Algenol: Case Study of an Unsuccessful Algae Biofuels Venture
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MARCH 2017 Algenol: Case study of an unsuccessful algae biofuels venture EXECUTIVE SUMMARY Algenol is a Florida-based biotechnology bring a product to market. company that has received considerable attention as one of the most promising 2. Algenol’s genetically engineered (GE) algae biofuel startups. Since its founding cyanobacteria pose potentially significant in 2006, the company has received $35 - threats should they be released into $50 million in public support, alongside the wild. Such a release will be difficult tens of millions in private-sector to prevent in an industrial refinery investment. environment. Despite significant hype, however, We conclude that government support Algenol has remarkably little to show for for algal biofuels – as with fossil fuels its investments – a prime example of an and other harmful energy sources – is a industry kept aloft by empty promises, foolhardy use of taxpayer resources, given while developing technologies with the lack of demonstrated environmental potentially serious impacts on ecosystems benefit or successful commercial and human health. application. This briefing demonstrates that: Public sector funding would be put to better use on research, development, 1. Despite rosy claims to the contrary, and demonstration of proven measures Algenol faces significant economic to reduce energy waste and over- and technological hurdles to consumption while also ensuring commercialization. This experience equitable access and control over mirrors that of other algae and cellulosic production and distribution. biofuel startups that have received public sector support yet have so far failed to ALGENOL: CASE STUDY OF AN UNSUCCESSFUL ALGAE BIOFUELS VENTURE ~ MARCH 2017 ~ 1 INTRODUCTION Algae play a key role in the regulation on genetically engineering algae species of the earth’s systems, and are found in to promote certain traits beneficial to almost every ecosystem on the planet. energy production. While there is no universally agreed upon definition of algae, most biologists Founded in 2006, Algenol was one confine the term to photosynthetic life of hundreds of startup algae-based ranging from unicellular microorganisms biofuel companies that aimed to pick to macro-scale seaweeds, as well as up where the ASP left off.2 Many of bacteria capable of photosynthesis – these companies have since folded or known as cyanobacteria, or “blue-green gone bankrupt, but Algenol continues algae.” Algae are thought to have played to attract private and public investment a significant role in drawing down – despite its failure, after ten years of atmospheric CO2 levels in a previous existence, to produce commercially viable spike around 50 million years ago, and are biofuel. responsible for much of the oxygen we currently breathe. Algenol was successful in attracting attention and investment based on Research on algal biofuels has been the claim that its proprietary algae ongoing since the mid-20th century. could cost-effectively transform CO2, Beginning in 1978, the U.S. government an industrial waste gas, into ethanol – funded the Aquatic Species Program a process that’s been described as the (ASP), which over its 18 years of existence “holy grail” of bioenergy production.3 If identified two main pathways for successful, this process would allow large producing algal biofuels – growing algae polluters to avoid measures to reduce in open ponds or raceways, or inside of emissions by substituting “reuse”. They plastic tubes called photobioreactors.1 could potentially derive profits from sale of CO2 derived products, and also The ASP was eventually defunded in command elevated prices in the context 1996, with its scientists concluding that of renewable fuels standards or other raceways faced difficult hurdles due to subsidized markets for such biofuels. contamination, while photobioreactors were too expensive for use in biofuel Algenol’s system involves vertically production. However, the program laid aligned closed plastic photobioreactors, the groundwork for today’s algal biofuels filled with seawater and GE blue-green boom, especially in catalyzing research algae, into which CO2 is pumped as a ALGENOL: CASE STUDY OF AN UNSUCCESSFUL ALGAE BIOFUELS VENTURE ~ MARCH 2017 ~ 2 feedstock. The algae, which possess the beginning. Despite years of research natural capacity to secrete tiny amounts and development, the company’s of ethanol, have been genetically ethanol-producing algae continue to engineered to produce significantly underperform, leading to the company’s more ethanol, in addition to other traits 2015 decision to shelve its ethanol beneficial to commercial production. pathway for the time being.5 Prohibitively high costs plague the company This ethanol leaks into the surrounding throughout its production process, seawater medium and evaporates leading to a questionable profitability in the headspace at the top of the margin. photobioreactor, condensing and draining off into an energy-intensive These fundamental issues, alongside refining system designed to separate the poor market conditions, appear to fuel from water and other chemicals. The underpin Algenol’s recent turn towards process eliminates the need to crush and non-fuel-based commodity production – kill each batch of algae to extract the oil a pattern that defines the trend among a – allowing for repeated harvests, in what slew of algae and microbial fuel startup the company likens to “milking the cow, companies. This trend, exemplified as opposed to butchering it.”4 by companies such as Algenol and Solazyme, raises serious questions However, technological and economic about why biofuel investors and the barriers have beset Algenol’s roadmap U.S. government continue to provide towards commercialization from the very significant finance.6 A CHRONOLOGY OF ALGENOL Algenol’s roots go back to the 1980’s, barrel, Woods teamed up with former when co-founder Paul Woods spent pharmaceutical executives Craig Smith $700,000 financing research on GE and Ed Legere to launch Algenol in cyanobacteria with the capacity to March of 2006. The company had an produce ethanol.7 The results of that immediate boost from Mexico City-based research were published in 1999, with businessman Alejandro González, who U.S. patents on two GE algae strains contributed the bulk of $70 million in secured in 2001 and 2004.8,9,10 startup capital and also extended $100 million for the rights to use Algenol’s After oil prices surpassed $50/ proprietary technology in Mexico.11,12 ALGENOL: CASE STUDY OF AN UNSUCCESSFUL ALGAE BIOFUELS VENTURE ~ MARCH 2017 ~ 3 With the support of González, the owner Algenol continued expanding after of a major cardboard recycling company Indian petrochemical conglomerate and heir to the Corona beer fortune, Reliance Industries sunk $93.5 million Algenol quickly expanded its operations. into the company, and by 2014, it was The company opened laboratories in ranked the “#1 hottest U.S. biofuels Germany, Spain and Florida to research company” by Biofuels Digest.19,20 That and test algae systems, and hired year, the federal government approved researchers at Johns Hopkins and the three of Algenol’s GE algae strands under University of Maryland to start a lab that the Toxic Substances Control Act (TSCA), would function, in their words, as “the and also approved Algenol’s ethanol as world’s largest algae library.”13,14,15 qualifying for advanced biofuel credits under the Renewable Fuels Standard In 2009, the company partnered with (RFS).21,22 Dow Chemicals on a successful bid for an American Recovery and Reinvestment Act In 2015, however, shortly after (ARRA) grant via DOE, netting $25 million announcing a deal to build a $1.3 to build a pilot-scale algae-to-ethanol billion commercial biorefinery, Algenol’s biorefinery with a projected output of investors pushed through a major 100,000 gallons of ethanol per year.”16 overhaul in their corporate strategy.23 The project was initially slated to be built The company’s board, led by González, at Dow’s facility in Texas, but a souring announced plans to scale back from relationship and a $10 million grant biofuels and pivot towards near-term from Lee County, Florida enticed Algenol commercial prospects in carbon capture, to move operations to the Sunshine food additives and nutraceuticals. CEO State.17,18 Paul Woods resigned shortly thereafter.24 ALGENOL: CASE STUDY OF AN UNSUCCESSFUL ALGAE BIOFUELS VENTURE ~ MARCH 2017 ~ 4 The commercial biorefinery plans were Solazyme received $22 million from the quietly scrapped. DOE for algae biofuels, and after failing to succeed, now sells anti-wrinkle skin- In shifting to non-fuel-based products, care products.25 Algenol is following a long line of algal biofuel companies scrambling for return Biofuelwatch believes it is unlikely that on investment amidst poor energy taxpayers would knowingly approve market conditions and underperforming of millions of dollars being handed to technologies. After $50 million in DOE companies that only appear capable of support, Sapphire Energy now makes producing niche cosmetic compounds algal oil for nutritional supplements. made from risky engineered microbes. ISSUES WITH ALGENOL’S TECHNOLOGY A closer look at Algenol’s production published in 2016, “it is unclear whether process reveals high capital and operating closed photobioreactors will ever be a costs, a low energy return on investment, viable commercial option.”26 and – despite the green hype – less- than-stellar greenhouse gas emissions An even more problematic situation