Algae’s Potential as a Transportation Biofuel

Congressional research reportJan 30, 2014

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January 30, 2014

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R42122

Algae’s Potential as a Transportation Biofuel

Summary

Congress continues to debate the federal role in biofuel research, biofuel tax incentives, and

renewable fuel mandates. The debate touches on topics such as fuel imports and security, job

creation, and environmental benefits, and is particularly significant for advanced biofuels, such as

those produced by algae.

Congress established the Renewable Fuel Standard (RFS2), a mandate requiring that the national

fuel supply contain a minimum amount of fuel produced from renewable biomass. The RFS2 is

essentially composed of two biofuel mandates—one for unspecified biofuel, which is being met

largely with corn-starch ethanol, and one for advanced biofuels (or non-corn starch ethanol),

which may not be met in coming years due to a lack of production. Within the advanced biofuels

category, the RFS2 requirements for the cellulosic biofuels subcategory (e.g., ethanol from

switchgrass) have not been met for the last few years, which could cause alarm among those

required to purchase fuel or credits to satisfy the mandate, as this subcategory is slated to ramp up

from roughly 3% of the requirement in the standard in 2012 to roughly 44% of the standard in

2022. Limited cellulosic biofuel production has occurred to date. As a result, as allowed under the

RFS2, the Environmental Protection Agency (EPA) has lowered the required cellulosic biofuels

volume for 2010, 2011, 2012, and 2013 and has proposed to do the same for 2014.

Currently, algae-based biofuel qualifies as an advanced biofuel under the RFS2, but not as a

cellulosic biofuel. If algae were added as an eligible feedstock type under the RFS2 cellulosic

biofuels mandate, and if an increase in production resulted, then a larger portion of the

requirement might be achieved, although current production is minimal. Algae does qualify as a

feedstock for the biomass-based diesel subcategory of the RFS2 advanced biofuel mandate. The

RFS2 does not mandate rapid growth of biomass-based diesel, as it does for cellulosic biofuels.

Algae can be converted into various types of energy for transportation, including biodiesel, jet

fuel, electric power, and ethanol. The potential advantages of algae-based biofuel over other

biofuel pathways include higher biomass yields per acre of cultivation, little to no competition for

arable land, use of a wide variety of water sources, the opportunity to use carbon dioxide from

stationary sources, and the potential to produce “drop-in” ready-to-use fuels. Potential drawbacks

include the anticipated cost of production, the amount of resources (e.g., water and land) required

to produce the biofuel, and the lack of commercial-scale production facilities. Algae-based

biofuel research and development are in their infancy, although work has been conducted in this

area for decades. At present, published research efforts offer policymakers little guidance on what

algae types or conversion methods could be the front-runner for commercial production, or on

when and for which biofuel.

Congressional support for algae-based biofuel has consisted of congressionally directed projects

and funding of programs and studies by the Departments of Energy (DOE) and Defense (DOD).

Some algae industry advocates contend that Congress should encourage advances in algae-based

biofuel production by extending the expiration date for eligible tax credits, appropriating

additional federal funds for algae-related programs, and modifying the RFS2 to include algae in

the cellulosic biofuels mandate, as was done recently for the cellulosic biofuels production tax

credit. In contrast, some argue that Congress should reconsider its investment in biofuels because

of the current federal budget crisis and the lack of any measurable progress in cellulosic biofuels

production.

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Algae’s Potential as a Transportation Biofuel

Thus far in the 113th Congress, legislation pertaining to algae-based biofuels has not been

introduced. Proposed legislation in the 112th Congress would have either expanded the cellulosic

biofuels definition for the RFS2 to include algae by amending the Clean Air Act, and/or expanded

the definition in the tax code for select tax credits to incorporate algae (e.g., H.R. 1149, S. 1185).

The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) amended both the cellulosic

biofuel production tax credit and the cellulosic biofuel depreciation allowance to include algaebased biofuels. Both tax incentives expired at the end of 2013, and it is not known if they will be

extended.

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Algae’s Potential as a Transportation Biofuel

Contents

Introduction...................................................................................................................................... 1

Algae and the Renewable Fuel Standard ......................................................................................... 2

Technical Background on Algae-Based Biofuel .............................................................................. 4

Potential Challenges .................................................................................................................. 7

Potential Benefits....................................................................................................................... 8

U.S. Government Research and Development ................................................................................ 9

Funding ...................................................................................................................................... 9

Selected Research Challenges ................................................................................................. 10

Legislative Issues ........................................................................................................................... 12

Conclusion ..................................................................................................................................... 13

Figures

Figure 1. RFS2 Biofuel Mandate ..................................................................................................... 3

Figure 2. RFS2 Advanced Biofuel Subcategory Mandates ............................................................. 4

Figure 3. Algae to Fuel Pathways .................................................................................................... 5

Figure 4. Algae Cultivation Systems ............................................................................................... 6

Figure 5. Conversion Processes for Energy Production from Microalgal Biomass ........................ 6

Tables

Table 1. DOE Biofuel Oil Yield Comparisons ................................................................................. 8

Table 2. Key Resource Requirements for Algae Systems .............................................................. 12

Contacts

Author Contact Information........................................................................................................... 15

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Introduction

Congress is currently questioning whether existing policies are leading to the expanded use of

domestic advanced biofuels—including algae-based biofuels (ABB), among other options. In the

Energy Independence and Security Act of 2007 (EISA, P.L. 110-140), Congress expanded the

Renewable Fuel Standard (RFS2) by mandating that increasing volumes of renewable biofuels be

used in the nation’s transportation fuel supply.1 The RFS2 identified four specific biofuel

categories and established time-specific mandates for quantities of fuels, the fastest-growing and

largest of which is the cellulosic biofuels category. Algae is not identified as a cellulosic biofuel

feedstock type to meet the RFS2.

According to RFS compliance data monitored by the U.S. Environmental Protection Agency

(EPA), a steady production of small amounts of cellulosic biofuel began in mid-2013. As a result

of the small amounts produced, EPA was compelled to lower the cellulosic biofuel mandate for

the fourth successive year and has proposed to do so for a fifth year in 2014. Moreover, the longterm certainty of the tax incentives for which ABB is eligible is debatable.2 There is considerable

concern about how the U.S. cellulosic biofuels industry will develop to meet the mandates in the

absence of federal support and which, if any, other types of biomass could be used as a primary

feedstock to meet the mandate.

Thus far, legislation pertaining to algae-based biofuels has not been introduced in the 113th

Congress. Congress held hearings and Members introduced legislation during the 112th Congress

that supported the use of multiple biomass feedstocks as energy sources to meet transportation

needs.3 Of particular interest are feedstocks that are sustainable and domestic in origin, could spur

job creation, and would have few adverse environmental impacts. Some argue that algae—

generally defined as simple photosynthetic organisms that live in water—is one biomass

feedstock that could meet these criteria. Algae can be used to produce a variety of biofuels, but

most production to date has focused on biodiesel and jet fuel, and it is unclear whether production

of other biofuels would be feasible given resource requirements and other concerns.

If successfully commercialized, ABB would have potential advantages and disadvantages

compared to other biofuels. Among its advantages, algae has higher biomass yields per acre of

cultivation than other feedstocks, leading to larger oil yields. It also may use water that is

undesirable for other uses (e.g., wastewater or saline sources). In addition, ABB production could

potentially use carbon dioxide from the flue gas of stationary sources (e.g., power plants), if ABB

facilities are co-located with such facilities.4 Some ABB drawbacks concern the cost of running a

commercial-scale facility, the volume and availability of resource inputs (e.g., water, land, and

nutrients), the immaturity of technology to convert algae into biofuels, and the sensitivity of algae

to minor changes in its environment.

For more information on the RFS, see CRS Report R43325, The Renewable Fuel Standard: In Brief and CRS Report

R40155, Renewable Fuel Standard (RFS): Overview and Issues. Congress first established an RFS with the enactment

of the Energy Policy Act of 2005 (EPAct, P.L. 109-58). This initial RFS is referred to as RFS1. Two years later, EISA

superseded and greatly expanded the biofuels mandate. The expanded RFS is referred to as RFS2.

For example, the $1.01 per gallon cellulosic biofuel tax credit expired at the end of 2013. However, Congress may

issue an extension as it has done previously for this credit and other biofuel tax incentives.

For more information, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues.

U.S. Department of Energy, National Algal Biofuels Technology Roadmap, May 2010, http://www1.eere.energy.gov/

biomass/pdfs/algal_biofuels_roadmap.pdf.

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Substantial ABB research and development (R&D) has taken place since the 1950s, but for

various reasons ABB has yet to gain a foothold in the transportation fuel market. The main reason

is that ABB is not currently economical to produce at commercial scale. Also, it is not a major

component of energy and agricultural statutes; as a result there is likely more inherent investment

risk. The relevance of ABB to the U.S. transportation sector could potentially rise if technological

advances are achieved, if oil prices rise, if certain fuels (e.g., cellulosic biofuels) prove incapable

of meeting annual RFS2 mandates, or as federal agencies and corporations announce ventures

involving ABB for both vehicle and aircraft use.

This report discusses the status of ABB research and development, federal funding, and

legislative concerns. While this report focuses on the use of algae as a biomass feedstock for

transportation fuel, there are other applications for algae (e.g., nutraceuticals, cosmetics).

However, congressional and public interest are currently focused on algae use for transportation.

Algae and the Renewable Fuel Standard

Many ABB discussions involve its limited eligibility for the RFS2—a mandate requiring that the

national fuel supply contain a minimum amount of fuel produced from renewable biomass—

compared to other biomass feedstocks.5 Although ABB is eligible to participate in the RFS2, it

does not qualify as an eligible feedstock under the cellulosic biofuel subcategory because it is not

defined as cellulosic in the RFS2 regulations.

The RFS2 is composed of two biofuel categories: unspecified biofuel and advanced biofuels (or

non-corn starch ethanol; see Figure 1).6 The advanced biofuel portion includes three

subcategories: cellulosic and agricultural waste-based biofuels, biomass-based diesel, and “other”

(see Figure 2). Each advanced biofuel subcategory has a specific volume mandate for each year

of the RFS2 (currently 2006-2022) and must meet lifecycle greenhouse gas (GHG) emissions

reduction thresholds. The cellulosic biofuels subcategory is ultimately the largest component of

the RFS2. Its carve-out is set at 0.5 billion gallons for 2012 (roughly 3% of the RFS2) and ramps

up to 16 billion gallons in 2022 (roughly 44% of the RFS2). The biomass-based diesel carve-out

of the advanced biofuel category (the portion that algae-based biofuels do qualify for) had a 2013

mandate of 1.28 billion gallons, and EPA proposes a 2014 and 2015 mandate for the same

amount. The biomass-based diesel volume for 2016 to 2022 has not been set and will be

determined by the Environmental Protection Agency (EPA) in future rulemaking, but is to be no

less than 1 billion gallons.

In February 2013, EPA clarified that the RFS biomass-based diesel subcategory includes jet fuel.7

Assuming algae is converted to a diesel/jet fuel substitute, ABB would qualify for the biomassbased diesel subcategory, but to date it cannot compete cost-effectively with soy biodiesel in this

subcategory.8 One study reports that the production of algae biodiesel could cost from $9.84 to

Questions also arise about tax credits and grants available for ABB, but these topics are beyond the scope of this

report.

While corn-starch ethanol technically is not a biofuel category of the RFS, most unspecified biofuel used to satisfy

this portion of the mandate tends to be corn-starch ethanol.

U.S. Environmental Protection Agency, Regulation of Fuels and Fuel Additives: Identification of Additional

Qualifying Renewable Fuel Pathways under the Renewable Fuel Standard Program, February 22, 2013.

40 CFR 80.1125; for more information, see CRS Report R41631, The Market for Biomass-Based Diesel Fuel in the

(continued...)

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$20.53 per gallon, compared to $2.60 per gallon for petroleum diesel production.9 In 2011, the

U.S. Navy and the U.S. Department of Agriculture (USDA) announced the $12 million purchase

of 450,000 gallons of advanced drop-in biofuel, from a blend of non-food waste and algae, to be

mixed with aviation fuel or marine diesel fuel.10 It is unclear what impact ABB may have on the

RFS biomass-based diesel carveout if it proves to be cost-effective to produce ABB as a jet fuel.

Even with an RFS2 mandate and tax credits, cellulosic biofuels have yet to meet the required

mandate. EPA reports that very few facilities are consistently producing cellulosic biofuels for

commercial sale. As a result, the EPA lowered the 2010, 2011, 2012, and 2013 cellulosic biofuel

mandates and proposes to lower the 2014 mandate.11 Congress may consider whether other

biomass feedstock types, including algae, should play a larger role in meeting the overall RFS2

mandate. Some suggest that broadening the RFS2 to include algae as a cellulosic biofuel

feedstock would boost production opportunities. Others contend that ABB will never be costcompetitive. Others could argue that the potential for higher prices of crude oil would be an

incentive to produce fuels that may eventually be lower in cost.

Figure 1. RFS2 Biofuel Mandate

Source: EISA (P.L. 110-140), Section 202.

(...continued)

Renewable Fuel Standard (RFS).

Ryan Davis, Andy Aden, and Philip T. Pienkos, “Techno-Economic Analysis of Autotrophic Microalgae for Fuel

Production,” Applied Energy, vol. 88, no. 10 (October 2011), pp. 3524-3531. Production cost of $9.84 and $20.53 per

gallon is with the use of an open pond system and a photobioreactor, respectively, for 2011.

U.S. Department of Agriculture, “Navy Secretary Ray Mabus and USDA Secretary Tom Vilsack Announce Largest

Ever Government Purchase of Biofuel,” press release, December 5, 2011, available at http://www.usda.gov/wps/portal/

usda/usdahome?contentid=2011/12/0500.xml&contentidonly=true.

For more information, see CRS Report R41106, Meeting the Renewable Fuel Standard (RFS) Mandate for Cellulosic

Biofuels: Questions and Answers.

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Figure 2. RFS2 Advanced Biofuel Subcategory Mandates

Source: EISA (P.L. 110-140), Section 202.

a. “Other” includes any advanced biofuel as determined by EPA.

b. The mandate for biomass-based diesel is to be determined by EPA through a future rulemaking, but is to be no

less than 1.0 billion gallons.

Technical Background on Algae-Based Biofuel

Technology exists to convert algae (like any organic matter) into multiple forms of energy,

including liquid fuels (e.g., diesel or jet fuel), electric power, and biogas. However, there is no

current technology to convert this biomass feedstock into a transportation biofuel economically

and at commercial scale. While no technology is currently available to make this conversion

commercially viable, microalgae, macroalgae, and cyanobacteria are each being considered for

ABB production.12 Microalgae are microscopic photosynthetic organisms. Macroalgae,

commonly referred to as seaweed, are fast-growing marine and freshwater plants that can grow to

be quite large. Cyanobacteria are not technically algae, but bacteria that live in water and collect

energy via photosynthesis. All three require light, nutrients, water, land, and carbon dioxide

(CO2) or sugar to be successfully cultivated. Three primary components of algae—lipids,

carbohydrates, and proteins—can be used to make energy. Different algae strains produce these

components in different proportions.13 Depending on the biofuel to be produced, all or only one

of these components may be used.

Algae undergoes four major processes in its conversion to biofuel: cultivation, harvest,

processing, and biofuel/bioproduct conversion (see Figure 3). Algae cultivation may be

photoautotrophic (algae requiring light to grow) or heterotrophic (algae grown without light and

The industry appears to be at the beginning stages of demonstrating if the conversion technologies are commercially

viable. For example, Sapphire Energy constructed a commercial demonstration facility, in part with federal funding,

which the company reports has been in continuous operations since 2012.

For more information on the chemical composition of algae, see Table 6-1 in Food and Agriculture Organization of

the United Nations, Renewable Biological Systems for Alternative Sustainable Energy Production, 1997,

http://www.fao.org/docrep/w7241e/w7241e00.htm#Contents.

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requiring a carbon source such as sugar to grow).14 Photoautotrophic cultivation can occur in an

open pond or in a closed system (e.g., a photobioreactor; see Figure 4). Each has advantages and

challenges.15 Open pond cultivation is generally less expensive and simpler to build, but is subject

to weather conditions, contamination, and more water consumption. Cultivation conditions may

be better controlled in a closed system, but there are scalability concerns, and closed systems

historically have been more expensive than open ponds. Heterotrophic cultivation occurs in a

fermentation tank and can use inexpensive lignocellulosic sugars for algae growth, which could

lead to competition for feedstocks with other biofuel technologies.

Figure 3. Algae to Fuel Pathways

Source: U.S. Department of Energy. “The Promise and Challenge of Algae as Renewable Sources of Biofuels.”

September 8, 2010. http://www1.eere.energy.gov/biomass/pdfs/algae_webinar.pdf.

After cultivation, a variety of methods can be used to harvest the algae, including flocculation,

filtration, and centrifugation.16 While algae harvest cycles vary based on the strain, in general

algae can be harvested numerous times throughout the year, compared to once a year for many

conventional crops. The next step is to process the algae, usually by dewatering or drying, which

separates the algae into the various components necessary for biofuel conversion. Afterward,

Algae cultivation methods described here are for microalgae and cyanobacteria. Macroalgae requires unique

cultivation strategies such as offshore, near-shore, or open pond facilities. This report does not address another

cultivation method—mixotrophic cultivation which combines photoautotrophic and heterotrophic cultivation methods.

For more information on the technical advantages and limitations of cultivation systems, see Table 2 in Giuliano

Dragone, Bruno Fernandes, and Antonio A. Vicente, et al., “Third Generation Biofuels from Microalgae,” Current

Research, Technology and Education Topics in Applied Microbiology and Microbial Biotechnology, 2010, pp. 13551366, http://www.formatex.info/microbiology2/1355-1366.pdf.

Flocculation is the process by which clumps of solids in water or sewage aggregate through biological or chemical

action so they can be separated from water or sewage. Filtration is a treatment process that removes solid matter from

water by passing the water through a porous medium, such as sand or a manufactured filter. Centrifugation is the

process of separating substances of different densities using centrifugal force.

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certain components of the algae, such as lipids and oils, are extracted for biofuel conversion. The

algal biomass is converted into biofuel through a chemical, biochemical, or thermochemical

conversion process, or through a combination of these processes (see Figure 5).

Figure 4. Algae Cultivation Systems

Source: U.S. Department of Energy. “The Promise and Challenge of Algae as Renewable Sources of Biofuels.”

September 8, 2010. http://www1.eere.energy.gov/biomass/pdfs/algae_webinar.pdf.

Figure 5. Conversion Processes for Energy Production from Microalgal Biomass

Source: Giuliano Dragone, Bruno Fernandes, and Antonio A. Vicente et al., “Third Generation Biofuels from

Microalgae,” Current Research, Technology and Education Topics in Applied Microbiology and Microbial Biotechnology,

2010, pp. 1355-1366. Adapted by CRS.

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Potential Challenges

The primary challenge for ABB is that it has not yet been demonstrated to be economical at

commercial scale.17 If economic production can be achieved, the potential impact on the national

transportation fuel network would need to be assessed. Also, as mentioned above, algae

cultivation requires significant amounts of CO2, and there are questions about where this CO2

would come from. While the CO2 could come from existing stationary sources, it may be

incorrect to assume that all algae processing facilities would be located near existing sources of

CO2 or that enough CO2 from existing sources would be available to meet demand for commercial

levels of ABB production. It is likely that siting and permitting of these facilities would require

involvement of local, state, and federal government agencies. It is unclear how use of CO2 from a

power plant for the production of algae would be treated under the Clean Air Act.18

There may be supply and demand concerns for ABB. The use of some feedstocks for biofuels has

been controversial, as some report that rising demand for biofuels shifts biomass feedstocks and

arable land away from use for other purposes (e.g., food).19 Some assert that significant quantities

of resources (e.g., land, water, and CO2) exist to support algae-based biodiesel production;20

however, it is not clear if existing resources can support biodiesel and bio-jet fuel, bioethanol, and

more from algal feedstock. The National Research Council (NRC) reports that the quantity of

water necessary for algae cultivation is a concern of high importance, among others, that has to be

addressed for sustainable development of ABB.21 In general, biofuels derived from open-pond

algae production consume more water for feedstock production and fuel processing than

petroleum-derived fuels, although the water quality may not be comparable, since some algae is

able to use waste- or brackish water. One reported possible technique to drastically curb water use

is to site ABB facilities at optimized locations—locations where land with the lowest water use

per liter of biofuel produced is available—but algae would still use significantly more water than

petroleum.22 Another technique is to use water unsuitable for other purposes. Algae requires both

water and nutrients (e.g., phosphorus) to grow, which may inadvertently put it in competition with

other areas of agriculture, depending on water sources and land types selected for algae

cultivation should ABB be produced at a large scale. Also, large-scale ABB production may

involve the use of genetically modified algae, which some may oppose because of concerns that

genetically modified algae may escape into the environment and become invasive, as algae that

are non-native to that location.

DOE estimated open pond algae feedstock production and logistics costs for a 12-year timeframe based on certain

technical projections ranging from $18.22 per gallon gasoline equivalent (GGE) in 2012 to $3.27/GGE in 2022. U.S.

Department of Energy, Biomass Multi-Year Program Plan, November 2012. For more information on some of the

potential challenges, see Y. Chisti, “Constraints to commercialization of algal fuels,” Journal of Biotechnology, vol.

167 (2013), pp. 201-214.

If used to produce liquid transportation fuels, the CO2 will eventually be emitted.

For more information, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues.

U.S. Department of Energy, A Look Back at the U.S. Department of Energy’s Aquatic Species Program, NREL/TP580-24190, July 1998, http://www.nrel.gov/biomass/pdfs/24190.pdf.

National Research Council of the National Academies, Sustainable Development of Algal Biofuels in the United

States, 2012.

Ibid.

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Potential Benefits

ABB could have some potential benefits relative to other biomass feedstocks used for biofuel

production, primarily its ability to produce large oil yields using considerably less land than other

biomass feedstocks (see Table 1). The DOE identified nearly 4 million acres of suitable land—

mostly in the Southwest and Gulf Coast—for algae cultivation that minimizes water use and

could support approximately 5 billion gallons per year of algal oil production.23 A further

advantage is that algae cultivation does not have to compete for land or water traditionally used

for food, feed, and fiber production, because algae may be cultivated using non-freshwater (e.g.,

saline, wastewater) and can be cultivated on non-productive, non-arable land. Certain ABB types

also have the potential to be a “drop-in” fuel that could be used without having to modify existing

vehicles or build new transportation and distribution networks.24 Algae cultivation requires CO2, a

greenhouse gas that has been targeted for emission reductions. As a result, algae could potentially

reuse CO2 emitted as a waste product from stationary sources. Last, ABB companies could

control their own feedstock, meaning they could grow the algae needed for conversion to biofuel

and would not be dependent on external forces that could potentially affect feedstock supply and

price, such as drought or an economic incentive to grow a traditional row crop as opposed to

switchgrass for cellulosic ethanol.25

Table 1. DOE Biofuel Oil Yield Comparisons

Crop

Oil Yield

(Gallons/Acre/Year)

Soybeans

Camelina

Sunflower

102

Jatropha

202

Oil Palm

635

Algae

1,000-6,500a

Source: U.S. Department of Energy, National Algal Biofuels Technology Roadmap, May 2010, National Algal

Biofuels Technology Roadmap.

Estimated yields.

U.S. Department of Energy Biomass Program, Pathways for Algal Biofuels, November 27, 2012.

The “drop-in” characteristic is not unique to algae-based biofuels. For example, biobutanol is also a potential drop-in

fuel. Biobutanol, butanol produced from biomass feedstocks, is a liquid alcohol fuel that can be used in gasolinepowered internal combustion engines. Biobutanol may be blended with gasoline, and is also compatible with ethanol

blending and can improve the blending of ethanol with gasoline.

The presumption is that in the beginning ABB companies are likely to own the algae farms, which means control of

the feedstock. However, in the future there may be market forces that could lead to ownership of algae farms by

companies external to the ABB industry, which might affect how algal biomass is utilized.

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U.S. Government Research and Development

Funding

Since at least the late 1970s, Congress has appropriated funds for ABB, some of which were

targeted for general agency programs and some for specific projects. Federal research and

development funding for ABB has fluctuated over time. The Department of Energy (DOE) and

the Department of Defense (DOD) are the two agencies that have spent the most money on ABB.

ABB has been a minor component of the DOE biofuels program relative to other biofuels. DOE

has funded algae through its Office of Biomass Program (OBP), the Advanced Research Projects

Agency (ARPA-E), Office of Science, the Fossil Energy Program, the Bioenergy Technologies

Office, and the Small Business Innovation Research Program (SBIR). DOE reports it spent

approximately $43.0 million on ABB in 2012, and $52.8 million on ABB in 2013.26

As of December 2010, DOE cumulatively had invested about $236 million in algae R&D.27 The

DOE OBP spent roughly $183 million on algae R&D from FY2009 to FY2011, of which roughly

$146 million was from the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 1115) and roughly $37 million was program funding.28 The ARRA funding was spent on three algaerelated integrated biorefinery (IBR) projects cost-shared with industry, two of which are at pilot

scale (Algenol, with DOE’s cost-share of $25 million and nearly $34 million in non-federal

funding to construct an integrated pilot-scale biorefinery with the capacity to produce more than

100,000 gallons of fuel ethanol per year; and Solazyme, with $22 million in DOE cost-share and

close to $4 million in non-federal funding to build, operate, and optimize a pilot-scale integrated

biorefinery with the capacity to produce 300,000 gallons of purified algal oil per year) and one at

demo scale (Sapphire, with $50 million in DOE cost-share and roughly $85 million in non-federal

funding to construct an integrated algal biorefinery with the capacity to produce 1,000,000

gallons of jet fuel and diesel per year).29

Additionally, $49 million from ARRA was spent on the National Alliance for Advanced Biofuels

and Bio-products (NAABB) algae biofuels R&D consortium project, a cost-shared effort with

industry, university, and national lab partners. OBP program funds were spent to support three

other cost-shared algae R&D consortium projects and a number of additional algae-related

projects with industry, universities, national labs, and the National Academy of Sciences. DOE

also supported algae R&D through a nearly 20-year Aquatic Species Program (ASP) at a total

cost of roughly $25 million from 1978 to 1996. The major focus of the ASP was to produce

FY2012 and FY2013 spending data provided from various DOE offices to CRS in January 2013 and December 2013

under the coordination of Martha Oliver.

David Schwartz, “The A.I.M. Interview: Sandia and DOE’s Ron Pate,” Algae Industry Magazine, September 18,

2011, http://www.algaeindustrymagazine.com/aim-interview-sandia-and-does-ron-pate/.

As a comparison, DOE was appropriated $215 million to use towards cellulosic biofuels in FY2009. For more

information on direct federal spending on R&D for cellulosic biofuels, see CRS Report RL34738, Cellulosic Biofuels:

Analysis of Policy Issues for Congress.

U.S. Department of Energy, Integrated Biorefinery Project Locations, 2011, http://www1.eere.energy.gov/biomass/

integrated_biorefineries_text_only.html; U.S. Department of Energy, Energy Efficiency and Renewable Energy,

Biomass Program News “$564M Biomass Project Descriptions: Pilot and Demonstration Scale FOA,” December 4,

2009, http://energy.gov/sites/prod/files/edg/news/documents/564M_Biomass_Projects.pdf.

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biodiesel from high lipid-content algae grown in ponds, using waste CO2 from coal-fired power

plants.30

Both the DOD Defense Advanced Research Projects Agency (DARPA) and the Defense Logistics

Agency (DLA) have funded algae-related efforts.31 DLA is interested in algae oil-derived fuel for

Navy ship engine testing. DARPA is interested in cost-effective, large-scale production of algae

oil to be processed into a JP-8 jet fuel surrogate.32 In 2009, DARPA stated that algae research was

in its early stages.33 DARPA provided funding for two algal fuel projects, run by Science

Applications International Corporation (SAIC) and General Atomics.34 Reports indicate that in

2009 DARPA awarded SAIC $25 million to develop jet fuel from agricultural and aquacultural

feedstock materials.35 General Atomics received a $43 million contract from DARPA in 2009 to

develop a scalable process for cost-effective, large-scale production of algae oil and an algaederived JP-8 jet fuel surrogate.36 DOD reports that the $12 million purchase of 450,000 gallons of

cooking oil and algal fuel was the only algae-based biofuel expenditure for FY2012.37

With regard to specific congressionally directed projects, roughly $11 million was appropriated

between FY2008 to FY2010, with the vast majority in 2010, for at least 13 projects.38 A CRS

analysis of conference reports for appropriations bills suggests that one project was funded in

FY2008 at a total cost of $0.98 million, three projects in FY2009 at $2.4 million, and nine

projects in FY2010 at $7.7 million.

Selected Research Challenges

In 2010, DOE issued an algal biofuels technology roadmap that detailed the challenges and

opportunities associated with ABB production. The roadmap acknowledged that “many years of

both basic and applied science and engineering will likely be needed to achieve affordable,

U.S. Department of Energy, A Look Back at the U.S. Department of Energy’s Aquatic Species Program, NREL/TP580-24190, July 1998, http://www.nrel.gov/biomass/pdfs/24190.pdf.

A study from the RAND Corporation suggests the defense industry would be better served by focusing on using

energy more efficiently in the near-term, and that the use of alternative fuels such as algae offer the armed services no

direct military benefit. James T. Bartis and Lawrence Van Bibber, Alternative Fuels for Military Applications, RAND

Corporation, 2011.

JP-8 is a jet fuel. JP-8 surrogate is a replacement fuel for JP-8 with similar performance characteristics.

U.S. Congress, House Committee on Armed Services, Subcommittee on Terrorism, Unconventional Threats and

Capabilities, Terrorism, Unconventional Threats and Capabilities Subcommittee: FY10 National Defense Authorization

Budget Request for DOD Science and Technology Programs, hearing, 111th Cong., May 20, 2009.

Suzanne Goldenberg, “Algae to Solve the Pentagon’s Jet Fuel Problem,” The Guardian, February 13, 2010,

http://www.guardian.co.uk/environment/2010/feb/13/algae-solve-pentagon-fuel-problem.

Socaltech.com, “SAIC Gets $25M In DARPA Biofuel Contract,” January 27, 2009, http://www.socaltech.com/

saic_gets__25m_in_darpa_biofuel_contract/s-0019592.html.

Susanne Retka Schill, “DARPA Finances General Atomics Algae Project,” Biodiesel Magazine, January 27, 2009,

http://biodieselmagazine.com/articles/3184/darpa-finances-general-atomics-algae-project.

E-mail to CRS from Brian Greer, Department of Defense, January 23, 2013. DOD staff is unaware of any specific

proposals to purchase algae-based biofuels in FY2013.

Analysis based on information contained in conference reports for appropriation bills. CRS performed a keyword

search for ‘alga’ and ‘algae’ in conference reports for the relevant divisions of the appropriations bills for each fiscal

year. Spending tables for congressionally directed projects (CDPs) list the title of the project and not a summary. Thus

it is possible that a CDP may include algae, but not be included here because ‘alga’ is not listed in the spending table.

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Algae’s Potential as a Transportation Biofuel

scalable, and sustainable algal-based fuels.”39 Furthermore, DOE noted that “[c]ost-effective

methods of harvesting and dewatering algal biomass and lipid extraction, purification, and

conversion to fuel are critical to successful commercialization of the technology.”40 On the other

hand, in 2011, industry sources indicated that the following two years could perhaps tell whether

ABB production could be commercially viable, as various pilot projects were expected to come

online.41 The Algal Biomass Organization reported that in 2011 algae projects were underway in

research labs and pilot plants in 44 U.S. states.42

Some research and development challenges must be addressed before large-scale ABB production

can take place.43 The largest challenge appears to be that there is no long-term history of

comprehensive published algae research. For example, it has not yet been determined which algae

species will be most cost-effective and produce the highest biomass yields. Furthermore, multiple

processing techniques exist, using various components of the algae. It may be that no one algal

species or processing method is identified as optimal. In addition, scaling up the algae cultivation

process from small-scale research to commercial size has proven challenging, both technically

and economically, and the current research has not yielded new solutions.

Comprehensive studies of ABB’s energy balance, life-cycle emissions, environmental impact, and

water demand would also be needed for policymakers to understand the implications of policies

that promote ABB commercialization. Certain ABB production steps, such as mixing the water

during algae cultivation and dewatering algae to prepare it for biofuel processing, are energyintensive and therefore costly. Research into processes that reduce the amount of energy needed

and lower the cost could make ABB production more economical. Additionally, standards would

need to be developed for ABB production to ensure uniformity and assist with potential

regulatory compliance measures.

If ABB is to be used nationwide, in addition to solving production problems, additional research

would need to be conducted on major points of distribution and utilization, and availability of

inputs including water sources and CO2 sources (see Table 2). More analysis would be needed on

the best locations to site ABB facilities. Some might consider locating ABB facilities in the

Southwest, where there is plenty of sunlight and less agriculture than in other parts of the country,

but this region faces water supply concerns. Some might consider locating ABB facilities in the

Rice Belt (e.g., Louisiana, Mississippi), where there might be fewer water supply concerns.

Consideration of stationary CO2 sources will also likely have to be taken into account when siting

an ABB facility.

U.S. Department of Energy, National Algal Biofuels Technology Roadmap, May 2010.

According to DOE and the Algal Biomass Organization in 2011, the United States has a slight edge in ABB research

and development fields, but they also report that this edge could be surpassed quickly. China and Australia were

reported as countries that might surpass the United States in ABB research and development.

Personal conversation with Stephen Mayfield, Director, of the San Diego Center for Algae Biotechnology,

November 2011.

Jeremy Shere, “Backers Of Algae Biofuel R&D Want Equal Treatment,” Talking Points Memo (TPM), October 11,

2011, pp. http://idealab.talkingpointsmemo.com/2011/10/backers-of-algae-biofuel-rd-want-equal-treatment.php. The

Algal Biomass Organization has an algae industry map with the locations of algae production projects, research, and

more (see http://www.algaebiomass.org/algae-industry-map/). The projects identified are for the use of algae for

several purposes, and are not limited solely to algae-based biofuel.

This section highlights a few of the more important ABB research and development challenges. A list of challenges

composed by the DOE is available on p. 6 of the National Algal Biofuels Technology Roadmap, at

http://www1.eere.energy.gov/biomass/pdfs/algal_biofuels_roadmap.pdf.

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Algae’s Potential as a Transportation Biofuel

Table 2. Key Resource Requirements for Algae Systems

Algae Production Approach

Key Resource Requirements

Photoautotrophic Microalgae Production

Climate, water, CO2, other nutrients, required energy

inputs, and land

Heterotrophic Microalgae Production

Suitable organic carbon feedstock, water, energy, and other

inputs required for siting and operating industrial

bioreactor-based algae production, and post-processing to

fuels and other co-products

Photoautotrophic Macroalgae Production

Suitable coastal and offshore marine sites

Source: U.S. Department of Energy, National Algal Biofuels Technology Roadmap, May 2010, National Algal

Biofuels Technology Roadmap.

It is difficult to predict what ABB type might be most promising, and when it might be

commercial. Federally funded research efforts are at a significantly lower level for algae than for

other biofuels. While private companies periodically report their financial investment in ABB, for

proprietary reasons they rarely report scientific or technological breakthroughs. This limits the

ability of policymakers and analysts to assess and predict future ABB developments.

Legislative Issues

Congress has debated whether algae-based biofuel could help diversify the U.S. transportation

fuel portfolio. While Congress has created a policy that mandates the use of alternative fuels for

transportation (e.g., RFS2) and set up tax credits that support alternative fuel production, much of

the legislation and tax provisions for alternative transportation fuel is constrained to a set of

feedstock types (e.g., cellulosic) and fuel types as defined in the statute (e.g., ethanol, biodiesel).

Going forward, Congress may choose to reevaluate how it supports alternative fuels by possibly

expanding the feedstock and fuel types that qualify for transportation and energy mandates. For

example, in the past the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) amended

both the cellulosic biofuel production tax credit and the cellulosic biofuel depreciation allowance

to include algae-based biofuels. Both tax incentives expired at the end of 2013 and it is not known

if the incentives will be extended. Additionally, algae is eligible for one part of the Biomass Crop

Assistance Program (BCAP).44

Some in Congress have expressed interest in ABB because it could have significantly lower

greenhouse gas emissions on a life-cycle basis than conventional fuels.45 If ABB is to become an

alternative to help reduce U.S. dependence on petroleum and reduce greenhouse gas emissions,

some stakeholders contend that consistent, comprehensive, long-term (for the duration of multiple

congressional sessions) policy support, as well as further research and development, would be

required. Options that have been proposed for policies to encourage ABB include modifying the

RFS2, creating a federal low-carbon fuel standard, or placing a tax on carbon.

Algae is an eligible crop for the establishments and annual payment portion of BCAP. Algae is not an eligible

material for the matching payment portion of BCAP. For more information on BCAP, see CRS Report R41296,

Biomass Crop Assistance Program (BCAP): Status and Issues.

At present there are a limited number of studies that compare the greenhouse gas emission profile of ABB to other

biofuels and conventional fuels, due to some extent to the nascent nature of the industry. Some contend that significant

amounts of CO2 will be sequestered during algae growth.

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Algae’s Potential as a Transportation Biofuel

ABB advocates also assert that Congress could encourage the growth of the U.S. algae industry

by providing tax parity with other biofuels, appropriating additional federal funds for algaerelated programs, and modifying the RFS2 to be feedstock-neutral so that algae-based biofuels

can be more broadly included.46 Tax incentives may accelerate ABB research, development, and

demonstration testing, thus possibly shortening the timeline for commercial ABB production.

However, some might argue that it is premature to issue tax breaks to an industry that has very

few commercial production facilities. Furthermore, it may be that tax breaks for renewable energy

in general will phase out under the emerging policy environment of fiscal discipline and budget

restraint. Opponents of such support argue that Congress should not be involved in selecting

biomass feedstock types for biofuels before commercial success has been proven, or more

broadly, that Congress should not be selecting the technology at any point. Congress did select

certain feedstock types for biofuel production under the RFS2. At the time, industry assertions

and government data supported the argument that certain levels of cellulosic biofuel production

capacity would be achievable within the given time frame, although these have not come to

pass.47

Given the federal budget situation, Congress could decide to expand the cellulosic biofuel

definition for the RFS to include algae and let industry take the research funding lead. This could

give the ABB industry a long-term goal and guaranteed market as part of the RFS2 (for roughly

10 years). At a later time, perhaps after the ABB pilot projects that have come online yield data on

the feasibility of ABB production, Congress could have a legislative discussion about what

federal funding or other types of support, if any, would be appropriate.

Legislation introduced in the 112th Congress would have incorporated some of these ideas. In

general, proposed legislation either would have expanded the cellulosic biofuels definition for the

RFS2 to include algae by amending the Clean Air Act (codified as 42 U.S.C. 7401 et seq.), and/or

would have expanded the definition in the tax code for select tax incentives to incorporate

algae—which Congress did with ATRA. H.R. 1149 (112th Congress) also would have amended

the Clean Air Act to include algae-based biofuel in the renewable fuel standard program.

Conclusion

Algae-based biofuel is a potential domestic transportation fuel option that could help to smooth

fluctuations in petroleum supply, and it could potentially diversify the biomass feedstock supply

needed to meet renewable liquid transportation fuel mandates. The potential benefits of ABB

include per-acre yields reported to be significantly larger than those for other biofuel feedstocks

(e.g., soybean, jatropha), and the potential for algae to grow in water not traditionally used for

other purposes. The potential concerns of ABB include limited information about the costs of

large-scale ABB production, the amount of energy required, and life-cycle emissions analysis.

The need for large amounts of the greenhouse gas CO2 to grow algae may be a benefit or a

concern: algae cultivation could potentially contribute to emissions neutrality by reusing CO2

from stationary sources, but there are concerns about whether enough CO2 from existing sources

is available to support commercial levels of ABB production. The use of genetically engineered

Algal Biomass Organization, How Can Congress Support the U.S. Algae Industry, http://www.algalbiomass.org/

how-can-congress-support-algae/.

For more information, see CRS Report R41106, Meeting the Renewable Fuel Standard (RFS) Mandate for Cellulosic

Biofuels: Questions and Answers.

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algae could also be a benefit or concern: genetically engineered algae could lead to higher yields,

but also could have unintended consequences such as threatening aquatic ecosystems.

While the DOE has studied algae for at least 35 years, much of that research has focused on using

algae to produce biodiesel. Current research efforts examine the use of algae for jet fuel, power,

bioproducts, and more.48 Federal support for ABB has occurred through general agency programs

and specific projects.

Currently, there are no commercial-scale ABB plants,49 although a commercial demonstration

facility was completed in 201250 and ABB was offered for sale at retail pumps in late 2012 in

California for a limited time.51 ABB pilot facilities that came online over the last year may give a

better indication of ABB’s productivity potential and cost effectiveness.52 Even if ABB is

demonstrated to work at a commercial level at one or two facilities, it may not produce a

significant portion of the U.S. transportation fuel supply in the near term. Multiple commercialscale facilities that could possibly produce ABB in significant quantities will require financing, a

labor force,53 and distribution and supply infrastructure that may take some time to devise.

Because no ABB facilities are operating at commercial scale, it is not yet known what regulatory

issues might arise. As with many new technologies, regulatory issues and perception by the

general public are likely to be a concern.

ABB currently faces many of the same questions as were posed about biofuel industries that

preceded it (e.g., corn-starch ethanol). ABB is less developed than established biofuels industries

such as corn-starch ethanol. However, its development and deployment at commercial scale may

be informed by lessons learned from these industries. For instance, mastering the technology to

convert a certain feedstock to a biofuel may not happen in the timeframe predicted, regardless of

the amount of financial and technical assistance granted. Additionally, the development of cornbased ethanol showed that long-term contracts for feedstock supply and associated resource

requirements are vital to gauging the economic standing of biofuel production. Last, uncertainties

about policy support (e.g., inclusion in the RFS2, lowering RFS2 mandates, and expiring tax

provisions) and unforeseen competition from other fuels internal and external to the biofuel

industry could all have an impact on the bottom line and the aggressiveness put toward ABB

production.

Bioproducts are products made from biomass (e.g., plastics, glues).

Philip T. Pienkos and Al Darzins, “The Promise and Challenges of Microalgal-Derived Biofuels,” Biofuels,

Bioproducts and Biorefining, vol. 3 (2009), pp. 431-440.

“Sapphire Energy’s Commercial Demonstration Algae-to-Energy Facility Now Operational,” press release, August

27, 2012.

Solazyme, Inc., “Propel Fuels & Solazyme Deliver World’s First Consumer Access to Algae-based Fuel,” press

release, November 13, 2012, http://solazyme.com/media/2012-11-13.

One such project is the Algenol biofuels facility. Algenol reports that its research and development efforts at this

facility have led to peak production rates of 9,000 gallons of ethanol per acre per year. Algenol, “Algenol Biofuels

exceeds 9,000 gallons of ethanol per year per acre,” press release, March 6, 2013.

ABB production would likely require employees with a scientific and technical background (e.g., phycologists,

microbiologists, agricultural engineers).

Congressional Research Service

Algae’s Potential as a Transportation Biofuel

Author Contact Information

(name redacted)

Specialist in Agricultural Conservation and Natural

Resources Policy

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

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