Thursday, December 20, 2007

Costing the Algae Economy

Dug made the following comments on how little we know as to the operational costs at the moment.

Could you reference your statements with the final costs per storeable gallon of fuel. I notice you make no mention of fertilizer, extraction, separation, filtration and stablization costs and without addressing them - you haven't produced usable or a cost efficient fuel. As we all know, producing algae is the easy part. Also your production units need to referenced with a time unit. i.e. - X gallons/acre/year.

While we all appreciate enthusiasm and optimism, but you might also want to point out, that to date no one has produced one gallon of algae oil that is competitively priced to petroleum sourced diesel fuel. Competitively priced means that OPEC can't drive the would be producers out of business as they have at least twice over the past 40 years.

The truth is, any cost figures that get thrown out now are early days and must be suspect. I prefer to not bandy them about except to use them as magnitude checks. The company's announcement did spell out that their production system (do look at the pictures) supported a annual through put of 276 dry tons per acre that however calculated is very likely accurate.

It was apparent from the visuals and the obvious design parameters that their input costs will compare favorably to those of commercial greenhouse operations. To say more than that at this stage is speculation and misleading at best. The protocols need to be finessed and even the working algae species have to be successfully worked out. I simply do not believe we are anywhere close today nor will we for a long time.

What we have though is an industrial production platform that is obviously scalable and can be operated in reasonable isolation from wild species. Hopefully they do not have to maintain negative atmospheric pressure.

It is also a platform that promises low capital costs for setting up with mass production techniques which is critical as was critical for the expansion of the green house industry.

Of course fertilizer, extraction, separation, filtration and stabilization are critical but are subject to scaling issues and are not to likely to be fully addressed as yet. We all can imagine a rotory filter press hard at work, but there are many options and such a system has to be optimized around a scale choice.

I personally suspect that the key issue will turn out to be the utility of the deoiled byproduct. I simply cannot believe that this will not make a viable cattle feed, but this is a long way from been sorted out. If that works, then this technology can be quickly integrated with feedlot operations and the oil becomes a shippable byproduct of an operation set up already to deal with similar issues.

As in green house operations the nutrients must be provided, but then there is little wastage unlike most open field agriculture. If those same nutrients end up feeding cattle then we have created a viable link in a meritorious system.

Another option for the usage of the algae meal may be fish food for vegetarian fish at least. No one has gone there yet. The real point here is that there is a need for innovative food stocks for all animal husbandry industries as traditional supplies have been inadequate. I may be possible to blend the needs with the production of oil.

I do not want to dive into the economic practices of the oil industry, except to say that conversion to this source is inevitable in the long term, but postponable in the short term by the advent of additional sources of petroleum. The political will must exist to say that we want to be totally independent of petroleum and we are prepared to support an appropriate premium. I suspect that square mile sized algae oil facilities producing in excess of 80,000 tons of bio diesel (around 20,000,000 gallons) is an attractive option to those tired of been whipsawed by a politicized oil supply industry that is no longer truly based in the homeland.

In the meantime, we have a model greenhouse pumping out 256 tons of biomass per acre per year as a threshold. That will require a predictable amount of fertilizer per ton and associated costs. It is a good start. The rest is subject to incremental increases in efficiency by species selection and management. Hopefully the will, the money and the time exists to complete the job.

By the way, no other source of oil will ever be competitive with petroleum on a cost basis. It has already been manufactured and there are many places were it can be lifted for pennies. So that is an unfair question. It is like mining gold in competition with the US mint. The problem is that petroleum imposes huge indirect global economic costs that are how becoming unbearable that can be completely mitigated by transitioning over to algae bio diesel. And with the prospect of cattle feed, I am trying to show that it can be better than that.

This is so far the only 'business plan' that has any reasonable prospect of keeping our oil based civilization working on a sustainable basis as an oil based economy forever. I also suspect that all other alternatives will usually be too little too late.

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