The promise of making motor fuel out of pond scum is inching closer to reality as the algae industry and its supporters plow forward with technology demonstrations and demand tax credits that are needed to cut costs.

The head of the 170-member Algal Biomass Organization (ABO), Mary Rosenthal, predicts the fledgling fuel source could be cost competitive with oil in seven years.

“We’re hoping to be to be at parity with fossil fuel-based petroleum in the year 2017 or 2018, with the idea that we will be at several billions of gallons,” Rosenthal told SolveClimate News in a phone interview.

Some are more optimistic.

Dan Simon, president and CEO of Heliae, an algae technology company based in Arizona, thinks industry could deliver commercial algae at the price of oil after about three years. However, he acknowledged it may take longer — perhaps as long as a decade.

For now, the industry has yet to produce a drop of fuel for commercial production. And while producers pin their hopes on cost breakthroughs, some researchers maintain a skeptical eye.

Berkeley Report: ‘Neither Quick Nor Plentiful’

A new report by the University of California, Berkeley’s Energy Biosciences Institute (EBI) said it would take a decade of testing to determine if algae companies can produce affordable biofuels in mass quantities.

The current cost of a barrel of algae biofuel ranges from $140 a barrel to $900 per barrel.

“Algae oil production will be neither quick nor plentiful — ten years is a reasonable projection for the R&D to allow a conclusion about the ability to achieve relatively low-cost algae biomass and oil production, at least for specific locations,” the authors, Nigel Quinn and Tryg Lundquist of the Lawrence Berkeley National Laboratory, wrote.

The industry still must leap at least one key hurdle: finding the right strain of algae that will produce reliably — and cheaply — at high yields. The goal is to “at least double biomass and oil productivity through strain selection and genetic modification,” the report said.

But Rosenthal, who spent more than 20 years in corporate work, is quick to dismiss any suggestion that the technology may not be poised for prime time.   

“The technology is mature,” she said. “We’re going through the same nascent issues of any emerging industry — where you’re going from lab to pilot, from pilot to scale.”

100-Plus Startups at Work

Algae converts sunlight and carbon dioxide into oil. Some strains can be made into diesel fuel, aviation fuel and gasoline and are processed in two basic ways — in open-air ponds or closed photobioreactor systems like those used by Heliae.  

Algae yields up to 20 times more energy per acre than leading biofuel crops like corn, according to estimates. Unlike corn ethanol, algal strains can sprout on marginal lands so they need not gobble up acres used to grow food.  Because the slimy organisms suck up CO2, they also have potential to cut climate-altering greenhouse gases.

The Department of Energy says algae grown on a 15,000-square-mile area, about the size of Maryland, could theoretically meet the nation’s oil needs.

Currently, more than 100 companies worldwide are at work to bring algae to market. In the U.S., scale-up demonstration projects by startups Algenol, Phycal, Sapphire Energy, Solazyme and Heliae are being planned or running in eight states.

For two years, Heliae has churned out algae-based biofuel at its pilot site at Arizona State University. Its first demo plant is expected to be operational in Gilbert, Arizona — about 20 miles southeast of Phoenix — in the first quarter of 2012.

“We will build out a truly scaled model from algal-strained development all the way through refining,” Simon said.

Last month, the U.S. navy successfully tested a 49-foot gunboat fueled by a 50-50 blend of diesel and algae in a first-ever move heralded by ABO as an “important milestone” in algae’s growth.

Tax Credit Bill Advances, But Not Enough

But even as the industry quietly builds steam, producers have big concerns.

They worry about the lack of capital to grow the burgeoning industry and say their future depends on government efforts to encourage investment.

“It’s the same as the process with ethanol back in the 2000 time frame. Until we invested in the industry we weren’t driving down the production cost of ethanol from corn,” Simon said.

A crucial first step, advocates say, is the passage of a tax credit bill that would level the playing field with producers of non-food cellulosic fuels made from switchgrass, wood waste and other materials.

The Algae-Based Renewable Fuel Promotion Act, S.1250, introduced in the Senate last year, would expand the $1.01 per gallon cellulosic production credit that expires at the end of 2012 to algae producers.

The House approved the companion bill, H.R. 4168, in September.

Rosenthal said it has been placed on the Senate’s lame duck calendar for after the Thanksgiving holiday and is “very positive” about its prospects.

Simon, who worked for about 15 years in the renewable energy sector, said he would welcome the measure but seeks Washington’s guaranteed support over the long term. 

“The bigger impact for us right now as an industry is our government simply not having a long term-view of renewable energy development.”

He continued: “We’re at least three years from commercial viability. If you take that in mind we need anywhere from five to ten years of committed investment from our government in the form of tax credits, investment credits or producer credits.”

USDA Has Role to Play

Changing the perception of algae at the U.S. Department of Agriculture (USDA) could secure more federal support, ABO says.

The nation’s renewable fuels mandate, part of the 2007 energy law, requires the use of 21 billion gallons of advanced biofuels a year by 2022, and 15 billion gallons of corn-based fuels.

The USDA largely left algae out in its recent roadmap for achieving those targets. According to ABO, the exclusion threatens its potential as a key energy crop and green jobs engine across rural America.

“If this omission continues, it will deter future investments in these promising technologies as investors flock other technologies that are more strongly supported by the federal government,” ABO said in comments to the USDA.

See also:

U.S. Navy Tests Boat Powered by Algae

Airlines Could Be Flying on Biofuel Within 5 Years

Algae Emerges as DOE Feedstock of Choice for Biofuel 2.0