Sep 08 2009

Algae: The Original Solar Cell

Posted by: Jonathan Marshall

Today, a modified Prius sets out from San Francisco on a 10-day, cross-country tour to promote green vehicles. What makes this car special isn't its plug-in hybrid technology, which gives it a claimed 150 miles per gallon, but that fact that its internal combustion engine runs on gasoline made from algae. Thus its name: Algaeus.

Eons before human beings began tinkering with renewable energy, algae was one of earth's first and most productive solar cells--based on carbon, not silicon. It captures solar energy to convert carbon dioxide--a greenhouse gas--into various organic materials. With the right genetic tinkering, it can produce biofuels and other substitutes for petroleum.

Startups developing algae-based fuels are one of the hottest sectors of venture capital these days. At least 57 firms are competing in this niche space for a market that could someday be worth hundreds of billions of dollars a year.

San Diego-based Sapphire Energy, which is supplying the fuel for the Algaeus, has raised more than $100 million from various venture investors, including Bill Gates' Cascade Investments.

The Department of Energy is also supporting algae, with promises to devote up to $85 million in stimulus funds to algae-based and other advanced biofuels. And the California Energy Commission has awarded six-figure grants to NASA Ames Research Center and South San Francisco-based Solazyme Inc. to develop algae technology.

More impressively, Big Oil is starting to place some bets on algae. Exxon recently signed an R&D deal worth more than $300 million with Synthetic Genomics; BP has partnered with Marktek; and Chevron has a development deal with Solazyme, one of the algae industry's leaders.

But not even Big Oil can make a success of algae unless these startups master their biggest challenges: scaling up production and lowering costs. So far "no one is close to competing with petroleum," Jeff Matais, a senior executive at A2BE Carbon Capture, LLC, told NEXT100.

Few algae companies have even demonstrated significant production, much less competitive costs. California-based Aurora Biofuels says it has developed a strain of algae that is twice as productive as other species. The company also projects that it can produce fuel for about $1.75 per gallon, but so far, according to the New York Times, "the new algae strains have been producing a gallon of biodiesel a day in an Olympic pool-sized pond."

Sapphire says that by 2011 it will be producing 1 million gallons of diesel and jet fuel per year. But Tim Zenk, its vice president for corporate relations, conceded to NEXT100, "that's really just an R&D level. The real thing to focus on is 2018 and beyond when we get to commercial quantities."

At levels of 100 million gallons annually and up, he says, the company's product should compete with oil at $60 to $80 per barrel. "It's all about scalability. What drew us to algae is we believe it can be turned into an industrial crop through biology, then grown at a world scale. That's what we are building and perfecting."

At last year's Algae Biomass Summit in Seattle, the prince of venture capital, Vinod Khosla, said he had not invested in any algae companies yet because none had demonstrated an ability to achieve reasonable production costs.

But he added, "I believe algae can be a solution. I'm convinced someone here (at the Summit) will break the code." Maybe that breakthrough will be heralded by a cross-country drive starting in San Francisco.

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