Politics & Policy

Algae: Fuel of the Future?

Maybe, but not because of government subsidies.

President Obama’s latest renewable-energy fixation is algae. During a speech at the University of Miami, he touted his administration’s $24 million investment in the fuel, saying, “Believe it or not, we could replace up to 17 percent of the oil we import for transportation with this fuel that we can grow right here in the United States.”

In 2010, the DOE awarded $6 million to Arizona State University for the creation of the Sustainable Algal Biofuels Consortium (SABC), $9 million to the University of California, San Diego for the creation of the Consortium for Algal Biofuels Commercialization (CABC), and $9 million to Cellana LLC Consortium in Kailua-Kona, Hawaii. However, Dr. Matthew Posewitz, assistant professor at the Colorado School of Mines, estimates that there are already more than 100 academic efforts to modify and refine algae into fuel. So far, these DOE grants have done little more than add a couple more confusing acronyms to an already growing list.

Making fuel from algae is not as absurd as it sounds. There is a body of scientific research dating back to the 1950s that speculates on the possibility of extracting a lipid produced by algae, then converting and refining it into fuel. One researcher likened petroleum itself to “ancient algae.” The algae lipid is very similar to what we extract from fossil fuels; it just hasn’t been in the ground decomposing for 200 to 300 million years.

There are some substantial advantages to algae fuels compared with other renewable sources, especially corn. Some researchers estimate that the algae would consume as much carbon dioxide in the course of their normal life processes as burning their fuel would produce, making the technology carbon neutral. Unlike corn-based fuels, algae fuels would be able to mix freely with fossil fuels, meaning they could be transported in the existing infrastructure. Algae could produce ten times as much fuel per acre as corn, and it could be cultivated in the desert. One of the main problems with corn-based ethanol is that it requires the use of farmland that would otherwise be used for growing food, increasing the cost of grain globally (for this reason, the UN, OECD, World Bank, and WTO — the entire Justice League of Post-America — has asked G-20 nations to stop subsidizing corn-based ethanol). Assuming little resistance from American desert conservationists, algae, which is grown in tanks, could be a huge step up from corn.

But algae fuels are still at a very early stage of development. Much is still unknown about algae on the microbial level. Before algae can be used to replace any part (let alone 17 percent) of our petroleum use, researchers will need to isolate optimal, robust strains of genetically enhanced algae and test different growth systems. At present, algal fuel would cost about $8 a gallon. That same gallon would also require 350 gallons of water to produce. A recent study by the Rand Corporation concluded that algal fuels are at least ten years away from marketability (a timeframe that is prohibitive for some policies, but apparently not for others). As Al Darzins, co-author of a DOE report on algae’s viability, said, “The path to algal biofuels commercialization will not be totally dependent on any one unit operation or technology but rather on the industry’s ability to string together or ‘integrate’ robust and scalable technology solutions.”

Venture capitalists and private firms have started to pour money into this research. In 2009, ExxonMobil started a $600 million partnership with Synthetic Genomics to study algae fuel-extraction and growth techniques. Several different venture-capital firms, including Bill Gates’s Cascades Investment LLC and the Rockefeller family’s Venrock, have invested tens of millions of dollars in Sapphire Energy. Founded in 2007, Sapphire is on the forefront of algae research, having cultivated over 4,000 different strains. The company has made algal jet fuel, which has been tested successfully by Continental Airlines. Last November, Sapphire was listed as one of “16 Companies to Watch With Under $1 Million in Sales” by Forbes.

The lesson from algae-fuel research, then, is that government-funded venture capitalism has been mostly a lagging indicator of market interest. Investment in algae has taken off while the government was busy subsidizing other things. This is for the best. At such a dynamic point in algae-fuel development, much research will inevitably lead to dead ends (few of those 4,000 strains engineered so far will produce important findings). Private and local concerns are more than willing to fund these efforts lavishly and absorb any incumbent loses. In fact, even the three consortia that received DOE grants each had substantial private investment: Cellana LLC, for example, raised around $100 million in capital on top of its DOE grant.

Kenneth Green, a resident scholar at the American Enterprise Institute who has written extensively on biofuels, has speculated that by funding algae research and, more important, by broadcasting its funding of algae research, the Obama administration is trying to offer something positive, with real potential, in the face of rising gas prices and continuing arguments over ANWR, the Keystone pipeline, our shale reserves, etc.

But Green also suggests a less innocent motive for the administration’s touting of its algae efforts. “The Obama administration has adopted a cynical tactic of finding things that Republicans or the private sector have approved of in highly qualified theoretical discussions and using that to try to bullet-proof their highly specific, politically twisted cronyist policies,” he says. “This began with cellulosic ethanol, and has persisted through cap-and-trade, the GM Volt, renewable electricity, and now, algae fuels.”

And politicizing algae research may have a disastrous effect on the research itself. It could “force responsible private-sector money out of the effort, lure irresponsible rent-seekers into the process, and make funding of it an unreliable political football,” following a pattern that Green has described as the “green kiss of death.”

As arguments over energy policy continue into the summer, it seems likely that the Obama administration will continue to extol its investment in algae research. But in this environment, with the private sector so willing to invest in algae, federal funding is unnecessary. It may also be counterproductive.

— Nash Keune is a Thomas L. Rhodes Journalism Fellow at the Franklin Center.

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