TODAY’S STUDY: FOR ALGAE TO REPLACE OIL

Are the two challenges most commonly mentioned as obstacles to replacing oil with something else – scale and cost – really obstacles?

Electric vehicles were disdained as a too costly niche concept just a decade ago yet are now selling out of showrooms as fast as dealers can supply them.

It is a pattern that new technologies regularly repeat. When an idea's time comes, the market demands, momentum gathers and supply emerges.

Are algae-based biofuels an idea whose time is imminent? There is need. Electric vehicles will do for personal transport but batteries cannot now meet commercial needs for heavy highway and roadway transport or air flight.

The potential is also there. Of all the biofuel formulas now proposed, algae show the best potential for being refined into heavy transport and jet flight fuels.

Algae can be grown very cheaply and advocates say the methods to ramp up production to meet demand in obtainable space is available.

The biggest obstacle so far has been producing and refining algal oils into commercial products affordably but, as the report highlighted below demonstrates, technologies to bring the cost of production down are coming out of innovative labs everywhere.

There are likely still some years before big rigs will be fueling up with algae stuff. That is the rub. What will happen sooner, affordable algae-based biofuels or better batteries?

Exciting, competitive times in New Energy, these.

The potential impact of VG Energy’s lipid oxidation inhibitors on the economics of algal biofuels
John Sheehan, February 2011 (VG Energy/SheenBoyce)

VG Energy has recently announced that it has been able to translate a research discovery related to cancer treatment into a potential breakthrough for biofuels made from algae. Laboratory experiments show that molecules which can disrupt the burning of fats (lipids) in tumor cells can also encourage microscopic plant cells like algae to accumulate and even secrete fats. These fats can be used to produce diesel and jet fuel substitutes for traditional petroleum fuels. This note summarizes a preliminary analysis aimed at understanding the potential for exploiting these findings in commercial technology. The scenarios evaluated include:

• Enhanced production of higher value oils such as omega-3-fatty acids in open pond algae systems

• Enhanced production of fats for oil produced as a feedstock for biofuels in open pond algae systems

• Scenarios that take advantage of observed oil secretion in VG-treated algae to permit non-destructive recovery of oil and recycle of algae to ponds.

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The enhanced production scenarios are compared with scenarios based on literature values for currently achievable productivity levels of algal open pond systems. The results show that VG Energy’s discovery could transform algae technology from being a negative rate of return proposition to being an attractive and profitable venture. There are many caveats that go with such a statement. The preliminary nature of this analysis, which has a wide margin of error associated with it, and the uncertainty of how these early lab results will translate into practical process schemes are chief among them. Furthermore, while the high price of nutritional markets makes them an attractive near term target for the technology, it is important to bear in mind that any new technologies will face stiff competition from existing commercial producers. It is in the fuel markets that VG Energy’s technology show the promise to compete with crude oil in today’s market.

Caveats

Any one considering this analysis should understand that it is preliminary and subject to significant error. The available performance data is simply too thin at this point to give this estimate more than an order-of- magnitude precision. That said, it signals a green light to move forward. Among the things I have not accounted for in this analysis is the value of recycling algae.

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Evaluating the economics of algal oil

The basics of an open pond algal oil production system are shown in Figure 1. Algae are grown in shallow ponds in which an aqueous suspension of algae circulates in a raceway pattern to maintain mixing and turnover of algae at the surface to improve access to sunlight for photosynthesis. CO2 from a waste source such as a power plant or ethanol plant is sparged into each pond. Nitrogen, phosphate, potassium and iron are added to support growth. Growth rates are measured in grams of algae per day per square meter, with typical values ranging 10 to 20.

The algae can accumulate large amounts of carbohydrates (sugars and starches), lipids (fats) or protein depending on the species and the condition under which they are grown. Of particular interest to energy technologists is the ability to achieve high levels of lipid content in these fast growing simple plants. The combination of rapid growth and oil production makes algae technology potentially more productive than even the fastest growing oil crops in the world such as oil palm.

This analysis only considers open pond systems. They represent the lowest cost and simplest design of an algae production system. Many companies are currently working on new so-called photobioreactor systems. These designs may change the economic landscape for algae given the extent to which they can lead to improved light capture, better control of (and therefore independence from regional) climate conditions, and increased concentration of algal biomass. The obvious trade-off for such systems is cost. Even the simplest step toward enclosing algae production systems (plastic covers or greenhouse type enclosures) dramatically increase the capital cost of the system.

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Table 1 summarizes other key inputs and assumptions in the analysis. The analysis is based on a process engineering model developed in the form of an Excel® spreadsheet several years ago. The model incorporates two downstream process options. In the first option (shown in Figure 2), a conventional hexane extraction is used to recover the oil. This is an energy intensive process that requires two stages of water removal followed by drying of the algal biomass prior to extraction. Dried biomass from extraction is assumed to have value as a fertilizer coproduct. Note that CO2 is not free. It is assumed to cost $80 per metric ton.

The second option (shown in Figure 3) is a much lower cost and lower energy alternative that uses a three phase centrifugal extractor to directly remove the oil from a wet paste of algal biomass. Such an approach has been used in a commercial process for recovering neutraceutical grade beta carotene from open pond algae systems. It’s use for high yield recovery of total neutral lipids from algae has not been demonstrated. Thus, this second option represents an unproven but plausible scenario. Liquids and biomass from the extractor in this second option are sent to an anaerobic digester, which produces methane used for heat and power production. It also generates a CO2 stream and a liquid effluent containing some of the nutrients (nitrogen, phosphate and potassium), both of which can be recycled to the growth ponds and used to reduce total nutrient supply costs.

Lipid products recovered from the algae fall into two market categories: High value oil products such as omega-3-fatty acids for use in food products and generic triglycerides (neutral lipids) that can be used as a feedstock for biofuels production. The high value oils could range in value from $10 to $40 per gallon. Neutral lipids for biofuels production must be competitive with current crude oil prices, which would be around $2.14 per gallon ($90 per barrel).

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Findings

Tables 3 summarizes the findings of this analysis. The results are expressed as a minimum selling price of the algal lipid product required to meet a 10% real rate of return on capital.

The improved performance scenarios with the VG additive all fall well below the low end of the high value oil market benchmark of $10 per gallon. Of greater interest is how the VG additive scenarios, with the addition of recycle made possible by the ability to non-destructively recover oil secreted by the algae, fare against price of crude oil as a feedstock for fuel production.. As Figure 2 shows, oil futures have been highly unstable, reaching a high of around $140 per barrel in mid 2008 and dropping to under $40 per barrel after the economic collapse in late 2008. As the economy as slowly begun to rebound, oil prices have once again climbed. Even before the recent unrest in the Middle East, prices were back in the $70-$84 per barrel range. USDOE’s long term estimates for oil price are conservatively low at $135 per barrel in the year 2010.

Figure 3 shows compares selected scenarios of improved performance and recycle of biomass with the VG additive, high value oil price ranges and petroleum prices. At 75% recycle levels (cases 3a and 3b), algal oil prices are $94 to $139 per barrel, easily within range of DOE oil price projections for 2035, and almost competitive with current oil futures prices. At the theoretical (but not likely practical) maximum for recycle rate of 100%, the price of algal oil competes favorably at only $67 per barrel.

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Conclusions

The introduction of VG Energy’s additives offers the ability to knock down the cost of algal oil production by almost a factor of ten as a result of productivity improvements. If oil secretion currently observed in the lab can be fully demonstrated in larger scale growth systems, there is a potential for further decreasing costs by another factor of roughly two. These represent dramatic changes in the economics of algae technology, and are truly game-changing. A lot of work remains to be done to establish the robustness of the VG Energy’s lab results, but these preliminary economic analyses show that the promise of the technology warrants further investment and investigation.

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Discussion

There are two major benefits to VG Energy’s discovery: 1) the ability to maintain and even increase growth rates of algae while also increasing the relative amount of lipid produced per unit of biomass; and 2) the observation that the algae actually secrete the lipids as they accumulate in the cell. The economic repercussions of higher growth and lipid production are obvious. The ability to get cells to secrete the lipids offer some less obvious advantages. First, it improves the ease with which lipids can be separated from the water and biomass coming out of the growth systems. Second, it opens up the possibility that oil can be separated and recovered from the algae in a non-destructive way. This is important because it means that it is now possible to recycle living cells back to growth system. The system no longer has to completely replace biomass that is lost in conventional destructive processes for recovery of lipids.

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This analysis has been done in such a way that we can evaluate these benefits separately. In particular, results are presented for:

• A conservative base case growth rate and oil production with conventional extraction

• A conservative base case growth rate and oil production with centrifugal extractor and recycle options

• Enhanced growth rate and oil production with conventional extraction

• Enhanced growth rate with centrifugal extractor and recycle options

Each of these cases are further split into two scenarios. One in which the ability to get light into the system limits the concentration of biomass to 0.5-0.6 grams per liter, and one in which limit limitations are ignored and the cell concentration is allowed to increase with increasing recycle rate. Maintaining cell concentration at a lower level is achieved by reducing the residence time of the growth reactors as recycle rate is increased.

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...[On] net and total cost results...a few points to note.

• First, that, as recycle rate increases, the relative difference between net and total cost declines. That is because recycling reduces the amount of biomass available for coproduct and electricity production.

• Second, the impact of recycling of the algal biomass is much greater for the low base case productivity scenarios. To understand this, just consider that if 80% of the biomass recycled, that means that the reactor volume needed to grow algae drops by a factor of 5. At lower growth rates, the starting cost of the growth reactors (that is, without recycle) is much higher than the starting cost of the enhanced growth system.

• Third (and really the inverse of the second point), the relative cost savings as a function of recycle rate is much lower for the higher growth rate scenarios.

• Fourth, the difference between conventional hexane and centrifugal extraction processes is much greater for the higher growth rate scenarios. This makes sense since, under higher growth rates, the cost of the growth systems is lower and the savings associated with downstream recovery steps represent a larger portion of the total cost of the system.

• Finally, if light limitations require the growth reactors to be operated so as to maintain lower cell concentrations, the benefit of recycling the biomass is reduced by roughly a factor of 2...