Friday, August 19, 2011

Holding Up Yield Sign to Algae

A presentation a few weeks back detailing a failed algal-based biofuel project got me wondering just how much oil can algae produce.  Many investors, including me, have been looking to algae to provide that highly scalable alternative to petroleum as a transport fuel alternative.  What if those little green blobs turns out to be...well lazy blobs and not highly productive blobs?

A website holding itself out as an authority on algae, oilgae.com, suggests algae can produce between 5,000 to 15,000 gallons of oil per acre per year.  This compares to corn and palm, which can produce 18 gallons and 635 gallons of oil per year, respectively. 

Apparently not all algae are created equal.  As percentage of dry weight the most productive algae are chlorella protothecoides and nannochloropsis, which have oil content up to 55% and 68%, respectively.  Green algae has been the most popular among developers of biofuel.  Green algae apparently produce more starch and the lipids or fats, but they proliferate at a astonishing rates when temperatures are kept at a steady 30 degree Centigrade.  Marine nannochloropsis reportedly has a theoretical maximum yield of 20 gallons per cubic meter per day when grown in open ponds.  This data was gathered by the National Renewable Energy Laboratory in laboratory tests.

Now all these figures are wonderful.  I am not taking issue with even one number.  However, investors should take note of those key words "theoretical" and "laboratory."  Algae may not perform so well in large scale commercial conditions.  Thus it is incumbent upon investors to hold up a big yellow yield sign to algae companies hungry for capital and first verify the claims of algal-based biofuel operations.

There are over forty companies in the Algae Group of our Beach Boys Index for companies involved in production of alternative energy through processes and sources involving photosynthesis.  Over the next several weeks we plan to verify the production claims of each company, beginning with the public companies.

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