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According to NAA Executive Director Barry Cohen, “2010 has been another busy year, and I want to thank everyone for contributing to the productivity! Some of the accomplishments include:
- Construction of commercial-scale demo PBR at Lone Star College;
- Delivery by NAA Engineering Consortium of plans and design for the 100-acre challenge;
- Delivery by NAA finance team of first financial modeling showing positive CAPEX and OPEX;
- Launch of the first algae production incubator program;
- Algae Production Certification Program providing first-ever full spectrum of algae strains, growing, harvesting, extraction and economics.
I started 2010 off by opening the NAA conference in January with a challenge: to build out 100 acres of algae production. I am disappointed that it has not been met, but it is only one of the frustrations for 2010.
After issuing the challenge, some of the best and brightest minds in water process, engineering, construction and came together with equipment manufacturers to develop plans and specifications, along with CAPEX and OPEX financial modeling, for a 100 acre turnkey algae production facility. It was disappointing to realize that growing, harvesting and extraction equipment companies had not communicating with one other. The amount of time, effort and dedication of the NAA Engineering and Research Committees in identifying and resolving issues every step of the way was amazing. The end result was that plans and specifications were developed, with positive financial models, but more importantly, that we have confirmed that “collaboration at all levels” is necessary to conquer the steep learning curve in commercial-scale algae production.
To help lower risk and some financial liabilities for algaepreneurs and algae farmers, the NAA has started the first algae production incubator in the US. Acreage and services are now available to qualified algaepreneurs.
A lot of the frustration for 2010 was centered on the need for financing, which has been felt in all industries throughout the country. Algaepreneurs need financing to build production facilities, equipment manufacturers need financing to build their equipment, and so on. So long as interest rates remain low, banks do not have the incentive to make loans in emerging markets. The investment community is also skeptical – they don’t want to get burned in another dot-com fiasco. Couple that with the fact that the IPO market has slowed. I am adamant that we not willingly participate in another debacle based on false promises and unproved claims. NAA has issued definitive guidelines for benchmarking algae production systems and production levels. I feel confident that the NAA procedures will be implemented on a broad scale.
Algae's Culture Club: San Diego Site Tour, a rather insightful article written by Will Thurmond of Emerging Markets Online (emerging-markets.com) summed up the situation quite well. According to this article, the “Big 4” algae labs in San Diego, Sapphire Energy, Scripps Institute of Oceanography, Synthetic Genomics, and SD-CAB at UC-San Diego affiliated with the DOE’s CAB-COMM, represent nearly $1 billion in funding from private and public sector investment, and none are in commercial production yet! To put it in perspective, ExxonMobil’s R&D expense for 2009 was a little over $1 billion – this is an aggregate number and includes R&D to support all of its business lines. Therein lies the difference – R&D to support its business lines, not to see if it’s worth launching them! The point I am trying to make is that R&D will continue, but we need to emphasize the importance of deployment in our on-going commercialization efforts.
The financial frustration has caused NAA to reach out to various government agencies in 2010. I am happy to say that NAA has benefitted tremendously from the relationships that we have developed with the likes of (a) an attorney to whom DOE Project Administrators report - we now know why only $9 billion of the $32 billion in committed funds has been spent, but more importantly, we can appreciate the level of frustration at the DOE, (b) NREL employees, some of whom share our frustration and very much appreciate NAA’s efforts, (c) individual researchers, many of whom privately agree that it’s time to scale up and some of whom have admitted that they are not trained in commercialization and in how to get it done!
Another frustration, rooted in the lack of financial support for algae-to-fuel projects, is that many companies that were interested in algae for fuel have changed their focus this year to nutraceuticals. As oil prices continue to go up, algae biocrude becomes more profitable. Having many years in commercial lending, I realize and encourage all algaepreneurs, while they are looking for equity investment into their companies, to also look for potential off-take contracts and strategic alliances to be more attractive to lenders.
The first billion dollar algae transaction, which was announced last month, is a positive move for the industry, but moves the business to vitamin giant Royal DSM, located in The Netherlands. This is bittersweet for me – it establishes a commercial value for a proven marketable technology. Again, herein lies the difference – the value is based on proven technologies and markets. The only way algae technologies will have any commercial value is when they can be used in commercial-scale production, not sitting on shelves.
Looking towards 2011, and as oil prices continue to rise, I see more movement towards commercial scale algae production. More and more American algaepreneurs are interested in getting into the algae production industry. Some have their own acreage and some are coming into the NAA algae production incubator program. What matters is that we work together and start commercial scale production, and we start it now!”
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