South African algae biofuels company breaks down

Over the long to very long term, algae may offer an interesting potential for the production of biomass and biofuels. But much fundamental research is first needed to make algaeculture systems competitive and feasible, with some estimating that costs will have to come down 20 times before algae can compete with ordinary biofuels. Since algae research programs were discontinued in the early 1990s, no major biotech or engineering breakthroughs have been made in the sector, so we must assume that algal biomass yields remain the same as at that time, that is, between 30 and 50 tonnes per hectare - below the productivity of most tropical terrestrial crops (earlier post).

However, many entrepreneurs have quickly established algae companies, hoping they could profit from the hype that surrounds the technology. They have acquired the questionable habit of distributing optimistic but unsubstantiated press releases full of absurd yield projections. Very few of these companies have demonstrated their technologies (the ones that have used photobioreactors, which many researchers have dismissed as unfeasible because way too costly). None of the companies has ever shown a large-scale working system based on open ponds (the only system thought to have a future). And with all of them, yield projections are up to 100 times those of actual results obtained in field trials. In short, a hype has been created around algae that has not the slightest basis in science and reality.

With this background in mind, it does not come as a surprise that investors from South Africa feel betrayed by one such an algae company that kept issueing press releases with false numbers and that created absurd expectations. The virtual collapse of De Beers Fuel (no connection with the diamond-mining giant), which had promised South Africa vast quantities of cheap biodiesel produced from algae, has left a stink in the biofuels industry there.

The company had teamed up with US-based GreenFuel Technology - another algae company - whose technology it licensed. But in what is a blow to the algae hype, the licensing agreement has been terminated owing to “nonperformance” by De Beers.

The algae company was recently 'exposed' by an investigative programme as a scam (earlier post) and Engineering News now finds that investors in the company, who invested up to 6 million Rand each in biodiesel plants, in what was trumpeted to be the world’s first fuel-franchising scheme, today have nothing but paper to show for their money. Not one plant has been built and the company has been spewing fake numbers on the technology's potential and outright false statements about its order book:
bioenergy :: biofuels :: energy :: sustainability :: biomass :: biodiesel :: algae ::South Africa ::

The amount of money lost by investors, and the number of investors who have lost money, could not be determined owing to conflicting information on the value and number of plants sold.

De Beers Fuel marketed the concept under the Infiniti Biodiesel brand name. Shareholders were promised plants capable of producing tens of thousands of litres of biodiesel every day, and exclusive offset areas. These plants would initially process conventional vegetable oils, like sunflower oil.

However, from the company’s public launch onwards, a more exciting, if somewhat strange, source of alternative feedstock was punted – algae. De Beers Fuel started a relationship with Green- Fuel Technology Corporation, of the US, which had been working on the development of a strain of algae suited to the production of biofuels.

One of the founders of GreenFuel Technology, Dr Isaac Berzin, researched the use of algae on the International Space Station and at the Massachusetts Institute of Technology. Berzin and GreenFuel Technology inter- national MD Paul Rodzianko visited South Africa in November.

De Beers Fuel founder Frik de Beer and adviser to the company’s board, Hendy Schoon-bee, sang the praises of algae as a feedstock for biofuels production during a media visit to the company’s demonstration algae bioreactor in Mookgopong (formerly Naboomspruit), which coincided with Berzin and Rodzianko’s visit.

Also accompanying the group was Stretch Fowler, of Green Star Products, the US company contracted by De Beers to build 90 high-pressure biodiesel reactors, and Matthias Wackerbauer, of MWK Biogas, of Germany.

The experts expanded on the potential of algae technology to provide large volumes of algae feedstock for biofuels production in South Africa. The fact that De Beers was the first company to receive a licence for commercial biofuels production from the South African Revenue Service was also mentioned frequently.

At the time of the visit, the media was told about De Beers Fuel’s ambitious plans to produce feedstock for between 16-billion litres and 24-billion litres of biofuels a year.

Moreover, by enabling the propagation of large volumes of relatively cheap renewable algae feedstock, De Beers would limit the use of food-crop feedstocks, such as sunflower and soy, in local biofuels production.

Besides giving South Africa biofuels, algae technology would consume carbon dioxide, as algae depended on large amounts of carbon dioxide for its rapid growth. Plans were made known to deploy a fuel- assessment unit at the Kelvin power station, in Johannesburg.

The technology would also be tested in other locations in South Africa. To prove De Beers’ abilities, visitors were shown a production plant that, according to De Beer, produced 144,000 liters/day of biodiesel and was being run 25 days a month, and had 50-million litres of diesel on its order book every month.

However, on April 1, popular investigative programme Carte Blanche ‘exposed’ the company when it aired a programme on De Beers Fuel. When questioned by Carte Blanche, De Beer said that the company had only sold 41,000 liters of biodiesel and had 39,000 liters in its tanks, ready to be sold.

And, while investors in De Beers and Infiniti Biodiesel were given the impression that algae was an almost immediate solution to the antici- pated shortage of vegetable oil for biofuels production, in truth, the production of algae feedstock is viewed as a third-generation technology.

Rodzianko then said that, “on an accelerated schedule, the earliest that a commercial-scale facility would be available [would] probably be the end of next year, to the beginning of 2009”.

Even after being exposed, De Beers continued to publish on its website unrealistic claims about its abilities. The company also continued to point out its relationship with GreenFuel Technology, which had received the prestigious Frost and Sullivan technology innovation award of the year.

GreenFuel has since terminated the licensing agreement with De Beers Fuel owing to “nonperformance”. It also requested that the company remove any reference to the agreement from its website.