Thursday, 16 February 2012

In Australia, the fuel-from-algae business is booming

Here's a green growth sector if ever there was one: fuel from algae. The three companies previewed in this post are developing technologies, and building plants using those technologies in Australia. They also have something else in common: links with the USA. Australia appears to be an ideal place to develop scale in this sector of the energy industry due to an abundance of sunlight and the existence of numerous carbon-emitting industrial plants.

The basic premise of fuel-from-algae is, according to some in the industry, a speeded-up version of the way fossil fuels were delivered to us in the first place. Instead of taking millions of years for algae to turn CO2 into fuel, however, the new industrial CO2-to-algae process takes just days, and there's no drilling involved. Each of the companies I look at here has a different method of growing algae. Algae.Tec (Perth, Atlanta) uses a modular, enclosed system to grow algae, based on the design of shipping containers. MBD Energy (Melbourne, California) uses a system of enclosed trenches filled with water to grow algae. Aurora Algae (Perth, California) uses open ponds and seawater to grow algae. No doubt there are other differences, for example in the species of algae each uses. I don't know. What they have in common, however, is a business strategy where you take emissions from industrial plants, expose these emissions to algae which then grow, and finally extract useful oils (and other byproducts) from the algae after a few days' growth.

MBD Energy CEO Andrew Lawson says that one of his company's algae-to-fuel plants would convert "up to 50 percent" of an industrial plant's CO2 emissions. He says that 1 million tonnes of CO2 would translate into sales of $250 million in downstream products.

Investors are showing interest. Algae.Tec has listed its stock on exchanges in Sydney, New York and Frankfurt. MBD Energy, a private company, has attracted investment from Anglo-American, a mining company, and the Sentient group, a private equity investment firm specialising in the resources industry. Aurora Algae is privately held and has attracted American venture capital funding. And commercial plants are coming onstream.

Algae.Tec is moving ahead with a trial plant in Sri Lanka next door to a cement plant operated by Holcim. The company has also signed an MoU with Shandong Kerui Group Holding Ltd in China to form a 50/50 joint venture with a view to building a commercial plant. Algae.Tec is building a demonstration plant next to a Manildra facility in Nowra, a town in the Australian state of New South Wales. And the company has signed an MoU with German airline Lufthansa for algae-based jet fuel trials.

MBD Energy has operated a demonstration plant at James Cook University in Townsville for five years and its first commercial algae-to-fuel plant is being constructed a Tarong Power Station at Nanango, a town in the state of Queensland. Executives have also spoken about replicating the scheme at other power stations in Australia that rely on coal for fuel: Louyang in Victoria and Eraring in New South Wales. Together, says Lawson, the three plants represent "more than 20 percent of coal-fired power generation in Australia".

Aurora Algae is building a plant in Karratha, Western Australia, a town which is home to a large number of industrial plants.

MBD Energy's relative success in building its business inside Australia possibly reflects the fact that it retains on staff a number of people who have come to it from the heavy industry sector, including chairman Jerry Ellis, who used to be chairman of BHP. Executive director Enrico Bombardieri has worked in the energy sector in Australia for many years. And Robin Batterham AO joined the board as a non-executive director this year; Batterham has worked at Rio Tinto and Comalco in research positions.

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