principal operation is cleaning up the water; any algae produced in the process can be converted into biofuel. Again, the costs are cheaper because they are principally borne by the primary activity.

I'm not sure if W2Energy's operations are what Rapier has in mind here, but I think what they, and companies like them do, is a niche that can be profitable. In earlier posts, I wrote how W2Energy signed a deal to convert old tires into fuel products and energy that could be sold to the power grid. I also wrote about their deal to do the same with municipal waste in Laurel, Md. A look at their process flow chart shows the biomass converted into a gas during the plasma phase. Leftover CO2 from that operation is then fed into bioreactors which produce algae. The algae is then fed back into the plasmatron to create more gas and fuel products. As I've described, they fit this operation on the bed of a tractor trailer and can chain them together to scale up. It ain't fancy but at least W2Energy is doing some real business that seems to have a better chance of making profits sooner, than some pie in the sky 20 years from now.

Thursday, November 26, 2009

Algae oil: scaling, breakthroughs and costs of production

In my last post, I mentioned scaleable as a possible problem area in the algae oil sector. I also mentioned Robert Rapier, who has a great deal of experience in fuel. He brings up the same point in his essay, Renewable Fuel Pretenders, on The Oil Drum. Most "pretenders" sincerely believe that they have "cracked the code," he writes, and that they are not pretenders, but contenders. But Rapier notes this:

"What I have discovered in many of these cases is people often believe this because they have no experience at scaling up technologies. They might have something that works in the lab, but this can instill a false sense of confidence in those who have never scaled a process up."

Scaling often requires the solution of a number of technological problems, some small and some large. In the same essay quoted above, Rapier also notes that "the potential for success falls rapidly as the number of needed [technological] breakthroughs pile up." He asks us to imagine a new technology with “a 25% chance of achieving commercial viability in the next 20 years.” In this scenario, if there were three hurdles to be cleared, there would be only a 1.56% chance of success. Since algae fuel, he contends, has multiple technological hurdles, the chance for success, even in five or ten years, is not strong. Perhaps this explains the plethora of methods still being attempted. Not enough hurdles have been cleared to narrow the race track down to one or two, maybe three, lanes.

Many bets have, however, been placed on photobioreactors -- a closed environment where CO2, nutrients and lights are controlled within glass (usually) tubing. The problem, like almost any prototype, is that the energy, or, in this case, the costs are still too high to produce a biofuel that can compete with fossil fuels. Rapier cites an analysis by PhD graduate Krasen Dimitrov in which he examines the technology and processes of GreenFuel Technologies (now defunct) and asserts that production costs (just production costs, mind you) for algae oil would be about $853/bbl or $20.31/gal. About eight or nine time where gas sells now.

In addition to Dimitrov’s analysis, Rapier cites a report commissioned by the British Columbia Innovation Council to assess the possibility of an algae fuel industry in B.C. The report looked at three methods of producing algae biofuel -- photobioreactors, open ponds (called raceways because of their shape), and fermentors (that is, devices using fermentation). They came up with the following estimates for the cost of production:

  • Photobioreactors -- $93.23/gal
  • Open raceways -- $49.54/gal
  • Fermentors -- $ 9.03/gal

Even at nine bucks a gallon, we're not yet in the ballpark, because the estimate is just for the cost of production. No marketing, no distribution, no health insurance packages (in the U.S., anyway), no social security payments, and so on and so on. In short, none of the normal operating costs of a business -- just production. And as for bioreactors, they are going to need an almost impossibly steep curve down to become viable in the near future. Rapier contends that there can be some cost improvements, some economies of scales, but that the main elements of production are basically fixed costs -- things like building material, machinery, and land -- and not subject to much in the way of improvement.

But, all is not completely hopeless, as we shall see in the next post, as we just saw with fermentation in the BCIC study.

Friday, November 20, 2009

Algae oil: when green turns to gray

Years away from commercial production

I ended Part 1 of my analysis report on algae oil noting that Part 2 would address the cultivation and production challenges facing this nascent industry. I was then going to move on to a look at the financial state of the sector in Part 3; political, cultural and environmental impacts in Part 4; and, end with a summary and investment recommendation for the sector in Part 5. Well, mission aborted. My initial excitement about algae oil has turned south. It’s not that there isn’t a possibility for algae oil to contribute some percentage of our energy needs, but that it’s so far in the future that chances are high that some other clean energy (or combination) will capture the market instead.

I recently heard an engineer on NPR (National Public Radio) discuss the reality of prototypes. What looks like a stripped-down, scaled-down version of the final product humming along for an audience is actually being tweaked and prodded and monitored by a team of engineers making sure (sometimes, manually) that all the systems are working. That seems to be where we are with algae oil. It can be produced, but not without putting a lot more energy in than we get out. That’s not a good plan for making money in the marketplace.

I came to this conclusion, at first, simply because of the jumble of techniques used to cultivate and process algae into biofuel. Although this could be considered a sign of strength that this marvelous little organism could be turned into the energy we all love and crave, it became clear from researching web sites and papers that we were perhaps only one or two doors down the hall from the lab where the algae oil idea was hatched. As skeptics are saying, if somebody tells you algae oil is now at competitive prices, ask where you can buy a gallon. Best estimates put the current price at about $100/gallon.

At last count, there were well over 50 start-up companies looking to turn algae into biofuel. There are about six methods being used:
  1. Bioreactors -- Algae is grown in closed glass or plastic tubing, or polyethylene bags. CO2 and nutrients are fed into the system. Light can be natural (sunlight) or artificial lighting.
  2. Fermentation -- Algae grows in closed tanks with no sunlight. Sugar is introduced to feed algae growth.
  3. Wastewater -- Companies clean up algae-infested bodies of polluted water and turn algae into biofuel.
  4. Gasification -- High temperatures are used to turn algae into biogas.
  5. Green Crude -- Various methods are used to create a fuel product that can be fed directly into our current refinery system for eventual consumer use, instead of conversion to ethanol or biodiesel.
  6. Open pond -- Algae is grown in shallow ponds and fed CO2 and nutrients. CO2 often comes from nearby factory smokestacks.
There are more, as well as more combinations, of these methods. My problem with the sector, rather than the companies or methods, is that there seems to be no consolidation around any one or two methods, with the possible exception of bioreactors. This indicates to me that we are still experimenting with methods that are neither cost-effective or scaleable.

Enter Robert Rapier, who I ran across in my research. I could end here and just send you to his blog and web writings, but instead I will attempt to summarize his conclusions in my next post about the dimming prospects for algae fuel, as well as my own thoughts. Remember, of course, that he is the scientist/engineer; I’m the journalist.

Friday, November 13, 2009

Set Phasors to Smart!

While Google was making a splash in early October opening up its API for web tool PowerMeter, the Tennessee Valley Authority (TVA) was quietly stirring up its own waves by making its SuperPDC available to others in the power industry. The SuperPDC, a phasor data concentrator, is a computer system used to determine the health of the power grid. Whereas Google's PowerMeter monitors home energy use, the SuperPDC collects and monitors information on the entire eastern U.S. power grid. Despite the difference in scale, both recent announcements indicate steps being taken toward the creation of the smart grid.

Time seems to be moving faster than what anybody imagined. In the Jan/Feb issue of Electric Energy T&D Magazine, the article, “Phasor Measurement Units - From Exotic to Everyday,” explains how the authors implemented a simple approach to PMU (phasor measurement unit) technology over the past three years at the Salt River Project in Phoenix, Ariz. At the end of the article, authors Gary Roskos and Bill Robertson are predicting that the more widespread use of PMUs would “lead to advances in distributed real-time dynamic stability control applications.” Translating engineer-speak, that means applications like the SuperPDC which “would lead to the development of control algorithms… to preserve the integrity of the overall Grid.”

The SuperPDC collects its information from PMUs which are often situated at critical points in the grid such as generation sites and control area boundaries between a utility and its neighbors. The Electric Energy authors recommend asking three questions when locating PMUs: 1) What data is needed by regional organizations and neighbors?, 2) Where is system observability poor or estimation/measurement errors are high?, and 3) Where are elements, such as transformers or phase shifters, where impedance models vary?

PMUs will be the sensor workhorses of the smart grid by measuring electric current 30 times per second, with each measurement carrying a time stamp taken from GPS (Global Positioning System) satellites. By being able to monitor and report line conditions in real time, PMUs and PDCs enable more power to flow over existing lines. And, the system of sensors and software are integral to meeting the Department of Energy’s (DOE) requirements for a smart grid -- one that is capable of sensing system overloads, preventing or minimizing outages and automatically “healing” itself when variances occur in the power grid.

As the nation’s largest public power provider, TVA has always been on the vangarde of development. The success of the SuperPDC has led the North American Electric Reliability Corporation to contract with TVA to expand the system into a regional PDC. Wide industry use is targeted for the beginning of 2010. The use of phasors and the software systems that record and analyze their data are one of the most important steps in the improvement of the nation’s power system for smart grid technology.

“We’re hopeful that TV’s technology will enable both computer system vendors and the electric power industry, as billions of dollars are invested, to modernize the power grid over the next several years,” said Jacinda Woodward, TVA Vice President of Power Control Systems.

TVA announced its open PDC approach at a meeting in Chattanooga, Tenn., led by the North American Electric Reliability Corporation. Utility representatives, computer system vendors and power grid researchers attended. Such meetings, of course, can only help to advance the clock as interested parties around the country conduct their own experiments in setting the grid to smart.

Wednesday, November 4, 2009

Distributed Generation -- roots-rock energy

"I'm doing my part to help America become energy self-reliant."

Distributed generation sometimes seems like the 21st-century version of 1960s recycling and compost heaps, but it is actually a part (albeit small) of the plan for the Smart Grid. Energy is generated at or near the place where it is used, with any excess usually sold to larger power plants in the grid. Often, the modular and scaleable plants at this level use renewable resources in a way reminiscent of early ecology movements, but with new and old technology configured into systems that allow for mobility and diversity of feedstocks. Below are three companies that are part of a movement that seems to be operating under the radar of national media attention.

Organic electricity

Let’s start with two Canadian companies that have teamed up to turn organic trimmings into electricity. Loblaw Companies Ltd. is Canada’s largest food distributor with 47 corporate grocery stores in southwestern Ontario. All of the organic trimmings -- meat, dairy, fruits, vegetables, and grease traps -- will be shipped to a nearby biogas facility run by StormFisher Biogas. StormFisher estimates that the organic material will produce enough biogas to operate turbines generating electricity to power 225 homes annually. The electricity produced at the facility will be sold to Ontario Power Authority.

The biogas results from a process called anaerobic digestion, much like what goes on in our own stomachs. In short, organic feedstock interacts with various bacteria and methanogens to produce the gas which is approximately 60% methane and 40% CO2. Liquids and solids also are produced during the process and can be sold as organic fertilizer. The plant, to be located in London, Ont., is expected to begin operation in late 2010.

Yes, in my back yard

In my last post, I wrote about W2 Energy and their mobile mass-to-energy trucks. Well, you can’t get much closer to home than their U.S. sales and marketing office in Laurel, Md. Rather than filling up landfills (and paying for the privilege), the mayor and city council agreed to allow W2 Energy to set up one of its mobile prototype units to convert 4 tons per day of municipal solid waste into electricity, ultra low sulfur diesel, and even gasoline and jet fuel.

The city currently collects 28 tons a day. W2 Energy calculates that each metric tone of municipal solid waste can produce about 100 gallons of liquid fuel and 200kw of electricity. The agreement with the City of Laurel will permit W2 Energy to install a full-size commercial plant to process all of the city’s municipal waste once the prototype has been proven and tested.

Cows want to help, too

Lastly, there is Green Mountain Power of Vermont and a herd of 1,200 cows, doing one of the things that cows can do so well, at Westminster Farms. Green Mountain Power and the farm, with their own funds and help from federal, state and local agencies, will set up a now, newly popular (it would seem) anaerobic digestor to convert the herd’s manure into electricity. Green Mountain estimates that cows will produce enough manure to generate 225kw of electricity, enough to power 250 homes. In addition, the project produces a revenue stream for the farm, helping to keep it profitable. Farm methane is just one of several renewable energy resources that Green Mountain has added to its portfolio, which includes hydro, wind, landfill methane, and a planned solar plant. Green Mountain provides about 25% of Vermont’s electricity needs.

Investment potential

Chances are that these three projects, or similar one, are occurring across the country and may be an early investment vehicle, before larger companies and projects begin to come on the scene.