Sapphire Energy, Inc.

From Algae to “Green Crude”

By combining the disciplines of energy, biotechnology and agriculture, San Diego-based Sapphire Energy has created a biofuel with the potential to change America’s energy landscape; something the company calls “Green Crude.” Using abundant desert sunlight and carbon dioxide (CO₂) Sapphire grows algae in open-air ponds located in southern California and New Mexico, and then harvests and processes the algae into Green Crude, a low-carbon crude oil¹ similar to light sweet petroleum crude oil.² The Green Crude can then be refined into gasoline, diesel and jet fuel.

What’s more, unlike today’s commercially-available biofuels, Sapphire’s drop-in replacement solution is fully compatible with the existing petroleum infrastructure, which means that existing vehicles, pipelines, refineries, and fuel distribution networks can all remain unchanged. In tests, gasoline produced from Sapphire’s Green Crude has achieved a 91 octane rating while meeting the high fuel-quality standards set by the American Society for Testing and Materials.³

Sapphire’s roots can be traced back to a San Francisco coffee shop, where, in 2007, three friends debated the merits of the best way to make biofuels. The trio of scientists and entrepreneurs eventually determined that algae had the most potential and Sapphire Energy was born.⁴ Since its founding, the company has garnered a lot of attention—and capital. In its first four years, Sapphire raised more than $200 million in private and public funding to execute on its vision of making algae a practical source of renewable fuel. Big name investor groups, including Bill Gates’ Cascade Investments and the Rockefeller family’s Venrock, contributed to the initial $100 million of financial backing, and in December 2009, Sapphire was awarded $104.5 million in federal funding. 

Proving the Technology Works and Scaling to Meet Demand

Sapphire honed its technology at its 22-acre facility in Las Cruces, New Mexico, a large-scale test and development center where algae is grown and harvested in bulk quantities.⁵ The company also has a 50,000 square foot biotechnology laboratory complex at its headquarters in San Diego and an engineering office in Orange County, CA.

By 2009, Sapphire’s jet fuel had already been successfully tested on two commercial airliners (a Continental B737-800 jet and a Japan Airlines B747-800 jet). On both test flights, during which one engine burned a biofuel-jet fuel blend, the pilots said the airplanes performed smoothly. Also in 2009, gasoline made from the Green Crude was blended with petroleum gasoline and used to fuel the Algaeus, the first algae-powered plug-in hybrid electric vehicle, which drove across the United States.⁶ During its cross-country test drive of more than 3,000 miles, the Algaeus’s engine performed as normal.

Despite successfully demonstrating that their fuels can serve as drop-in replacements for petroleum fuels, the company acknowledges that new technology does not come without risks or challenges. “Of course,” says Tim Zenk, Vice President of Corporate Affairs, when asked if there are concerns over the technology’s scalability. “This is biology that has never been attempted at this scale. But algae is the most scalable crop in the world, and we are confident in our technology’s prospects for success.”

To address the biggest near-term challenge and prove that algae-based energy is scalable, Sapphire broke ground in June 2011, on the Integrated Algal Bio-Refinery in Columbus, NM, a first of-its-kind, fully-integrated, large-scale commercial demonstration facility to grow algae and convert the algal biomass into green crude on 300-acres of land.⁷ Zenk says that by the time the Columbus, NM, demonstration concludes in 2016, Sapphire will focus on bringing its technology up to full commercial scale, so that it can be economically competitive with new sources of crude.⁸

How to Get to ‘The Price is Right’

Since delivering a fuel that is not only renewable and cleaner, but also affordable, is crucial to the company becoming fully commercial, how does Sapphire intend to arrive at a competitive price of its Green Crude for future customers?

It is a two-part answer. First, the company needs to scale production of its Green Crude. Establishing new facilities using Sapphire’s technology on several thousand acres would be enough to provide a large and reliable supply for a refiner to make commercially-viable algae-based fuel. Studies show that algae can produce approximately 1,000-6,500 gallons of oil per acre per year.⁹ This yield compares favorably to that of ethanol from corn, by far the most common biofuel made and used in the United States today. Modern corn-to-ethanol plants in ideal locations produce about 440-470 gallons of fuel per acre per year.¹⁰

Second, Sapphire needs to establish an inexpensive supply of CO₂. Since the scale of future algae farms will be considerable, large quantities of the gas will be needed to cultivate the algae. Sapphire’s partnership with German-based Linde Group is key to filling this role. Linde, a leading global supplier of specialty and industrial gases, captures CO₂ from various sources, such as power plants, chemical plants, and natural gas processing plants. In May 2011, Linde agreed to a multi-year deal to deliver CO₂ to Sapphire’s commercial-scale open ponds and to work to reduce the costs associated with CO₂ supply.¹¹The two companies are co-developing a technology based on Linde’s experience in industrial gases to both collect and transport CO₂ for algae cultivation. Zenk says this will enable Sapphire to receive low-cost CO₂ from commercial sources by the end of the construction of the biorefinery in Columbus, NM.

Zenk also notes the federal government could play an important role in advancing the biofuels development lifecycle by increasing investment into them and demand for them. In particular, the U.S. military has a strategic imperative to reduce dependence on petroleum, considering that imported oil accounts for about 52 percent of U.S. consumption.¹² Thus far, the U.S. Navy has taken a lead within the U.S. Department of Defense (DoD) to help create a market for advanced, drop-in biofuels, like Sapphire’s algae-based diesel and jet fuel. In addition to proposing a $510 million joint investment between the DoD, the U.S. Department of Agriculture, and the U.S. Department of Energy, the Navy has plans to deploy a Great Green Fleet fueled by advanced biofuels by 2016, and to cut petroleum use in half by 2020. Furthermore, the U.S. Army has created an Energy Initiatives Office to help the agency achieve its goal of obtaining 25 percent of its power from renewable sources by 2025.¹³

Algae on the Rise

After beginning with only a handful of team members, Sapphire now employs more than 150 people, 100 of whom are headquartered in San Diego. If the commercial demonstration in Columbus, NM, succeeds, the company plans to increase its acreage of algae production. With construction and subsequent permanent employment, Sapphire hopes to create more than 700 new jobs as it scales to commercial production.

Assuming an algae yield of 4,000 gallons per acre per year, establishing algae production on about seven million acres of non-arable desert land would displace about 15 percent of U.S. transportation fuel needs. Achieving this scale may seem an enormous challenge, but this is less than 1/10th the acreage of current cropland used for U.S. corn production. It is the integration between biotechnology and agriculture that will allow algae to scale up as a real energy source. Also, algae grows in high-saline, non-potable water and can use non-arable land, neither of which are in short supply. The ideal location for an algae production facility is one that has access to abundant sunlight, a reliable source of CO₂ (such as a point source like a power plant) and sustainable amounts of salt water. New Mexico, for example, has a large underground saltwater aquifer, as do Texas and some parts of Arizona. Sunny coastal locations could be utilized as well (e.g., Texas Gulf Coast and Southern California).

If Sapphire and other algae producers succeed, communities in those areas may very well see algae fuel production plants springing up over the next several years, signifying a possible transition to the future of transportation fuels.

Oct 2011

Endnotes