A Sober Look at Biofuels From Algae

Large-scale algae-to-biodiesel production is getting tantalizingly close to reality. However, some highly touted production pathways may not be all they are cracked up to be.
By Martin Tampier | March 09, 2009
First-generation biofuels are based on commonly available agricultural commodities such as wheat or corn. Second-generation biofuels process lignocellulosic biomass, such as corn stover, straw or wood. There is now a lot of talk about third-generation biofuels, which include algae-based biodiesel or ethanol. Seed Science Ltd. spent several months examining the technical and economic feasibility of algae-to-biofuels in British Columbia. As a result, skepticism has surfaced as to whether algae will be part of the biofuels future, whether in British Columbia or elsewhere.

The advantage of growing algae instead of conventional agricultural crops is their very high growth rate, which in turn reduces the surface required to produce a given amount of biofuel. In addition, there is no competition for agricultural land useful for growing food crops since algae can be grown on land unsuitable for agriculture. Big names such as Shell Oil Co. and Chevron Corp., as well as the U.S. military, are investigating biofuels from algae. Over the past few years, some algae start-up companies have been able to leverage several million dollars of investment. So, surely consumers will soon see the first biofuels made from algae at gas stations, won't they?

This article, based on the study completed for the British Columbia Innovation Council, concentrates on photobioreactors, one of the main technologies being proposed to grow algae for biofuels. Photobioreactors, in the sense of this article, use natural sunlight to grow microalgae. They consist of glass or acrylic tubes, pumps, concrete and a greenhouse cover. At least 15 companies are known to be pursuing the photobioreactor concept, mostly in Canada and the United States. There is no doubt that growing algae in photobioreactors is technically feasible since successful operations doing just that exist today. There are, however, serious challenges in making this process cost-effective for low-value products such as biofuels.

The first problem with photobioreactors is their high capital cost. Assuming major economies of scale, the authors used costs of $1.5 million per hectare. Yet, this was thought to be too low by a factor of two or three by industry experts consulted for this work. These capital costs alone will result in per-liter costs of $7 to $15 for oil made from algae, depending on available sunlight and the specific oil yield of a given algae species. This calculation already includes revenues from selling byproducts, such as algae cake, for ethanol production or as animal feed. Since this cost is higher than current diesel pricing, the article could end right here.

There are, however, additional costs in photobioreactor algae production. Current experience with photobioreactors shows that anywhere from one to 15 people per hectare are necessary to operate such facilities. Even assuming as little as one employee per hectare still results in per-liter labor costs of $1.50 to $3 in industrialized countries. Finally, operational costs for fertilizer, electricity, maintenance, etc., will add another $3 to $6 per liter. Figure 1 shows the per-liter costs that were determined for producing biodiesel from algae oil. Equivalent results would be obtained when doing the same analysis for ethanol from algae starch.

Table 1. Comparison of Base Case Capital and Production Costs for Three Algae Production Technologies

*Assumes that the algae cake is sold to an ethanol producer for its carbohydrate content

Fertilizer costs have increased greatly in past years, but major operational costs in algae cultivation are due to the consumption of electricity. The main difference between the cultivation of algae and conventional agriculture is that instead of the tractor moving over a field a few times per year, algae cultivation requires the constant movement of water 24 hours per day, seven days per week. The concentration of dry matter in photobioreactors is a few grams per liter. Assuming a concentration of 5 g/L, 19 metric tons of water need to be moved for every metric ton of algae harvested. In addition, photobioreactors require cooling for at least part of the year, even in moderate climates. Cooling can be provided either from cooling water, which means moving even more water, or via air conditioning. Using photobioreactors in warm climates may therefore result in a negative energy balance.

Carbon Offsets
What about the value of sequestered carbon in algae-based biofuels? In short, there isn't any. Atmospheric carbon is only sequestered for a short time until it's burned in an engine. Under existing biofuels mandates in most industrialized countries, there will be no opportunity to sell carbon offsets unless fuel production is additional, or beyond such mandates. The extra value of biofuels is reflected in their higher market value, as well as tax credits or exemptions. Even for cases where the use of algae-based biofuels would be additional and could generate carbon offsets, the value of such offsets by itself (expected to be between $15 and $50 per metric ton of carbon dioxide) can't counterbalance the high production costs.

What about economies of scale or technology improvements? Economies of scale were considered in the analysis, using very generous assumptions. Some improvements could be made, including increased automation, genetically modified algae with higher oil yields and minimized light losses. On the other hand, the main components, such as concrete, glass and machinery, are unlikely to drop in price. Since there are limits to how much oil and starch algae can produce, the result is that photobioreactors can't produce biofuels competitively today and are unlikely to do so in the future. It's not slightly higher than fossil fuels, but by a factor of 10 to 15.

High-Value Byproducts
The possibility of producing high-value byproducts has also been examined, though in less detail. Initial results show that even very high-value byproducts, such as omega-3 fatty acids, can't improve bioreactor economics enough. Note also that algae producing a maximum of oil or starch don't necessarily produce the required amounts of high-value products. Therefore, one has to decide whether the production of biofuels or high-value products is the main business. If a high-value byproduct is required to reach financial breakeven, then the byproduct becomes the main product, whereas the biofuel is merely a byproduct. Production volumes would then be determined by the market size for the high-value product. Unless the market for high-value products is very large or unless such a large market can be created, algae-based biofuels from photobioreactors can only be produced in small quantities by companies catering to a niche market. Other (non-algae) biofuel production methods that are cheaper are therefore likely to dominate the market.

Raceways and Fermentors
Two other technologies to grow algae were also examined: open raceways and fermentors. The raceway also uses sunlight and carbon dioxide to grow biomass, but capital costs are much lower compared with photobioreactors (roughly by a factor of 10). Reliability and yields, however, are also lower, and the analysis couldn't confirm the possibility of producing biofuels in British Columbia cost-effectively using this technology, even with the most optimistic assumptions. All technical problems solved, the raceway may function cost-effectively in warm climates, where yields are expected to be higher. The fermentor is a quite different technology that uses no sunlight and an organic carbon source. According to the analysis, this technology comes closest to commercial viability. Nevertheless, it would need further improvements to become competitive with fossil fuels and to offer real life-cycle advantages over first-generation biofuels. Table 1 compares all three technologies examined.

The verdict, based on the research, is therefore that algae research should concentrate on the two technologies identified (the raceway for warm climates and the fermentor). At the same time, other alternatives, such as using bacteria to produce biofuels, should be compared to using algae to see if they offer a bigger chance of success.

These results may come as a surprise to many. They were, however, confirmed by a number of independent sources. The study, although intended to examine the feasibility of algae cultivation for biofuels in British Columbia, has yielded findings that also apply to other regions and worldwide. The 70-page report and appendices can be accessed at www.bcic.ca/media-and-press/media-releases/132-2009/598-high-technology-a-priority-for-agriculture.

Martin Tampier is an energy consultant working under the name of Envint Consulting in Montreal. Reach him at [email protected] or (450) 627-1003.
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