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Florida Algae-preneurs - Making Fuel from Algae

Some Florida businesses are squeezing a trickle of fuel from algae, claiming they can help power the world. But right now, a few expensive drops in the bucket are all they have to show.

On 1,000 acres on the northwest shores of Lake Apopka, Orlando businessman Nick VandenBrekel touts a new crop for Florida that he says can help boost the state's economy as it provides another source of alternative energy.

His company, Agrisys, has raised more than $25 million from investors and plans to break ground this quarter on ponds and a small refinery where VandenBrekel says Agrisys will be able to grow algae, process it into an oil, and refine the oil into jet fuel, diesel or gasoline.

Nick VandenBrekel
Agrisys founder Nick VandenBrekel plans a facility near Lake Apopka where the company intends to grow algae and refine it into fuel and omega-3 "fish oil." [Photo: Jeffrey Camp]
The operation, he says, will be "the world's first large-scale, vertically integrated algae-to-biofuels facility."

Scaled up, VandenBrekel envisions a host of 1,000-to-20,000-acre farms across the Southeast where algal fuel is grown, processed and used locally, from community gas stations to diesel fleets such as school buses. Success, he says, would create no less than a "rebirth of American agriculture."

Like Agrisys, a troop of other Florida companies — including PetroAlgae of Melbourne; Algenol of Bonita Springs; AquaFiber of Orlando; and Algae Aviation Fuel of Sarasota — sees the same promise in algae as a source of biofuel. Algae grows faster than any other potential crop, reaching maturity in less than 24 hours. As it grows, it devours CO2, generating oxygen as a byproduct. Most important for its potential as fuel, algae produce lipids, which store energy as fat.

Turning that fat into fuel requires identifying a species with high lipid content, growing it quickly, harvesting it and then extracting oil from the microscopic cells and refining it.

fuel derived from algae
VanderBrekel displays fuel derived from algae.

The Florida firms all boast unique algae strains or proprietary processes they say can make fuel.

Agrisys, for example, has developed or licensed technology for growing and processing its algae in partnership with a research institute called CEHMM and a private technology firm called ARA, both in New Mexico. VandenBrekel says researchers there have been able to squeeze 125 gallons of oil daily from 1,000 gallons of algae-water mix piped from five acres of ponds.

But scientists say nearly four decades of research haven't answered the question whether anyone can do it at the scale the Florida companies envision — much less at a profit.

"There is a lot of hype because all these companies are chasing investors, so the bigger the numbers they use, the better hope they think they have of attracting dollars," says George Philippidis, energy director of the Applied Research Center in Miami, the business arm of Florida International University. Philippidis worked at the National Renewable Energy Lab in Colorado during early efforts to research algal fuels and today consults with some of the algae companies popping out of the pond.

Philippidis sees real promise in a Florida algal-fuel industry because the state's exposure to sunlight and warm temperatures make it an ideal place to cultivate algae. But he estimates algal fuel is still about a 10-year bet. The technology, he says, still faces "significant challenges."

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Scientists understood the potential for extracting oil from algae as early as the 1940s. But it wasn't until the 1970s oil embargo that the U.S. launched a major effort to study algal fuel. The Department of Energy created the $25-million Aquatic Species Program as part of the National Renewable Energy Lab. Researchers found that under certain conditions, large quantities of microalgae with significant amounts of lipids can be grown in open ponds. They found strains and technologies promising enough to have "significant impact on U.S. petroleum consumption."

The problem was cost. The most optimistic assumptions put algae oil production at $56 to $186 a barrel.

In 1996, with oil selling for less than $20 a barrel, the Clinton administration abandoned the Aquatic Species Program on economic grounds. But in recent years, climate change and growing concerns about U.S. dependence on imported oil have led to enormous public and private investment in all potential biofuels, including algae. Interest has intensified as oil prices have risen to their present levels of more than $80 a barrel.

A 2007 expansion of the federal Renewable Fuel Standard requires that 36 billion gallons of renewable fuel be blended into gasoline by 2022. Only 15 billion can come from corn ethanol, a fuel that has required huge financial subsidies and lots of water, even as it generates both pollution and fears about replacing food crops with fuel crops.

Petro Algae
PetroAlgae grows specially bred species of algae in a series of test ponds in Indian River County.

Algae and other non-food crops, such as the fast-growing jatropha being planted en masse in south Florida these days, are seen as the "next-generation" of biofuels. As part of the 2009 economic stimulus bill, the federal government poured $800 million into next-generation fuels. That cash is buoying Algenol, which received a $25-million grant from the Department of Energy to build a pilot-scale algal-fuel biorefinery with partner Dow Chemical in Texas. After Lee County commissioners invested

$10 million to help Algenol build its biology and engineering labs in job-hungry Fort Myers, the company agreed to build its full-scale biorefinery in southwest Florida, too.

Rather than grow algae in ponds like most of its competitors, Algenol cooks algae, sunlight, CO2 and seawater in 50-foot-long, soda-bottle-shaped bioreactors to produce ethanol. CEO Paul Woods says his company "will be the largest consumer of CO2 on the planet."

Scalability is the key. While more than 100 companies nationwide have now jumped into the algae-to-fuel business, all of their testing to date has been so small-scale that "the state-of-the-art in this field is wanting in almost all respects, from the ability to achieve long-term culture stability to high productivities to low-cost harvesting to extraction and processing of the oil," according to a recent national analysis of the industry by a team of researchers at Cal Poly State University and Lawrence Berkeley National Laboratory in California.

According to the Cal Poly report, as of mid-2010, not one pilot algae plant of 10 acres or more was operating anywhere in the world. Only two small-scale, "pre-pilot" plants had progressed for more than two years, one in Israel and one along Florida's east coast, at the Florida Institute of Technology's Institute for Marine Research. Professor Junda Lin, director of FIT's marine institute, was principal investigator on that project, funded by Aurora Algae, an Alameda, Calif.-based company.

For the past four years, Aurora and FIT scientists have tested different algae species in myriad conditions at a four-acre site adjacent to the ocean at Vero Beach. Lin says the project, now coming to a close, was successful enough that Aurora executives believe they have the technology they need to commercialize production. Last fall, they announced they'll build the company's first large-scale facility in northwestern Australia, which they say has "the combination of a perfect climate and the right blend of resources — including abundant seawater, industrial CO2 and skilled labor."

Still, the economics of algae are problematic enough that Aurora last year repositioned itself to also produce pharmaceuticals, protein bars, oils and fishmeal. In addition to oil that can be refined into fuel, algae can yield omega-3 fatty acids, proteins and other oils at more profitable margins than other methods of production. "Food or pharmaceuticals give us the possibility to be profitable from day one," says Aurora CEO Greg Bafalis.

The omega-3, "fish-oil" strategy is a linchpin of VandenBrekel's business plan as well. His profit margin from turning algae into biofuel, he says, is too small to justify investing only for that reason. The economics for omega-3 oils — a byproduct of his process — work a lot better. "Omegas have a wonderful market price," he says. "On the fuel side, we show Americans that we can reduce our dependence on fossil fuels. On the fish-oil side, we have a business."

VandenBrekel criticizes the level of government support subsidizing his competitors. Yet the New Mexico non-profit from which his technology is licensed relied on years of government funding to achieve its results. VandenBrekel has funded the company's proprietary distillation and other techniques.

In any event, the industry burns through cash faster than algae eat CO2. Take Florida's PetroAlgae. The company has been growing specially bred species of algae in its series of sun-lit tubes and checkerboard test ponds west of Fellsmere in Indian River County since 2006. PetroAlgae's executives say its bioreactors are generating more than 10 times the fuel yields typical in the industry. But in three years of operation the company hasn't generated any revenue and has burned through $80 million. It's now trying to raise $200 million in an IPO.

FIT's Lin says in addition to pharmaceuticals, proteins and pigments, algae companies may find profitability in another natural byproduct: Clean water. The primary work of Orlando's AquaFiber is to restore surface waters impaired by high nutrient loads or pollution. CEO Tom Bland says the realization that the process generates biomass came later, and "it's potentially earth-changing." AquaFiber's dried algae has been made into both algal oil and jet fuel. Sarasota's Algae Aviation Fuel also dries algae into a powder its developers say can be used to fuel jet engines.

But so far, it's all just enough to fill a beaker rather than a barrel.

"We need to adjust our expectations," says Lin, who agrees with Philippidis and many top national scientists in the field that algal-fuel technology needs about another decade of R&D.

"On the other hand, we've got to realize that this is important, that it is worth our investment," Lin says. "One of these days, there's going to be a crisis. If we have to face it without alternative energy sources — we're going to be in trouble."

Junda Lin
"We need to adjust our expectations," says Junda Lin, director of Florida Institute of Technology'’s Institute for Marine Research. He believes algal-fuel technology will take another decade of research and development. [Photo: Scott Wiseman]