Investing in the Next Form of Renewable Energy, Algae

jet fuel made from algae
Jet fuel from algae / Honeywell
In the mid 1970s during the oil embargo, the United States decided to bump up its efforts to find alternative energy sources including oil shale. But as soon as the oil embargo ended, Americans were right back to using oil and the idea of alternative fuel sources faded into the background. What will be the next alternative fuel source.

It does seem that when oil prices are high, there is a great deal of research into alternative energy and when oil prices drop that talk fades away. Until recently, oil prices have been above $100 per barrel since 2009, and in that time, there has been ongoing research into alternative energy sources along with an increase in oil drilling in the U.S.

Much has happened since the economic crash of 2008 with electric cars becoming more popular and it was recently announced that Toyota, Honda and Hyundai have come out with hydrogen fuel cell hybrid cars.

Algae as an Alternative Fuel

The search for the alternative to oil continues. Corn and switch grass are used for ethanol, but the percentage of ethanol that can be used in cars can only go so high before damaging the engines. And there are other arguments with using food like corn as a fuel.

Electric cars are becoming more popular as an alternative to oil, but it still takes power plants to produce the electricity.

Biofuel is an area of both research and ridicule with stories of cars running across country on McDonalds French-fry grease. Venture capitalist, large investment groups and the U.S. military are taking algae seriously as a real alternative to petroleum. Research in turning algae into fuel isn’t new; it has been ongoing since the 1970s.

The public took notice in algae when in 2009, Bill Gates’ investment company; Cascade Investments sold their shares of the ethanol company, Pacific Ethanol (PEIX) and invested in a privately held algae company, Sapphire Energy.

Just because Bill Gates invests a small percentage of his money into a company that is researching turning algae into a usable fuel is not much of reason to start putting our money into algae. But people do pay attention to where the so-called smart money goes, and that includes people like Bill Gates. Another large group that has begun to inquire about algae as a fuel for their fighter jets is the United States Air Force.

The US Air Force goal was to have its entire fleet of aircraft to have the ability to fly on a 50-50 mix of oil and synthetic fuel by 2011 and to be entirely “carbon zero” in a decade. In 2013 demonstration, the U.S. Navy sailed their fleet near Hawaii that was powered in part by algae. The one big drawback was the price for the algae fuel was $28 per gallon [1].

The research doesn’t only concern turning the algae into fuel; it has to do with making enough algae and at an affordable price.

The pentagon defends this higher price for fuel in the name of national security and getting the U.S. military to be less dependent on foreign oil. Another benefit of the military using algae and other biofuels is to help jump-start the biofuel industry.

According to an article in Algae Industry Magazine, the Defense Advanced Research Projects Agency (DARPA) has recently extracted oil from their research algae ponds at a cost of $2 per gallon. They state that they are now on track to begin large scale refining that oil into jet fuel at a cost of $3 per gallon [2].

Investing in Algae Companies

There are different ways each of these companies grows its algae. Some algae companies use in tanks indoors and instead of using sun it uses sugar. Others use outdoor facilities and the sun. These companies are coming up with new and interesting ways to use carbon dioxide (CO2) for their projects. An Israeli company is using the CO2 from the electric company’s smokestacks for their algae growth.

Most algae producing companies are penny stocks with a few trading on NASDAQ Solazyme being the best prospect at this time as they are not producing biofuels but also food with algae.

  • Solazyme (SZYM) was founded in 2008 with their headquarters in San Francisco. Solazyme has come a long way since 2008 and now produces and sells several products including Soladiesel BDR and Solajet. Soladiesel BDR is a 100% algae-derived biofuel.

  • OriginOil (OOIL) has patents and is employing several next-generation technologies to greatly enhance algae cultivation and oil extraction.

  • Green Plains Renewable Energy (GPRN) is a large ethanol producing company and has recently announced they are also getting into the algae business.

Privately Funded Companies

Many of these companies are not publicly traded at this time. That doesn’t mean that they won’t decide to go public at some time in the future so it would be a good idea to watch and read about all of these companies and what they do.

  • Sapphire Energy successfully produced a product, called Green Crude, that yielded 91% octane gasoline from algae. Sapphire Energy appears at this time to be one of the leaders in the algae to fuel field.

  • Solix Biofuels, Inc is another privately held company, has a long list of investors including companies in China. Founded in 2006 and is backed by Colorado State University’s Engine and Energy Conservation Laboratory.

  • Synthetic Genomics recently landed a large development deal with Exxon that is potentially worth $600 million.

  • Seambiotic is a company in Israel that uses flue gas from coal burning smokestacks to create the CO2 in its algae production. They clean up an environmental problem and use it to grow their algae.

  • Cellena is a company in Hawaii that is mostly owned by Shell Oil.

Copyright © 2014 Sam Montana


[2] Algae Industry Magazine

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