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<DIV minmax_bound="true"><SPAN class=journalname minmax_bound="true">Nature
Biotechnology</SPAN> <SPAN class=b minmax_bound="true">27</SPAN>, 15 - 18 (2009)
<BR minmax_bound="true"><SPAN class=doi minmax_bound="true"><ABBR
title="Digital Object Identifier" minmax_bound="true">doi</ABBR
minmax_bound="true">:10.1038/nbt0109-15</SPAN></DIV>
<DIV minmax_bound="true"><SPAN class=doi minmax_bound="true"><A
href="http://www.nature.com/nbt/journal/v27/n1/full/nbt0109-15.html">http://www.nature.com/nbt/journal/v27/n1/full/nbt0109-15.html</A></SPAN></DIV>
<DIV>
<P id=errorcor minmax_bound="true"></P>
<H2 id=atl minmax_bound="true">Biotech's green gold?</H2>
<P id=aug minmax_bound="true">Emily Waltz
<P minmax_bound="true"><FONT size=3><STRONG>Introduction</STRONG></FONT>
<DIV id=articlebody minmax_bound="true">
<P class=norm minmax_bound="true">When the UK's Carbon Trust last year set out
to fund algal biofuels research, organizers quickly met with a mélange of
overzealous claims coming from the industry. Companies were projecting biofuel
yields ten times what is theoretically possible and proposing techniques that
are not now and may never be economical. A year later, after wading through the
claims and gathering opinions from a network of more than 300 experts, the
agency announced on October 23 the creation of the Algae Biofuel Challenge, a
£16 ($24) million fund that will support the development and large-scale
production of algal oil.</P>
<P class=norm minmax_bound="true">The Carbon Trust's experience navigating algae
excitement is one that funding groups and investors in the biofuels industry
increasingly face. Encouraged by high oil prices and the push for alternative
fuels and carbon trading, more than 100 such algae-to-fuel companies have popped
up worldwide, mostly in the last couple of years, say industry experts. But, not
a single commercial facility has been built, and an eagerness to be the first,
plus the enticing investment along the way, has encouraged some entrepreneurs to
overstate their capabilities. "Some of these operators and startup companies
claim they can do anything under the sun," says Tasios Melis, an algae
researcher at the University of California, Berkeley.</P>
<P class=norm minmax_bound="true">Among startups in any nascent technology,
there will be some winners and a lot of losers. But when fuel is the product,
particularly apt is the old admonishment: buyer beware.</P>
<H4 class=norm minmax_bound="true">Feeding frenzy</H4>
<P class=norm minmax_bound="true">Nearly every week the industry sees another
anecdotal example of algae fervor. Investors in August plunked more than $45
million into S. San Francisco–based Solazyme, an algal fuel company using
'synthetic biology'. The launch of a new startup, AXI, spun out of the
University of Washington in Seattle, was also announced in August. In September,
Sapphire Energy, a San Diego startup developing crude-like oil from algae, said
it had raised more than $100 million. At its annual biotech meeting in October
in Hanover, Germany, European Bioperspectives for the first time held algae
sessions.</P>
<P class=norm minmax_bound="true"><STRONG><U>The draw is that algae have the
potential to produce up to ten times more oil per acre than traditional biofuel
crops such as oil palm</U></STRONG> (<A
href="http://www.nature.com/nbt/journal/v27/n1/full/nbt0109-15.html#t1"
minmax_bound="true">Table 1</A>). <STRONG><U>They can survive where agricultural
crops can't, such as in salt water and on marginal land. They thrive on a diet
of waste carbon dioxide and the nutrients in agricultural run-off and municipal
wastewater. They aren't needed for human food. And in addition to fuels,
valuable co-products, such as biopolymers, proteins and animal feed can be made
during the process.</U></STRONG></P>
<DIV class="figure-table clearfix" id=t1 minmax_bound="true">
<DIV class="padding clearfix" minmax_bound="true">
<H5 class=norm minmax_bound="true"><A
href="http://www.nature.com/nbt/journal/v27/n1/fig_tab/nbt0109-15_T1.html"
minmax_bound="true">Table 1: Potential oil yields per acre per year</A></H5><A
href="http://www.nature.com/nbt/journal/v27/n1/fig_tab/nbt0109-15_T1.html"
minmax_bound="true"><IMG class=thumb
alt="Table 1 - Potential oil yields per acre per year"
src="http://www.nature.com/common/images/table_thumb.gif"
minmax_bound="true"></A>
<DIV class=text minmax_bound="true"><BR minmax_bound="true"><A class=full
href="http://www.nature.com/nbt/journal/v27/n1/fig_tab/nbt0109-15_T1.html"
minmax_bound="true">Full table</A></DIV><SPAN class=cleardiv
minmax_bound="true"><!-- --></SPAN></DIV></DIV><BR class=clear
minmax_bound="true">
<P class=norm minmax_bound="true">The concept of using algae to make fuel was
first discussed more than 50 years ago but a concerted effort began with the oil
crisis in the 1970s (<A
href="http://dx.doi.org/10.1111/j.1365-313X.2008.03492.x" minmax_bound="true">Hu
, Q. <I minmax_bound="true">et al</I>. <SPAN class=i
minmax_bound="true">Plant J.</SPAN><SPAN class=b
minmax_bound="true"> 54</SPAN>, 621–639, 2008</A>). The US Department of
Energy (DOE) from 1978 to 1996 devoted $25 million to algal fuels research in
its aquatic species program at the National Renewable Energy Lab (NREL) in
Golden, Colorado. The program yielded important advances that set the stage for
algal biofuel research today.</P>
<P class=norm minmax_bound="true">In the 1980s and 1990s, researchers tried
various approaches. They grew algae in outdoor open ponds and enclosed
photobioreactor tanks, they experimented with breeding, they fed algae
smokestack carbon dioxide emissions to boost their growth and tested species
that can tolerate extreme salt and pH environments. The first genetic
transformation of microalgae came in 1994, and scientists a few years later
successfully isolated and characterized the first algal genes that express
enzymes thought to enhance oil production. From 1990 to 2000, the Japanese
government funded algae research through an initiative at the Research Institute
of Innovative Technology for the Earth (Kyoto). The program focused on carbon
dioxide fixation and improving algal growth with concentrated mirrors that
collect light.</P>
<P class=norm minmax_bound="true">These approaches yielded some successes and
many are still the focus of scientists today, but none have proven economical on
a large scale. The DOE program closed in 1996, in part, because algal systems
couldn't compete with the cheap crude oil of the late 1990s. Now, NREL is back
in the algae business with a cooperative research agreement with Chevron, of San
Ramon, California, and the beginnings of a research funding roadmap it is
designing for the DOE. Oil prices, which reached all-time highs last summer,
renewed many scientists' hopes that the economics might work.</P>
<P class=norm minmax_bound="true">Only a handful of companies are working with
genetically modified algae but among the small group are some of the most
serious and promising in the algae-to-fuels industry, say independent
researchers (<A
href="http://www.nature.com/nbt/journal/v27/n1/full/nbt0109-15.html#t2"
minmax_bound="true">Table 2</A>).</P>
<DIV class="figure-table clearfix" id=t2 minmax_bound="true">
<DIV class="padding clearfix" minmax_bound="true">
<H5 class=norm minmax_bound="true"><A
href="http://www.nature.com/nbt/journal/v27/n1/fig_tab/nbt0109-15_T2.html"
minmax_bound="true">Table 2: Companies applying genetic and genomic techniques
to harvest fuel from algae</A></H5><A
href="http://www.nature.com/nbt/journal/v27/n1/fig_tab/nbt0109-15_T2.html"
minmax_bound="true"><IMG class=thumb
alt="Table 2 - Companies applying genetic and genomic techniques to harvest fuel from algae"
src="http://www.nature.com/common/images/table_thumb.gif"
minmax_bound="true"></A>
<DIV class=text minmax_bound="true"><BR minmax_bound="true"><A class=full
href="http://www.nature.com/nbt/journal/v27/n1/fig_tab/nbt0109-15_T2.html"
minmax_bound="true">Full table</A></DIV><SPAN class=cleardiv
minmax_bound="true"><!-- --></SPAN></DIV></DIV><BR class=clear
minmax_bound="true">
<H4 class=norm minmax_bound="true">Pond scum 101</H4>
<P class=norm minmax_bound="true">Like all photosynthetic organisms, with a
little water, a few nutrients and carbon dioxide, microalgae—pond scum—use
energy from the sun to grow. With just these inputs, they can easily double
their population in a day.</P>
<P class=norm minmax_bound="true">Faced with stresses such as nutrient
deprivation, algae put their energy into storage—often in the form of natural
oils such as neutral lipids or triglycerides—and growth slows. Similar to the
oils from crops such as soybeans, jatropha and oil palm, algal oil can be
extracted from the organisms and refined into biodiesel (methyl (ethyl) esters)
by transesterification with short-chain alcohols (e.g., methanol) or by
esterification of fatty acids. Algae also synthesize other fuel products, such
as hydrogen, ethanol and long-chain hydrocarbons that resemble a crude-like
oil.</P>
<P class=norm minmax_bound="true">But when algae divert energy into accumulating
oil, they don't grow very fast, if at all, and when they devote energy to
growing, they don't make much oil—a trade-off that can result in little increase
in overall production of oil. "It's simply a law of thermodynamics. You can't
get around that," says Steve Mayfield, a biologist at The Scripps Research
Institute in La Jolla, California.</P>
<P class=norm minmax_bound="true">This trade-off has stumped scientists for
decades. Companies are still trying to improve on concepts and cultivation
systems developed in the 1980s. "I worked on biofuels 20 years ago and nobody
gave a damn," says Keith Cooksey, a semi-retired microbiologist at Montana State
University in Bozeman. "Then about a year ago I started getting phone calls and
requests for papers I had published in the 1980s. That doesn't usually happen.
Either you've contradicted what you published 20 years ago or the field has
moved on and it's irrelevant. But these companies and programs are basically
picking up where I left off."</P>
<P class=norm minmax_bound="true">Since the mid-1990s, however, the tools for
genetic engineering have improved, and scientists are increasingly applying them
to algae with fuel applications in mind. Much of the work is focused on
identifying the genes involved in lipid synthesis and how those genes are
regulated. The idea is to manipulate those genes so that the organisms'
metabolic pathways are tricked into producing storage lipids, even when the
algae are not under stressful conditions. "There are none I can say is a 'key
gene' but there are a lot of labs looking for it," says Mayfield, who is
studying <I minmax_bound="true">Chlamydomonas reinhardtii.</I></P>
<P class=norm minmax_bound="true"><I minmax_bound="true">C. reinhardtii</I> is
the <I minmax_bound="true">Escherichia coli</I> of algae and the model organism
for many labs. It is one of only a handful of microalgal species whose nuclear
and chloroplast genomes have been sequenced. But 'Chlamy' isn't the ideal
biofuel organism because it doesn't naturally produce much oil. "The choice to
sequence algae is not being made because [of their] importance in biofuels
applications," says Al Darzins, a group manager at NREL. "But I think the
[Walnut Creek, California-based] Joint Genome Institute is becoming more
interested in that."</P>
<P class=norm minmax_bound="true">Algae species are spectacularly diverse, which
makes for slow genetics research because the knowledge often doesn't translate
from one species to another. But this diversity also gives scientists hope. Up
to 200,000 algal species may exist, Darzins says, and less than a quarter have
been described. The idea that there are great species still out there keeps
scientists hunting for them, but it's a laborious process.</P>
<P class=norm minmax_bound="true">For example, the US Air Force funded Juergen
Polle, a biologist at Brooklyn College in New York, to do algae bioprospecting.
Polle and his students go on local excursions and trips to the western US to
collect species. They bring them back to their lab, and one at a time, they
isolate strains and screen them for lipids. Stacks of Petri dishes fill the back
room of Polle's lab. High-throughput methodologies, such as cell sorters and
robotic liquid handling, promise to speed up the process.</P>
<P class=norm minmax_bound="true">Polle and others are looking for strains that
not only produce oil, but also fend off other organisms. Algae cultivated in
open ponds are subject to predators and other, stronger algal species.
Transgenic algae are particularly at risk because their commercially important
traits may reduce their fitness. As there are likely fewer algal predators in
extreme conditions, some researchers theorize that transgenic extremophiles may
have a better chance of survival than other types of transgenic algae.</P>
<P class=norm minmax_bound="true">Enclosed photobioreactors provide a bit more
protection for transgenic algae, although these systems are no fortress. Closed
bioreactors tend to be more productive than open systems, but are more
expensive. Selling the co-products made during the process will be necessary if
any of the technologies are to be economically viable.</P>
<H4 class=norm minmax_bound="true">The numbers</H4>
<P class=norm minmax_bound="true">Near-term technologies may allow algae to
produce up to 6,000 gallons of oil per acre per year (gal/ac/yr). "If you really
push the limits, then maybe 10,000 gallons per acre," says Ron Pate, a
researcher at Sandia National Laboratories in Albuquerque, New Mexico. This
figure could improve with advances in cultivation, species selection, breeding
and genetic modification, but only to a certain extent. The laws of
thermodynamics and the limits of photosynthetic efficiencies just won't allow
it. "When you see 20,000 or beyond—that's total bologna," says Pate. "It isn't
going to happen."</P>
<P class=norm minmax_bound="true">Yet there are companies claiming they can make
up to 100,000 gal/ac/yr, and raking in tens of millions in investment based on
those promises. "The moment their production goes over a certain prediction of
gallons per acre, you know they are not serious," says Polle, who has supplied
algal strains to startups. "Only a handful of companies are really serious."</P>
<P class=norm minmax_bound="true">Valcent Products, a public company located in
Vancouver, is experimenting with a range of algal species in enclosed
bioreactors. Valcent CEO Glen Kertz says he can sell a barrel of algal oil for
less than a barrel of crude oil and that his system has the potential to produce
100,000 gal/ac/yr.</P>
<P class=norm minmax_bound="true">"I said to him [Kertz], 'You are not doing
anyone any favors by making absurd claims'," says Scripps' Mayfield. "That is
five times the theoretical maximum energy from sunlight landing on an acre. It's
physically impossible to do that." No outside experts have been allowed to
validate the system yet, according to Kertz.</P>
<P class=norm minmax_bound="true">In Valcent's 200-square-foot test facility in
El Paso, Texas, algae flow through 30 clear plastic panels hung vertically
inside a greenhouse. The algae are exposed to light for a few minutes and then
pumped into dark, underground tanks. Kertz theorizes that algae can absorb more
light if they are repeatedly exposed to it for short periods, rather than if
they are left in the sun all day.</P>
<P class=norm minmax_bound="true">"Ridiculous nonsense," says John Benemann, an
algae-to-fuels consultant and a former researcher at the University of
California, Berkeley. Benemann says that the technique may have some effect on
productivity, but not enough to support the company's claims.</P>
<P class=norm minmax_bound="true">Valcent plans to build a 100-panel
demonstration system, and will then seek to license its technology, says Kertz.
The company does not plan to build full-scale facilities or sell oil.</P>
<P class=norm minmax_bound="true">Such small-scale facilities are typical among
algal biofuels companies, which may be a driver behind some inflated claims.
"People are extrapolating inappropriately from lab data," says Robert Trezona,
head of R&D at the Carbon Trust in London.</P>
<P class=norm minmax_bound="true">Making outrageous claims has gotten algae
companies into trouble in the past. Two years ago, De Beers Fuel in South Africa
(unrelated to the diamond company) said it would within five years produce more
than 6 billion gallons of algal biodiesel per year. The company collected tens
of millions of dollars from investors, but the biodiesel facilities never
materialized. A group of investors, a marketing company and a security company
reportedly filed a claim in a South African court, accusing company executives
of misappropriating funds.</P>
<P class=norm minmax_bound="true">De Beers Fuel based its claims, in part, on an
obsolete bioreactor it had bought from Cambridge, Massachusetts-based GreenFuel
Technologies. "We were not careful about our prospective buyers," says Bob
Metcalf, a partner at Polaris Venture Partners in Waltham and an investor in
GreenFuel. "The South African company said they wanted to buy it for $300,000
and use it for demonstration. We stupidly agreed."</P>
<P class=norm minmax_bound="true">GreenFuel designs closed bioreactors that feed
off industrial flue emissions and, in 2007, faced some setbacks. A pilot project
failed, its bioreactors turned out to be twice as expensive as expected and the
company had to fire nearly half its staff, according to Metcalf. For the failed
pilot, the company had made the mistake of trying to scale-up a small test
system by a factor of 100 all in one step, and it didn't work, he says. Some
experts have also expressed skepticism about the oil yields GreenFuel has
projected in the past, which have since been lowered, according to people
familiar with the matter. GreenFuel spokespersons could not confirm the old
projections.</P>
<P class=norm minmax_bound="true">GreenFuel faces the same challenges that most
closed system operators face. Photobioreactors are more complex and more
expensive than open ponds, and it's tough to make the economics work (<A
href="http://www.nature.com/nbt/journal/v27/n1/box/nbt0109-15_BX1.html"
minmax_bound="true">Box 1</A>). "Anyone working on closed photobioreactors has
got a problem," says Benemann. "And there are dozens of these companies out
there," he says. "Just like in agriculture, you have to keep it as simple as
possible and as cheap as possible. You can't grow commodities in greenhouses and
you can't grow algae in bioreactors."</P>
<P class=norm minmax_bound="true">An informal calculation by Pate and his
colleagues at Sandia estimates that closed systems double the cost of a gallon
of algal oil, says Pate, noting that their calculations were based on limited
data. For example, oil from an open system may cost $10–20 per gallon to make
and $20–40 per gallon in a closed system, he says.</P>
<P class=norm minmax_bound="true">"I don't think we'll ever get down to $3–4 per
gallon," adds Mayfield, who chairs the scientific advisory board at Sapphire
Energy. "Realistically, we could get it down to $6–10 per gallon in the next
four to five years."</P>
<P class=norm minmax_bound="true">Startups pooh-pooh the naysayers, of course.
"The old algae world stemming from the failed project at NREL has produced some
old-timers who are negative," says Metcalf. "We're trying not to listen to
them."</P>
<P class=norm minmax_bound="true">Most algae-to-fuel companies refuse to reveal
much information about their technologies, which has led to more skepticism.
"There are a lot of companies' claims that I'm having a hard time validating
what they're doing because they aren't willing to show it," says Pate at Sandia.
"One example of this—and I won't say who it is—I talked to them a year ago and
we even entered a nondisclosure agreement but I kept getting the runaround. That
makes me skeptical of their fabulous claims."</P>
<H4 class=norm minmax_bound="true">The bubble</H4>
<P class=norm minmax_bound="true">The danger of overly optimistic claims is that
they pressure the rest of the industry to match and create expectations among
investors and the public. If those expectations aren't met, the whole field
could suffer—from basic research to commercial endeavors—and bullish venture
capital investments fuel those expectations.</P>
<P class=norm minmax_bound="true">"My worries are that VCs [venture capitalists]
are not considering all of the challenges and barriers that need to be overcome
before this technology can be commercialized," says Darzins. "It would be
horrible if a lot them jumped in with a lot of money, and then one or two years
down the road realized it's harder than they thought and dropped support. That
would be a tragedy."</P>
<P class=norm minmax_bound="true">"We should be careful with what we're
promising," adds Otto Pulz, a researcher focused on photobioreactors at IGV
Institut für Getreideverarbeitung in Bergholz-Rehbrücke, Germany. "I'm afraid
this short-term thinking is damaging to microalgae research."</P>
<P class=norm minmax_bound="true">Investors have various strategies for choosing
companies and conducting due diligence. Vinod Khosla, founder of Khosla Ventures
in Menlo Park, California, says his criteria for all biofuels technologies is
that they can compete—unsubsidized—with oil at $50 per barrel. That's a tough
standard, and the dozen or so algae companies that Khosla has evaluated have not
met the financial hurdles, he says. "It's not an economical technology yet," he
says, "but it's worth pursuing."</P>
<P class=norm minmax_bound="true">Other investors look for tangible progress,
such as pilot facilities. "We're looking for assets on the ground that the
management team has invested in," says Tyler Krutzfeldt, a managing director at
Mont Vista Capital in Miami, whose firm conducts due diligence on algae
companies.</P>
<P class=norm minmax_bound="true">The Carbon Trust's approach was to establish a
core group of seven to eight experts who helped identify yields that are
feasible and technologies that are economical. They then built a community of
about 300 people with different perspectives and held meetings, but were in
"listening mode," says Trezona. After a year, they were able to draw some
conclusions. Photobioreactors are best left as tools for labs and not for
large-scale projects, says Trezona. "We think open ponds are the way to go,"
because the economics are better, he says.</P>
<P minmax_bound="true"><!-- 300x250 ad --></P>
<DIV class="ad ad300x250" minmax_bound="true">
<P minmax_bound="true">Pate says he is trying to put together an assembly of
researchers, companies and government representatives to create an open but
intellectual property–friendly environment where people can discuss technologies
and report R&D problems. The group last met in August.</P></DIV>
<P class=norm minmax_bound="true">If all else fails, the back-up plan for some
companies is to produce specialized algal oil for nutraceuticals and cosmetics,
and to sell byproducts such as ingredients for animal feed. A joint project
between GreenFuel Technologies and the Spanish environmental company Aurantia
Group of Madrid will set its sights on "higher value ingredients for feed and
food" before attempting to produce biofuel, according to a GreenFuel investor,
Metcalf. "The company was very much oriented toward fuel in the beginning but
over the last couple of years we've been seeing that algae have other great
applications," says GreenFuel CEO Simon Upfill-Brown. Such products can fetch
high prices, but some of these markets already have dominant players.
Alternative fuel boosters hope a plan B won't be necessary.</P><BR
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