Algae Biofuels’ Promise Deserves Serious Scrutiny

The green energy revolution was supposed to have arrived by now. That’s what we were promised back in the 1970s or so by the Whole Earth Catalog and other friends of sustainable development. Renewable energy gets sidetracked whenever wishful thinking and pipe dreams distract public policymakers from the most promising technologies. Algae-based biofuels may or may not be one of those promising technologies, depending on where and how it’s produced.

Mainstream scientific thought endorses algae-based biofuels but with realistic expectations. People who’ve done the math know that replacing a small portion of America’s liquid fuel would require devoting enormous amounts of farmland to algae crops with very low yields. This does not mean algae-based biofuel should never be produced under any circumstances. It means there is a niche somewhere for limited production that doesn’t crowd out food crops. Seaweed-based biofuel may avoid a food vs. energy tradeoff.

People who haven’t done research take the easy way out and seek government subsidies. The algae-fuel industry is pushing for federal tax incentives that will put it on the same footing as the ethanol industry. That is very premature and probably a poor use of public money. Ethanol is a controversial energy source because it does not always produce a positive EROEI. Factoring in energy used in fertiliser added to crops gives ethanol a negative EROEI. Growing it organically gives it a positive EROEI but, like all things organic, limits the yield. Algae-based fuel must not fall into the same trap if it is to be viable.

Full disclosure: No investments in biofuel companies at this time.

About Anthony Alfidi 128 Articles

Affiliation: Alfidi Capital LLC

Anthony Alfidi is the Founder and CEO of Alfidi Capital. His firm publishes free investment research with honesty and humor.

Mr. Alfidi holds a Bachelor's degree in human resource management from the University of Notre Dame (cum laude) and an MBA in finance from the University of San Francisco. He is a life member of Beta Gamma Sigma, the academic honor society for business majors. He has been a private investor since the 1990s.

1 Comment on Algae Biofuels’ Promise Deserves Serious Scrutiny

  1. Anthony-
    You say “People who’ve done the math know that replacing a small portion of America’s liquid fuel would require devoting enormous amounts of farmland to algae crops with very low yields.”

    This is missing the point about the benefits of algae-based fuel. Cultivating algae does not require fertile farmland – it can grow in the desert. Nor does it require freshwater – algae are fine with seawater or brackish water that is useful for nothing else, depending on the strain. And that’s how major developers are developing it. It also is being used in wastewater treatment operations to reclaim the water – it grows fine in that and is being developed to go from that state to biofuels. As CO2 is one of its primary nutrients, partnering with industrial polluters to rechannel their waste streams are part of the program as well. And as for efficiency, algae cultivation is commonly regarded by science and agriculture to be 30-50 times more efficient than corn as far as output per acre.

    Many algae producers are seeing the shift this year to commercial scale, and most of them have had to abandon fuel as their first target, rather developing higher value applications to build their economies of scale in order to develop fuel products more competitively down the road.

    Thanks for your interest in promoting the benefits of this most basic of our raw materials.

    David Schwartz

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