Algae oasis: Sapphire Energy has started construction on what will be a 300-acre algae farm near Columbus, New Mexico.
This week, algae-biofuel startup Sapphire Energy announced it has received $144 million in new funding, which brings its total to over $300 million.
The company, which is less than five years old, has been moving quickly to build a 300-acre algae farm as a large-scale demonstration of its process for making algae oils. The U.S. government has supplied over $100 million of the investments, including a $50 million Recovery Act grant designed in part to spur job creation.
But Sapphire’s rapid expansion raises the question of whether it is scaling up its technology too soon. Some of its ideas for reducing the cost of algae fuels are at too early a stage to be implemented at the new farm. Yet these technologies might prove vital to making its fuels competitive.
Knowing when to move technologies out of the lab and into large-scale demonstrations is a perennial challenge for energy startups. According to some experts, Range Fuels, a startup founded to produce ethanol from wood chips, foundered because it built a large-scale plant too soon, before the bugs had been worked out of its technology at a smaller scale. As a result, the plant didn’t work well enough to be economical.
The new funding will allow Sapphire to finish building its algae farm, near the small town of Columbus, New Mexico, just north of the U.S.–Mexico border. A 100-acre segment of the farm has already been finished, and when the whole project is complete, by 2014, Sapphire will have the capacity to produce about 1.5 million gallons of algae crude oil, which can be shipped to refineries to make chemicals and fuels such as diesel and gasoline.
Algae is attractive as a source of fuel because the microörganisms naturally make large amounts of oil and can be grown in ponds filled with brackish or salt water, so they don’t use up fresh water supplies or quality farmland. But algae are expensive to grow and harvest, so previously they’ve only been used commercially to produce relatively high-value products such as cosmetics and nutritional supplements.
Sapphire hopes to lower the cost of producing algae fuels by changing every part of the production process. That includes increasing the quality and the amount of oil produced, reducing the cost of building ponds, and developing low-cost ways to harvest the oil. The company aims to have a product that’s competitive with oil priced at $85 per barrel, and it expects to meet this goal once it reaches full-scale production in about six years. Oil costs over $100 a barrel now.
Achieving these cost targets will require significant innovation. Last year, a pair of studies from the National Renewable Energy Laboratory in Golden, Colorado, concluded that algae-based diesel made by scaling up existing algae technologies would cost several times as much as conventional diesel. According to one of the studies, it would cost about $9.84 per gallon to make algae diesel, as opposed to $2.60 per gallon for petro-diesel, at January 2011 costs. Other studies have estimated even higher costs.