Navigant Research Blog

The Solazyme Effect and Algae’s Second Wave

Mackinnon Lawrence — April 27, 2012

When it comes to navigating the advanced biofuels’ winding pathway to commercialization, no company is faring better than Solazyme.  Whether delivering biojet fuel for commercial flights or producing hundreds of thousands of gallons of advanced fuels to help the U.S. Navy launch its Green Strike Force in 2016, Solazyme has been on a marketing tear.

The company has also unveiled a steady stream of partnerships, with companies such as Unilever and Chevron, in the last few years, securing its place among the companies to watch in biofuels.  Earlier this month, the company made a splash at the Advanced Biofuels Leadership Conference in Washington, D.C., where it announced a new joint venture with Bunge Global Innovation, a subsidiary of agribusiness giant Bunge.  The partnership will build, own, and operate a commercial-scale renewable tailored oils production facility in sugarcane-rich Brazil.

But caught in the backwash of the attention and hype surrounding Solazyme is a more troubling development: the skewing of expectations around algae commercialization.

Not quite an algae company – “traditional” algae companies rely on CO2, sunlight, and water as inputs – Solazyme uses an algae platform that relies on cheap sugars, which it feeds to microalgae in closed steel fermentation tanks.  The sugar-dependent algae platform coupled with the company’s genesis in the traditional algae space no doubt contributes to its characterization as an algae company.

More accurately, it sits alongside a slew of promising companies chasing cheap sugars, including venture-backed startups like Amyris, LS9, and Codexis.  All of these companies have proven adroit at straddling the chemicals and fuel markets.  As discussed in Pike Research’s Biofuels Markets and Technologies report, these companies stand out in the advanced biofuels industry, rebranding their companies around the production of “renewable” or “tailored” oils.  More importantly, they are on a very different commercialization trajectory than the algae-to-fuels industry.

Like any good Shakespeare character worth his salt, Solazyme has expertly used appearance versus reality to its advantage, aligning itself with algae when the industry is hot, and distancing itself when it’s not.  Meanwhile, the long-term impact of the “Solazyme Effect” on the algae industry remains unclear.  On one hand, the company’s recent success has provided important cover for a young algae industry still clawing its way towards commercial viability in the harsh, post-Solyndra landscape; on the other, the Solazyme Effect may be feeding unrealistic expectations about algae’s near-term potential.  If the Solazyme star flames out, the algae industry could suffer collateral damage, further delaying development timelines.

Green Crude Outlook

With or without Solazyme, though, things are starting to heat up for green crude.  Promising companies like Sapphire Energy and Origin Oil are making headway.  As with any new technology, the real test for the algae industry will be managing expectations while marching towards commercial viability.

At the end of the day, what algae has going for it is (potential) scale and infrastructure.  As a biofuels platform capable of producing fuels that can be dropped-into existing pipelines and engines – ground, aviation, or otherwise – the road to commercialization is less onerous from a marketing standpoint than it has been for ethanol or first-gen biodiesel.  And as a renewable energy platform, algae could very well be one of the killer apps that enhances our existing energy infrastructure by cleaning up wastewater or soaking up CO2 exhaust from industrial facilities.

But all this will take time and money.  As Katie Fehrenbacher rightly notes in a recent article at GigaOM, it’s a long, long (long) road for algae fuel.  Pike Research’s Algae-Based Biofuels report projects that biofuels production from algae will rise to just 61 million gallons by 2020, partly owing to early production being soaked up by low-volume, high-value markets like biochemicals and nutraceuticals.  Although we profiled Solazyme in the report, the company’s production forecasts did not factor into our global projections.

For those looking for relief at the pump in the near-term, don’t hold your breath as we don’t see much change in these projections, especially given the growing emphasis on production for non-fuel markets in the near-term.  Nevertheless, algae’s long-term prospects continue to shine.

One response to “The Solazyme Effect and Algae’s Second Wave”

  1. anonymous says:

    How can a company be sustainable if they produce algae-based jet fuel at a cost of $400 per gallon. According to their S-1 they are not in production. They need third party producers.

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