Algae-based biofuels have been receiving increasing attention from researchers, investors and Congress.  Not previously thought of as a major player within the biofuel community, support from Congress coupled with strong private investment could make algae a very competitive biofuel feedstock.

The renewable fuel mandate established in 2007 requires that twenty-one of the thirty-six billion gallons of annual (BGY) ethanol production by 2022 come from advanced biofuels. Seventeen of the twenty-one BGY must come from cellulosic biofuels or biodiesel.  The legislation, however, contains no specific provision for algae.  A bill recently introduced in the House (H.R. 3640) would change the state of play, adding a specific provision for algae and, perhaps more importantly, extending to algae-based biofuel producers the tax credit given to cellulosic biofuel producers.  Those within the industry hope that this type of congressional support will create parity between the algae-based biofuel industry and others within the Renewable Fuel Standard.

Presaging the increased congressional attention, the algae-based biofuel industry has recently seen some major investments in research.  Some of the more widely publicized investments include:

• ExxonMobil announced plans to invest at least $600 million in a joint venture with Synthetic Genomics, Inc. (SGI). If all goes well, ExxonMobil’s investment could increase into the billions.
• Dow Chemical Co. announced plans to build a $50 million pilot plant in Freeport, Texas, as part of a joint venture that will test the technology developed by Algenol Biofuels. The technology grows algae in plastic tubes containing saltwater, which are then filled with CO₂. The project envisions hundreds of acres of algae farms containing these tubes, using CO₂ that comes from nearby oil refineries and chemical plants to produce ethanol.
• The Woods Hole Oceanographic Institution, the Massachusetts National Guard and Plankton Power are teaming up with the eventual goal to produce five percent of Massachusetts’s diesel and home heating oil, which would require producing 100 million gallons of biodiesel per year. In the meantime, the group plans to build a $20M pilot plant, $16M of which is from DOE funding, which would lead to 1 million gallons of biodiesel per year.

There are many promising aspects of algae-based biofuels that may explain why the industry is gaining so much traction.  The fact that algae can be grown on non-arable land, requiring only sunlight, water and carbon dioxide to grow and produce oil means that its production does not interfere with food supply.  Also, the fuel produced from algae can be chemically identical to that made by petroleum, which would enable a seamless integration into commercial use.  Some advocates also tout algae’s carbon capturing ability, though others doubt its ability to handle large amounts of emissions from neighboring refineries and power plants.

Despite the recent attention and investment algae has been receiving as of late, many question whether the commitment behind developing this technology.  The concern within the industry is that the commitments are for research only and that the investments may not continue after the results come out.  These skeptics cite to BP’s recent abandonment of its joint venture with UK-based D1 Oils to develop jatropha as a biofuel feedstock as an example. 

Though algae-based biofuels are still at least a couple years from being commercially competitive with crude oil at $60 to $80 a barrel, the intrigue in their potential appear legitimate.  If the industry is successful in obtaining more government support, private investment will likely follow.

For further information about this topic, please contact Akin Gump.