Green Is the New Yellow - Vertigro's Algae Farm

Ethanol Is Out and Algae Is In

Remember the BP ads of a couple of years back? Something about yellow being the new green, yellow being representative of corn—or maize as the Brits call it. Corn, of course, is the principal feedstock for fuel ethanol production in the U.S, and ethanol, as we all know, has emerged as the consensus answer for overcoming our fossil fuel dependency and ending our reliance on foreign oil. In 2002 it was the Hydrogen Economy, but then in 2006 it was ethanol. And maybe it's still ethanol only now algae derived biodiesel seems poised to displace it as the alternative fuel of the moment. In other words, green is now the new yellow. Or about to be.

So how opportune it was that I got to see my first algae plantation courtesy of Global Green Solutions who operates said plantation in El Paso, Texas in partnership with Valcent Products, an intellectual property company active in several different fields. The joint venture between the two firms, incidentally, is known as Vertigro.

Now I'd been following algae at a distance for some time. I'd also read through a lot of technical literature from the past, and I'd come away with the conclusion that while the concept of algae as a fuel crop appears to have merit, primarily due to the incredibly rapid growth rate of many species and the fact that they do not require planting, the path to commercialization seems long, tortuous, and strewn with obstacles. Much research has already gone into the production of fuel from algae, some of which had commenced back during the petroleum crises of the seventies and eighties, and nobody has succeeded in developing high yield, cost effective production facilities, at least nobody's proven that they have. Still, a number of firms are making claims that they're already there, and that all they need to do to go commercial is find the funding to scale up.

Global Green Solutions isn't making that claim just yet, I might add. The word I got from their principals is that they're about two years away.

So what's my take on these representations based on what I saw?

After experiencing their dog and pony show along with a number of other journalists, most of whom did not appear deeply knowledgeable on the subject, I had to admit that the company is seriously committed. They have built a real lab and stocked it with millions of dollars worth of sophisticated test equipment and laboratory instruments, and they have hired a couple of scientists with demonstrated expertise in the area. Moreover, their executives are clearly highly knowledgeable about the current biofuels industry as well as the larger liquid fuels industry. And they've also built a small pilot growing facility as a proof of concept—a considerable accomplishment in and of itself.

What they've got, however, is a long way from a real factory, and I'd say that they probably require tens of millions to get where they need to be. Whether they'll get it will depend upon what's happening elsewhere in the alternative fuels industry, what's happening with conventional fuel prices, how plausible they appear to investors, and what comes out of their experiment in terms of capital and operational expenditures per gallon fatty liquids produced.

Vetrigro in Context

Algae cultivators attempting to produce liquid fuels have tended to follow three approaches.

The simplest approach is the open pond or raceway where the algae is allowed to grow on the surface of a shallow water channel. Facility cost is relatively modest, but considerable energy is expended just to provide circulation of the water. Furthermore, preventing the intrusion of unwanted species has proven next to impossible to date, while yields of the desired species have never been very great and the useful biomass obtained has fallen far short of that provided by the better terrestrial fuel crops.

In the second approach the channels are covered to prevent the entry of invasive species and otherwise the setup is pretty similar. Such simple two dimensional closed systems have also proven disappointing in the past, with only incrementally greater yields being obtained at significantly higher capital costs. The basic problem is that you're still confined to about inch of sodden biomass at the surface of the pond, while incident sunlight is falling on a two dimensional surface, and thus the pond is not a particularly efficient solar collector. With conventional crops, on the other hand, a dense mass of relatively dry living material may extend many meters above the surface of the ground. True the algae will exhibit a much greater growth rate, but so far nobody's demonstrated favorable economics on that basis.

The final approach is the fully enclosed three-dimensional system. These usually consist of intricate lattices made up of small diameter transparent pipes containing water, nutrients, and the algae themselves. These are theoretically capable of enormous yields, but the cost of all that pipe fitting is high, and the energy cost of pumping water through the dense array of small pipes is quite high as well due to frictional losses. While experimental plants have been built according to this notion, no one has ever demonstrated a cost effective model.

What Vertigro has is a fairly ingenious new wrinkle on the third approach. Instead of pipes they're putting the algae, water, and nutrients in segmented, transparent plastic pouches hanging from overhead frames. The pouches look almost like packaging from the food industry, and they've got to be a whole lot cheaper than the glass tubing and fiber optic light distributors used by earlier experimenters. But they've still got to pump water and aerate the algae. I was told by Glen Kertz, Valcent's CEO and chief architect of the Vertigro system, that wind or solar power would be used to operate the plant in the future, but for now they're running off the grid.

At this point, Vertigro is completely proof of concept. The scale of the operation is so far from being commercial that I'm assuming a real plant would easily occupy hundreds or even thousands of times the area of the current installation. (Projected yields of lipids per gallon of water is only one gram per liter, or one tenth of one percent by weight, so you're talking about tens of millions of gallons to produce tens of thousands of gallons of biofuel, a fairly modest daily production.) But, compared to say an ethanol plant, let alone a petroleum refinery, the Vertigro system, which is purportedly fully modular, is scarcely heavy engineering. You've got plastic bags hanging from light aluminum scaffolding, and plumbing that doesn't look all that far removed from the sprinkler systems one sees in a mechanized farm. In other words, you're probably not looking at a $200 million contract with Chicago Bridge & Iron to build a commercial plant. What you are looking at is an extremely water intensive operation with a heavy, heavy pumping requirement.

The Vertigro business plan is based upon a licensing model, and that means persuading investors to lay down a considerable sum of money to enter a market which is still miniscule, at least in North America. There's also the question of what effects algal oils will have on the established oilseed markets and how producers of oilseeds will respond. The idea underlying the cultivation of algae feedstocks for liquid fuels is that algae will ultimately provide a superabundant source of lipids that will enable biodiesel to compete with petroleum diesel without subsidies. But initially, at least, algal oils will not be superabundant and will have little impact on the market. The algae cultivator may be able to undersell the soy oil or cottonseed producer, but why would he want to? Why not just take market prices and pocket the profits?

But if he does that, biodiesel will remain expensive and its acceptance will be limited, particularly if distillate fuels from natural gas, oil shale, and coal can be produced at competitive prices. What I'm saying is that what's good for the industry may not be good for the individual cultivator.

There's also the difficulty in persuading anyone to raise a fuel crop, particularly anyone with an agricultural background. With corn or soybeans you can always sell the crop to food processors if biodiesel prices are depressed, and vice versa, but with algae it's not clear where the secondary and tertiary markets are at this time. Sure, there are some co-products, but you're basically betting on biodiesel which will probably be competing with synfuels in the years to come..

One biodiesel entrepreneur of my acquaintance made the remark, "people won't embrace coal or shale based synfuels because they're immoral even if they prove to be cheaper." He really believed that too. I admire that kind of idealism, but I'm not sure I'd want to base a business plan on it.

But back to algae:

My thinking is that investment in algal cultivation is at an early stage and will increase greatly if not exponentially over the next five years. At that point the algae guys will be at the same place the fuel cell guys were circa 2004. They will have to demonstrate commercial feasibility or algal lipids will join hydrogen as the fuel of the future, the indefinite future that never quite seems to arrive.