Tuesday, December 2, 2008

The Future of Algea - Off-Take Production

The future of algae is finding someone willing to pay you to play with it.

I've talked to dozens of start-up entrepreneurs with dreams of phytoplankton business. All these business models with the hopes of developing a new crude oil for the next century. The "crude dreams" of oil production from an endless uber-productive super-algae that would feed the humanity protein as well as feed our insatiable vehicles carbohydrates distilled into ethanol and fats reacted into biodiesel.

The big issue though. How do you pay for the capital cost of a algae bio-reactor? The device that will take water, light, CO2 and make the bugs into an industrial input. Will angels and VC pay for the magical devices that will make algal goo. This goo in turn being cut, distilled, processed, reacted and made into the endless variety of products that we currently source from petroleum.

Deep pockets in this market though are tough to come by. What is now looking apparent is the need for someone already paying to deal with algea. A current cost stream begging for a better solution.

One such industry is commercial fish farms. To that end I came across a recent article that caught my eye. Though this is not a unique idea its still one to watch. What makes it innovative is the fact that the technology might actually work. In the word of biofuels technical talk is cheap and demonstration is worth millions in Federal funding.

From an article from Greenbang.com:
Under PetroSun’s BioFuels Aquaculture Lease Programme, participating farm operators would receive a rent incentive and monthly royalties in return for access to their pond algae. In future, farmers could also gain additional benefits from a carbon credit program, the company said.
PetroSun (a leader in algae technology in the US) has announced what I would call an interesting and very viable business model. To co-locate with fish farms that have an algae maintenance concern. Instead of these farms paying the internal cost to deal with algal growth they will get a return for partnering with PetroSun to create value from the biological reality association with commercial aquaculture.


mus302 said...

The only problem that I see with this idea is that they won't be able to keep out invasion algae species that don't have very high oil contents. Because of that they won't be able to achieve ultra high yields but considering the situation any fuel gained would be a plus.

Mark Fitz said...

This isn't an issue with that. They are taking the local algea (which are in essence already invasive) and getting what oil they can. Chances are the cost of servicing the algea is so high to the fish growing operation that they can make it work. Purity only matters if your sole business is producing algae consistently.

They are a water/waste/algae scrubbing service that also happens to share revenues for the algae if it produces value. Similar to a waste motor oil, waste wood, or waste vegetable oil producers and their waste handler.

Based on the free water, free algea food, and free space of a fish farm they are likely paying only based on how much oil they produce.

In essense they pay for production reducing the operating cost of setting up an algea grow operation makes it pencil.

As opposed to the pond or closed reactor systems that try for purity of algae strain. A less productive algea will likely not have as much of an effect if the capital cost covered by the host who then only gets paid if their farm produces.