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Pond-Scum Fuel Could be Headed for a Gas Station Near You

It's going to need a better name, because "pond scum" just doesn't have a ring to it. Algae fuel, after decades in the wilderness without much funding or technical breakthroughs, is finally reaching commercial-scale production as startup Sapphire Energy builds a 300-acre fuel farm in southern New Mexico, capable of producing a million gallons annually.

The Sapphire plant will be online next year. It's a big play, and a major gamble on the viability of algae-based fuels. Algae has a major political benefit over some other ways of producing bio-gasoline in that it can be made all over the U.S.A. A high-yielding process for producing diesel fuel from the fast-growing jatropha plant (SG Biofuels and others) faces the hurdle, in Congress at least, of needing to grow in the tropical soils best found abroad.

The great thing about the algae process is that the fuel produced is, effectively, crude oil, which can be refined into gasoline, diesel or jet fuel. It doesn't compete with food crops, as ethanol does. And it doesn't require a whole separate fueling infrastructure, as hydrogen and electric cars do. What it needs is lots of open, flat land that gets steady supplies of sunshine for ponds to "grow" the fuel, and carbon dioxide as feed.

Evolving viability
Early algae work proceeded slowly, because costs were high and work was not always replicable -- we are talking about biological processes here, and they sometimes go awry (which is a problem holding back the very promising cellulosic ethanol). Some algae producers have branched out into non-fuel applications. But as fuel producers settle on commercially replicable processes and particular strains of productive algae from the estimated three million available, investors have flocked to the sector.

Sapphire's goal is crude oil at $80 a barrel, which would certainly be competitive today. But that's a goal. Today, it could produce gasoline at a little less than $7 a gallon, but Sapphire hopes it can get that price down rapidly when the large-scale plant goes online. The price has been a stumbling block before. A 10-year National Renewable Energy Lab study ended in 1996 because it couldn't produce fuel at a competitive price. But that was several breakthroughs ago, prospects look brighter now, and NREL is interested again.

The big gamble
The New Mexico plant is "commercial grade," not commercial yet. It's the last step before the fuel that's been tested in several jetliners and in a coast-to-coast run by a Prius nicknamed "Algaeus" is ready for a gas station near you.

Sapphire, lauded as a Wall Street Journal "Next Big Thing," has growing federal and private support, including $104 million in Department of Energy and Agriculture Department grants and loans, and $100 million in Series B venture funding from, among others, Bill Gates' Cascades Investments arm, the Rockefeller family's Venrock, and Arch Venture Partners. And in March it secured an undisclosed investment from biotech giant Monsanto.

Another big player is Craig Venter's Synthetic Genomics, which secured a more than $300 million investment from Exxon in 2009. (Exxon's total commitment to algae fuel is $600 million). General Atomics is also looking at algae for military fuel applications, with the Air Force among other partners.

A San Diego hub
All of these companies are in San Diego, where the tech-based University of California at San Diego has a concentration of algae scientists, many of whom are involved in startups. Tony Haymet, director of the university's Scripps Institute of Oceanography and co-founder of Clean Tech San Diego, estimates that there are more than 30 businesses focused on algae research in San Diego, a third of which are UCSD-affiliated.

Stephen Mayfield, director of the San Diego Center for Algae Biotechnology and a UCSD molecular biology professor, is also a founder of Sapphire Energy. "The challenge is to bring algae fuel to scale and do it affordably," he said. And, of course, finding the land. Mayfield estimates that to replace 50 percent of U.S. liquid fuel use, algae would need 30 to 40 million acres of sun-rich land. He points out that there are 10 million acres of abandoned agricultural lands in the U.S., but of course that's the same barren ground eyed by biodiesel producers.

Unlike soybeans for biodiesel, however, algae would grow well in the desert. But maybe algae fuel doesn't need land at all. NASA's Ames Laboratories has looked at growing it in the open ocean, in giant plastic bags. I can see some challenges to that -- storms (and seals) regularly rip apart ocean-based pens for raising salmon and other fish in aquaculture farms. Removing the land requirement is a big bonus, though.

Algae gasoline could end up being a transitional technology, a foreign oil independence play as electric cars ramp up. Since it can be pumped through existing infrastructure, it could be ramped up in a surprisingly short time. And maybe people would forget that it began life as pond scum.

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