Stirring Up Scum

What was once considered an environmental menace and a slimy annoyance is now being touted as a potential treasure. Algae has been identified as a prospective third-generation biofuel and, in the past few years, has caught the attention of many Washington companies hoping to decrease the world’s carbon footprint.

Blue Marble Energy CEO and President Kelly Ogilvie (left) and James Stephens, vice president
and chief scientific officer, in the company’s Spartan lab space in Seattle’s Fremont neighborhood.

But despite successfully fueling a few experimental Boeing flights and drawing a lot of capital (such as Bill Gates’ $100 million investment in San Diego-based Sapphire Energy), advocates of pond scum as biofuel have struggled against practical and economic barriers in a stubborn market. Because of these setbacks, some local organizations are capitalizing on a potentially more lucrative use for algaculture: production of renewable chemicals and food flavorings.

Though it may be hard to remember in recent years, the price of petroleum has historically been extremely cheap. Consumers were content to keep filling their tanks with gasoline despite harmful emissions rather than invest in a vehicle that ran on more expensive biofuels.

The cost of crude oil skyrocketed at one point last year to more than $100 per barrel. Fear that oil prices will return to those high levels have made eco-friendly fuels, such as algae-derived oil, a much more compelling long-term option.

“We’ve seen what the price of oil can do and it’s not very reassuring,” says Margaret McCormick, general manager of bio-based materials at Seattle bioscience firm Targeted Growth Inc. (TGI). “It’s a much easier sell now to invest in technologies that help the biofuel economy, and with algae, we can develop biofuels that fit into the existing biostructure.”

Post-Petroleum Options

The evolution of biofuels has been problem-laden. First-generation biodiesel, derived from foodstocks such as corn, palm oil and sugarcane, was criticized for drawing resources away from the food supply and destroying rainforests. Second-generation sources, including woody nonfood materials such as timber waste, offer the potential of higher-quality fuel and less environmental damage, but efforts have been stalled due to the necessity of building a new, expensive infrastructure to harvest and transport the biomass.

Third-generation biofuel, which is where algae comes in, holds promise because algae consumes carbon dioxide, is plentiful and rapidly renewable, doesn’t compete with food supplies for land and can be produced domestically.

Algae naturally produces oil throughout its growth cycle as a result of exposure to sun, CO₂ and nutrients. Some species have more effective or fruitful production than others, so companies try to select these strains or genetically engineer their own for production. After extracting the oil, the oxygen in it is replaced with hydrogen, which turns it into a form of diesel fuel. From this point, the oil’s constitution can be manipulated to produce gasoline, jet fuel, kerosene or other products.

“Algae’s ability to reuse carbon presents many environmental and economic benefits that appeal to large carbon emitters,” says Mary Rosenthal, executive director of the Algal Biomass Organization in Preston, Minn. “It grows efficiently on marginal, desert-like land with minimal fresh water required, oftentimes preferring nutrient-rich water supplies such as wastewater and agricultural runoff.”

Algae oil would seem to have high potential as a biofuel, but so far the funding has been lacking to produce it at a cost-effective scale-millions of gallons of capacity would be needed before it can compete with crude oil on the market.

“The technology exists to make it a seamless replacement, but there will be cost problems when we hit commercial scale that are somewhat dependent on investment in the facilities,” says McCormick.

But crude oil is a supplier of much more than fuel. Petroleum, the backbone of the energy industry, is used to manufacture most products we use-from synthetic fabrics in clothing such as nylon and polyester to additives in food. Replacing petrochemicals and flavorings with algae derivatives is more practical than biofuel production, at least in the short term, because the scale of production is much smaller. In addition, chemicals and food additives are potentially much more profitable: Some algae products can sell for hundreds of dollars per milligram.

“It’s a lot easier to produce a small amount of flavorings than a large amount of fuel,” says Jon Naimon, founder of Light Green Advisors, a Seattle-based asset management firm that specializes in environmentally sustainable investing. “Flavorings are worth more than fuels.”

A Shift in Taste

Seattle-based Blue Marble Energy was founded in 2005 by CEO Kelly Ogilvie and Chief Scientific Officer James Stephens to produce an eco-friendly biofuel from algae and other biomass. But in recent years, driven by the expense of production and the lack of a sustainable market, the company has altered its focus to manufacturing biochemicals and flavorings.

“Currently, most artificial flavorings come from petroleum,” says Ogilvie. “By switching to algae derivatives, we can create a carbon-neutral source that is more easily renewable.”

The company now produces carbon-neutral renewable chemicals from biomaterials by fermenting feedstock with their AGATE (Acid, Gas, and Ammonia Targeted Extraction) system. With the support of $1 million in financing from private equity by investor Rajiv Shah, a soft drink bottler and distributor based in Nairobi, Kenya, Blue Marble currently produces 1 ton of esters (chemicals used in plastics, food flavoring, fragrance and adhesives) per day from more than 10,000 pounds of pollution-fueled algae removed from Puget Sound.

Last October, Blue Marble struck an open research and development agreement with Bionavitas, a Redmond-based algae research company. Bionavitas’ technology helps maximize algae growth while reducing harmful elements through its Light Immersion Technology process, which distributes light below the surface layer of algae, allowing for denser growth. Blue Marble is in the process of acquiring a manufacturing plant in Lincoln County, Wash., scheduled to start operation in mid-2010, and plans to expand its approach to eventually include production of pharmaceuticals.

“We’ve evolved over time and adapted to meet market conditions,” says Ogilvie. “We are constantly changing and evolving with our successes and failures. Adaptability is key.”

Last year, Washington State University, Targeted Growth and Inventure Chemical Inc., a biofuels company based in Tacoma, banded together to create the Washington State Algae Alliance, which is also looking at ways of profitably producing flavorings and chemicals in addition to sustainable energy sources.

“We were probably the first firm in this space to publicly target renewable chemicals and not just fuels, but now it appears to be a stampede in that direction,” says Mark Tegen, Inventure’s CEO.

Inventure is set to receive $2 million in funding in 2010 from WSU through the federal 2010 Senate Energy and Water Development appropriations bill. Targeted Growth will focus on cultivation and genetic engineering of cyanobacteria (blue-green algae) algae strains, while WSU will develop growth and harvesting technology. Inventure will then convert the substance into chemicals and fuel.

“It’s always been part of our business plan to start looking at alternative products,” says TGI’s McCormick. “A lot of the work we do is helpful for both production of fuel and chemicals. We can also adjust our strategy as those opportunities arise.”

A Future for Fuel?

With many businesses putting their original vision for algae on the back burner, will the plant’s enviro-friendly potential as a fuel ever be realized? It depends.

“Algae is the most promising biofuel approach since it does not have the biodiversity risks of palm oil or the food cost impact of food-based biofuels like ethanol. However, the commercial scale hasn’t happened yet,” says Naimon. “You can get cells to do lots of things in labs, but trying to take a lab system and produce millions of gallons is always difficult. That’s a really big challenge if it’s going to produce any kind of impact on carbon in contrast to other biofuels.”

But these obstacles are simply forcing companies for the moment to look to more feasible ways to stay afloat while promoting eco-health.

“The planet isn’t going to make it the way we’re going,” says Ogilvie. “We need to change the way we interact with the environment as a whole and find a way to turn waste back into resources. That’s sustainability.”