The Rise and Fall of Algae Biofuel

February 8, 2021 - Emily Newton

For a time, algae biofuel — low-emissions, renewable fuels derived from algae — seemed like the answer to some of the largest remaining challenges for green energy production. 

Algae biofuel startups raised tens of millions of dollars in venture capital in the 2000s and 2010s. Then, over the course of the 2010s, they began folding or shifting focus to other industrial applications of algae.

Now, green energy researchers have mostly moved on to other potential avenues for green fuel — primarily second-generation biofuels derived from lignocellulosic matter, agricultural waste and certain non-food crops.

The story of algae biofuel shows what challenges may be ahead for other low-emissions renewable fuel sources.

This is why algae biofuel ultimately failed — but also what the future may have in store for algae-derived biofuels.

How to Make Fuel From Algae

The typical production process for algae biofuel varies somewhat, but most processes include a few key features.

Algal biomass is cultivated on land, in large ponds, or in devices called photobioreactors. In either case, the algae needs a combination of water, carbon dioxide, light and minerals. 

As the algae grows, it produces glucose. Fermentation of this glucose produces equal parts carbon dioxide and ethanol, 

Algae can also be genetically modified to produce this ethanol directly.

Much of this ethanol is blended with gasoline to form a mixture used in flexible fuel vehicles (FFVs). These vehicles have engines that can handle the ethanol. Typically, the ethanol is sold as part of mixtures like E10, which is ethanol mixed with 10% gasoline, or E15, which is ethanol mixed with 15% gasoline.

Other methods of biofuel production, rather than using the sugars, instead break down natural oils in the algae to create fuel. 

Algal biomass is mostly composed of three major elements — carbohydrates, proteins, and organic fatty acids (called lipids). The organic fatty acids are primarily triglycerides. These triglycerides are excellent for creating biodiesel by a process called transesterification.

Why Green Fuel Is In High Demand

Green fuels, like biofuel, are renewable fuel sources that produce little to no emissions. Many green fuel researchers see these fuels as a kind of silver bullet for some remaining green energy challenges. It’s not possible to power everything with grid-based renewable energy. 

Modern battery technology isn’t advanced enough to keep the engines of large, fuel-powered vehicles — like cargo ships and jets — powered for long distances. As a result, these ships and planes need some kind of liquid or gas fuel source to run.

In most cases, this means non-renewable fuels — like marine gas oil or petroleum-derived jet fuels. Both of these fuel types generate significant amounts of greenhouse gas emissions. This is part of why the shipping and aviation industries are, collectively, such major emitters. 

If scientists are able to develop a green fuel — one that doesn’t produce GHG emissions when burned for energy — they could effectively nullify a major chunk of global emissions without disrupting transportation and logistics.

This discovery would be a major coup for the ongoing struggle against climate change — one that would require no shift in consumption from involved parties.

This potential has generated significant investment in biofuels, opening up many new research avenues. However, the same potential may also produce significant buzz for ideas that ultimately aren’t workable in practice. 

This is what happened to algae biofuel — a promising fuel source that attracted hundreds of millions of dollars in venture capitalist funding, but never became practical for industrial purposes. Today, the history of the fuel source may be something of a cautionary tale for researchers looking for fast progress towards a biofuel “silver bullet.”

Early Successes for Algae Biofuel

The early algae biofuel market was driven by high levels of investor optimism. New startups that had begun investigating industrial-scale process for manufacturing ethanol (or other fuels) from algae attracted major investor attention.

This investment came in the form of both major public and private spending. For example, algae biofuel company Algenol, founded in 2006 by Paul Woods, received $30 to 50 million in public support, along with tens of millions in private investment.

Early estimates from businesses like Algenol made algae biofuel seem like an incredible investment. According to Algenol, once at scale, their algae production processes could generate 8000 gallons of fuel per acre per year at $1.27 per gallon.

This would have potentially made algae biofuels price competitive with fossil fuels. As a result, biofuel producers would have been potentially able to undercut oil prices. This could allow producers to help save the climate while making significant money by disrupting the fuel industry.

The Fall of Algae Biofuel

The initial buzz slowly faded. Over time, it became clear that these intial promises weren’t workable. Algenol’s promises of commercial production of algae-derived ethanol by 2009 failed to materialize. 

At the same time, oil prices fell steeply between 2008 and 2014. The growth of new fossil fuel extraction methods — primarily fracking — also meant that the possibility of “peak oil,” or the year when petroleum production would hit its highest rate then begin to decline, was pushed further and further into the future. 

This meant that oil prices weren’t likely to spike suddenly over the next few years. It also meant that venture capitalists would see smaller and smaller returns on biofuel investment, even if these new biofuel companies were ultimately successful.

This change, combined with slow progress on algae biofuels, meant that many investors became much less invested in finding ways to transition away from the use of fossil fuels.

In 2015, the founder of Algenol, Paul Woods, resigned. The company, at the same time, announced it would lay off a quarter of its staff and shift focus to non-fuel applications of algae.

In his resignation statement, Paul Woods wrote that “low cost fuels cannot continue to be the sole focus of Algenol, we live in a new reality of low oil prices, low demand and abundant supply.”

What the Future May Hold for Algae Biofuel

Despite these setbacks, it’s still possible that algae biofuel may have commercial uses in the future. Researchers are still at work finding ways to refine the production process.

There are also a few key advantages that make algae biofuel attractive to researchers, even after the major setbacks of the past two decades. Algae ponds, for example, can help landowners take advantage of land that they can’t use to grow food crops. 

There are fears that production of biomass for biofuel could compete with production of food. Most ethanol in the U.S., for example, comes from corn. If researchers could make algae biofuel practical, widespread use of the fuel type, rather than corn-derived ethanol, could reduce the risk of competition between food and fuel producers.

Scientists face a few remaining challenges, however, that they’ll have to solve if algae biofuel will become possible at scale. They’ll need to find ways to optimize the fermentation process in the case of bioethanol production. Researchers will also need to learn more about efficient dewatering of algal biomass in the process of creating diesel from algal lipids.

What Algae Biofuel Can Tell Us About the Future of Green Energy

For now, maritime shippers and aviation companies continue to use non-renewable fossil fuels. 

While biofuels are still central to green energy, it’s possible that algae won’t be playing a key role — at least, not for a few more years. 

Instead, algae biofuel may provide two things. The first is as an example of how the research and development of new fuel sources that takes time. Investors may not have the patience for projects that take years or decades to produce cultivation processes that are viable at scale.

The second may be a valuable biofuel source — in due time. Researchers are continuing to work on algae biofuel production, solving key challenges that prevented the approach from being practical.


Emily Newton

Emily Newton is a technology and industrial journalist. She is the Editor in Chief of Revolutionized.

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