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Proprietary technology owned by VG Energy [5] could create algal biofuel at costs competitive with current prices for conventional crude according to a report [6] released by the company this week.

The study was authored by John Sheehan [7], former project manager at the National Renewable Energy Laboratory and currently the Biofuels Coordinator in the Institute on the Environment at the University of Minnesota. Sheehan also serves on the technical advisory board of VG Energy, a majority owned subsidiary of biotech start-up Viral Genetics [8] (VRAL).

His projections are based on existing industrial processes and early lab results from VG Energy that indicate algae-derived diesel and jet fuel substitutes could be produced at prices competitive with conventional oil at $94 per barrel [6]. This potential price breakthrough comes as world oil prices are spiking well beyond $100 and conventional producers are intimating [9] that world supplies will be squeezed for the foreseeable future.

According to the study:

The introduction of VG Energy’s additives offers the ability to knock down the cost of algal oil production by almost a factor of ten as a result of productivity improvements. If oil secretion currently observed in the lab can be fully demonstrated in larger scale growth systems, there is a potential for further decreasing costs by another factor of roughly two. These represent dramatic changes in the economics of algae technology, and are truly game-changing. A lot of work remains to be done to establish the robustness of the VG Energy’s lab results, but these preliminary economic analyses show that the promise of the technology warrants further investment and investigation.

The long sought after technique to boost algae oil production has an unlikely origin. Viral Genetics researcher Dr. Karen Newell [10] has been developing novel techniques to disrupt tumor metabolism to prevent them from burning fat reserves, making them more susceptible to chemotherapy and radiation.

This same metabolic switch appears to be the elusive lipid trigger [11] that algal biofuel researchers have been seeking since the 1990’s that forces algae to store energy as fat rather than carbohydrates or protein.

When these trace chemical amendments developed by Viral Genetics to fight cancer were added to algae cultures in the lab, they were found to increase extractable lipid production by more than 300%.

“What they have stumbled on indirectly through a fairly unrelated field of research is the possibility that you really can turn on lipid production in algae,” said Sheehan. “For the last five years of the research at the National Renewable Energy Lab, we were entirely focused on exactly this question.”

Algae is attractive for biofuels due to their ability to grow much more quickly than terrestrial crops because they are very simple organisms. The problem is that algae tend to only want to produce the oil when they are stressed or believe they are in a scarce environment.

According to Sheehan, “algal biofuel researchers have been looking for the so-called ‘lipid trigger’ for over a decade. Our goal was to find a way to promote storing of organic carbon in algae in the form of oil, and that is what Karen Newell has appeared to have stumbled on.”

VG Energy’s techniques also cause algae to release fats outside of their tough cell walls creating the potential to recycle algal biomass without destructively extracting the oil. Sheehan feels that a 75% biomass recycle rate is possible, contributing to greatly reduced production cost projections. 

Along with the enormous potential market to create economic biofuels, VG Energy’s technique could also create high value nutritional oils such as omega 3 fats at approximately one quarter the price of conventional sources. This market, while far smaller than transportation fuels, is still worth about $1.4 billion [12] annually and growing at 10% [13] per year.

Sheehan, who has been a leading expert in this algal biofuel research for more than fifteen years says that he is “cautiously excited” about the potential price breakthrough, but stresses that much must happen before you can economically fill up your tank with fuel refined from algae.

“VG Energy has made a really interesting discovery but a lot of work remains to turn this into a viable commercial process.”