Algae industry embraces lowered expectations

FORT COLLINS – After a long and uncertain winter, the algae-cultivation company Solix BioSystems has the 720-square-foot pool in its backyard ready for summer – with a considerable amount of green muck growing in it.

Solix is running its proprietary algae growth system – called the Lumian AGS 4000 – on the grounds of the Colorado State University Engines and Energy Conversion Lab in Fort Collins. The design of the inflatable tank includes 20 patent-pending photobioreactor panels where algae is cultivated for use as oil, a base for biofuel, or whatever purpose a customer might have. Formerly considered research and development equipment, the algae growth system is now being marketed by Solix to other companies and institutions looking to make their own algae. It announced its first sale this week to New Mexico State University in Las Cruces, which plans to use the Lumian AGS 4000 to produce standardized biomass for jet fuel testing experiments in collaboration with the U.S. Air Force and the University of Central Florida.

The Lumian AGS 4000, said Joanna Money, vice president of business development for Solix, is “all-in-one, fully integrated, plug-and-play, all you need to harvest algae,” along with sources of water, power and carbon dioxide.

The sales pitch and equipment repurposing are part of the broader set of services from Solix in 2011. The company, which opened in 2006 as a CSU-hatched venture and spinoff, has also revamped its name – from Solix Biofuels to Solix BioSystems – as part of its recalibrated focus on alternative markets and uses for algae beyond fuels.

In five years’ time, hyped expectations and a wave of investment for algae and biofuels have fallen away to reality, according to José Olivares, biofuels program manager at Los Alamos National Laboratory in New Mexico and director of the National Alliance for Advanced Biofuels and Bioproducts, a consortium of 30-plus businesses and research institutions, including Solix and CSU.

“I think companies, like Solix and many others, have realized for some time there are current limitations to the technology,” Olivares said. “Current methods are not going to compete with the petroleum market.”

Algae was once hailed as pond-scum wonder-fuel that would replace petroleum and gasoline. But gaps in technology have limited cheap and efficient production. In the deflated market, some algae companies have disappeared, while others, such as Solix, have repositioned themselves and adjusted operations to pursue avenues other than biofuels.

“I truly believe there’s going to be an algae industry,” Money said. “What products are going to be produced from algae is unknown, but I think fuel is almost certainly going to be one of them.”

Hype and hope

Solix has weathered the ups and downs in the biofuels market, but not without some setbacks. This past January, the company announced that CEO Doug Henston and CFO David Maytubby had resigned; chief technology officer Joel Butler has since taken over as CEO.

Money said the turnover was part of “a natural evolution” that many startup companies endure, and that Butler’s experience in technology commercialization fits well with the next phase for the business. Some market analysts, however, have speculated the moves have been related to disappointing production at the company’s Coyote Gulch demonstration plant in southwestern Colorado, which first opened in summer 2009.

In March, Solix announced its name change, along with news that the company had secured over $16 million in investments from the first part of its Series B financing round. The funding will support the company’s push into commercial production and sales of the AGS 4000. But several previous investors, namely Valero Energy, were not included on the financing list, also raising flags with observers.

The released list doesn’t mean more financing won’t come forward, Money said, and Solix officials believe the AGS 4000 offers advantages in cultivation methods to attract buyers and promote progress toward cheaper biofuels production.

“When I joined the company, algae was a hope, but also a lot of hype with people reporting data that was way out of line,” Money said. “The technology has advanced enough that I think algae oil is a reality. It’s just a matter of technology and investment.”

It is also a matter of finding other uses for products derived from cultivated algae. Last fall, Solix inked an agreement with the global chemical company BASF “to investigate the use of algae to produce certain chemicals.”

At the Coyote Ridge facility, Solix plans to be converting cultivated algae to crude algae oil by this summer. The oil can then be sold to manufacture bioplastics, fertilizers, animal feed, and a range of health supplements and antioxidants, sometimes called “nutraceuticals.” The sales of the AGS 4000 should also enable other companies to test various strains of algae to see which are best suited for different climates and uses.

By turning attention to the alternative markets and products, Solix can demonstrate and develop algae-oil technology, Money said. “We’re really trying to target multiple markets. Biofuels is one of them.”

Biofuel future?

Solix and other companies might not be giving up on biofuels, but forays into other markets signal that manufacturing affordable fuel from algae is more of a long-term goal. In particular, businesses must figure out how to reduce water and power use to run the photobioreactors, which would increase yields and decrease costs.

Olivares of the national biofuels consortium said companies must build up the size of operations to increase productivity, but that hasn’t happened yet. In terms of commercial production, even Solix’s Coyote Ridge site, which is cultivating over 150,000 liters of algae in three growth systems on three-fourths of an acre, is relatively small.

Still, Olivares said the biofuels market isn’t just a pipe dream.

“I don’t see major roadblocks. We’re producing fuels today out of algae. The barriers are really: Can we produce those fuels at a competitive price? In order to do that, we need to scale up,” he said.

Initiatives, such as the January announcement by the U.S. Department of Defense to significantly reduce petroleum use and employ alternative fuels for its fleet of vehicles, could play a big role in supporting research and investment and larger biofuels pilot projects. Moving beyond the biofuels hype that surrounded the industry just a few years ago should also temper future expectations.

In the meantime, Olivares said, “Developing some of these intermediate markets is critical.”

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