These Two Developments Could Make Algae a Feasible Source of Energy
Whenever discussion moves to what is happening in renewable energy, at some point a category that I call the “algae of the week” will come up.
You see, just about once a week, somebody contacts me about a laboratory “breakthrough.” There is a subset of researchers out there just fascinated with the possibility that something breeding in a test tube could hold the solution to the energy problem.
I have always found pushing the envelope through experimentation a fascinating area. But admittedly, my response to algae as energy is somewhat tongue-in-cheek. Growing slime for energy strikes me as just this side of “The Blob.” I have in mind Steve McQueen’s original 1958 classic and picture an energy-saving lump of green, minty Jell-O slowly oozing out of a movie theater somewhere in Middle America.
Well, I may have to start taking this “algae of the week” phenomenon more seriously. In fact, there may be something here of much greater substance than my rather critical view lets on.
And a very small company may just hold the key.
The Return on Energy Has Been Too Low
To be fair, once you move beyond initial experimentation, this algae isn’t grown in laboratories at all, but in carefully controlled environments.
But two problems have existed to lessen the profitability of the approach. The first deals with the environment necessary to grow the algae. The second concerns how to make harvesting more efficient.
Algae may seem to grow quite readily in nature. However, to obtain the volume necessary to turn it into energy is a rather difficult proposition with three major requirements.
First, you need a stable environment. That is decisive, since both carbon dioxide and nutrients must be introduced. Second, the process requires a lot of light, and that light must be evenly distributed over the entire culture area. Third, algae has a hard, protective outer layer. That layer must be “cracked,” in what is usually an energy-intensive process.
That last factor alone becomes the deal-killer in most attempts.
It involves a well-known concept in energy management. We used to call it the energy profit ratio (EPR). Today, it is usually called energy returned on energy invested (EROEI). If you need to use up a lot of energy to produce only a small amount of energy in return, the entire process is largely useless.
The conclusion is usually a no-brainer. If one barrel of oil equivalent is needed to produce one barrel, the EROEI is 1. If it is less than 1, more energy is consumed than is produced – and unless a nation is in the middle of a war or similar national crisis, that could not be justified.
Most algae approaches in the real world (not the laboratory) have given us results of way less than 1.
And then there is the similarly energy-intensive and highly challenging need to harvest. Try skimming only certain material from the surface of a swamp, and you get the idea…
But algae could suddenly be back on the list of possible (and renewable) energy sources, now that a micro-cap company may be offering solutions to all of these problems.
New Technology and Carbon Caps May Change the Story
OriginOil Inc. (Nasdaq:OOIL) has introduced patent-pending technology that may be changing the landscape.
Its approach significantly lowers the cost of growing algae, while the company’s Single-Step Extraction™ process and mobile algae extraction lab MAX ONE are doing the same on the side of harvesting costs. OriginOil’s latest advance even allows for the separate harvesting of hydrogen, thus introducing a secondary revenue stream from the process.
I am NOT recommending that you run right out and buy OOIL. This remains a new concept; the company is still largely in its early stages; and it has never come close to running at a profit.
Currently trading at 15 cents a share, it will certainly need breakthroughs on the investment and contract side before it really takes off.
However, there is positive news on that front.
OOIL announced on September 2nd that private, Melbourne-based MBD Energy will adopt the harvesting technology and may become a primary user. And it is one of the connections between these two companies that may hold a major upside for OOIL.
MBD is positioning itself to be a major player in the Australian carbon capture and storage market, as well as moving heavily into the alternative energy field.
Growing algae requires considerable amounts of carbon dioxide. And Australia and the U.S. are both looking for ways to lessen carbon emissions. Washington is likely to introduce either carbon taxes or cap and trade or both (“Two Ways to Profit from the Coming Carbon Cap“), although not until after the current election cycle.
In short, the business of finding uses for the captured carbon dioxide is going to become a big one.
Despite my skepticism, seems growing energy slime may work in nicely after all…
Before I sign off for the week, an update: Several months ago, I told you about how my contacts at Chinese Sinopec Corp. (NYSE:SNP) were talking about moving into shale gas (“China’s Back-Door Push Into Our Front Yard“).
This morning, SI and American major Chevron Corp. (NYSE:CVX) announced just that. The two companies will begin development of Chinese shale gas deposits. This may change the entire energy picture in Asia.
I’ll keep an eye on developments and, as always, keep you up to speed on investment opportunities.