Algae biofuels promise new industry in San Diego

Making algae into oil isn’t all that difficult, if you know what you’re doing that is. But producing the oil cost effectively is the challenge - This is according to Mario Larach, chairman and CEO of Kai BioEnergy, which has offices in Del Mar and Hawaii.

“Algae oil can be produced today easily, but it would be at about $60 per gallon,” Larach said. I believe the costs can come down to under $2 per gallon. That’s the goal.”

Kai BioEnergy is just one of many companies locally that are under the algae industry umbrella. And there’s a lot of excitement and promise that algae will be an extremely viable alternative to fossil fuels in less than 10 years.

Algae research has been going on for decades, and there’s been a convergence, at least here in San Diego, of companies starting to capitalize on the promise that algae oils bring. Defense companies like General Atomics and SAIC are developing algae fuels for military applications, and Kai BioEnergy, HR Biopetroleum, and Sapphire Energy are looking at widespread commercial applications for algae a sustainable fuel source.

Sapphire Energy, by the way, is one of San Diego’s early algae success stories, though there will likely be many more to come. In 2008, Sapphire drew attention to the region’s algae industry by securing $100 million in funding, and on the heals of its fundraising efforts announced that it successfully tested its “green crude” fuel in two commercial flights-Continental and JAL. And Tim Zenk, Sapphire’s Vice President of Corporate Affairs, says that true “commercialization” of his company’s fuel is much closer than most people realize.

“We have a test and demonstration site currently in development in Las Cruces, New Mexico, which will be completed in May 2009,” Zenk said. “This will be followed up by an integrated algal biorefinery, which will be operational in 2012 and produce 750,000 gallons of diesel and jet fuel per year.

The company has some big hairy audacious goals, too.

Zenk continued, “We expect to meet our next commercialization milestone in 2015 by developing a facility in the southwest U.S. to produce 135 million gallons of diesel per year. By 2020 we expect to be producing 1.4 billion gallons of diesel per year. That means Sapphire Energy, alone, would be producing enough fuel to meet 5 percent of the nation’s 36 billion gallon renewable fuel standard.”

Surprisingly, Sapphire has accomplished a lot in just a few short years. It was founded in 2007.

Competition and Collaboration

Clearly one company can’t do it all, and Kai BioEnergy, also founded in 2007, has fairly aggressive plans, as well. The company, which specializes in the extraction of oil from indigenous, natural recurring species of algae, is partnering with biorefineries to produce a “green” fossil fuel alternative and also is in the process of raising additional funds to scale its business. If all goes as planned, Larach thinks Kai BioEnergy is about three years from being commercial just like Sapphire.

“But that’ll just be a drop in the bucket,” Larach added. “We’re talking starting off in three years with 5 million gallons and building that up to 50 million gallons in five years. And to say that algae’s going to make a real impact, that’s probably seven to 10 years away.”

That promise of widespread commercialization is starting to garner a whole lot of attention in and outside of the region.

As vice president of CleanTech San Diego, a nonprofit trade group focused on ensuring that San Diego is a leader in the emerging clean technology economy Holly Lepre is a huge advocate of the industry, and she makes it clear why.

“Algae biofuels have the potential to provide a secure and renewable source of transportation fuel that is at least carbon neutral, and does not compete for land or fresh water resources required to grow food supply crops,” she said. “This explains the appetite behind the Pentagon rewarding $36 million in federal grants to General Atomics and SAIC to research algae as a biofuel.”

On top of that, some local companies are looking into other applications for Algae, which, according to Rick Halperin, should continue to put the spotlight on San Diego as an algae hub.

“There are a lot of potential products up and down the food chain,” said Halperin, project manager of another local organization, the Regional Algae Initiative, focused on raising thee industry’s profile. “Fuel is a major one, obviously, but I’m working with a company that’s looking at making advanced composites with algae as a feedstock in comparison to other poly-based feedstock like soy which runs into the fuel versus food issue.”

It should come as no big surprise that, like the life sciences industry that came before it, the algae industry is starting to feed off of a large collaborative effort. Halperin says that regional life science organization Biocom was an inspiration to his organization, and that many leaders throughout San Diego County and the Imperial Valley have stepped up to the plate to help ensure algae’s commercialization success.

The Regional Algae Initiative was a collaborative effort between CleanTECH San Diego, the San Diego EDC and the Imperial Valley EDC, and it was underwritten by the Bank of America Sustainability Initiative. CleanTECH San Diego, which represents the entire cleantech industry locally, is extremely involved, as well. It is partnering with San Diego Center for Algae Biotechnology (also known as SD-CAB) to help build up a strong algae base in San Diego County.

Plus, some of San Diego’s more established industries are continuing to play a part in algae’s growth and maturity.

According to Halperin, “The algae industry is not being built from the ground up. There has been-and will continue to be-contributions from life sciences, high-tech, engineering, and defense. No other area that we’re aware of either nationwide or worldwide has pulled together this kind of collaboration.”

Due to the decades of research, the early successes and the collaboration locally, Halperin believes that unlike the letdown that occurred from corn ethanol as a once highly hyped fossil fuel replacement, algae is the real deal, prompting he and others to call the aquatic, nonvascular plants “the great green hope.”

See related story: Algae biofuels industry bolstered by new partnership.

Jon Hindman is a freelance writer in San Diego.

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