Nothing awakens America’s’s innovative drive like a threat to the unimpeded flow of cheap oil. It took a combination of stratospheric gas prices and a volatile Middle East, but Congress finally presented a bold vision of an American car culture, fueled not by dwindling carbon deposits halfway around the world but by gas made from plants grown right here at home. Stuff like algae. Easy to grow and environmentally friendly, algae can be converted into biodiesel. And so the Department of Energy launched the Aquatic Species Program to turn algae biofuel into reality. The year was 1978.
Thirty years on we can mark the political moment when that innovative spirit officially sunk to near slumber: the day in 1986 when President Reagan ordered the solar panels installed by President Carter yanked off the White House roof. You know the rest: Oil prices plummeted, cars’ average fuel economy stagnated, the SUV era alighted. The little-noticed algae research program carried on valiantly — making several breakthroughs on its meager $25 million budget — until 1995, when the Clinton administration killed it. Who needs gas from slime when you’re awash in $20-a-barrel oil?
But here we are, scrambling once again to produce sustainable biofuel, and the one that did make it out of the first oil shock — corn ethanol — is not just a complete bust from an environmental perspective, but also a model for how not to fashion an alternative energy policy. Through the mid-1990s the ethanol industry relied heavily on government handouts. Driven by Corn Belt representatives flush with agribusiness donations, Congress has provided subsidies — known as the “blender’s credit” — to the tune of 51 cents per gallon sold. But when California, New York, and other states banned the gasoline additive MTBE in 2004, the great boom in ethanol, which was considered the only viable alternative, commenced. Soon, corn ethanol’s backers were proffering it as the all-in-one biofuel solution: We could grow our fuel, wean ourselves off of nasty foreign oil, and combat global warming — plus, as a bonus, help out America’s farmlands.
If all that sounded too good to be true, it’s because it was. But the tide has begun to turn against Big Ethanol, driven by both food shortages (partly as more farmland is dedicated only to cornfields) and a new scientific consensus that corn-based biofuels are ecologically horrendous. One study, published by Science in February, showed that corn ethanol produces more greenhouse gases than oil and petroleum products. The fertilizer runoff from corn crops are also being blamed for water pollution flowing from the Midwest to the Gulf of Mexico.
Even Washington appears to be wising up. Congress has begun shifting its largesse from corn to “cellulosic” ethanol. Derived from the woody parts of plants rather than the starch of corn and sugarcane, cellulosic ethanol minimizes adverse greenhouse gas buildup. Last year’s energy bill mandated that, by 2022, 21 of the nation’s 36 billion gallons of required ethanol be cellulosic, instead of derived from corn, while this year’s farm bill offers tens of millions in subsidies for cellulosic companies. Startups like Verenium and Range Fuels have responded by building pilot plants around the country. But because ethanol can’t be transported by pipeline (it’s water-soluble and corrodes pipes) and must go by rail or truck, and with only 6 million ethanol-friendly E85 cars on the road throughout the nation, cellulosic ethanol alone isn’t the answer. That’s where the brilliant idea of the Aquatic Species Program — converting algae into a biofuel — could prove to be a game-changer.
A few miles north of the San Francisco airport sits the cluster of small, unobtrusive warehouses that Solazyme calls home. A white algae-powered diesel Jeep, plastered with the corporate logo, sits out front. Inside, a collection of Silicon Valley–style cubicles are flanked by laboratories, where counter top fermenters churn out experimental formulations of green sludge. Solazyme has concocted an algae-based diesel fuel that the company’s principals say is ready to run today’s cars and trucks. Founded six years ago by a geneticist and an MBA who stumbled across a report on the defunct Aquatic Species Program, the start-up is brimming with venture capital and is working to make the fuel affordable.
“This is high-quality diesel, and we’ve driven cars thousands of miles on this fuel,” says Harrison Dillon, Solazyme’s chief technology officer, holding up a gallon of strange-looking, yellowish liquid. “It meets California standards. It can go into a pump right now.”
What’s so special about algae? The aquatic plant naturally stores its energy as lipids — more than half its weight — that can easily be converted into fuel. Algae also grows faster than just about any other plant on the planet, in saltwater or wastewater, without taking up valuable agricultural land. There are two ways to cultivate algae in bulk: outdoors, fed by sunlight in ponds and specially designed clear plastic “bioreactors”; or in the dark, fed by massive amounts of sugar that algae converts into lipids, which can then be converted into biodiesel.
Solazyme — which raised $45 million in new capital in last August alone — is using the latter method. The company grows its genetically enhanced algae in huge, closed steel containers that can hold thousands and thousands of gallons of green muck, fed with sugars culled from other plants, such as wood chips and switchgrass. After just a few days, company technicians remove the algae, extract its oil, ship it to a refinery, and start the process again. “Single-cell algae are one of the world’s original oil producers,” says Jonathan Wolfson, Solazyme’s energetic CEO. He and Dillon, former college buddies, founded the company in 2003, when oil was still $18 a barrel. “The algae really want to make oil, and what we are doing is encouraging them to make it very efficiently,” says Wolfson. “We’ve already done the whole process in commercial-size equipment.”
A half-dozen or so other private companies, meanwhile, are taking the sunnier route. In June two-year-old Aurora Biofuels, based near Oakland, California, raised $20 million for its algae efforts, while Cambridge, Massachusetts’s GreenFuel Technologies received an infusion of $14 million in May. “When we started this people said, ‘You want to grow algae?’ They had no clue what we were talking about,” says Matt Caspari, Aurora’s chief executive. “This went from some obscure niche concept to one of the hottest areas of the energy world.” Another company, PetroSun, is busy creating experimental jet fuel in algae ponds in Texas.
To tackle the nation’s needs to achieve energy independence and fight climate change, the nation requires biofuels that are not only sustainable but that also can work with existing liquid fuel infrastructure — for cars, UPS trucks, 18-wheelers, 747s, gas stations, pipelines, you name it. Two well-backed Bay Area outfits, Amyris and LS9, are taking still another approach, using synthetic biology to create special bacteria to break down plant materials directly into diesel or gasoline. By manipulating bacteria’s cellular machinery, both companies have created organisms that can ferment the sugars found in plants into standard fuels.
Smelling future profits, even Big Oil is getting in on the act, with both Shell and Chevron pledging to invest in non-food-based biofuels. Earlier this year Solazyme signed a development deal with Chevron. Shell has its own investment in algae, and BP pledged to spend $500 million on the new Energy Biosciences Institute at the University of California–Berkeley, devoted to next-generation biofuels. If that sounds like the global warming solution brought to you by the people who gave you global warming, well, suck it up. “If you want to make a difference, you have to get your products out there,” says Wolfson of Solazyme. “ There are relatively few companies that control the refining, distribution, and marketing of transportation fuels.”
Refreshingly, most of these “third generation” biofuel companies insist they don’t need government handouts to survive. But they will need federal money to scale up fast enough to make much of a dent in our 140-billion-gallon-per-year gasoline habit. “We are investing at an embarrassingly small level. It’s almost criminal,” says Dan Kammen, professor of energy and resources at Berkeley, who is also an adviser to Barack Obama. Kammen says that a $150 billion investment, similar to what Obama has proposed, would almost certainly reduce the estimated five years of development needed for third-generation biofuels to get to the pump in tangible amounts.
The most significant boost would be if the federal government adopts California’s “low-carbon fuel standard,” mandating that producers reduce the greenhouse gas emissions of their fuel by at least 10 percent by 2020. That goal is intended to encourage the market — without backing a loser like corn ethanol — as well as to differentiate between biofuels made by cutting down virgin forest to plant, say, switchgrass and those that use out-of-production agricultural land. “The legislation should say, Here is the goal: Reduce dependence on foreign oil, or reduce the cost to consumers at the pump, and then let’s find mechanisms to do that,” says Greg Pal, a senior executive at LS9. “But let’s not preordain that ethanol will be the answer.”
None of which is to say that algae fuel alone is the final answer. It’s an open question as to whether companies can scale up fast enough, grow biomass in sufficiently large quantities to meet consumer demand, and make the biofuel cheap enough to end our gasoline addiction, at least in the near term. Besides, the annals of energy history are littered with technologies hyped by startups, venture capitalists, and, yes, journalists as “just five years away.” Some of these companies, even some of these ideas, will never fly. There will, in other words, be winners and losers. But that’s the whole point. The mistake is to think that our choices are to pursue either algae or switchgrass, better mass transit or electric cars, hydrogen fuel or ethanol. To quote the bromide making the rounds in the energy business these days, there’s no silver bullet for this energy crisis. This time we need silver buckshot.
Media Contact: pr@aurorainc.com
