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A Value Chain and Life-Cycle Assessment Approach to Identify Technological

Innovation Opportunities in Algae Biodiesel

R. Levine*, A. Oberlin**, and P. Adriaens***

* University of Michigan, Ann Arbor, MI, USA
** University of Michigan, Ann Arbor, MI, USA
*** University of Michigan, Ann Arbor, MI, USA

ABSTRACT 1.1 Algae-to-energy

Algae biodiesel is an opportunity space that has gained Algae are photosynthetic organisms found in a variety of
renewed interest for venture investment. As with any new aquatic and terrestrial environments. Algae can range in
opportunity space, determining where the greatest value size from microscopic single cells on the order of 0.2-2.0
capturing potential resides has important implications for µm in diameter to giant kelp that can reach 60 m in length
directing investment and research. This paper presents a [1]. To date, the majority of research on algae-to-energy
value chain analysis of algae biodiesel and maps current pathways has focused on microalgae and the unique ability
industry players against similar segments in the biofuels of some species to accumulate lipids as a large proportion
and petroleum value chains. Using margin analysis and of their body mass. In general, algae demonstrate higher
life-cycle analysis of one of the market pains (energy use in biomass and lipid productivities than terrestrial plants and
algae harvesting and biomass processing to biodiesel), a can be grown on salt water and wastewater, providing
technology opportunity was identified. The identification essential treatment services and reducing freshwater
of potentially high value companies using semi-quantitative requirements for feedstock production. Though most
analysis provides a useful tool for investors and research has targeted phototrophic algae growth in hopes of
entrepreneurs in the algae biodiesel space. using waste CO2 from plant power flue gases, algae grown
heterotrophically on carbon sources like glucose and
Keywords: biofuel, algae, biodiesel, life-cycle analysis glycerol are being investigated to achieve higher biomass
densities and productivities.
1. BACKGROUND Algae are generally grown in open ponds or closed
bioreactors and must be harvested to obtain a biomass
suitable for processing into liquid biofuels. When grown in
Today there is broad scientific consensus that human sunlight, algae rarely achieve densities greater than 5 g dry
activities have altered our climate. Experts are more certain weight/L, necessitating flocculation and dewatering steps
than ever that increases in anthropogenic greenhouse gas that can be energy intensive and expensive. Today there is
(GHG) concentrations have caused a rise in global average no single process established for cost effective harvesting,
temperatures, leading to substantial environmental, social, oil extraction, and conversion into biodiesel. In fact, this is
and economic consequences. Given the substantial impact an area of active research and a significant part of the
of liquid petroleum combustion, which accounts for intellectual property claimed by many companies in the
approximately 39% of energy-related CO2 emissions in the space. Although anaerobic digestion and gasification of
US, it is not surprising that biofuels, such as ethanol and algal biomass are other processing strategies being
biodiesel, have become increasingly popular as investigated, here we focus on lipid production as a
governments, producers, and consumers alike seek to feedstock for biodiesel.
reduce their carbon footprints [4]. When produced from From 1978 to 1995, the US Department of Energy’s
food grains, these biofuels may reduce direct-effect GHG Aquatic Species Program (ASP) spent roughly US$25M to
emissions compared to their fossil fuel analogs [8; 11], but identify algae species appropriate for biodiesel production,
global land-use changes may actually result in greater understand lipid biosynthesis in hopes of discovering ways
emissions from their production [14]. In an effort to to increase productivity, and assess the economic viability
develop a new biodiesel feedstock that does not use food of fuel production [15]. The data indicated that although the
grains or arable farmland for fuel production, over 50 start- technology held great promise, the cost of algae-based
up companies and numerous university and national biodiesel could not be compete with low-cost petroleum
laboratories are investigating how microalgae can meet diesel. Likewise, the Japanese invested about $117M
these requirements while providing attractive, scalable through the Research Institute of Innovative Technology for
solutions for investors and entrepreneurs. the Earth (RITE) to develop enclosed bioreactors for CO2
sequestering algae, but the project also ended with
disappointing cost projections. These conclusions create

An updated version of Oswald business model in a related industry can be used. 1. may significantly open ponds. Like any industry. a Hawaiian marine major factors affecting the net energy balance and begin biotechnology company successfully producing astaxanthin compiling the data necessary for a more complete LCA. If a pure player does not exist. Although intellectual property protection makes it difficult to determine what companies 2. as has been proposed [2]. and it remains unclear and increase efficiency. (2003) published results from their US$20M transesterification to biodiesel. peer-reviewed literature and company websites. improve the economics and energy balance attributed to Over the past three years. and the value chain. oil extraction. each with unique captured by the segment.3 Life-Cycle Assessment The idea that biofuel feedstock production from 3. Huntley requirements of cultivation. and et al. We intend for our analysis to be a basis for capital (VC) and other investment support has gone into discussion within the industry as to where opportunity lies start-up companies attempting to commercialize algae-to. in addition to published. A company scaling. harvesting. incorporated into an analysis aimed at identifying segments energy production is comprised of a set of activities that can of highest value capture.opportunity for technological innovations that reduce cost liquid biofuel feedstock production. With this significant investment. from Haematococcus pluvialis [9]. A thorough life-cycle assessment diversity in positioning and product development across the (LCA) has not been completed on algae cultivation for value chain. VALUE CHAIN ANALYSIS microalgae reduces net GHG emissions relative to petroleum diesel is widely assumed to be true but almost Market and company analysis of industries indicates entirely unsubstantiated. Several economic models of large-scale its profit margins are considered indicative of the value algae cultivation have been published. Given the process- specific nature of any LCA. preliminary data that should be verified by companies as they develop their processes. for both investment returns and long-term environmental energy products. Segments can be 2. In an initial analysis of market pains for technology costly. Furthermore. to US$50 dollars when using a unique hybrid cultivation combining biodiesel feedstock production with wastewater system that incorporates both closed photobioreactors and treatment. The value chain used here was based on . or by addressing for biodiesel processing inputs [10].1 Value Chain Analysis have achieved and what remains hypothetical. Operating supply chain and represents both material (primary) and margin analysis and venture investment were assessed and information (supporting) flows. Segments were assessed based on known 1. contribution to the product’s life cycle energy balance. METHODS towards where technological innovation has the greatest value capturing potential. Here we outline several investment (1998-2001) in Aquasearch. eliminating segments.2 Life-Cycle Assessment quantified by determining the operating or net profit margins of companies performing that value-adding activity. here we present only very an emerging market. assumptions that directly impact projections for energy use margins from a proxy company with a parallel role and and related GHG emissions. over US$240M of venture both processes. algae-to. or essential segment. but some basic calculations can reveal strategies indicates that per barrel oil prices could range from US$84 that are unlikely to yield positive results. with higher margins potentially indicating a more difficult. Washington. thereby enabling scalable solutions whether a positive net energy balance is possible given the for algae-to-biodiesel in the marketplace. we have focused on net energy production across operating in only one segment is termed a pure player. Their economic Ultimately. Recently. time sensitive. A value & Benemann’s 1996 assessment [3. 12] was chosen as the chain analysis informs where potentially profitable entry basis for a simplified energy balance evaluation of algae points exist or where existing companies can increase their cultivation and a recent LCA on soy-based biodiesel portion of the value capture through creating a substitute or completed by Argonne National Laboratory provided data alternative solution. such an analysis will be site and process analysis contrasts sharply with previous estimates and specific. we can categorize basic process distinctions at each segment of the Information presented at the 2008 Algae Biomass value chain to determine its likelihood for success and its Summit in Seattle. was used to construct a value chain that reflects the algae-to-biodiesel opportunity space. a careful sustainability. assessment of where opportunity lies along the value chain can help guide development of this nascent industry 2.2 Value Chain Analysis pure player profit margins and approximated values from proxy companies in parallel industries such as crop-based A value chain describes value-creating activities along a biofuels and petroleum production and refining. be segmented and analyzed individually to determine where the potential for value capture is highest.

For example. they capture more along with biotech companies like Honolulu-based Keuhnle value for themselves.5M achieved like this. AgroSystems and Seattle-based Targeted Growth. and conversion. The necessary to understand the wider implications of fuel choice of algae strain can affect everything from necessary production. patented open bioreactor design and recently raised $5M to Nutrients must be obtained from waste streams or added build a pilot plant near Durango. or genetically originally plant derived. +100M industrial plants. Solazyme synthetically characteristics. They own patents on The next segment of the value chain is producing algal multiple technologies. (4) storage and (i. an algal biotech gasoline” and has emphasized the grow out of company has a databank of algae strains. such as increased be inappropriate.. ION Geophysical Corporation is a pure player in the entire value chain received investment. comparable to the farming and harvesting portion of the Some companies have already protected genetically agriculture industry and the drilling and production section engineered algae while others suggest such genetically of the petroleum industry. Seattle. Algae can be grown in and sunlight or with organic materials. Firms in this segment can be compared with both oil The CleanTech group indicated in their Q3 investment field exploration firms and agricultural seed stock report that algae biodiesel companies with products across databanks. combining segments of the value chain. growing conditions and nutrient inputs to later choices of This segment of the algae biodiesel value chain is harvesting and processing methods. They are partnered with 3. if sugar derived from corn was used to grow algae which was then converted into fuel. which can exemplifies the value chain and uses proxy companies in take the form of CO2 from the atmosphere or flue gas or the petroleum and agriculture industries to map value. Schlumberger plays in unlikely to maintain dominance in outdoor ponds thought to both oil field exploration and drilling and production. isolated from natural water glycerin from biodiesel production). In the same way. Solazyme. including for algae grown from CO2 biomass on a commercial scale. distribution.analogies with the crop-based biodiesel and oil industries. various types of cellulosic waste and organic matter if capturing segments. and (5) retail. WA). This type of life-cycle consideration is lipid content or enhanced photosynthetic efficiency. closed bioreactors. their pertinent photosynthetic microorganisms.e. the source of the carbon compound must be carefully considered. excess private culture collections. A few companies bypass this segment . The following section chemicals. manages modified organisms (GMO) are unnecessary. organic compounds that allow them to grow without certified biodiesel sunlight. growing algae heterotrophically. A carbon source is also necessary. (2) grow out. and other industrial and specialty chemicals. For example. the overall conversion of sunlight energy into fuel 3. Company Defining Investment to Likewise. extraction. fuel as well as nutraceuticals. grow out Some companies avoid regional and climatic constraints Solazyme engineering synthetic +70M important for photosynthetic growth by feeding algae marine microbes. Though much higher productivities can be Solix Biofuels patented bioreactor 15. specialize in creating customized strains of algae for prospective growers. However. though they don’t dangerous if accidently released to the environment. CO. by collecting already existing unwanted algal blooms in including: (1) algae selection and cultivation. or in the open ocean. Syncrude Canada Ltd. the largest algae fuel start-up in terms of chain that uses seismic data acquisition to identify and funds raised. Blue Marble. Companies like Vertigro and Washington-based Bionavitas sell patented photobioreactors designed to Table 1. Leading algae start-up by investment totals increase productivity and photosynthetic efficiency. Bodega Algae is focusing on modular bioreactors innovation/strategy date that can be installed on-site to mitigate CO2 emissions from Sapphire Energy renewable gasoline. is focusing on producing a “renewable model potential oil fields. potentially oil reserves and produces crude oil.e. cosmetics. By be the least expensive method for cultivation. and manufacture their own equipment. natural waters for conversion to biofuel and other products (3) harvesting. Solix Biofuels uses a open ponds. even if it was bodies or waste treatment facilities. if the carbon source were Algae for large-scale cultivation can be purchased from truly a waste product destined to be land filled (i. and will be able to sell this information or evolves marine microbes for biosynthetic manufacture of characterize new strains as needed by clients. Inc.2 Grow Out Chevron and are the only company to have produced certified biodiesel from algae thus far. such a negative accounting would engineered for desired characteristics.1 Algae selection and cultivation energy would be lower than had the algae been grown photosynthetically. the oil field exploration segment of the petroleum value Sapphire Energy.

which sells expend energy and money to dry the biomass. and those involved in the grow out Table 2. Indeed.80% Corporation 1+2) Schlumberger 29. with lesser margins in the refining. Margin Analysis of Companies Along the Value and extraction of the lipids.00% 7. focuses on refining petroleum into mainly harvesting/production at scale (requiring specialized light transportation fuels like diesel and gasoline. a potential to produce a relatively high-value energy product. both in terms of biochemical composition and moisture 6) Travel Centers of content. oil production from algae must biodiesel produced within the next few years. stage. lipid.g. produce biomass with given proportions of polysaccharide. . technology closest to commercial-scale viability with the We compare this segment with Enbridge Energy. Conversion processes are considered on 4) Enbridge Energy 4.5 Retail The dilute nature of algae cultivation presents unique Algae biodiesel will be sold just as biodiesel or petroleum challenges to companies in this segment. LIFE CYCLE ANALYSIS 2) SUNCOR Energy 17.3.86 %. placement of infrastructure for algae grow-out fermentation to ethanol.4% 24. Though biodiesel production is the focus of the Today. However. Extraction and Conversion 3. All data from www.10% 25. direct comparisons of the energy 3. anaerobic digestion. production from soybeans. In addition. Though petroleum products to consumers. can be assumed. Nevertheless. When comparing algae species known to margin was +0.4 Storage and Distribution obtained through different conversion methods is possible. 9. there are no algae companies producing enough present work. and oil reserves) and Refining. algae biodiesel must be stored in can be assessed given the various inputs and outputs of each tanks and distributed to where it is sold to consumers. biodiesel production is the plan to utilize the existing fuel distribution infrastructure.e.50% 4. One of the main Company 2007 2006 2005 challenges in these early segments of the value chain is the 1) ION Geophysical energy input-to-output ratio of the process. and oil extraction. Most algae startups research. post-harvest processing. The value is created in identifying the sources the refining stage of petroleum processing.hoovers. seeds for crops. The equivalent for algae would be companies involved in screening and identification of algae with high oil content. We model contend with a wet biomass feedstock (>90% moisture) or this segment on Petro Stopping Centers. most of the processing facilities (which are in need of inexpensive value is created in the exploration and processing segments. The competitive differentiation Chain here involves screening tools and equipment/process design Operating Margin for scaled production and extraction. and thermochemical liquefaction should consider the cost and energy involved with are additional pathways that have also received significant transporting the product to (2-20-09). Summary and Analysis willing to divulge how this part of their process works. the opportunity to combine conversion methods Like most liquid fuels. and the overall economic feasibility a Note.90% 6. the energy ratio and conversion efficiency -2. many are proprietary and few companies have been 3.2% 17. and protein.4% 5. the difficulty in producing biodiesel from algae lies in the harvesting. biomass into liquid fuels. along with 3) Western Refining 5. Alternatively. some strategies for harvesting and conversion are well known. distribution and retail The harvesting and conversion segment is analogous to segments. Inc.30% 7. Western (e.0% the basis of the condition of the biomass starting material.7% X X Americaa technically achievable. Unlike biodiesel diesel is sold to consumers at a filling station.6.6% Several options for the conversion of algal biomass into usable forms of energy have been researched.9% 3. the Army.20% X several direct uses for algae biomass or conversion process waste products.50% 21. large fleets) could extraction from a mostly dry (<10% moisture) oilseed absorb a significant fraction (if not all) of the algae containing 18-20% oil. company which transports. stores and markets refined If high lipid content and high overall biomass productivity petroleum products. 2008 of the process. It is likely that extracted oil would be sent to existing biodiesel In the biofuel and petroleum value chains. it is not the only strategy for converting algae biodiesel to warrant a significant investment in this segment. which involves solvent large commercial buyers (i. infrastructure). feedstock) or processed on-site (depending on scale).3 Harvesting.

Roadmap. applied for the energy normally required to treat wastewater Typically. . and transportation lypholization (freeze-drying). (2006) Algae: anatomy. drum drying. and high risk involved in exploration. this is likely due to the necessary specialized To understand the energy used for harvesting in the technology and equipment used. but includes capital and operating costs for algae settling units. Normally. (2008) based on energy requirements for wastewater treatment compared to an updated version of Benemann & Oswald’s 1996 analysis. As referenced above. rather. it is Energy Technology Center. J. P.000 gal of oil could be produced per year in 100 ha of open ponds treating wastewater. wastewater cost of production and negatively impacts the energy treatment in the US consumes about 2. W. 5754 Mg of algae and over 410. MWh/d. NREL. suggesting this is from algae.75 kWh. In the petroleum prohibitively expensive [7]. the percent of total GHG emissions. (2003) provides estimates of the energy input required produced from the anaerobic digestion of sludge at for centrifugation (1 to 8 kWh m-3) and filtration (0. Altogether the process is expected to consume 17 biochemsitry. As evident in the above two examples. it was theoretically treating 20 MG/d. such as (between 10-100 fold). which results in electricity usage equal to 40% of the energy obtained in the algae when considering only oil [2] Benemann. maintenance of equipment. If we only consider the oil Our preliminary life cycle assessment begins to outline harvested from 1 m3 of suspended algae. or parallels the grow out.6 wastewater treatment facilities and have not considered kWh m-3) along with concentration factors feasible other important indicators of environmental impact. the most value is and solar drying. As [3] Benemann. We assume this algal biomass with the addition of an energy-intensive drying process to contains 25% oil on a dry weight basis and the extracted oil reduce transportation costs of excess water and make algal has a similar density (0. about 10% to 20% (or 100 g L-1 to 200 g L-1) and major costs involve depreciation. Final Report to the US Department of biomass can be cost-effectively dried to a point suitable for Energy. Further drying can be accomplished by spray drying. harvested by centrifugation. This economic analysis does not disclose how REFERENCES harvesting would occur. harvesting can account for 20-30% of the total using existing technologies. the energy how process improvements in harvesting and oil extraction obtained is 2.w. US DOE. and difficult and unreliable. and drying [1] Barsanti. huge capital required for context of biodiesel production. and biotechnology. 50 MWh/d just to clean the water.2-1. also known as dewatering. L. The analysis did not include the energy Greenhouse Gas Abatement with Microalgae-Technology necessary to extract the oil and convert it to biodiesel. Solid-liquid separation. we predict the market pains to be similar. we propose a hypothetical entry. Of course. which uses transporting crude oil in the petroleum industry. we have neglected electricity normally et al. filtration. Thermal dehydration by sun drying is both added in the upstream segments of drilling. which atomizers to expose a fine spray of the slurry to hot air. producing. lyophilization. a significant amount of energy must be expended to harvest algae. beds. harvesting. For example.500 kWh/million balance of fuel production from algae given the high inputs gallons (MG) [5]. 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Grima created. and the embodied energy in solids (%TSS) in the concentrate following centrifugation is materials. meaning a suitable to all algae. CONCLUSIONS electricity for operation [6]. very difficult to estimate additional energy requirements for these key processes./L is being biodiesel industry. (1996) Systems and no reliable process has been developed for oil extraction Economic Analysis of Microalgae Ponds for Conversion of from wet biomass. is energy intensive and segments of the algae biodiesel chain. MJ/kg) to soybean oil [13]. less electricity was used and a valuable biomass was flocculation/flotation. and centrifugation. Based on our value chain analysis. Future work must refine this analysis on a site not a viable harvesting strategy when used as a primary and process specific basis. Pittsburgh Energy Technology Center. J. gravity thickeners. while continuing to assess method. Harvesting can be accomplished by sedimentation. harvesting could greatly reduce energy inputs for biodiesel production could potentially require up to 8 kWh/m3. and 5. it is noteworthy that [4] Energy Information Administration (EIA) (2008) combining wastewater treatment with biofuel production.

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