Please Explain How Algae Biodiesel at $9 to $40 per Gallon is Economically Viable?

Currently regular diesel is going for around $2.50 per gallon. A new study, Algae 2020, reports:

Based on the examination of several algae business and economic models, the Algae 2020 study finds the estimated costs to produce algae oils and algae biodiesel today range from $9 to $25 per gallon in ponds, and from $15 to $40 in photobioreactors (PBRs) today. Reducing these costs are critical for commercial success.

Like many "green fuels" algae biodiesel appears to be a long way from economic viability. Not to worry - the Department of Energy is allocating $50 million in R&D funding to algae fuels. 

Comments

[brotherben]

Ummm, the senior partner can afford it to drive in the "algae bio-diesel only toll lanes" on his way to play a round of weekday round of golf enjoyed while swilling single-malt and a cuban seegar?

[New World Dan]

Algae biodiesel at $9 can't even compete with soy biodiesel at less than $4.

In the grand scheme of things, $50 million for R&D funding isn't that much. I'm inclined to believe that eventually biomass energy will be a profitable sector. But first, the greenies will have to swallow their pride and admit that they need the gene splicers to get to work on developing a good oil crop.

[brotherben]

Aaaaakkk, 1 too many "round of's." sorry

[Marc]

If they'd just charge for externalities at $40 a gallon, it would look like a good deal. The only reason it looks expensive is that regular diesel is so cheap.

*cough*

[Christ on a Cracker]

Is the DOE still funding research into cold fusion. After all, anything will work if given enough money.

[Brad]

I guess the question in the subject line would be the perfect question to ask ... if anyone was claiming that today's cost requirements for algae diesel WAS economically viable.

If only we could think of any technologies that ARE very cost effective today that were not cost effective at all when they were first being developed ... any at all (or should I say "all of them all?").

[Paul]

Currently regular diesel is going for around $2.50 per gallon.

Pff, where do you live? Regular (non-premium) gas is going for $2.65 a gallon.

[Cloner]

"Ummm, the senior partner can afford it to drive in the "algae bio-diesel only toll lanes" on his way to play a round of weekday round of golf enjoyed while swilling single-malt and a cuban seegar?"

Still the Marxist, I see.

[Gilbert Martin]

"If they'd just charge for externalities at $40 a gallon, it would look like a good deal. The only reason it looks expensive is that regular diesel is so cheap."

Shhhhh!

You'll conjure up Chad with all his yapping about massive externalities with that kind of talk.

[brotherben]

Cloner, it was sposed to be a joke at my own expense. Another poster suggested an econ book and I won't argue government responsibility till I finish the reading assignment.

Enjoy the quiet.

[Neu Mejican]

I believe the reason you put R & D money into a technology is to move it towards economic viability (that's the "D") part.

IOW, I am confused as to the point of this post.

[Marc]

GM: it was an experiment in pre-emptive hyperChadding.

[EscapedWestOfTheBigMuddy]

I believe the reason you put R & D money into a technology is to move it towards economic viability (that's the "D") part.

I believe that the approved response is that this is fine when it is you own money, but not so good when you're extorted it from the taxpayers.

The counter to that is usual some thing about the reluctance of private money to fund blue sky projects at the level that big research involves.

Followed by a reposte concerning the economic efficiency of funding technologies where we can make real progress for less than Billions And Billions of dollars.

You may now argue amongst yourselves.

[Pro Libertate]

NM,

I think Ron meant that it's nowhere near viability. Compare to other energy sources which approach the high end of oil/gas prices right now or which could become comparable to oil/gas in a relatively short time.

[sage]

I'm thinking Tim would not even have posted this if it was venture capital that was funding the R&D. Once again the government is really shitty at picking winners.

[sage]

I'm sorry, that was Ron. Not Tim. I'm on vacation and just woke up.

[sage]

Caption Contest!

"You think corn in your shit is bad? Try putting it in yo' gas tank!"

[Matthew]

Christ on a Cracker

You know, I hear Cold Fusion is only 20 years from being a viable and cheap energy source.

Oh snap, that would be Nuclear Fusion.

heh.

[Matthew]

Diesel, friends, diesel. 30% more energy density than gasoline, way more energy than that godawful political feed trough, ethanol.

It's the future.

[Alan Vanneman]

Laugh all you want to, Ron. In three years, I'll be rolling in pond scum, and you'll be out to pasture.

[bigbigslacker]

This reminds me of the strategic defense inititive. The argument from some was that it was a waste of money because it couldn't be done with the technology of the time. I wonder how many of those same people, particularly those who aren't Republicans now..., would argue the same way on green fuel "investment" by government.

[P Brooks]

Not to worry - the Department of Energy is allocating $50 million in R&D funding to algae fuels.

What percentage of that amount will be diverted to lobbying for additional, ever-increasing government grants?

[algaeater]

RTF. The article says a major cost is the extraction of the oil from the algae. There are new technologies just created that dramatically lower the cost of extraction...subtract $3 to $12 per gallon with these new extraction methods...id prefer to buy domestically grown algae than crude from the saudis any day...

[R C Dean]

Just what makes you think that petro-diesel won't cost $9.00/gallon by the time the carbon tax is applied?

Those green jobs aren't going to pay for themselves, you know.

[algaeater]

why would they carbon tax a fuel that is removing CO2 from the atmosphere...if anything carbon tax would be supporting this new industry...

[John C. Randolph]

why would they carbon tax a fuel that is removing CO2 from the atmosphere

Heh.. You want logic from the tax man?

-jcr

[Neu Mejican]

Once again the government is really shitty at picking winners.

A nice platitude, but not really what R&D money does. Government R&D money helps provide the market with options to choose from...some pan out, some don't.

Government R&D money does more to set goals than it does to pick winners, it seems.

Government R&D money was important in the development of energy efficient windows, for instance. The market likes those. The market choose the winner.

[Neu Mejican]

RC Dean meant that a carbon tax could make regular diesel cost 9$...reading is hard.

[Mango Punch]

Even Milton Friedman was divided on what the government's roll in supporting research should be. $50MM doesn't seem like that much especially when you look at other government spending...

VC is spending $$ in this sector already though (not just in the US) and I am inclined to believe that it will be a profitable industry on its own some day.

You should also note that the cost of producing algae oil is tough to estimate because the process isn't being run start to finish.

[Chad]

In the grand scheme of things, $50 million for R&D funding isn't that much. I'm inclined to believe that eventually biomass energy will be a profitable sector. But first, the greenies will have to swallow their pride and admit that they need the gene splicers to get to work on developing a good oil crop.

Actually, I have never seen a "greenie" object to this, and I spend more time with them than I do with you. I am sure you can find SOME crackpot out there, but mostly, this is a straw-man.

Anyone who doesn't see that oil prices are going to head up again, and that carbon can and will be priced, is deluding themselves. Expect that $2.50/gal fossil diesel to be $6-7/gal diesel in a few years. And that $9/gal biodiesel? Watch the price drop as people work out the kinks. It is not a matter of when the lines will cross, but when - and who will profit from the flip.

[algaeater]

Besides if we drop billions on bailouts for big banks and car companies...why is $50 million to develop a secure, domestic source of fuel a big deal?

[Chad]

Oh, and I forgot to ask Ron why he didn't mention that Big Coal has lined up TEN TIMES the amount of money given to algea biodiesel just to FILL OUT PAPERWORK for "clean coal", which is just as much a vaporware fantasy.

[mark]

carbon can and will be priced ... thanks to rent-seekers.

who will profit from the flip ... the aforementioned rent-seekers.

Why is this so hard to understand?

[Chad]

Actually, Mark, elementary economics indicates that a price should be put on carbon. It is the rent-seekers you fear so much that have kept the price from being adopted so far.

And who will lose in the flip? The big-coal big-oil rent seekers. It is pretty hard to feel sorry for them.

[R C Dean]

why would they carbon tax a fuel that is removing CO2 from the atmosphere...if anything carbon tax would be supporting this new industry...

First, I said petro-diesel would be taxed.

Second, bio-diesel doesn't remove CO2 from the atmosphere. Any CO2 absorbed during manufacture is released when it is burned.

Actually, Mark, elementary economics indicates that a price should be put on carbon.

Only after the assumption is made that CO2 emission constitutes a negative externality.

[R C Dean]

And who will lose in the flip? The big-coal big-oil rent seekers.

Depends on how its done. Under cap-and-trade, they could make out huge. I think it was CBO who estimated that the market cap of coal companies could go up 700% under some cap-and-trade proposals.

[Chad]

Only after the assumption is made that CO2 emission constitutes a negative externality.

I am sorry, RC, but this is way past an "assumption" by now. Not even your most beloved semi-credentialed skeptics are claiming that there are no externalities. They are haggling over the price, not whether there should be one.

Depends on how its done. Under cap-and-trade, they could make out huge.

No, not under cap-and-trade. Rather, under the political buyouts that people like you are making necessary in order to get cap-and-trade passed. Thanks for being a Big-Coal shill.

[Russ 2000]

They are haggling over the price, not whether there should be one.

Wrong again, Chad. As usual.

They're haggling over the SUPPLY. The market has been haggling over the price for, like, ever.

[Tom Gandolfl]

Your position on Algae Biodiesel exemplifies the old adage: "A little bit of knowledge is a dangerous thing" When Rudolph Diesel invented the Diesel Engine, he used Peanut Oil to power it. Peanut Oil comes from Peanuts which are a "vegetable"....got it so far? Algae is the fasted growing plant on the Planet! Like all new technologies, Algae-to-Biodiesel has had several obsticles to overcome. Some of these obsticles have been overcome and the remaining ones are about to be. Check-out: http://www.originoil.com to learn more and become less dangerous!

[mark]

Rather, under the political buyouts that people like you are making necessary in order to get cap-and-trade passed. Thanks for being a Big-Coal shill.

Is that really how your mind works? RC makes a point about how this system can be gamed, and has been gamed from the start, which is a hell of a reason not to implement such a system, and you just think "omg this guy is on the other side, like teh corporations!"

And I'd like to think of myself as a coal shill, not necessarily a Big Coal shill. We all get at least half of our energy from coal unless you live in Buffalo, NY. An "energy tax" based on kWh makes sense. A carbon tax, not so much.

[Neu Mejican]

An "energy tax" based on kWh makes sense. A carbon tax, not so much.

Wha!!!????

Energy is not a negative externality...c02 is...why tax clean(er) energy?

[mark]

Well if your goal is "energy independence" then the ideal solution is an import tax on oil. An energy tax would simply encourage conservation and if applied equally there would be less market distortion. If you want to promote clean energy, I like the program implemented by Germany: mandatory buyback of solar power at a certain rate. This was still a net cost to Germany's economy but I can't think of a more efficient way to subsidize renewable energy. The least efficient way, of course, is the American Clean Energy and Security Act.

[Chad]

mark | June 18, 2009, 1:15pm | #

Is that really how your mind works? RC makes a point about how this system can be gamed, and has been gamed from the start, which is a hell of a reason not to implement such a system, and you just think "omg this guy is on the other side, like teh corporations!"

Wrong, the cap-and-trade works just fine whether the permits are auctioned or given as gifts, the only difference being who ends up with the money. If there were strong support for cap-and-trade, we wouldn't need to buy votes. But that is essentially what we are doing. The "system" being gamed is the political one, not the carbon trading system.

[Neu Mejican]

if applied equally there would be less market distortion

Ahhh...I see your point. Of course, the point of a carbon tax, or an energy tax, or whatever, is to distort the market in a particular way. If your goal is energy independence, you distort one way, if you goal is reductions in c02 your distort another. There is really not such thing as a non-distorting tax. That said, I don't think you can conserve your way to energy independence. Finding sustainable ways to produce the energy needed for a robust economy will involve more efficient energy usage...but a fundamental change in the market is required to address the co2 issue.

[John P]

Just go ahead and take the piss out of all attempts to develop alternatives to oil with particular emphasis on those that show real potential. As I understand it there are many initiatives to extract oil from algae economically. As these evolve the price of extraction will drop. Even at $5 a gallon it is worth it. In the UK diesel currently sells at circa ?6.24 per US gallon. As a pitch leveller for new fuels perhaps the US should get off the artificial crutch of cheap petrol.

[mark]

Not sure if anyone'll be back for the discussion, but...
I don't think you can conserve your way to energy independence.
Conservation is a funny thing. Talking about it won't accomplish anything. Throwing money at unprofitable technologies will likely be a boondoggle and have little effect. 2008 seems like a distant memory, but higher prices were the only thing that got people to conserve.

The first time I looked at this issue, someone told me the best solution, which should have been implemented in the 70's, is a small and steadily rising gas tax, or even better IMO, an oil import tax (with corresponding tax cuts to make it revenue neutral, of course).

The issue has become muddled because "energy independence" which used to mean "try not to buy petroleum from OPEC" now means "cap and trade and invest in the green new economy shiny special crisis jobs economy permits and polar bears"! I'm starting to seriously question the decision not to open ANWR for drilling. In any other country it would be a no-brainer.

a fundamental change in the market is required to address the co2 issue.

Can you at least agree that there are better ways than cap-and-trade, legislation that could take up both sides of an 8 1/2 x 11 inch sheet of paper? Why do special interests always have to get their 1000 pages of gravy? This energy bill could be the nail in the coffin on our economy, as it rations energy and subjects most of the economy to political control. As per usual, the poorest will be screwed, when their FRN's are worthless and they have to buy petroleum products in Euros.