Algae Business by Riggs Eckelberry Hydrotreating Algae for Jet Fuel

Hydrotreating Algae for Jet Fuel

October 12, 2011
AlgaeIndustryMagazine.com

Way back on June 20, John Daly of OilPrice.com wrote an insightful overview of why so many players in the multi-sector air industry—airlines, airplane producers, national airlines, and militaries from the US Navy to European Union defense councils—were suddenly turning their collective attentions to jet fuel from algae oil.

Factors in Jet Biofuel Take-Off

He summarized three factors in what he called “an extraordinary convergence of recent events”. They were:

The international standards certifying body ASTM approved its “BIO SPK Fuel Standard”, of the use of hydrotreated renewable jet fuel in commercial aviation…

The second development is that the critical mass of HRJ fuels on both civilian and military aircraft has been completed, with various military and civilian aircraft flying with HRJ additives made not only from camelina, but jatpropha, algae, babasu and coconut oil, among others. Production is set to soar from small “designer” batches of HRJ produced up to now for testing…

Another unexpected development leveling the playing field for aviation biofuels was the unexpected vote on 16 June by the U.S. Senate to repeal tax credits worth about $6 billion annually for producing ethanol…

Daly concluded that investors are looking for biofuels winners in a field that was suddenly much more level.  Disillusioned with the ongoing subsidies required to sustain ethanol, not to mention growing international anxieties about food prices, cropland displacement, and emerging skepticism about whether ethanol production even saves net energy, major consumers and potential investors want in on the ground floor for promising advanced biofuels.

The Algae Spring

Daly’s column appeared just before the Paris Air Show, which coincided with three big media-grabbers. Boeing flew a biofuel-powered jet non-stop from Seattle to Paris, landing with Lindbergh-like fanfare. Neste, Finland’s largest oil refiner, announced a major algae research initiative in The Netherlands. In a tacit concession to air quality concerns of airports in major urban centers, Airbus announced a distant initiative to power futuristic globe-circling rocket-jets with algae oil; and a separate fueling system for take-off and landing powered exclusively by algae oil.

Meanwhile, Solazyme announced its breakthrough first industrial scale sale to the U.S. Navy.

On the strength of that bid and its many strengths in developing commercial algae based products, Solazyme effortlessly raised $227 million in a May IPO (Independent Public Offering), as part of a tidal wave of industrial biotech IPOs over the past year. On June 20, its algae oil passed its air tests with flying colors. The first industry-scale sale met the rigorous assessments of military quality control, and the industry was suddenly up and away.

It was almost anticlimactic when, last month, Solazyme announced a 150,000 gallon algae oil sale to a branch of the military that is particularly sensitive to the skittish supply and volatile costs of jet fuel. Long a branch leader in developing new technologies, supply lines, and products, the Navy made the commitment in part to encourage this new feedstock.

Military as Consumer Catalyst

What’s prompting the military to take so proactive a role in generating algae oil supply?

We tend to think of markets as unified supply-and-demand exchanges. The supply-and-demand part is true, but the unified isn’t.

Buyers everywhere have needs, interests, and specifications for purchases that go way beyond short-term cost–income projections and profit ratios.  Some cost inputs are offset by the need to attract customers for general sales, like the loss-leaders common in supermarket weekly coupons, or giving away New Year’s calendars to remind customers about a company’s services.

The highest-priority input is always an emergency.

No one is more in the emergency business than militaries, and no military in the world compares in size or purchase power with the USA’s.

When it comes to national defense or protecting American borders, Congress finds bipartisan unity, the branches of the armed forces coordinate their commands, and public opinion polls all converge like Daly’s confluence of aviation biofuel factors. We have had frequent examples of this in recent years, from armor plating American troops’ vehicles against IEDs to re-supplying troops when Pakistan closes the Khyber Pass. Retrofitting for personnel carriers and airlifts from Khazakhstan weren’t cheap; but nobody minded paying up.

The national oil reserves are one response to the accelerating military crisis of petroleum supply; but it’s only one aspect. Our Strategic Oil Reserve furnishes enough to keep America gassed, greased and gunning for three weeks. As anyone following Iraq, Afghanistan and Libya has noticed, these days, wars tend to last somewhat longer than that.

The answer is a defensible, predictable, renewable fuel supply, and that can only come from algae, which does not rely on fresh water or croplands.

The Clinton Global Initiative

At the recent Clinton Global Initiative conference, US Navy Deputy Secretary Tom Hicks noted that the Navy, the U.S. Department of Defense—and America in general—rely too much on fossil fuels, and far too much on foreign sources of oil. “That dependency degrades our national security, negatively impacts our economy and ultimately causes harm to our planet,” he said.

According to Hicks, several fuel convoys are needed every day in Afghanistan to move fuel needed for operations at forward operating bases. For every 50 of these convoys, one soldier is killed or wounded. “That is too high a price to pay for fuel,” he said.

Expense is also an issue. In an average year, the Navy consumes 30 million barrels of fuel. When the 2011 barrel price increased $38, that translated to $1 billion over budget. “That’s just an unacceptable level of risk.” Hicks said.

Algae oil won’t meet all that demand within the next few years. But clearly, we can meet a growing percentage of it, and unlike other biofuels constrained by potential scarcities in land and water, there is no upward limit.

Jet fuel will prime the pump for algae’s increasing dominance as the global renewable fuel of choice.

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