Though algae has emerged out of nowhere to become the most promising of all biofuel feedstocks, it really hasn’t given the reassurance to the world that it would be the perfect solution to the energy puzzle.  To some it might be a bit surprising that the commercial efforts for algal biofuels have been few and far between, compared to those for other biofuel feedstocks, given algae’s superior advantages. The reason for this possibly is because getting biofuels out of algae demands more research to overcome some challenges, than for other oil crops.

Until a few years back, there was hardly any company working on fuels from algae. The only significant program that had made efforts towards oil and fuel from algae was Aquatic Species Program from the NREL. There have been a good number of commercial ventures in this area only post 2001. Pundits claim that it would atleast take a decade for algae to be produced on a scale that would be meaningful to the fuel needs. The predominant reason for this slow drive is the significant amount of capital required for algal oil producers to scale up to commercial meaningful quantities.

Though large scale commercial success is taking time due to bottlenecks, one can’t write off this promising bioenergy feedstock which has the potential to impact the entire petroleum-based fuel portfolio.

Several privately held companies as well as academic institutions are actively pursuing research to develop practical, cost-effective methods of algae cultivation for use as a fuel. Several major energy companies—including Valero, Conoco Philips and Chevron are working with university research efforts, providing financing for small companies, or both. That’s because, someday, these big oil companies could consider algae a fuel source for their existing extensive networks of refineries and pipelines.

Efforts to understand the best suited strains of algae and the best methods of converting it to fuel are are largely in pilot stages. Financing to scale up operations through demonstration and commercialization stages are not happening as the investors are apprehensive about betting their dollars before witnessing longer-term results.

Given the reluctance from the investors, alleat the government must pitch in with the required support. For algae to move into commercial production more quickly, the industry needs more start-up financing, and regulatory certainty, such as existing federal renewable fuels standards. Legislation providing tax credits to the biodiesel industry must be reworked. Loan Guarantees to support ventures would also be helpful. Long-term incentives and mandates should be provided by government and regulatory bodies.

Another hurdle is cost. Tallow and Camelina, the two non-food plant oils available in the highest quantities, cost between $4 and $5 a gallon, while algae cost far more. Improvements in technology and yields can drive down the cost. At a demonstration plant in Colorado, Solix BioSystems uses waste water from coal-bed methane produced near the site, and CO2 from a mine scrubbing plant to create algae in the photobioreactor panels. Solix is using wastewater to make algae at its demonstration plant is to see if it can help bring the costs down. Sapphire Energy, San Diego, is using a more conventional approach by growing algae in ponds, using sunlight, CO2 and saltwater in deserts. Many such efforts should happen in near term to favorably alter the economics of the business.