An agreeable reporter from KPBS San Diego visited with the Digest this past week while working on a short segment, contrasting the progress of algae companies today to the promise seen when the BIO International Convention last visited San Diego in 2008.<\/p>\n
The premise of the articles was \u201cThen, there was a lot of talk about fuels. Today, there\u2019s more talk about nutraceuticals, food and feed. What happened?\u201d<\/p>\n
Then and now.<\/h4>\n
There are good reasons to ask hard questions.<\/p>\n
Then, it was Aurora Biofuels \u2014 now it\u2019s Aurora Algae. Them, it was Solix Biofuels, now it is Solix Biosystems. Then, Solazyme was generally focused on being a fuel company, now it is a \u201crenewable oils\u201d company more focused on higher-value, higher-margin products like Encapso drilling oils and Algenist health & beauty products.<\/p>\n
Then, it was \u201cthe summer of algae\u201d, and ExxonMobil was running an awful lot of commercials about its investments in algae-based fuels. Now, the commercials are long gone.<\/p>\n
Have the market drivers really changed all that much?<\/h4>\n
Recently here in Digestville, we had an opportunity to look back at the Algae 2020 study that Emerging Markets released back in 2009, at the height of the algae craze.<\/p>\n
Will Thurmond, the study\u2019s author, saw three key trends:<\/p>\n
Then, he projected \u201cInvestment in Diversified Products \u2013 Not Just Biofuels: Proteins for Animal Feed, Pharma\/Nutraceutical Products (DHA and Omega 3-6 Heart-Healthy Oils), Cosmetics (Facial Creams) and Bio-Degradable Polymers, Plastics and Environmentally Friendly Green Chemicals, Detergents, Solvents.\u201d<\/p>\n
He described algae then as one feedstock for \u201ca diversified portfolio of products,\u201d noting that \u201calgae products are and will be used to manufacture fuel, feed, food, fertilizer, plastics and green chemicals. Algae meal will be a protein supplement for aquatic and livestock\/poultry feeds. Noting at the time that 30% of the biomass would likely be the algae oil fraction for biofuels and green chemicals.<\/p>\n
He noted in 2009 that \u201cthe higher-value, multi-product focus is essential for cash flow for start-ups, and part of a diversified, targeted marketing strategy to generate revenues.\u201d<\/p>\n
![\"algae2010-5\"](\"http:\/\/www.biofuelsdigest.com\/bdigest\/wp-content\/uploads\/2014\/06\/algae2010-5.png\")
<\/p>\n
Noting that \u201cAging Baby-Boomers increasingly use more health product supplements, protein, fiber and facial creams,\u201d he wrote that \u201cAlgae co-product market strategies: co-products besides biofuels are critical to success,\u201d indentifying:<\/p>\n
Proteins & Carbs for Animal Feed
\nBio-Degradable Polymers, Plastics
\nEnvironmentally Friendly Green Chemicals, Detergents, Solvents
\nNutraceutical Products: Heart-Healthy Omega 3-6 Oils, DHA Fish Oils & Cosmetic Products \u2013 i.e. Facial Creams<\/p>\n
![\"algae2020-4\"](\"http:\/\/www.biofuelsdigest.com\/bdigest\/wp-content\/uploads\/2014\/06\/algae2020-4.png\")
<\/p>\n
He modeled a market that focused first on pharmaceutical and specialty chemical products based on prices between $25,000 to $800,000 per metric ton \u2014 during the 2009-2012 period.<\/p>\n
During the 2011-2015 period, he pegged that pharmaceutical, chemical and nutraceutical markets would dominate, with price points between $2000 and $25,000 per metric ton, including: omega-3s, food additives, plastics and high value chemicals, cosmetic industry products and additives, baby formula supplements, and livestock markets with higher-value animal protein, fish and livestock feed additives.<\/p>\n
Fuel markets, he projected would come later \u2014 depending on the scale of the ventures involved, he pegged a 2018-2025 timeline.<\/p>\n
![\"algae2020-1\"](\"http:\/\/www.biofuelsdigest.com\/bdigest\/wp-content\/uploads\/2014\/06\/algae2020-1.png\")
<\/p>\n
Algae repositioned?<\/h4>\n
So \u2014 have algae companies repositioned? Not really. Some investors and quick-buck artists have moved on. But crop-based investors have arrived on the scene.<\/p>\n
ADM has partnered with Solazyme to place production at its Clinton, IA facility. Bunge has established a massive JV with Solazyme, and the two are reaching commercial-scale down in Brazil just now. Monsanto has invested in Sapphire Energy, looking not only to empower a new crop, but possibly to find attractive traits in algae that can be adapted in other crops of interest. And the Mars family \u2014 owners of huge pet food and human nutrition brands \u2014 has invested deeply in Heliae.<\/p>\n
![\"algae2020-2\"](\"http:\/\/www.biofuelsdigest.com\/bdigest\/wp-content\/uploads\/2014\/06\/algae2020-2.png\")
<\/p>\n
Though, it is not all upstream companies. Valero remains invested in Algenol, Phillips 66 has partnered with Sapphire Energy, and India\u2019s refining giant Reliance Industries has invested quite a lot of money in recent years, also primarily in Algenol. DSM has invested more deeply in acquiring Martek.<\/p>\n
Delays?<\/h4>\n
Delays there have been \u2014 some of it pegged to the food and feed markets. For example, Aurora Algae, which has been working hard at its business for seven years now, is just this year hoping to receive GRAS (generally regarded as safe) approval for its protein \u2014 essential to releasing a product to the market.<\/p>\n
Now, in the case of 30% oil content \u2014 excepting companies that pyrolize the entire algae biomass \u2014 there are going to be 3.3 pounds of proteins and carbs for every pound of oils. So those USDA approvals, slow though they are, are critical to making fuels, as well.<\/p>\n
\u2028Perception vs reality<\/h4>\n
So what happened? To some extent, occasional observers have been influenced by the television commercials. Even in the \u201csummer of algae\u201d, the dominant production capacity was owned by Cyanotech, Earthrise and Martek \u2014 all focused on nutraceuticals.<\/p>\n
![\"algae2020-3\"](\"http:\/\/www.biofuelsdigest.com\/bdigest\/wp-content\/uploads\/2014\/06\/algae2020-3.png\")
<\/p>\n
The timeline problem<\/h4>\n
It took 56 years from the Titusville oil strike in Pennsylvania until petroleum was generally dominant in road transportation fuels.<\/p>\n
Petroleum started out as a replacement for, by and large, heating and lamp oil. The concern of the era was not Peak Oil, but Peak Whale \u2014 as whale oil supplies were not able to keep up with expanding demand. Then, gasoline was often discarded as a waste by-product. And it wasn\u2019t until World War II that petroleum began to comprehensively replace coal as a feedstock for chemicals \u2014 more than 80 years after Titusville.<\/p>\n
The Bottom Line<\/h4>\n
What is being built are crop companies, not fuel companies or nutraceutical companies. They\u2019ll sell their biomass to the highest bidder. As Will Thurmond projected five years ago, these are the \u201cmiddle years\u201d where the focus is on \u201comega-3s, food additives, plastics and high value chemicals, cosmetic industry products and additives, baby formula supplements, and livestock markets with higher-value animal protein, fish and livestock feed additives.\u201d<\/p>\n
How soon will individual companies get down their cost curve and into the bigger chemical and fuel markets? Algenol CEO Paul Woods is projects a cost of $1.27 per gallon for ethanol. Solazyme\u2019s 100,000 metric ton plant is now open for business. But we won\u2019t likely see fuels until the higher value markets are saturated \u2014 and, in this way, the innovation going on at algae companies \u2014 developing new higher-value formulations \u2014 may well be pushing that day out rather than making it closer.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"
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