Report: Cost Obstructs Path to Alagae-Based Biofuel Market Worth Billions

Among next-generation renewable fuel alternatives, algae stands out as one of the most promising and scalable options with the potential to supply key fuel and co-product markets. Strong demand from aviation and military consumers; technological breakthroughs in the production, cultivation, and extraction of algae oil; and the development of large-scale projects will be critical to widespread growth in the algae-based biofuels market.

According to a recent report from Pike Research, despite limited production to date, the scale-up potential of algae is substantial compared to other non-food based feedstocks. Although regulatory and policy uncertainty as well as competition from co-product markets will inhibit algae-based biofuels production initially, the cleantech market intelligence firm projects that the value of renewable fuels derived from algae will reach $1.3 billion by 2020.

“Due to the high costs associated with producing crude algae oil for the aviation, ground transportation, and other fuel end-markets, most industry ventures have pivoted away from a fuels-first approach to focus on the development of revenue streams from high-value, low-volume co-product markets,” said industry analyst Mackinnon Lawrence. “Scaleup of algae-based biofuels will depend on the realization of value in non-fuel end-markets. As key capital and operating cost hurdles are overcome, algae-based biofuel production should expand rapidly.”

Lawrence adds that the use of algae to produce crude oil for renewable fuel production can deliver a number of environmental benefits compared with other advanced biofuel feedstocks. Algae can be grown on non-arable land, co-located with stationary CO2 emissions sources, and use a wide variety of water resources, including wastewater and seawater. A number of algae ventures are making important headway with different strategies for maximizing yields while capitalizing on innovative pathways to mitigate the externalities associated with fuel and chemical production.

Pike Research’s analysis indicates that the algae-based biofuels market will be dominated by microalgae, which lends itself to rapid growth and genetic modification. Macroalgae will continue to generate interest in countries with large coastal regions, but investment in harvesting and conversion technologies is projected to lag behind microalgae R&D investments. North America and Asia Pacific are projected to account for 82 percent of algae-based biofuels production in 2020, representing at least 50 million gallons of algae-based biofuels per year.