When oil cost $145 per barrel, nearly any alternative fuel scheme could get funding. With oil’s stunning drop, the buzz is off, and now several recent news stories have brought a harsh light on algae as a means of creating biofuels and sequestering carbon. For example, in this interview Bryan Wilson, a co-founder of algal biodiesel startup Solix and a professor at Colorado State University, made some stark and sobering disclosures: He said Solix can produce biofuel from algae right now, but it costs about $32.81 a gallon. Explaining why the production cost is so high, Bryan blamed it on the energy required to circulate gases and other materials inside the photo bioreactors where the algae grow. It also takes energy to dry out the biomass, even though Solix claims to use far less water than other companies. He predicted that by exploiting waste heat at adjacent utilities, the price can probably be brought down to $5.50 a gallon, and by selling the proteins and other byproducts from the algae for pet food, the price can be further reduced to $3.50 a gallon in the “near term.” But neither of these “solutions” exists today.
You read the articles, we read between the lines: if and when $3.50 per gallon materializes, that’s still only the equivalent of $150 a barrel of oil – a challenge when oil is approximately one-fourth of that price. But a bounceback in oil isn’t the answer: as energy prices rise, the tipping point for economic viability for algal biofuels will get pushed out even farther.
These are daunting challenges, and a growing number of observers and investors are ready to declare algal biofuels dead. We see some hope: Algae could be a part of some countries’ overall biofuel mix, especially in high IR regions like the Arabian Desert. Using them as a water treatment solution makes a lot of sense, too, so long as companies don’t bank on any biofuels at the end of that process. Clearly, many of today’s startups will not survive, but radical changes in strategy might save algae yet, just as second-, third-, and fourth-generation biofuel technologies are being explored to overcome insurmountable hurdles with corn ethanol. We expect change from companies like Solazyme, Phycal, LiveFuels, and GreenFuel Technologies, which are all in similar situations and overhauling their strategies. For example, GreenFuel has moved towards a water treatment “green” pitch instead of a carbon mitigation pitch, something we expect more and more algal biofuels companies to do in the future: witness Aquaflow Bionomic, Bionavitas, and Blue Marble Energy. Even as oil prices come back, the free ride is over, and algal biofuel companies will need to be highly innovative to survive. Look for an upcoming State of the Market report from the Lux Biosciences Intelligence team for more on algal biodiesel and other next-generation biofuels