First, the Bad News

Greenfuels Technologies is the first algae company I've been following to bite the dust. They had been running some promising demonstrations at fossil fuel burning power plants, including the Redhawk plant in Arizona and Big Cajun II in Louisiana, showing how CO2 emissions can be diverted through algae incubators and recycled into oil which could be made into transportation fuels.

This letter from their then-CEO describes some of the problems they were facing in 2007. The algae incubators at the Redhawk plant produced algae more quickly than expected, and the algae was not harvested fast enough. This lead to overpopulation of algae which cut off sunlight in the incubator and killed the algae. The incubator was shut down for retooling. Another technical problem was that their new harvesting technology was found to be twice as expensive as initially projected.

It now looks like Arizona Public Service, which owns the Redhawk plant, will continue its own efforts to recycle CO2 using algae.

Greenfuels had also been working on an algae incubator to recycle gases from a cement-making plant in Spain.

The troubles at Greenfuels are probably just a hint of the challenges being faced by many algae startups around the world. Algae evangelists like me (evalgelists?) make blog postings that celebrate algae as the cure for the world's energy problems. But if algae is so great, then what's the holdup? Or is it too good to be true?

For one thing, algae is not attracting venture capital yet. This article recognizes the potential in algae but says that algae growing technology does not promise to yield profits soon enough to warrant venture capital investment at this time.

This report from the Algae Biofuels World Summit touches on many other difficulties involved in growing algae, removing water from it, and extracting oil. There is the debate of whether to grow it in open ponds or in enclosed incubators -- one speaker favors open ponds because he says none of the prototype enclosed incubators run by the various algae startups would work on a commercial scale. But, with open ponds, there is the problem of water evaporation, and the report goes on to say that this, rather than land availability, is the most limiting factor in large-scale algae production.

Other challenges facing the algae industry are genetically engineering algae strains that produce optimal yield; working with the government to develop means of regulating this hybrid industrial and agricultural business; and finding the best ways to separate algae from water and oil from algae in the harvesting stage.

And while one might think the current economic stimulus package might benefit the algae industry, the problem is that there are no shovel-ready algae projects. So this round of stimulus might contribute nothing to algae.

The good news is that algae research is indeed progressing. Origin Oil claims to have a very efficient way to distribute nutrients to algae in the growing stage without agitating the algae (agitation apparently slows algae growth), and an inexpensive way to extract oil in the harvesting stage using electromagnetic waves and pH adjustment of the water. The algae cells are cracked open and their oil floats to the top of a settling chamber, water remains in the middle, and broken algae mass collects at the bottom.

And, in New Mexico, the Center of Excellence for Hazardous Materials Management expects to be producing algae oil commercially, on a small scale, by September 1. They will be growing their algae in open ponds and hope to produce 5,000 gallons of oil per acre per year. One quote in the article says that, on 5,000 acres, the 25 million gallons produced could provide half of the Diesel fuel needed by that state in one year. Probably these optimistic projections will not be reached, but if the project can demonstrate feasibility in algae farming, that will mean a lot. It will also create 165 well-paying high-tech jobs. This is the only algae project I know of expecting to produce oil for sale regularly in the near future.