Hard Lessons From the Great Algae Biofuel Bubble

Algae/Other Aquatic Organisms/Seaweed, Business News/Analysis, Feedstocks, Funding/Financing/Investing, Opinions

April 21, 2017

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by Eric Wesoff (GreenTechMedia) Entrepreneurs can have tunnel vision. VC herd mentality doesn’t produce results. Physics and thermodynamics are fairly important in energy applications. — … Today, the few surviving algae companies have had no choice but to adopt new business plans that focus on the more expensive algae byproducts such as cosmetic supplements, nutraceuticals, pet food additives, animal feed, pigments and specialty oils. The rest have gone bankrupt or moved on to other markets.

The promise of algae is tantalizing. Some algal species contain up to 40 percent lipids by weight, a figure that could be boosted further through selective breeding and genetic modification. That basic lipid can be converted into diesel, synthetic petroleum, butanol or industrial chemicals.

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The question is: Can algae be economically cultivated and commercially scaled to make a material contribution to humanity’s liquid fuel needs? Can biofuels from algae compete on price with fossil-derived petroleum?

Once capital needs, water availability, energy balance, growing, collecting, drying, and algae’s pickiness about light and CO2 are factored in — the answer, so far, is an emphatic no.

Here’s a list, by no means complete, of algae companies attempting to pivot away from biofuels.

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There are many pieces to the algae puzzle that seem like afterthoughts, but which are actually crucial to the economics — co-products, nutrients, harvesting, drying and conversion technology. System design and algae type (which seem to be the focus of most discussions) are important, but not the only components.

Considering the immense technical risks and daunting capital costs of building an algae fuel company, it doesn’t seem like a reasonable venture capital play. And most — if not all — of the VCs I’ve spoken with categorize these investments as the longer-term, long-shot bets in their portfolio. But given the size of the liquid fuels market, measured in trillions of dollars, not the customary billions of dollars, it makes some sense to occasionally take the low-percentage shot. READ MORE

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