Can biofuels reach "petroleum parity"?

During November and December 2009, I wrote five posts about producing biofuel from algae. My initial interest and optimism faded as I read more about problems being encountered with costs and scaling. In my last two posts on the subject, I did hold out the possibilities that algae fuel could become a niche renewable (about 10% of our current usage) if Big Oil brought their money, experience and infrastructure to bear on the problem and/or if a strain of algae could be genetically "manufactured" that would secrete oil and thus eliminate a great many of the costs of production. Credit for the first possibility goes to Katie Fehrenbacher of Earth2Tech and for the second possibility to Robert Rapier.

Now comes a new report from Lux Research which seems to essentially confirm what I had reported. I have not read the report, only a press release put out by the company and distributed by Marketwire. Nevertheless, the release claims that in order for biofuels to replace the 30 billion barrels of oil consumed annually, biofuel producers "would need to cultivate an area the size of Russia." The report's lead author, Mark Bunger, acknowledges the strong interest in biofuels because they are renewable and can reduce the amount of CO2 entering the atmosphere. But, if they can't match petroleum in terms of costs, then they "will remain little more than a novelty," he concludes.

The report also concludes that waste biomass is the "best option" as a renewable fuel source in the near-term. The primary reason is cost -- gathering and processing the waste biomass has fallen to $40 per barrel of oil equivalent, according to the Lux report. With 316 million dry tons of waste biomass from forestlands and another 534 million dry tons from crop residues, there are more barrels of oil equivalent than competitors such as crop feedstocks (e.g., corn for ethanol), algae and CO2.

To this pile of waste, I would add cow manure being turned into methane by companies like Green Mountain Power of Vermont and municipal waste being converted into biofuels by companies like W2Engergy. I describe both activities in my post on distributed generation. As I said in my last post on smart people, it seems to make more sense to go for the low-hanging fruit first. The Lux Research report apparently comes to a similar conclusion. But, that's not to say that we should stop innovating for the promise and surprises of technology.

Smart People vs. smart grids, cities, homes, meters, etc.

At last count, there were smart cities, smart homes, smart meters, the smart grid, and probably a new smart thing being coined as we speak. What the world of green technology and energy really needs, however, are smart people. I love writing about the new technology and ideas more than anything I've ever written about in previous work, but the fact remains that smart people adhering to the time-worn tenet of environmentalism to reduce, reuse and recycle could do as much, and probably more, than all the green tech marvels for at least a few decades. Perhaps, after that, the science fiction of green tech in the present will become the science fact of green tech in the future, but until then, walking or bicycling to work will make a bigger dent than all the projected barrels of biofuels promised for the coming years. That's not to pick on biofuels. Conservation by humans, by the smart variety, would do more than all the windmills, solar panels, and geothermal projects can do at present to improve our rate of energy usage.

A recent study from the National Research Council confirms my belief in the value of smart people. According to the report, which received some of its funding from the U.S. Dept. of Energy, we could cut our energy use by 30% below 2030 projections simply by taking energy efficiency measures -- like caulking your house against drafts. In fact, a post on Green Inc. cites the study's finding that buildings "account for 41% of the energy used in the United States.” The transportation sector accounts for 28%.

Remember when Candidate Obama was ridiculed for pointing out that keeping your tires properly inflated by checking them with a tire gauge would save more oil than offshore (U.S.) drilling would produce. Offshore drilling could increase oil production by 200,000 bbl. per day by 2030. Sounds like a lot of barrels, except when you consider that we use 20,000,000 bbl. per day now. That's just a 1% increase in production. Properly inflated tires could improve gas mileage by 3%, according to efficiency experts.

But that knee-jerk reaction to Obama's suggestion was just deja vu all over again. President Jimmy Carter was similarly ridiculed in the 1970s for wearing a cardigan in a nationally televised speech and suggesting we lower our thermostats by one degree to conserve energy.

So, all I’m saying is not to lose sight of what we can do with conservation and efficiency alone. Now, not in 2030. But let's not also forget that technology has brought us wonderful advances. A smart person would pursue both avenues of attack. Cut demand now; design for renewable supplies in the future.

Algae oil: a "what-if" niche scenario

In a backchannel email, Robert Rapier asked if I would add one more situation to my list in which algae could become a biofuel niche -- at least 10% of our current fossil fuel usage. The new scenario calls for the genetic manipulation and breeding of a strain of algae that would do more than produce high oil yields. Aurora Biofuels has been working on the first part -- screening for microalgae strains that outperform others in terms of oil yields. And, the company has “further bred its select select portfolio to maximize fuel-production performance and to be cost effective at scale,” according to its web site. The company’s site also predicts it will start commercial production (they use the open pond method) in 2012, with an eventual capacity of at least 10 million gallons of biodiesel per year.

That’s all fine and good, but, that’s only half of what Rapier was hypothesizing. The second part of his scenario would be to continue the genetic manipulation and breeding to create a strain that naturally secretes the oil (lipids) the algae produces. The oil would then be skimmed off the top of the water where the algae is growing, according to Rapier, at “a tiny fraction of the cost and energy input” of the present method of gathering and pressing the algae for its oil.

Farfetched? Well, Rapier says to consider the production of insulin from designer bacteria. Special strains of E. coli bacteria have been developed to produce human insulin after being bred to carry the genetic material that directs the production of insulin in a human's pancreas. With arrarys of tests and just a bit of luck, perhaps some biogeneticist will develop a strain of algae that has the DNA that causes a cell to "sweat" lipids. And, since oil and water don't mix, it would be relatively easy to siphon off the oil alone.

I have not read about anybody doing research in this area, but would be interested to hear if any reader has some information.

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.