I once asked a friend of mine in the biodiesel business what in his opinion was the most successful alternative fuel. With no hesitation at all he proclaimed, "snake oil!" 

Without any question the alternative fuels business has been a mother lode of scams and exaggerated claims ever since it began to gather momentum a few years ago. And one can only expect more of the same as concerns over the future availability and pricing of petroleum continue to mount. Hydrogen, ethanol, coal based synfuel, and biodiesel—they've all been hyped and misrepresented so flagrantly that it's easy to distrust any new technology purporting to wean us away from our dependence on petroleum. And there are plenty clamoring for attention at present. 

Right now there is one especially charismatic new aspirant emerging, namely, algal biofuel, that is, motor fuel derived from algae, among the most primitive of photosynthetic plants. While the current publicity level for this latest alternative energy savior is considerably below that of hydrogen at its peak, the growth curve for the new segment appears much steeper than was the case for hydrogen at any point in its ill fated career. Two years ago there were a literal handful of companies devoted to commercializing algal biofuel. Now there are over 200, most of which have been active for less than a year. The so called hydrogen economy eventually encompassed almost 10,000 companies worldwide, easily the biggest investment bubble ever to occur within the large alternative energy business, and whether algae will get that big is uncertain, but it's definitely in contention. 

Most algal biofuel companies are angel and venture funded startups, some little more than some guy with a company logo and business plan, though there are plenty of heavyweights including Shell, Johnson Mathey, General Atomic, Boeing (NYSE: BA, Stock Forum), Honeywell (NYSE: HON, Stock Forum), Chevron (NYSE: CVX, Stock Forum), Imperium Biodiesel, and Diversified Energy. Several airlines are involved as well, as is the U.S. military. 

Most algae fuel companies are actually biodiesel companies, and almost everyone in the biodiesel industry is taking an active interest in this area. Certain strains of algae produce copious amounts of lipids—over 80% of total biomass, in some cases—and such lipids form the basic feedstock for biodiesel production. Furthermore, algae can be harvested every few days in the case of the most prolific species. In contrast, most oil producing terrestrial plants only secrete oils within their seeds, and often only once a year.  

Proponents of algae love to talk about the amazing potential yields of the crop. Barry Cohen, president of the new National Algae Association, a trade group, assured me that "millions of gallons per acre" were possible on a continuous production basis—in other words, a one acre algae farm would give a two billion dollar oil refinery a pretty good run for the money. In contrast, the most fecund terrestrial oil crops might give you 1,000 gallons per acre on a yearly basis or several orders of magnitude less.  

I'd never heard claims quite that extravagant previously, but some researchers, extrapolating from test tube results in the laboratory, have projected yields of thousands of tons of biomass per acre on a more or less continuous basis. And this is what the press has seized upon, infinite oil from practically nothing. 

So is algae really that promising? I am currently putting together a report on the subject, and I shall have what I hope are definitive answers when it is finished. In the meantime I can make some tentative observations regarding the logistics of production and some provisional suggestions as to the investment potential of this industry. 

First of all, nobody is making a fortune selling algal fuel today, and in fact real commercial facilities are practically nonexistent. It's largely a business of pilots and experiments with all sorts of different production processes competing with one another, and none with proven economics.  

There are also some reasons to believe that algae farms may not establish decisive superiority over more conventional feedstocks, reasons that are scarcely discernible amidst the hype, but which bear examining.  

Here I might point out that some of the more vociferous algae pimps are suggesting that algae need merely be introduced into a properly designed, water filled bioreactor and the organisms will multiply until the unit is packed to overflowing with tons upon tons of green biomass, all in the space of days. This is patent nonsense. Algae can grow quickly, but only in the presence of sufficient nutrients. Just like any other organism, algae require carbon, nitrogen, phosphorus, and various other minerals. Algae can obtain carbon from atmospheric carbon dioxide, but the amounts present are insufficient to promote rapid growth. That requires something like smokestack effluents containing more than 10% CO2, and in fact some of the earliest attempts to grow algae as a fuel source were predicated upon the development of pervasive industrial carbon dioxide capture. That's not happening, and unless it does, real mass production of algal biofuel is scarcely possible. And when one is dealing with the other essential nutrients, which would likely be derived from solid wastes or agricultural residues, then one is competing with other forms alternative fuel production methods that don't require photosynthetic life forms, methods such as gasification, thermal polymerization, and anaerobic digestion. And, it must be remembered, these sources are not infinite and would be severely drawn down if any attempt were made to substitute alternative fuels for petroleum. 

Algae cannot fix nitrogen from the atmosphere, and so they require some form of nitrogenous fertilizer, whether synthetic or natural. That might be provided by landfill organic wastes or agricultural residues of various sorts or specially prepared nutrient compounds, but whatever the source, you're not getting tons and tons of living biomass unless you put in tons and tons of decomposed biomass. It's just like any other kind of farming. You get out what you put in. 

And, unlike biofuel operations involving terrestrial fuel crops, algae factories require that the water in which algae is grown be continuously circulated which in turn requires power. This imposes a significant operational expense not present in conventional agriculture. 

In clear distinction from higher forms of plant life, microcellular algae lack any kind of circulatory system, and so the maximum depth that can be aerated is a mere fraction of an inch. If algae is cultivated on a pond or raceway, a thin carpet is all that can be supported, and that is not going to yield thousands of tons of dry biomass per acre. Three dimensional transparent structures can obviously distribute these shallow cultivation zones vertically so as to minimize the land requirements for fuel production, but only by incurring the penalty of extraordinarily high capital costs. Compromise systems utilizing suspended plastic pouches increase the cultivation area per acre of ground while avoiding the fabrication and assembly problems attendant upon the use high rise structures consisting of rigid conduits, and perhaps this approach is preferable. But it remains to be demonstrated that such compromises will exceed the yields of the most productive terrestrial fuel crops such as the oil palm and the Chinese tallow plant. 

Finally, the pervasive use of algal biofuel—and this is true of other biofuels as well—rests upon the assumption that the total biomass on the planet can be significantly increased or that spare capacity exists within global biosystems to support not only tremendously expanded cultivation of food crops but an approximately equal allocation of biomass to fuel applications. Make no mistake, biomass must be reserved or diverted to support massive cultivation of algae, or alternately dead biomass in the form of fossil sources must be utilized to provide nutrients and energy. And it is by no means certain that the biomass resources of the planet can be augmented to that degree. 

Certain forms of algae may yet prove to be excellent high yield fuel crops. I'm betting against algae emerging as the perfect solution to our fuel problems though.

At the same time I believe that some people are going to make a lot of money in this new industry, not so much by selling fuel as by selling equity and by selling intellectual property. The transportation industry is going to give algae a serious trial and some algae companies will achieve impressive stock valuations just as some fuel cell companies did. There may even be some killer IPOs, though none has occurred in the larger biofuels industry as yet. A couple of weeks ago a firm in San Diego calling itself Sapphire closed a forty million dollar investment round, impressive even by the inflated standards of the dot.com era. There will be others.
 

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