Algae’s Potential as a Transportation Biofuel
Released: 2014-01-30T00:00:00

Introduction

Congress is currently questioning whether existing policies are leading to the expanded use of domestic advanced biofuels—including algae-based biofuels (ABB), among other options. In the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ), Congress expanded the Renewable Fuel Standard (RFS2) by mandating that increasing volumes of renewable biofuels be used in the nation's transportation fuel supply. The RFS2 identified four specific biofuel categories and established time-specific mandates for quantities of fuels, the fastest-growing and largest of which is the cellulosic biofuels category. Algae is not identified as a cellulosic biofuel feedstock type to meet the RFS2.

According to RFS compliance data monitored by the U.S. Environmental Protection Agency (EPA), a steady production of small amounts of cellulosic biofuel began in mid-2013. As a result of the small amounts produced, EPA was compelled to lower the cellulosic biofuel mandate for the fourth successive year and has proposed to do so for a fifth year in 2014. Moreover, the long-term certainty of the tax incentives for which ABB is eligible is debatable. There is considerable concern about how the U.S. cellulosic biofuels industry will develop to meet the mandates in the absence of federal support and which, if any, other types of biomass could be used as a primary feedstock to meet the mandate.

Thus far, legislation pertaining to algae-based biofuels has not been introduced in the 113 th Congress. Congress held hearings and Members introduced legislation during the 112 th Congress that supported the use of multiple biomass feedstocks as energy sources to meet transportation needs. Of particular interest are feedstocks that are sustainable and domestic in origin, could spur job creation, and would have few adverse environmental impacts. Some argue that algae—generally defined as simple photosynthetic organisms that live in water—is one biomass feedstock that could meet these criteria. Algae can be used to produce a variety of biofuels, but most production to date has focused on biodiesel and jet fuel, and it is unclear whether production of other biofuels would be feasible given resource requirements and other concerns.

If successfully commercialized, ABB would have potential advantages and disadvantages compared to other biofuels. Among its advantages, algae has higher biomass yields per acre of cultivation than other feedstocks, leading to larger oil yields. It also may use water that is undesirable for other uses (e.g., wastewater or saline sources). In addition, ABB production could potentially use carbon dioxide from the flue gas of stationary sources (e.g., power plants), if ABB facilities are co-located with such facilities. Some ABB drawbacks concern the cost of running a commercial-scale facility, the volume and availability of resource inputs (e.g., water, land, and nutrients), the immaturity of technology to convert algae into biofuels, and the sensitivity of algae to minor changes in its environment.

Substantial ABB research and development (R&D) has taken place since the 1950s, but for various reasons ABB has yet to gain a foothold in the transportation fuel market. The main reason is that ABB is not currently economical to produce at commercial scale. Also, it is not a major component of energy and agricultural statutes; as a result there is likely more inherent investment risk. The relevance of ABB to the U.S. transportation sector could potentially rise if technological advances are achieved, if oil prices rise, if certain fuels (e.g., cellulosic biofuels) prove incapable of meeting annual RFS2 mandates, or as federal agencies and corporations announce ventures involving ABB for both vehicle and aircraft use.

This report discusses the status of ABB research and development, federal funding, and legislative concerns. While this report focuses on the use of algae as a biomass feedstock for transportation fuel, there are other applications for algae (e.g., nutraceuticals, cosmetics). However, congressional and public interest are currently focused on algae use for transportation.

Algae and the Renewable Fuel Standard

Many ABB discussions involve its limited eligibility for the RFS2—a mandate requiring that the national fuel supply contain a minimum amount of fuel produced from renewable biomass—compared to other biomass feedstocks. Although ABB is eligible to participate in the RFS2, it does not qualify as an eligible feedstock under the cellulosic biofuel subcategory because it is not defined as cellulosic in the RFS2 regulations.

The RFS2 is composed of two biofuel categories: unspecified biofuel and advanced biofuels (or non-corn starch ethanol; see Figure 1 ). The advanced biofuel portion includes three subcategories: cellulosic and agricultural waste-based biofuels, biomass-based diesel, and "other" (see Figure 2 ). Each advanced biofuel subcategory has a specific volume mandate for each year of the RFS2 (currently 2006-2022) and must meet lifecycle greenhouse gas (GHG) emissions reduction thresholds. The cellulosic biofuels subcategory is ultimately the largest component of the RFS2. Its carve-out is set at 0.5 billion gallons for 2012 (roughly 3% of the RFS2) and ramps up to 16 billion gallons in 2022 (roughly 44% of the RFS2). The biomass-based diesel carve-out of the advanced biofuel category (the portion that algae-based biofuels do qualify for) had a 2013 mandate of 1.28 billion gallons, and EPA proposes a 2014 and 2015 mandate for the same amount. The biomass-based diesel volume for 2016 to 2022 has not been set and will be determined by the Environmental Protection Agency (EPA) in future rulemaking, but is to be no less than 1 billion gallons.

In February 2013, EPA clarified that the RFS biomass-based diesel subcategory includes jet fuel. Assuming algae is converted to a diesel/jet fuel substitute, ABB would qualify for the biomass-based diesel subcategory, but to date it cannot compete cost-effectively with soy biodiesel in this subcategory. One study reports that the production of algae biodiesel could cost from $9.84 to $20.53 per gallon, compared to $2.60 per gallon for petroleum diesel production. In 2011, the U.S. Navy and the U.S. Department of Agriculture (USDA) announced the $12 million purchase of 450,000 gallons of advanced drop-in biofuel, from a blend of non-food waste and algae, to be mixed with aviation fuel or marine diesel fuel. It is unclear what impact ABB may have on the RFS biomass-based diesel carveout if it proves to be cost-effective to produce ABB as a jet fuel.

Even with an RFS2 mandate and tax credits, cellulosic biofuels have yet to meet the required mandate. EPA reports that very few facilities are consistently producing cellulosic biofuels for commercial sale. As a result, the EPA lowered the 2010, 2011, 2012, and 2013 cellulosic biofuel mandates and proposes to lower the 2014 mandate. Congress may consider whether other biomass feedstock types, including algae, should play a larger role in meeting the overall RFS2 mandate. Some suggest that broadening the RFS2 to include algae as a cellulosic biofuel feedstock would boost production opportunities. Others contend that ABB will never be cost-competitive. Others could argue that the potential for higher prices of crude oil would be an incentive to produce fuels that may eventually be lower in cost.

Technical Background on Algae-Based Biofuel

Technology exists to convert algae (like any organic matter) into multiple forms of energy, including liquid fuels (e.g., diesel or jet fuel), electric power, and biogas. However, there is no current technology to convert this biomass feedstock into a transportation biofuel economically and at commercial scale. While no technology is currently available to make this conversion commercially viable, microalgae, macroalgae, and cyanobacteria are each being considered for ABB production. Microalgae are microscopic photosynthetic organisms. Macroalgae, commonly referred to as seaweed, are fast-growing marine and freshwater plants that can grow to be quite large. Cyanobacteria are not technically algae, but bacteria that live in water and collect energy via photosynthesis. All three require light, nutrients, water, land, and carbon dioxide (CO2) or sugar to be successfully cultivated. Three primary components of algae—lipids, carbohydrates, and proteins—can be used to make energy. Different algae strains produce these components in different proportions. Depending on the biofuel to be produced, all or only one of these components may be used.

Algae undergoes four major processes in its conversion to biofuel: cultivation, harvest, processing, and biofuel/bioproduct conversion (see Figure 3 ). Algae cultivation may be photoautotrophic (algae requiring light to grow) or heterotrophic (algae grown without light and requiring a carbon source such as sugar to grow). Photoautotrophic cultivation can occur in an open pond or in a closed system (e.g., a photobioreactor; see Figure 4 ). Each has advantages and challenges. Open pond cultivation is generally less expensive and simpler to build, but is subject to weather conditions, contamination, and more water consumption. Cultivation conditions may be better controlled in a closed system, but there are scalability concerns, and closed systems historically have been more expensive than open ponds. Heterotrophic cultivation occurs in a fermentation tank and can use inexpensive lignocellulosic sugars for algae growth, which could lead to competition for feedstocks with other biofuel technologies.

After cultivation, a variety of methods can be used to harvest the algae, including flocculation, filtration, and centrifugation. While algae harvest cycles vary based on the strain, in general algae can be harvested numerous times throughout the year, compared to once a year for many conventional crops. The next step is to process the algae, usually by dewatering or drying, which separates the algae into the various components necessary for biofuel conversion. Afterward, certain components of the algae, such as lipids and oils, are extracted for biofuel conversion. The algal biomass is converted into biofuel through a chemical, biochemical, or thermochemical conversion process, or through a combination of these processes (see Figure 5 ).

Potential Challenges

The primary challenge for ABB is that it has not yet been demonstrated to be economical at commercial scale. If economic production can be achieved, the potential impact on the national transportation fuel network would need to be assessed. Also, as mentioned above, algae cultivation requires significant amounts of CO 2 , and there are questions about where this CO 2 would come from. While the CO 2 could come from existing stationary sources, it may be incorrect to assume that all algae processing facilities would be located near existing sources of CO 2 or that enough CO 2 from existing sources would be available to meet demand for commercial levels of ABB production. It is likely that siting and permitting of these facilities would require involvement of local, state, and federal government agencies. It is unclear how use of CO 2 from a power plant for the production of algae would be treated under the Clean Air Act.

There may be supply and demand concerns for ABB. The use of some feedstocks for biofuels has been controversial, as some report that rising demand for biofuels shifts biomass feedstocks and arable land away from use for other purposes (e.g., food). Some assert that significant quantities of resources (e.g., land, water, and CO 2 ) exist to support algae-based biodiesel production; however, it is not clear if existing resources can support biodiesel and bio-jet fuel, bioethanol, and more from algal feedstock. The National Research Council (NRC) reports that the quantity of water necessary for algae cultivation is a concern of high importance, among others, that has to be addressed for sustainable development of ABB. In general, biofuels derived from open-pond algae production consume more water for feedstock production and fuel processing than petroleum-derived fuels, although the water quality may not be comparable, since some algae is able to use waste- or brackish water. One reported possible technique to drastically curb water use is to site ABB facilities at optimized locations—locations where land with the lowest water use per liter of biofuel produced is available—but algae would still use significantly more water than petroleum. Another technique is to use water unsuitable for other purposes. Algae requires both water and nutrients (e.g., phosphorus) to grow, which may inadvertently put it in competition with other areas of agriculture, depending on water sources and land types selected for algae cultivation should ABB be produced at a large scale. Also, large-scale ABB production may involve the use of genetically modified algae, which some may oppose because of concerns that genetically modified algae may escape into the environment and become invasive, as algae that are non-native to that location.

Potential Benefits

ABB could have some potential benefits relative to other biomass feedstocks used for biofuel production, primarily its ability to produce large oil yields using considerably less land than other biomass feedstocks (see Table 1 ). The DOE identified nearly 4 million acres of suitable land—mostly in the Southwest and Gulf Coast—for algae cultivation that minimizes water use and could support approximately 5 billion gallons per year of algal oil production. A further advantage is that algae cultivation does not have to compete for land or water traditionally used for food, feed, and fiber production, because algae may be cultivated using non-freshwater (e.g., saline, wastewater) and can be cultivated on non-productive, non-arable land. Certain ABB types also have the potential to be a "drop-in" fuel that could be used without having to modify existing vehicles or build new transportation and distribution networks. Algae cultivation requires CO 2 , a greenhouse gas that has been targeted for emission reductions. As a result, algae could potentially reuse CO 2 emitted as a waste product from stationary sources. Last, ABB companies could control their own feedstock, meaning they could grow the algae needed for conversion to biofuel and would not be dependent on external forces that could potentially affect feedstock supply and price, such as drought or an economic incentive to grow a traditional row crop as opposed to switchgrass for cellulosic ethanol.

U.S. Government Research and Development

Funding

Since at least the late 1970s, Congress has appropriated funds for ABB, some of which were targeted for general agency programs and some for specific projects. Federal research and development funding for ABB has fluctuated over time. The Department of Energy (DOE) and the Department of Defense (DOD) are the two agencies that have spent the most money on ABB.

ABB has been a minor component of the DOE biofuels program relative to other biofuels. DOE has funded algae through its Office of Biomass Program (OBP), the Advanced Research Projects Agency (ARPA-E), Office of Science, the Fossil Energy Program, the Bioenergy Technologies Office, and the Small Business Innovation Research Program (SBIR). DOE reports it spent approximately $43.0 million on ABB in 2012, and $52.8 million on ABB in 2013.

As of December 2010, DOE cumulatively had invested about $236 million in algae R&D. The DOE OBP spent roughly $183 million on algae R&D from FY2009 to FY2011, of which roughly $146 million was from the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) and roughly $37 million was program funding. The ARRA funding was spent on three algae-related integrated biorefinery (IBR) projects cost-shared with industry, two of which are at pilot scale (Algenol, with DOE's cost-share of $25 million and nearly $34 million in non-federal funding to construct an integrated pilot-scale biorefinery with the capacity to produce more than 100,000 gallons of fuel ethanol per year; and Solazyme, with $22 million in DOE cost-share and close to $4 million in non-federal funding to build, operate, and optimize a pilot-scale integrated biorefinery with the capacity to produce 300,000 gallons of purified algal oil per year) and one at demo scale (Sapphire, with $50 million in DOE cost-share and roughly $85 million in non-federal funding to construct an integrated algal biorefinery with the capacity to produce 1,000,000 gallons of jet fuel and diesel per year).

Additionally, $49 million from ARRA was spent on the National Alliance for Advanced Biofuels and Bio-products (NAABB) algae biofuels R&D consortium project, a cost-shared effort with industry, university, and national lab partners. OBP program funds were spent to support three other cost-shared algae R&D consortium projects and a number of additional algae-related projects with industry, universities, national labs, and the National Academy of Sciences. DOE also supported algae R&D through a nearly 20-year Aquatic Species Program (ASP) at a total cost of roughly $25 million from 1978 to 1996. The major focus of the ASP was to produce biodiesel from high lipid-content algae grown in ponds, using waste CO 2 from coal-fired power plants.

Both the DOD Defense Advanced Research Projects Agency (DARPA) and the Defense Logistics Agency (DLA) have funded algae-related efforts. DLA is interested in algae oil-derived fuel for Navy ship engine testing. DARPA is interested in cost-effective, large-scale production of algae oil to be processed into a JP-8 jet fuel surrogate. In 2009, DARPA stated that algae research was in its early stages. DARPA provided funding for two algal fuel projects, run by Science Applications International Corporation (SAIC) and General Atomics. Reports indicate that in 2009 DARPA awarded SAIC $25 million to develop jet fuel from agricultural and aquacultural feedstock materials. General Atomics received a $43 million contract from DARPA in 2009 to develop a scalable process for cost-effective, large-scale production of algae oil and an algae-derived JP-8 jet fuel surrogate. DOD reports that the $12 million purchase of 450,000 gallons of cooking oil and algal fuel was the only algae-based biofuel expenditure for FY2012.

With regard to specific congressionally directed projects, roughly $11 million was appropriated between FY2008 to FY2010, with the vast majority in 2010, for at least 13 projects. A CRS analysis of conference reports for appropriations bills suggests that one project was funded in FY2008 at a total cost of $0.98 million, three projects in FY2009 at $2.4 million, and nine projects in FY2010 at $7.7 million.

Selected Research Challenges

In 2010, DOE issued an algal biofuels technology roadmap that detailed the challenges and opportunities associated with ABB production. The roadmap acknowledged that "many years of both basic and applied science and engineering will likely be needed to achieve affordable, scalable, and sustainable algal-based fuels." Furthermore, DOE noted that "[c]ost-effective methods of harvesting and dewatering algal biomass and lipid extraction, purification, and conversion to fuel are critical to successful commercialization of the technology." On the other hand, in 2011, industry sources indicated that the following two years could perhaps tell whether ABB production could be commercially viable, as various pilot projects were expected to come online. The Algal Biomass Organization reported that in 2011 algae projects were underway in research labs and pilot plants in 44 U.S. states.

Some research and development challenges must be addressed before large-scale ABB production can take place. The largest challenge appears to be that there is no long-term history of comprehensive published algae research. For example, it has not yet been determined which algae species will be most cost-effective and produce the highest biomass yields. Furthermore, multiple processing techniques exist, using various components of the algae. It may be that no one algal species or processing method is identified as optimal. In addition, scaling up the algae cultivation process from small-scale research to commercial size has proven challenging, both technically and economically, and the current research has not yielded new solutions.

Comprehensive studies of ABB's energy balance, life-cycle emissions, environmental impact, and water demand would also be needed for policymakers to understand the implications of policies that promote ABB commercialization. Certain ABB production steps, such as mixing the water during algae cultivation and dewatering algae to prepare it for biofuel processing, are energy-intensive and therefore costly. Research into processes that reduce the amount of energy needed and lower the cost could make ABB production more economical. Additionally, standards would need to be developed for ABB production to ensure uniformity and assist with potential regulatory compliance measures.

If ABB is to be used nationwide, in addition to solving production problems, additional research would need to be conducted on major points of distribution and utilization, and availability of inputs including water sources and CO 2 sources (see Table 2 ). More analysis would be needed on the best locations to site ABB facilities. Some might consider locating ABB facilities in the Southwest, where there is plenty of sunlight and less agriculture than in other parts of the country, but this region faces water supply concerns. Some might consider locating ABB facilities in the Rice Belt (e.g., Louisiana, Mississippi), where there might be fewer water supply concerns. Consideration of stationary CO 2 sources will also likely have to be taken into account when siting an ABB facility.

It is difficult to predict what ABB type might be most promising, and when it might be commercial. Federally funded research efforts are at a significantly lower level for algae than for other biofuels. While private companies periodically report their financial investment in ABB, for proprietary reasons they rarely report scientific or technological breakthroughs. This limits the ability of policymakers and analysts to assess and predict future ABB developments.

Legislative Issues

Congress has debated whether algae-based biofuel could help diversify the U.S. transportation fuel portfolio. While Congress has created a policy that mandates the use of alternative fuels for transportation (e.g., RFS2) and set up tax credits that support alternative fuel production, much of the legislation and tax provisions for alternative transportation fuel is constrained to a set of feedstock types (e.g., cellulosic) and fuel types as defined in the statute (e.g., ethanol, biodiesel). Going forward, Congress may choose to reevaluate how it supports alternative fuels by possibly expanding the feedstock and fuel types that qualify for transportation and energy mandates. For example, in the past the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) amended both the cellulosic biofuel production tax credit and the cellulosic biofuel depreciation allowance to include algae-based biofuels. Both tax incentives expired at the end of 2013 and it is not known if the incentives will be extended. Additionally, algae is eligible for one part of the Biomass Crop Assistance Program (BCAP).

Some in Congress have expressed interest in ABB because it could have significantly lower greenhouse gas emissions on a life-cycle basis than conventional fuels. If ABB is to become an alternative to help reduce U.S. dependence on petroleum and reduce greenhouse gas emissions, some stakeholders contend that consistent, comprehensive, long-term (for the duration of multiple congressional sessions) policy support, as well as further research and development, would be required. Options that have been proposed for policies to encourage ABB include modifying the RFS2, creating a federal low-carbon fuel standard, or placing a tax on carbon.

ABB advocates also assert that Congress could encourage the growth of the U.S. algae industry by providing tax parity with other biofuels, appropriating additional federal funds for algae-related programs, and modifying the RFS2 to be feedstock-neutral so that algae-based biofuels can be more broadly included. Tax incentives may accelerate ABB research, development, and demonstration testing, thus possibly shortening the timeline for commercial ABB production. However, some might argue that it is premature to issue tax breaks to an industry that has very few commercial production facilities. Furthermore, it may be that tax breaks for renewable energy in general will phase out under the emerging policy environment of fiscal discipline and budget restraint. Opponents of such support argue that Congress should not be involved in selecting biomass feedstock types for biofuels before commercial success has been proven, or more broadly, that Congress should not be selecting the technology at any point. Congress did select certain feedstock types for biofuel production under the RFS2. At the time, industry assertions and government data supported the argument that certain levels of cellulosic biofuel production capacity would be achievable within the given time frame, although these have not come to pass.

Given the federal budget situation, Congress could decide to expand the cellulosic biofuel definition for the RFS to include algae and let industry take the research funding lead. This could give the ABB industry a long-term goal and guaranteed market as part of the RFS2 (for roughly 10 years). At a later time, perhaps after the ABB pilot projects that have come online yield data on the feasibility of ABB production, Congress could have a legislative discussion about what federal funding or other types of support, if any, would be appropriate.

Legislation introduced in the 112 th Congress would have incorporated some of these ideas. In general, proposed legislation either would have expanded the cellulosic biofuels definition for the RFS2 to include algae by amending the Clean Air Act (codified as 42 U.S.C. 7401 et seq . ), and/or would have expanded the definition in the tax code for select tax incentives to incorporate algae—which Congress did with ATRA. H.R. 1149 (112 th Congress) also would have amended the Clean Air Act to include algae-based biofuel in the renewable fuel standard program.

Conclusion

Algae-based biofuel is a potential domestic transportation fuel option that could help to smooth fluctuations in petroleum supply, and it could potentially diversify the biomass feedstock supply needed to meet renewable liquid transportation fuel mandates. The potential benefits of ABB include per-acre yields reported to be significantly larger than those for other biofuel feedstocks (e.g., soybean, jatropha), and the potential for algae to grow in water not traditionally used for other purposes. The potential concerns of ABB include limited information about the costs of large-scale ABB production, the amount of energy required, and life-cycle emissions analysis. The need for large amounts of the greenhouse gas CO 2 to grow algae may be a benefit or a concern: algae cultivation could potentially contribute to emissions neutrality by reusing CO 2 from stationary sources, but there are concerns about whether enough CO 2 from existing sources is available to support commercial levels of ABB production. The use of genetically engineered algae could also be a benefit or concern: genetically engineered algae could lead to higher yields, but also could have unintended consequences such as threatening aquatic ecosystems.

While the DOE has studied algae for at least 35 years, much of that research has focused on using algae to produce biodiesel. Current research efforts examine the use of algae for jet fuel, power, bioproducts, and more. Federal support for ABB has occurred through general agency programs and specific projects.

Currently, there are no commercial-scale ABB plants, although a commercial demonstration facility was completed in 2012 and ABB was offered for sale at retail pumps in late 2012 in California for a limited time. ABB pilot facilities that came online over the last year may give a better indication of ABB's productivity potential and cost effectiveness. Even if ABB is demonstrated to work at a commercial level at one or two facilities, it may not produce a significant portion of the U.S. transportation fuel supply in the near term. Multiple commercial-scale facilities that could possibly produce ABB in significant quantities will require financing, a labor force, and distribution and supply infrastructure that may take some time to devise. Because no ABB facilities are operating at commercial scale, it is not yet known what regulatory issues might arise. As with many new technologies, regulatory issues and perception by the general public are likely to be a concern.

ABB currently faces many of the same questions as were posed about biofuel industries that preceded it (e.g., corn-starch ethanol). ABB is less developed than established biofuels industries such as corn-starch ethanol. However, its development and deployment at commercial scale may be informed by lessons learned from these industries. For instance, mastering the technology to convert a certain feedstock to a biofuel may not happen in the timeframe predicted, regardless of the amount of financial and technical assistance granted. Additionally, the development of corn-based ethanol showed that long-term contracts for feedstock supply and associated resource requirements are vital to gauging the economic standing of biofuel production. Last, uncertainties about policy support (e.g., inclusion in the RFS2, lowering RFS2 mandates, and expiring tax provisions) and unforeseen competition from other fuels internal and external to the biofuel industry could all have an impact on the bottom line and the aggressiveness put toward ABB production.