Commercializing algae—challenges and opportunities
Algae continue to be one of the more intriguing opportunities for expanding biofuel production and the food supply, production of specialty chemicals, wastewater treatment, and carbon capture. Although the term "algae" is used broadly to describe many different aquatic organisms—more than 35,000 species are described in literature according to Cheng (2011)—they all have the following attributes:
- Species of algae grow rapidly in a variety of different climates.
- Algae have the ability to produce more biomass per area than any other biomass source.
- Some species of algae are able to yield large volumes of lipids that can be used to produce fuel, food ingredients, or specialty chemicals.
- The primary carbon source for algae is carbon dioxide, and hence they could be part of a carbon recycling strategy.
- Algae are effective in wastewater treatment and can be part of an overall water treatment strategy.
Commercial applications of algae are nascent; however, several applications are mature. These include (Bixler and Porse, 2009):
- Agar: derived from red algae, approximately 9,600 tons (8,700 metric tons [MT]) a year is used globally for confections, baking, and gels.
- Alginates: derived from brown algae, approximately 26,500 tons (24,000 MT) a year is used worldwide for food and pharmaceutical applications.
- Carrageenan: extracted from red algae, approximately 50,000 tons (45,000 MT) a year is used worldwide in the global meat and dairy industry for texturizing and stabilization.
- Nutrition: two noteworthy applications for algae in nutrition include:
- Spirulina: approximately 1,000 tons (900 MT) of this green alga are consumed annually in the United States as a dietary supplement.
- Docosahexaenoic acid (DHA): used as an infant formula ingredient, this omega-3 fatty acid is produced using algae in dark fermentation with sugar.
- Pollution control: algae are often used in synergy with bacteria in facultative ponds to consume nutrients in wastewater treatment facilities.
With the exception of pollution control, current commercial applications for algae are for high-value, limited-volume products. To enable the widespread use of algae for the production of commodities such as fuel or green chemicals, numerous challenges will need to be overcome. These include (i) the high cost of producing and processing of algae, (ii) advances in the level of technology readiness of algae processing, and (iii) establishment of co-products that enhance the overall value proposition of an end-to-end algae process.
High cost of production and processing
|FIG. 1. Capital cost breakdown for algae processing. Provided by Science Applications International Corporation (SAIC).|
Assume that you are an investor with significant cash. If you want to invest in a soybean processing operation, you have relatively few barriers to entry. You can readily buy soybeans. Alternatively, if you want to grow a certain variety of soybeans, you can easily lease the land to grow the special varieties and harvest the soybeans using well-established practices. Furthermore, the soybeans can be easily processed in established facilities with mature technology. By comparison, if you want to be in the algae business, the first thing you need to do is to invest in infrastructure to grow the algae. While land area to grow the algae may be available, the ponds or bioreactors and all of the ancillary equipment necessary for growing algae would most certainly need to be built. The establishment of such facilities by far represents the single biggest expense of entering into the algae business. Based on work by Williams and Laurens (2010), approximately 93% of the total capital cost for producing and processing of algae is in the growing step. The breakdown for capital costs is shown in Figure 1.
As an illustration, assume the following:
- A supply of 100 million gallons (380 million liters) annually of algal oils is needed.
- Forty percent of dry weight of algae is algal oil.
- Open ponds can generate 75 dry MT per hectare-year of algae (Huebeck and Craggs, 2007).
- Photobioreactors can generate 365 MT per hectare-year of algae (Packer, 2009).
- The capital cost for an open pond system is $100,000 per hectare (Benemann, 2009).
- The capital cost for a photobioreactor is $1,000,000 per hectare (Benemann, 2008).
The simple math says that to produce the quantity of oil needed will require an investment of $1.14 billion for open ponds and $2.34 billion for photobioreactors. Assume that we had no processing losses and that we could sell the oil for $100/barrel or $698/MT and we could sell the residual meal for $200/MT. Also assume an operating cost of $120/dry MT of algae. In the case of open ponds, if the investor wishes to obtain an internal rate of return on the project of 32% or a payback of three years, he or she will need to do one of the following:
- Reduce capital costs by $697 million or reduce the cost of the open ponds to $39,000/hectare.
- Increase revenue by an additional $380 million by:
- Selling the oil for $243/barrel.
- Selling the residual meal for $865/MT.
- A combination of the two above.
- Increase the biomass yield to 194 MT per hectare-year.
- Share infrastructure costs with wastewater treatment plant or something similar.
Similarly, to close the business case for photobioreactors, we would have to:
- Reduce capital costs by $1.9 billion or reduce the cost of photobioreactors to $190,000 per hectare.
- Increase revenue by an additional $1.06 billion by:
- Selling the oil for $445/barrel.
- Selling the residual meal for $2,271/MT.
- A combination of the two above.
- Increasing the yield to 1,564 MT per hectare-year will close the case; however, this is theoretically impossible as the maximum based on sunlight availability is 715 MT per hectare-year (Weyer et al., 2010).
- Share infrastructure costs with wastewater treatment plant or something similar.
However, it is also important to note that the numbers used in this exercise are based on very generous assumptions; achieving these rates, yield, and oil content has yet to be proven on a commercial scale. Either way, what is clear is that we need to focus on either high-value products or a drastic reduction in capital costs in order to achieve the economics necessary to encourage investment.
Although much effort has been placed on developing technology, the techno-economic analysis shown above indicates where priority needs to be placed in terms of technology development. Clearly, it is an iterative exercise that needs to consider products with technology that is reasonably achievable and can be fully integrated from growing to processing. Technology readiness is often described as a combination of the rate at which the technology has been demonstrated and the degree of integration that the technology has with a full end-to-end process (US Department of Energy, 2008). Some noteworthy examples of commercial and demonstration-scale algae technology readiness include:
- Earthrise Nutritionals: 500 tons (450 MT) per year spirulina facility in the Sonoran Desert of California, USA.
- Cyanotech: 400 tons (360 MT) per year spirulina facility in Kona, Hawaii, USA.
|FIG. 2. In November 2009, five acres at the 230-acre Christchurch wastewater treatment plant in Bromely, New Zealand, were cordoned off into high-rate algal ponds that are used to make bio-crude oil. The demonstration project combines NIWA’s scientific expertise on advanced wastewater treatment and algal production pond technology with Solray’s bio-crude oil conversion technology. Adding CO2 into the ponds enhances wastewater treatment and doubles algal production. The algae are then collected and pumped into a reactor, where heat and pressure turn the biomass into bio-crude oil—a form easy to convert to a range of conventional fuels.|
- NIWA [National Institute of Water and Atmospheric Research, Ltd., New Zealand]/Solray Energy: demonstration in Christchurch, New Zealand (Fig. 2). The facility has five hectares of high-rate algal ponds tied to one ton per day supercritical water conversion plant. (For further information on this technology, see http://tinyurl.com/SC-H2Oconversion).
- Aurora Algae: demonstration facility on six acres (2.4 hectares) in Karratha, Australia.
- Cellana: demonstration facility on six acres (2.4 hectares) in Kona, Hawaii.
- Solix: 180,000-liter demonstration facility in Coyote Gulch, Colorado, USA.
- Sapphire Energy: demonstration facility in Las Cruces, New Mexico, USA.
- Algenol demonstration facility in Lee County, Florida, USA.
To date, the primary focus for the widespread commercialization of algae has been on the production of biofuels. This raises serious challenges as biofuels, comparatively speaking, are a low-value product in comparison with green chemicals that go into the production of plastics, cosmetics, detergents, functional foods, and other higher value applications. As shown in the techno-economic analysis earlier, high co-product value is necessary to make acceptable economic returns. However, a common misconception is that the laws of supply and demand do not exist for co-products. One needs to keep in mind that as supply increases, unless the demand increases with supply, the price will fall. To help mitigate this law of economics, focus will need to be on being both the low-cost producer and having a co-product with attributes that have value, but is not easily duplicated.
While the promise of algae provides much motivation for research and investment, a reduction in capital costs, an increase in yield, and an increase in product value, all in combination, are critical for the widespread deployment of algae as a feedstock. Furthermore, demonstrating the technology both at scale and as an integrated process is necessary for commercializing algae. Based on this, it is anticipated that initial operations will focus on high-value products and co-products as a means of generating both cash flow and knowledge. As domain knowledge improves, it can be expected that advances will be made that will enable an improvement in economics that will facilitate the widespread commercialization of algae.
Brian Yeh is an assistant vice president for Science Applications International Corporation (SAIC) and leads the biofuel initiative, food safety, food defense, and food security programs within SAIC. He is based in Oakland, California, USA, and can be reached at firstname.lastname@example.org or +1 510-466-7190.
Benemann, J R., Microalgal Biofuels: A Brief Introduction, July, 2009.
Benemann, J.R., Open Ponds and Closed Photobioreactors—Comparative Economics, presented at the 5th Annual World Congress on Industrial Biotechnology & Bioprocessing, Chicago, Illinois, USA, April 30, 2008.
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US Department of Energy, Office of Environmental Management, Technology Readiness Assessment (TRA)/Technology Maturation Plan (TMP) Process Guide, March 2008.
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