Algae farm in Mexico to produce ethanol in 2009

Rather than squeeze algae for its oil, like other companies are proposing, Algenol wants to turn each algae cell into a tiny ethanol factory.

An artist's rendering of an algae farm in action

The Maryland-based company said that business partner BioFields has licensed its technology and committed US$850 million to build a salt water algae farm in the Sonoran Desert in northwest Mexico, with production scheduled to begin next year. BioFields paid over US$100 million to license Algenol's technology, Algenol CEO Paul Woods said Thursday. He said the ethanol produced at the farm will cost US$1 less per gallon (28 Australian cents per litre) than current U.S. petrol pump price of about US$4 per gallon (AU$1.13/litre).

Algenol's technology was first developed in the mid 1980s. It wasn't until the crude oil price hit US$50 a barrel in 2006 &mdash it's currently about US$135 a barrel &mdash that Woods stepped up efforts to commercialise it.

The company chose from a collection of 10,000 strains of algae and used molecular biology to enhance certain traits. Specifically, company engineers enhanced certain algaes' ability to make sugar and, through their enzymes, to ferment sugar into ethanol.

"Most algae have a really tiny ability to make ethanol, and we've enhanced it greatly," Woods said. "We take in sunlight, massive amounts of carbon dioxide, and we grow (algae) in what look like a huge soda bottle on its side."

There are a number of companies developing technology to grow algae and convert it into fuel, typically biodiesel. The algae is grown in tubes, plastic bags, or open ponds and then harvested and pressed for its oil. Some companies propose taking the leftover biomass and burning it or using it as animal feed.

Algenol's process is very different in that the algae are not cultivated. Instead, algae produce ethanol in gas form that is siphoned off from the bioreactor tubes and condensed to a liquid, Woods explained.

He claimed that the system can produce 56,000 litres per hectare per year, far more than corn's rate of 3,500 litres per hectare per year or sugar cane's at 8,300 litres per hectare per year. The Mexican site is located a few miles away from a power generation station. By pumping carbon dioxide from the station into the algae bioreactors, the salt water algae farm can boost production to 94,000 litres per hectare per year, he said.

Algenol is privately funded with just under US$70 million and is currently not looking to raise more money. Woods said that there are a number of sites in the U.S. that it hopes to develop that have a plenty of sunlight, as well as access to seawater. "There are tons of CO2 being emitted, and we can take it all. There are lots of opportunities for good locations in the U.S.," he said.

Its process absorbs about 90 percent of the CO2 that is fed to the algae bioreactors, which are about 3 feet high and 50 feet long. Between 50 percent and 70 percent of the CO2 goes into ethanol.

One climate expert said that the technology holds promise, particularly because algae can produce much more ethanol than corn per acre. "It has a lot of promise," said John Steelman, a program manager at nonprofit group the Natural Resources Defense Council, told Reuters. But as with many new fuel ventures, it's hard to say how cost-effective it is or to measure the environmental factors. "We do not know if it's a great thing yet," Steelman told the wire service.