July 15, 2009
ExxonMobil To Pump $600M Into Biofuels Using Algae
This latest announcement from Exxon fits into a larger trend where the big oil companies pull back from solar photovoltaics and other non-liquid energy forms and instead focus their efforts on liquid hydrocarbons.
Oil giant Exxon Mobil Corp. is making a major jump into renewable energy with a $600 million investment in algae-based biofuels.
Exxon is joining a biotech company, Synthetic Genomics Inc., to research and develop next-generation biofuels produced from sunlight, water and waste carbon dioxide by photosynthetic pond scum.
But let us put that in perspective. In 2008 ExxonMobil had $443 billion in sales and $45 billion in earnings. So $600 million is chump change for them. I wonder what odds they place on this effort working.
Other recent biofuel venture fundings included oil refinery operator Valero as an investor for Solix Biofuels.
There were also at least two funding rounds in June. Solix Biofuels Inc. closed on $16.8 million to complete construction of a demonstration-scale facility, with investors including Shanghai Alliance Investment Ltd., London-based I2BF Venture Capital, Bohemian Investments, Southern Ute Alternative Energy LLC, petroleum refiner Valero Energy Corp. and Infield Capital. Solazyme Inc. added $12 million in an interim round standing at $57 million, which was led by Braemar Energy Ventures and Lightspeed Venture Partners and brought in new investor VantagePoint Venture Partners.
The oil companies are best thought of as companies that specialize in liquid hydrocarbons. The convenient storage and energy density of liquid hydrocarbons make them the single most widely used fuel for transportation with no other fuel even coming close.
What is not clear: can genetically engineered algae ever become a cost effective energy source with a favorable ratio of energy return on energy invested?
45.6/ 45 = 1.013. A decrease of 1% in profit takes consideration. And there are always more proposed ventures in the proposed budget than a corporation is willing to fund. Someone championed this venture and has their reputation on the line with its rise or fall--that person is not about to be a chump.
At least they were smart enough to realize that existing algae weren't up to the task. With genetic engineering a whole new space of possibilities opens up.
They need to completely reverse engineer the molecular biology of these algae, then develop a synthetic biology process that eliminates all of the extraneous biology of algae to make biofuels cost effectively. This is the only way to go.
SGI is Venter's outfit. If anyone can do this, he can. This is definitely the way to go for the oil companies. Wing and solar are bogus for the oil companies, which are electric utility stuff anyways. If synthetic biology can make hydrocarbon fuels cheaply, such hydrocarbon fuels would be carbon "neutral" since the CO2 is used to make them and the CO2 is created when they are burned. Thus, you have a completely closed cycle here.
I see only two methods for making synthetic hydrocarbons. One is by synthetic biology. The other is by thermal process using the waste heat from nuclear power plants (or fusion if polywell works). No doubt both methods will be used.
If oil companies are forced to participate in renewable fuels (because of silly modern mandates), then this seems like the best way to go. It still suffers from the fundamental problem that the amount of land required to get significant energy from solar (and that's what this is) is enormous.
"can genetically engineered algae ever become a cost effective energy source with a favorable ratio of energy return on energy invested?"
I think Robert Rapier would say no.
It's $600m over 6 years or annually:
+ $100m / $19b = 0.5% of 2008 capital expenditures
+ $100m / $2.2b = 5% of 2008 investments
+ $100m / $40b = 0.25% of 2008 free cash flow
Still, XOM isn't known for throwing money away so this is a bit puzzling since the basic chemistry and physics of using algae to turn sunlight into oil aren't feasible.
Krassen Dimitrov's calculates a cost of $850 per barrel to produce oil from algae.
Does XOM have some way around the theoretical limit of about 1.5 gallons of gasoline or equivalent liquid fuel being produced from a square meter of photosynthesis in a year?
I think it is good news. XOM doesn't want to waste $600m just because they can. They will welcome any good press they get from this. But I doubt good press alone could seem worth this amount.
Buying favors and friends? Can't know?
If XOM felt nothing worthwhile would result they could have given the money to universities and researchers. The tax advantages would probably be higher.
With energy there is always at least one Imp nearby. There are all sorts of subsidies and tax breaks for alternative energies. Subsidy fishing can be profitable.
I suspect that if polywell fusion works biofuels using algae will become an interesting curiosity.
The algae might be cost effective if they could be grown in open ponds, in competition with wild algae, and if they could get the CO2 from the atmosphere.
If they have to be grown in closed bioreactors, and if the CO2 has to be provided from fossil fuel combustion, I'd guess not.
Yes, Robert Rapier is notable for his algae biofuel skepticism.
I'm not sure. The potential of genetic tinkering seems pretty huge. Algae can be genetically engineered to:
- produce a lot of oil rather than a lot of green mass.
- survive in a liquid that would be toxic to competing strains of algae and other microorganisms.
So maybe open pond genetically engineered algae could be done cheaply. I think it really does require the two elements I list here. But how hard is it to do the genetic engineering?
Paul F. Dietz,
The key to the open pond approach is to use a chemical that is toxic to wild type algae which does not damage the genetically engineered algae. Otherwise the wild type will out-compete the genetically engineered strain since the genetically engineered strain will put more of their collected energy into making oil.
The difficulty lies with coming up with a toxin that:
- is cheap.
- doesn't have to get broken down by the genetically engineered algae.
- does no damage to the genetically engineered strain.
- totally blocks wild type strains.
That's a tall order. I think the problem of suppressing wild type is the biggest problem.
Don't put words in Robert Rapier's mouth. It's not honest and it's not ethical.
Herbicide resistant crops have been engineered for over a decade. Something similar may be done for algae, but I doubt that the problem will prove nearly as difficult as some people believe.
Putting words in Rapier's mouth? Are you referring to my line or Fat Man's? Try checking your facts before getting on an ethical horse.
Have you read what Rapier's written on algae as a biofuel? I fixed my link to a post of his. Here's an excerpt:
I have written several articles over the past couple of years that argued that there is a low probability that any of the would-be algal biodiesel manufacturers are going to make it. These essays included:
More Reality Checks for Algal Biodiesel
The Prospects for Algal Biodiesel Dim
Granted, he did not say 0 probability. But low probability is pretty close to Fat Man's "no" as a description of his position.
I'm more optimistic than Rapier. Though I'm not expecting a breakthrough in the next 10 years because I see it as a hard multi-faceted problem. Rapier's skepticism has made me lower my own estimation of eventual success.