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Algae industry welcomes incentives, despite long path to commercialization
(10/29/2009)
Katie Howell, E&E reporter
Incentives for algae-based biofuels that crop up several times in the sweeping Senate climate bill have the industry singing praises, but not all are certain the measures would have an immediate positive impact on the fledgling sector.
The global warming legislation, S. 1733, introduced last month by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.), includes language that would boost incentives for the sector. And Boxer's chairman's mark, released late last week, provides a further boost for the industry by expanding the definition of qualifying feedstocks in the federal renewable fuel standard, or RFS, to include advanced technologies, like algae.
"We are indeed very excited," said Mary Rosenthal, executive director of the Algal Biomass Association. "Senator Boxer and her colleagues ... have addressed one of the biggest challenges to commercialization of algae-based biofuels -- parity with other feedstocks."
Algae-based biofuels, once deemed too far-fetched and expensive to be considered as a viable energy source, have sprung back into the limelight this year, luring major investments from Exxon Mobil Corp. and Dow Chemical Co. And the sector's dogged lobbying efforts have garnered support on Capitol Hill. But the measures included in the newest version of the Senate climate bill could be the biggest boost yet for the industry, proponents say.
"Government plays a critical role in catalyzing the start of an industry," said Michael Milnick, a venture capitalist with CMEA Capital, which has invested in an algae-based biofuels company.
Boxer's mark would replace the definition of cellulosic biofuels in the federal RFS with an "advanced green" biofuels category that is more broadly defined and includes algae-based fuels.
The 2007 energy law caps corn ethanol production at 15 billion gallons a year by 2015 and has the remaining 21 billion gallons of renewable fuels coming from advanced biofuels, including 17 billion gallons from cellulosic biofuels and biodiesel, but there is currently no specific provision for algae-based fuels.
The change comes as concern has mounted that the 2007 law was too narrow to include emerging technologies, like algae-based fuels.
"Since algae-based fuels meet the requirements of the RFS for emissions reductions and renewable biomass, it is only fair that they be treated the same as other feedstocks," Rosenthal said.
But while the inclusion of algae-based fuels in the RFS would drive up demand for those fuels, not all are certain it would make an immediate impact on the fledgling sector, which has seen an explosion of interest in recent months but no projects have moved past the pilot stage.
"The algae industry is in its infancy, and scale up represents a big challenge that these algae companies ... are just beginning to grapple with," Melnick said. "It's going to take large amounts of capital investment as well.
"I see this as a long-term investment on the government's part," Melnick added, noting that if legislation were passed, it would not likely make a commercial impact for three to five years. "It's the same way that the government in the past made long-term investments in biomedical research, and it took many years to produce new cancer drugs."
Still, the investment is important to make sure the industry starts progressing toward commercial scale, said Mark Hanson, a Minneapolis-based partner at the Stoel Rives law firm and an expert on algae issues.
"The RFS brings demand, which tends to drive the production," Hanson said. "If you're planning out in 2012, 13, 14, 15, and looking at a 100-million-gallon facility, and you see a requirement, you have some comfort in knowing that ... there's going to be demand for it.
"This is significant from a standpoint that it should promote a progressive development of advanced biofuels by driving that market," Hanson added.
Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) wrote this summer in an op-ed that the RFS is too restrictive and could freeze out emerging technologies, like algae-based biofuels. And other legislators, like Sens. Tom Udall (D-N.M.) and Tom Carper (D-Del.), have been vocal on the issue as well.
In the House, Reps. Brian Bilbray (R-Calif.), Jay Inslee (D-Wash.), Harry Teague (D-N.M.) and a handful of California lawmakers introduced H.R. 3460 that would specify the feedstock in the RFS and extend a producer tax credit to algae-based biofuel producers.
That legislation, which was introduced before the August recess, remains in committee.
Additional boosts for algae
The legislation also provides additional perks for the algae-based biofuels sector.
It would expand the definition of renewable biomass to include algae, a move that would enable algae-based biofuels facilities to be eligible for grants and other incentives, Hanson said.
"All energy programs provide grants to advanced biofuels facilities, and now it's clear that algae-based facilities will be eligible for that as well," he said. "This is an extra shot in the arm."
The legislation also includes language that would ensure power plants that use a portion of their carbon dioxide emissions as a feedstock for algae only count the CO2 emissions -- that are emitted from the power plant and then again if algal biomass is burned -- once in allowance requirements.
Algae use sunlight and water to convert carbon dioxide into sugar, which the algae metabolize into lipids, or oil. Some power plants have considered using algae as a potential sequestration sink for CO2 emissions. But this legislation is the first to clarify that the CO2 emissions from burning leftover algae biomass after oil is extracted do not have to be included in allowance requirements.
"This has been a little bit of a stumbling block," Hanson said. "We'll probably see that type of algae production get a little boost."