Algae Fuel - Economic Viability

Economic Viability

In today’s economy, algal biofuels have gained much momentum in regards to their ability to potentially supplement our energy needs. However, with CO2 rates rising and projected to rise even further in the coming decades, much research is being conducted to not only have a renewable energy source but also a sustainable energy commodity, which will not adversely affect the environment. This trade-off of increasing energy yet decreasing CO2 burden in our atmosphere is what has yielded the desire for industry to invest in biofuel. Reasoning behind this endeavour is that algal biofuel will have the capacity to use CO2 out of the atmosphere to yield hydrocarbons, which can be readily combusted to yield energy. This concept has been termed the carbon-neutral system, which is a substantial step forward in contrast to pumping out the 30 Gt(10^9) of CO2 that global industry has been estimated releasing in the year 2010 by the Global CCS Institute. Although there is clearly a demand for sustainable biofuel production, in the end the discussion becomes whether or not they are cost efficient. If more energy goes into the fuel than is expelled after combustion, there really is no gain for the environment. Various models have been discussed and researched, trying to find manners in which the cost can be minimized, to a level, which it outcompetes, conventional petroleum.

In a 2007 report a formula was derived estimating the cost of algal oil in order for it to be a viable substitute to petroleum diesel:

C(algal oil) = 25.9 × 10–3 C(petroleum)

where: C(algal oil) is the price of microalgal oil in dollars per gallon and C(petroleum) is the price of crude oil in dollars per barrel. This equation assumes that algal oil has roughly 80% of the caloric energy value of crude petroleum. As of January 29 (2013), with petroleum priced at $110.52/barrel, algal oil should cost no more than $2.86/gallon in order to be competitive with petroleum diesel. (Note: 1 Fluid barrel = 31.5 US gallons)

With current technology available it is estimated that the cost of producing microalgal biomass is $2.95/kg for photobioreactors and $3.80/kg for open-ponds. These estimates assume that carbon dioxide is available at no cost. If the annual biomass production capacity is increased to 10000 tonnes, the cost of production per kilogram reduces to roughly $0.47 and $0.60, respectively. Assuming that the biomass contains 30% oil by weight, the cost of biomass for providing a liter of oil would be approximately $1.40 and $1.81 for photobioreactors and raceways, respectively. Oil recovered from the lower cost biomass produced in photobioreactors is estimated to cost $2.80/L, assuming the recovery process contributes 50% to the cost of the final recovered oil. If existing algae projects can achieve biodiesel production price targets of less than $1 per gallon, the United States may realize its goal of replacing up to 20% of transport fuels by 2020 by using environmentally and economically sustainable fuels from algae production.

There is always uncertainty about the success of new products and investors have to consider carefully the proper energy sources in which to invest. A drop in fossil fuel oil prices might make consumers and therefore investors lose interest in renewable energy. Algal fuel companies are learning that investors have different expectations about returns and length of investments. AlgaePro Systems found in its talks with investors that while one wants at least 5 times the returns on their investment, others would only be willing to invest in a profitable operation over the long term. Every investor has its own unique stipulations that are obstacles to further algae fuel development. Additional concerns consider the potential environmental impact of Algal fuel development, as well as secondary impacts on wildlife such as bears and fish.

Whereas technical problems, such as harvesting, are being addressed successfully by the industry, the high up-front investment of algae-to-biofuels facilities is seen by many as a major obstacle to the success of this technology. Only few studies on the economic viability are publicly available, and must often rely on the little data (often only engineering estimates) available in the public domain. Dmitrov examined the GreenFuels photobioreactor and estimated that algae oil would only be competitive at an oil price of $800 per barrel. A study by Alabi et al. examined raceways, photobioreactors and anaerobic fermenters to make biofuels from algae and found that photobioreactors are too expensive to make biofuels. Raceways might be cost-effective in warm climates with very low labor costs, and fermenters may become cost-effective subsequent to significant process improvements. The group found that capital cost, labor cost and operational costs (fertilizer, electricity, etc.) by themselves are too high for algae biofuels to be cost-competitive with conventional fuels. Similar results were found by others, suggesting that unless new, cheaper ways of harnessing algae for biofuels production are found, their great technical potential may never become economically accessible. Recently, Rodrigo E. Teixeira demonstrated a new reaction and proposed a process for harvesting and extracting raw materials for biofuel and chemical production that requires a fraction of the energy of current methods, while extracting all cell constituents.

Even with these difficulties some companies have managed to mass produce algae. Highlighted below are Blue Marble and Solazyme. These two companies have made significant progress in either environmentally safe practices or producing enough algae for the mass production of biofuel.