Algae Biofuel Technologies Ripe for $1.6 Billion Market By 2015
08/03/2012
SustainableBusiness.com News
Private sector investments, regulatory support and strategic partnerships are driving commercial production of biofuels derived from algae.
That activity will fuel compound annual growth of 43% for algae biofuels technologies, driving the market to $1.6 billion by 2015, according to new SBI Energy research.
"Strategic partnerships from ExxonMobil, Chevron, BP, Dow Chemical, Desmet Ballestra and many others will drive the investment needed to successfully commercialize algae biofuels," says Shelley Carr, publisher of SBI. "Private investment and venture capital will also provide funding through 2015."
The high yield per acre (up to 5,000 gallons of renewable oil per year on a single acre) and minimal environmental impact of algae biofuels make them one of the most viable and attractive biofuels. Government grants have been a major source of funding in the past. For example, in 2009, the sector received more than $100 million in funding from the U.S. Department of Energy.
But the landscape began shifting amid the weak economy and federal budget cuts, with the private sector picking up some of the slack.
One example is the joint venture announced in April between Solazyme Inc. (NASDAQ: SZYM) and global agribusiness Bunge (NYSE:BG) to build and operate a commercial-scale oils production plant in Brazil. In 2011, San Francisco-based Solazyme was the first algae biofuels company to make its IPO.
The US Renewable Fuel Standard (RFS2) requires the production of 21 billion gallons of renewable fuel annually by 2022; originally focused on ethanol, the standard was updated last year to cover all advanced biofuels, including cellulosic, algae, and other technologies.
The US military has been one of the biggest proponents of biofuels, citing the need to improve domestic production and improve the defense agency's energy "security."
But Congressional Republicans have squawked over high prices.
For the Rim of the Pacific exercise in July, the Navy used a mix of 50-50 biofuels to gasoline to power five warships, helicopters and aircraft. It spent $12 million on 450,000 gallons of biofuels, which, after being mixed with petroleum, cost about $15 a gallon.
The Department of Defense is committed to sourcing 25% of its energy from renewables by 2025: the Air Force plans to use biofuels for 50% of domestic aviation by 2016; and the Navy will reduce fuel consumption on ships 15% by 2020, while reducing dependence on fossil fuels 50% over the next decade.
As of 2011, 11.3% of DOD's energy comes from renewables, saving US taxpayers billions of dollars, the agency says.
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