To continue the discussion on biofuels, there have been a number of oil companies who invested in algae fuel. The major ones are:
Exxon
The big oil firm was looking for projects with high returns to exploit its industry knowledge and infrastructure. Exxon chose bio-fuels and geothermal energy. The company invested US$600 million in the sector through a partnership with Synthetic Genomics. While the company acknowledges that the real challenge is to create economically viable algae bio-fuel in large volumes which will require significant advances in both science and engineering, it remains positive about the investment.
Solazyme
The company is leading in terms of producing algae fuel at scale. Solazyme was founded in 2003 with US$80 million in venture capital backing. The company had one of the first development deals with Chevron. The company now expects to be able to commercialize its technology by 2012-2013, with a production cost target at US$60 to US$80 per barrel.
Chevron
Chevron announced a collaborative research and development agreement with the DOE’s National Renewable Energy Laboratory (NREL) to study and advance technology to produce liquid transportation fuels using algae. Chevron and NREL scientists are trying to identify and develop algae strains that can be economically harvested and processed into finished transportation fuels.
Shell
The company established a joint venture with bio-fuel company HR Bio-Petroleum in 2007. The joint venture, named Cellana is investigating different strains of algae, by cultivating them in ponds and seeks to process the algae into oil that can be used as a raw material for fuel.
ConocoPhillips
In July 2008, ConocoPhillips signed a US$5 million, multi year research agreement with the Colorado Center for Bio-refining and Bio-fuels (CCBB). CCBB is a joint venture of the University of Colorado at Boulder, Colorado State, Colorado School of Mines and NREL. Together they plan to develop new ways to convert biomass into low carbon transportation fuels.
BP
In February 2007, BP joined hands with University of California, Berkeley, the Lawrence Berkeley National Laboratory (LBNL) and the University of Illinois at Urbana-Champaign. The parties are developing technology to produce bio-fuels, including those made from algae. The collaboration formed the Energy Biosciences Institute (EBI), and BP has announced to support the Institute with a ten-year, US$500 million grant.
OriginOil
The objective of OriginOil is to break down the barriers to algae’s development at all the levels, that is, from plant growth to oil separation. The company has developed a novel, patented process for growing algae that introduces all the inputs — carbon dioxide, water, and nutrients — on a micron level. The company uses electric pulses to break down the algae cells and extract the oil using simple gravitational force. This system could save 90% of the energy used by traditional methods.
There are a lot of companies like the ones mentioned above who have already invested or are ready to invest in algae fuel. It is interesting to see big oil funds diverting towards research and development of an upcoming technology.
However, what’s noteworthy is that this is not the first time the oil companies are trying to wash away their much maligned image. For a long time now, oil firms are aware of the need to diversify the business portfolio as the market is likely to bet on renewable energy sources. Conspiracy theorists would be quick to point the possibility of the investments being made with the intention of sabotaging the technology. Chevron is still best known as the killer of the electric car in some circles by taking exclusive control of Nickel Metal Hydride (NiMH) battery licensing rights back in 1990s.
The principles that hold true for big oil firms as investors are equally true for other investors. Since the technology is in development phase and still not prime for applications in real world, investors putting their money into algae stocks might be risking their investment. The companies operating in this space might be garnering some brownie points such as Valcent Products’ vertical farming technology was named one of the best Innovations of 2009 by Time Magazine last month, but when it comes to hardcore financial numbers, companies don’t have anything else to offer except hopes of hitting it big-time. Some eventually might end up making superior returns, but 9 out of 10 companies look set for a shakeout. Who knows, big guys like Bill Gates and Exxon Mobil might be losing out on their investments in algae startups.
The option of perfecting a technology with long gestation periods doesn’t come without the risks. Almost invariably, the markets have managed to figure out replacements for the materials or technologies crossing their fair value. Algae fuel technology is running this risk and the long gestation period is already evident to be irksome for some investors. Vinod Khosla, one of the prominent cleantech investors maintains that he hasn’t found even one viable algae technology plan after looking at many options. “The economics of algae don’t seem to work” Khosla adds. What happened with the corn based ethanol technologies is matter of public knowledge now. These are still hay days for the technology, but the billions pouring into solar and wind energy could prove to be fatal for algae.
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