2013: The “Hold em or Fold em” Year For Algae Biofuels?

I’ve talked a lot about Solazyme in recent weeks. This is because there just seems to be no stopping this company recently. They are making news and rocking the algae biofuels boat in a big way. Take for example, this news story.

The elegance of utilizing algae to power the world’s motor vehicles continues to be in the center of countless investment proposals over the years-some which have hit a brick wall spectacularly, plus some that happen to be still inching along along the prolonged route to commercialization. But 2013 could possibly present a critical 12 months for a lot of of the algae fuel market leaders who have invested many years raising capital, constructing pilot projects, and promoting their algae within specialized niche market segments such as in compounds for expensive skin ointments.

Among the businesses that’s the furthest along is Solazyme (SZYM), a South San Francisco-based business which went public early in the year of 2011. Solazyme was among the initial companies to target the various chemical compounds as well as personal care market segments, creating a modest but constant income stream as it prepared itself for the issues of producing its algae oil at a level and price that could remain competitive with oil for transportation.

But Solazyme is currently on the edge of ramping up its algae oil for petrol, as well. Recently the business asserted that its Brazilian partnership with food processing giant Bunge (BG)-called Solazyme Bunge Produtos Renováveis-has obtained authorization for a $120 million bank loan from the Brazilian Development Bank to construct its initial commercial-scale algae fuel manufacturing plant in Brazil. The plant is currently being built (it started in the summer of 2012) alongside Bunge’s sugarcane mill in São Paulo (it employs sugar for a feedstock). Solazyme anticipates it’ll be prepared to go operational by the fourth quarter of 2013. In the beginning it’s going to generate 100,000 metric tons annually, but by 2016 it’s designed to produce 300,000 metric tons per year.

Solazyme in addition intends to achieve commercial scale of its algae fuel in the U.S. shortly, utilizing a plant in Clinton, Iowa, belonging to agriculture giant Archer Daniels Midland (ADM). That factory should create 20,000 metric tons of algae oil annually in early 2014, and ultimately 100,000 metric tons per year. Additionally, it possesses its own smaller-scale design plant in Peoria, Ill.

Sapphire Energy is yet another business that’s trying to get across  the so-called Valley of Death from low-volume output to industrial scale that will eventually be competitive with oil. The business includes a 2,200-acre algae farm in Columbus, N.M., which includes 70 ponds, each the dimensions of a football field, in addition to a refinery on site. The New Mexico refinery evidently began generating oil in reduced quantities last summer and by 2014 should be capable of making 1.5 million gallons of algae crude per year, and 10,000 barrels a day by 2018.

Sapphire and Solazyme are targeting the algae oil market with different strategies. Solazyme grows its algae in sealed fermentation tanks, while Sapphire is cultivating it in the open air on huge plots of acreage. Outdoor ponds might in theory be less expensive, nonetheless they have to deal with the issue of making certain that they don’t get infected and disrupted by exterior factors.

Still another organization perfecting algae fuel is Synthetic Genomics, which is the creation of genomics master Craig Venter. Venter defeated the U.S. government to become the very first to sequence the human genome, as well as directed his team recently to be the first one to create the world’s first artificial microbial cell, referred to as first artificial life form by many people. The scientists constructed an artificial chromosome and introduced it into a living bacterial cell, where by it took over the cell and grew to become a completely new life form.

Synthetic Genomics managed to score a huge, likely $600 million development package with Exxon. Last spring, Synthetic Genomics purchased an 81-acre location in California’s Imperial Valley, close to the Salton Sea, and it intends to scale up and test its algae strains there with 42 open ponds.

Scaling up these unique production facilities and farms requires a huge amount of cash. But they’re necessary as the algae oil must be created at a massive scale to get it inexpensive enough to play competitively with oil.

The expenses without a doubt take a toll on these innovators. Solazyme’s net deficits are increasing, and the business lost $58.52 million for the 9 months ended September 2012, up from a $38.32 million net loss for the very same time period a year earlier. The organization will probably not be profitable for years, and it’s helping fund its manufacturing agreement with ADM with equity. This week Solazyme reported that it plans to sell off $100 million worth of notes to assist it construct its plans.

Here’s my question: Since only small scale algae production is currently viable and realistic, why isn’t research money flowing to this already proven area? Instead of concentrating on what works and bettering that, why are these companies spending 100’s of millions of dollars to create something which hasn’t been proven to work?

Couldn’t 1000 people, with small scale ponds create just as much algae as one company with 1000 ponds?

Either sharing the wealth isn’t in their corporate plans, or small scale algae production just isn’t sexy enough.