Algae biofuel, an alternative source of energy
Abstract
Across all sectors, the European Union is making efforts to decrease emission of greenhouse gasses. One of the few sectors that is still growing in terms of emission is the transportation sector. Algae biofuel is considered as an alternative source of energy for existing automobiles. In this paper it is compared to existing sources of energy in terms of cost efficiency and environmental impact. Based on the cost analysis, the introduction of the new fuel product is evaluated in a hypothetical situation in order to determine whether governmental support is necessary to compete with the existing products. Although the preliminary market price for algae biofuel is at a competitive level, realising the production is the greatest issue due to the high costs and land needs. The European Union is recommended to either subsidize the production in order to have the issue resolved through competition, or to support research and development into higher yield production methods.
Names: Major: Student numbers:
Sabine de Haes Earth & Economics 10203230
Jona de Kruif Ecology 10217096
Jan Lebens Economics 10203958
Marijn Louise Sauer Earth & Economics 10281835
Tutor: Jaap Rothuizen MSc
2. Table of contents
1. Title and abstract2. Table of contents 3. Introduction 4. Methodology
5. Theoretical framework 6. Results
6.1. Advantages over other biofuels 6.2. Algae biofuel product and production
6.2.1. Algae production
6.2.2. Techniques for production 6.2.3. Price of algae biofuel 6.2.4. Impact on environment
6.3. Production capacity within the European Union 6.3.1. Production requirements
6.3.2. Spatial needs and resources 6.4. Competing with petrol
6.4.1. Price of petrol
6.4.2. Present state of competition 6.5. The need for governmental intervention
6.5.1. Governing tools 6.5.2. The subsidy case 7. Conclusion
8. Discussion 9. Literature list 10. Data sources
11. Appendix A. Finding common ground 12. Appendix B. Earth Scientific Theory Figures 13. Appendix C. The price of petrol
14. Appendix D. The price oil oil 15. Appendix E. GIS-maps
3. Introduction
The leaders of the European Union (hereafter: EU) agreed on the 23rd of october 2014, on a 2030 policy framework that aims to make the European Union's economy and energy system more competitive, secure and sustainable. The policy includes targets such as a 27% renewable share of the energy production and a reduction in greenhouse gas emissions of at least 40% compared to 1990, by the year 2030 (European Commission, 2015). The transportation sector accounts for 26% of global CO2 emissions and is one of the few sectors where emissions are still growing. In fact, the transportation sector is the second largest polluter after the energy production sector (Chapman, 2007).
Algae biofuel is a carbon neutral alternative (Chisti, 2007) to petrol and can be used in existing engines without modification (Mascal et al., 2014). Microalgae are photosynthetic microorganisms that convert sunlight, water and CO2 to algal biomass. Many microalgae are exceedingly rich in oil, which can be converted to biodiesel using existing techniques (Chisti, 2008). As cars will not have to be modified, algae biofuel can compete with existing fossil fuels. If algae biofuel would account for 40% of fuel consumption, the emission of CO2 by the transportation sector would have also been reduced by 40%. Algae were first explored as a fuel alternative in 1978 under President Jimmy Carter by the Aquatic Species Program. Gas prices had skyrocketed, lines at the pump were endless, and the government of the United States of America was looking to help ease the crisis (Sheehan et al., 1998). In the National Renewable Energy Laboratory, high oil-output algae for biofuel was searched. More than 3,000 types of algae were tested, and the program concluded that the high-yielding plant, if produced in large enough amounts, could replace fossil fuels for home heating and transportation purposes (Sheehan et al., 1998).
However, the production costs for this biodiesel were two times higher than the current petroleum diesel fuel costs, so little prospect for this alternative was given (Sheehan et al., 1998). Now, 20 years of technological advances later and with oil reserves depleting, it may be worth to consider this alternative once again.
This research will explore the possibilities of algae biofuel as a car fuel alternative, in order to decrease emissions in the transportation sector by answering the following research question. How can the introduction of algae biofuel, as an alternative car fuel, contribute to the realisation of the EU emission targets for 2030?
4. Methodology
Climate change may be the biggest societal and most complex environmental-related problem for international co-operation this century and beyond (Muller, 2002). With the aim of the research with conducting a possible (part)solution to the rising atmospheric CO2, this does not include only one, but several disciplines. As not only ecology is needed (research on suitable algae), also geology (spatial considerations, geopolitics) and economics (costs versus profits) are needed to aim at a valuable conclusion. Therefore, an interdisciplinary approach has been chosen, with the different disciplines; Ecology, Earth science and Economics.
As stated by Repko (2012), an interdisciplinary approach is needed when a problem is complex and viewpoints of more than two disciplines are needed for understanding the problem. Also considering the complexity of the issue, not one single discipline can address the problem, important insights from multiple disciplines are needed. We created common ground on the term efficiency. As stated in general, efficiency means the smallest input produces the largest output, this had a controversy in our research. In Ecology, this means the less nutrients as input, with the largest yield of algae. However, as stated by economist, efficiency means using the least amount of capital to produce the most. To find common ground, we stated in this research that efficiency is to generate with as little financial resources (which also includes costs for nutrients, space etc.) as possible the largest yield of algae. Thus, most net yield is generated. In appendix A the structure that leads to our common ground can be viewed. Below the sub chapters are stated with the used method.
1. Advantages over other biofuels
This subquestion explains why algae biofuels are chosen for this research. This is done by comparing algae biofuel to alternative biofuels. The comparison is made by making use of literature.
2. Algae biofuel product and production
For earth science and ecology a literature research is aimed at creating knowledge regarding the characteristics of microalgae and different production methods, which are used to conduct biofuel. The possibilities of the different production methods to compete against petrol is the main focus. In order to get a better understanding the main conditions for the production of algae biofuel are analyzed, in order to create a better understanding of spatial potential, production potential and costs. Therefore, the goal of these sub question is to distinguish the potential best process method to compete with petrol.
Algae biofuel 1. Historical production cost development 2. Production site requirements
3. Production capacity within the European Union
In order to determine the potential production capacity in Europe, we have ascertained the spatial needs of a production facility through others’ research. This allowed us to estimate the number of production facilities needed and total cost of construction.
4. Competing with petrol
The price of oil and petrol in 2030 will be computed using historical data. By performing a regression test on the historical data, an equation is obtained that constructs the best fitted line, dependent on a time variable. Regression analysis is a process through which a relation can be determined between variables.
5. The need for governmental intervention
Literature research will be used to create geopolitical and economic insight in the introduction of algae biofuel on the fuel market and if/ what kind of governmental intervention should be needed.
First, research is conducted on the position of oil producers and their investments in algae biofuel. When the private sector invests in the technology and/or production of algae fuel, probably less governmental intervention is needed (Klijn & Teisman, 2000). Assuming oil producers are rational decision makers with no further agenda than maximize profits, not bound to contracts and a preference for short term results rather than long term ones, a conclusion can be made for governmental
intervention. Second, different EU governmental tools will be examined, which can be used by the government to potentially lower the demand for fossil fuel and increase the one in algae biofuel. Here the assumption is made that the EU is willing and capable to use every governing tool in her power. After, the kind of reaction expected when implementing a governing tool is set forth with the use of the Green Paradox theory (Sinn, 2008). However questionable if this will occur, as described in several studies (Grafton, Kompas & van Long, 2010; Edenhofer & Kalkuhl, 2011; Hoel, 2013; Gerlagh, 2011). With these insights, a conclusion can be drawn on which tool can be used best in order to derive the desirable outcome of the implementation of algae biofuel, without any paradoxical outcomes. Hereby the assumption is made that when emissions decline by the use of algae fuel instead of fossil fuel, these emissions are not compensated by another sector. This because the overall aim of the EU is to reduce the total emissions by 40% in 2030 compared to 1990, and not only in the transportation sector.
5. Theoretical Framework
In this chapter all theories with their associated assumptions are set forth in order to conduct a valuable answer on the question How can the introduction of algae biofuel, as an alternative car fuel, contribute to the realisation of the EU emission targets for 2030?
Earth science
Anthropogenic climate change
The interventions of this theory are of relevance for the pressure on the rate in which the EU will have to shift to more sustainable resources for road transport such as algae fuel. Depending on the choice of scenario’s adduced by the Intergovernmental Report on Climate Change (IPCC), the EU will have to adapt its policy to be able to achieve its goals concerning CO2 reduction.
For the development of this theory the IPCC plays an important role. It is the leading international body for the assessment of climate change since 1988 and has ever since gathered scientific, technical and socio-economic data and information concerning causes and effects of climate change (IPCC). Since the previous century there is growing consensus that substantial climate change is caused by greenhouse gases emerged from human activity (Johns et al, 2003). In the fifth assessment (AR5) in 2014 of the IPCC, apparently scientists are more than 95% certain that a major part of global warming is caused by anthropogenic activities. In the box in the appendix B.1, observations of an increasing average overall temperature is visible. Projections in this assessment show scenarios with a mean rise of a number between 0.3 and 4,5 degrees at the end of the century (IPCC, 2014).
The theory is reinforced by analyses of the ecological consequences of human activity, based either upon simplified climate models, expert opinions, or predictions from general circulation models and statistical tests.
However, simplifications could lack several important factors, which is currently emphasized by skeptics. Furthermore, projected increasing temperatures differ quite strongly due to, for example, uncertainty about the balance of greenhouse warming and sulphate aerosol cooling. Despite evidence provided by climatologists and other scientists, there still is lack of long term knowledge of the most recent human actions, and therefore certainty about the consequences of anthropogenic pollution up until now remains feeble (Myles et al, 2000). Thus, intensification of quantification of long term effects is needed. Overall, a positive causal relation is scientifically observed between the actions of human and climate change. Even though there still is uncertainty about the precise drivers, pressures, states, impacts and responses to climate change, IPCC has agreed upon the fact that adaptation and mitigation measures are essential for protection of future societies (Chmielewski, 2002).
Peak Oil
The theory of Peak Oil emphasizes the need for resources replacing fossil fuels. It is of relevance for this research because of the potential of algae fuel to function as a substitute for fossil fuels in the transport sector.
Geophysicist Marion King Hubbert contrived the concept ‘peak oil’ in 1956. The theory implicates the phenomenon of how the production of crude oil grows, reaches a maximum at a certain point and then
gradually decreases to zero (Bardi, 2009). The bell shaped figure, as demonstrated in appendix B.2 is shaped by accumulating the yields of found oil fields through time: production increases when the oil field is found, and decreases again as soon as the field gets exhausted (Tao & Li, 2006). With the logistic equation P=aQ(1-Q/R),whereby P stands for the annual production of oil, Q the cumulative production which can be derived from P, R denotes the ultimate reserves and the parameter a is the intrinsic growth rate; the oil production can be estimated (Tao & Li, 2006). Verification of the theory happened in 1971 in practice: the oil production in the US peaked conform the symmetric shape, ever since, the theory is globally applied to oil production. According to Bardi (2009), oil production has declined since 1971 for 33 of the 48 important oil producing countries. It is expected that the worldwide oil Peak will occur in the early decades of the 21st century(Ugo Bardi, 2009).
Rammelt and Crisp (2014) endorse this idea by implicating the concept of ‘balancing feedback’: the point where, in this case in oil fields, extraction costs will outweigh benefits, resulting in decreasing
investments in new oilfields. This phenomenon is however inhibited by the fact that the scarcer it gets, the higher the price, and investing at a sudden point will get interesting again (Rammelt & Crisp, 2014). Critics on this theory mainly express exceptions on the rule. Not all cases show a bell formed production curve such as Saudi Arabia, or some show double peaks; Russia and Iran. Also, the assumption made in Hubberts’ concept is based on a free market economy: geopolitical and technological innovation factors for example are not taken into account (Ugo Bardi, 2009).
Ecology
Invasive species theory:
An invasive species is a non native species, which is believed to the ecosystem, human economy or human health. With the current transportation not animals and plants are more often transported to not native areas. Generally the species are with too little or do not survive the new environment. In some cases however an animal or plant manage to adapt and reproduce on an extremely high level, this is mainly due to a lack of parasites or natural enemies in the new environment. The high reproduction of a new non-native species can do enormous harm to the local species in terms of competition or
predation of the exotic species. By outcompeting or eating of local species, certain local species will decrease and might even go extinct. Because ecosystems are extremely complex the extinction local species can have an enormous impact (colautti et al, 2004),(Lowe et al.,2000). The theory of invasive species can used for open ponds systems in two ways. Firstly the invasiveness of the algae to the environment and secondly the local species to the ponds systems.
Autophagy:
The autophagy theory is first discovered by Keith Porter in 1962 (Porter,1962). By addition of glucagon in rats, the amount of lysosomes in the liver cells increased. This was therefore also the first research done in intracellular digestion. Christian de duve introduced the autophagy as theory, which is nowadays widely accepted as a general theory (Kiionsky,2008).
Autophagy is a catabolic process, where lysosomes degrade unuseful or dysfunctional components of the cell (Lin et al, 2012). Autophagy generally occurs, when the organism is exposed to not favourable environmental conditions. This mechanism creates new lipids, which can be used as energy resources for the organism. When autophagy exactly occurs is still not clear for a lot of organisms. Algae are one of these organism, where is still little known about (Lin et al, 2012).For a high production capacity of algae
biofuel as renewable research, more research therefore has been done on this subject. Moreover a increased amount of lipids in algae will increase the potential of algae biofuel, therefore this theory is from great relevance.
Currently an important subject of research to autophagy is in combination with potential cancer treatment techniques. Autophagy plays a role in the tumor as well as in the suppression. A better understanding of this process might provide better/more insight in the fight against cancer (Furaya et al, 2012). The focus on autophagy on algae however is less focused on at the moment.
Ecological Resilience:
C.S. Holing introduced the resilience theory in ecological systems, which were influenced by natural or anthropogenic causes (Holing,1973). The resilience theory focus on the adaptability by changing environment, before the systems shifts to an new equilibria. The less the disturbance influence the steady-state of a system, the higher the resilience is. (Folke et al,2004) Resilience consist of four underlying concepts. The latitude is the maximum amount of disturbance a system can recover from. Resistance is the difficulty to change the system by disturbance. The precariousness is the distance to a threshold from the system. At last panarchy focus on the interactions in the system itself (Walker et al,2004).
The resilience theory is introduced in a lot of disciplines and widely accepted as a reliable theory. Resilience changed also the visions on conservation and even policy makers. The idea to create a stable resilient system instead of solving the problems was a new insight for a lot of different disciplines and work fields (Gibbs,2009). Resilience has a high relevance for this research, because the pumps are an open system. That means a lot of disturbance from the direct environment, therefore the algae pumps must be resilient.
Economics
Green Paradox:
The Green Paradox theory is coined by the German economist Hans-Werner Sinn in 2008. He was convinced that instead of mulling over for the thousandth time about which technical measures can be applied to reduce CO2 emissions, we should turn to the core question of how to induce the resource owners to leave more carbon underground, as that is the sole possible way to solve the climate problem. (Sinn, 2009)
Because according to Sinn, fighting climate change through fossil fuel demand-reducing policies that are intended to flatten the time profile are paradoxical. The impact of such policies only steepens the extraction path of fossil fuels rather than flatten it. ( van der Ploeg and Withagen, 2010). Although the measurements to reduce consumption exert an increasingly stronger downward pressure upon the world’s fossil fuel market price and dampen the rate of increase in such prices, the supply side is not taken into account.
However, several research have been conducted on the likeliness of the occurrence of the Paradox. Grafton, Kompas & van Long (2010) concluded that the Green Paradox can be caused from a policy of biofuel subsidies, but is not a general result. This depends on demand and supply elasticities,
technological change in fossil fuel extraction and how extraction costs respond to changes in remaining reserves.
& Kalkuhl. 2011; Hoel, 2013). For instance, if policy is aimed at the supply-side, no Green Paradox will occur (Hoel, 2013).
An important insight to our research problem is that Hoel also states that cheap clean energy causes a Green Paradox as much as carbon tax plans, especially when this energy is a future option instead of immediately available. (Gerlagh, 2011)
6. Results
6.1.
Advantages over other biofuels
Petrol is a product of crude oil and so are all other fossil fuels. Biofuels though may have similar properties but are not necessarily of similar origin. Algae biofuel is a product of the lipid content of the algae organisms, triglycerides. Algae biofuel has many advantages over alternative biofuels produced from land plants. First of all algae are the fastest growing organisms and therefore algae are highly suitable for production purposes (Radakovits et al, 2010). Secondly the algae biofuel factories do have less and different criteria for suitable land compared to normal agriculture or nationals parks (Sumatra is under high deforestation stress, because of palm oil plantations (Teuscher, 2015).) , therefore algae biofuel will less to not compete for land against agriculture of national parks.
Furthermore less fertilizers and no pesticides are necessary, which results in less environmental impact. The species of algae used for the production are well adapted to nutrient low environment, because less nutrients are needed (Bessemer, 2007). Algae are adapted to lower nutrients amounts, because of their triglycerides. These triglycerides contain high amounts of oil, which are the reserves of the algae. Because of the high amount of these reserves algae do have a much higher oil content compared to land plants (Bessemer, 2007).
Fourthly, algae biofuel over other biofuels require fewer square meters of production facility to produce a similar quantity. Palm oil for example requires 61% of the United States agricultural area to fully supply the fuel market whereas algae biofuel would only require 3% (Chisti, 2008). Also, an important
ecological benefit of algae fuel production is their capability to fixate CO2 out of the atmosphere or in PBRs, collected from polluting industries or power plants. Making the fuel a sustainable source for transport..
The last advantage is that it is more acceptable socially due to the fact that other biofuels are often made of edible plants and vegetables. This relates to the discussion on biofuel production over food production. One of the main disadvantages of algae is that there is still little known about the different species and optimizing the process. But the advantages over alternative biofuels are so overwhelming that algae biofuel has by far the highest potential of the alternative biofuels.
6.2. Algae biofuel product and production
6.2.1. Algae production Proces
Algae have a lipid metabolism. The lipids used by algae are called triglycerides. These triglycerides are used for the storage of energy. Extraction of these triglycerides from the algae creates the biofuel (Bessemer, 2007). The different processes involved in algae cultivation are; growing, harvesting, biomass processing, oil extraction and biodiesel production. (mata et al., 2010). The biomass processing consists of dewatering, thickening, filtering and drying the algae as demonstrated in the model in appendix F. After this process the cell get disrupted and the oil get extracted. From the extracted oil, biodiesel get transesterification, from the remaining biomass ethanol can be produced (Sivakumar et al.,2012).The remains can be used as fertilizers, animal feeds or biopolymers (lundquist et al.,2010).
Conditions
The main ecological conditions that determine efficiency of the production process are the temperature, carbon dioxide saturation of the water and the nutrient availability. In order to have an optimal
production process, the temperature must be between the 20-35 degrees (Lundquist, 2010). Sufficient water is necessary for the production of algae, because the evaporation will cause a high rate of water loss. Algae also thrive in a carbon dioxide rich environment, but enrichment of water with carbon dioxide is a costly process (Bessemer, 2007). The addition of CO2 increases the growth and amount of algae in the pumps. Moreover the pumping process of CO2 is expansive. To maximize this process the PH has to be optimized for CO2 saturation. According to (Lundquist, 2010) the PH is optimal between 7.8 and 8.5. The oxygen concentration has to be controlled, because an high concentration of oxygen can cause photo-oxidative damage to the chlorophyll reaction centers. This causes inhibition of
photosynthesis and reduces the productivity. (Miron,1999). For the algae systems, water with a high salinity is favorable, because more algae species are adapted to this environment and because the salinity increases the resilience of the system. On the other hand increases salinity the evaporation of water, which means that more water need to be used (Borowitzka et al, 2010).
The main nutrients, which are necessary for algae are nitrate (ammonia) and phosphate (an et al, 2013). However, compared to agriculture the nutrients addition is less, because most algae can survive in nutrient-low water (Lundquist, 2010). The optimization of the photosynthesis of algae is also an important issue. The so called light saturation point is the optimal concentration of irradiation for photosynthesis. Too much UV radiation will cause contamination of the algae. It is technically still difficult to reach this perfect saturation point and even distribution of light intensity in the pumps. Therefore this is one of the issue, where technical revolution will increase the optimization of algae productions. There are also three unavailable losses related to light. These are inactive photon absorption, reflection and respiration, these therefore are normally not taken into account by the optimization of the system. (Vijayaraghavan et al,2009)
For the algae systems water with a high salinity is favourable, because more algae species are adapted to this environment and the salinity increases the resilience of the system. On the other hand salinity increases the evaporation of water, which means that more water needs to be used (Borowitzka et al, 2010). The second problem is that addition of CO2 increases the growth and amount of algae in the
pumps. Moreover the pumping process of CO2 is expansive. To maximize this process the pH has to be optimized for CO2 saturation. According to (Lundquist, 2010) the pH is optimal between 7.8 and 8.5. The main nutrients, which are necessary for algae are nitrate (ammonia) and phosphate (An et al, 2013). However, compared to agriculture the nutrients addition is less, because most algae can survive in nutrient-low water (Lundquist, 2010). Another advantage of this technique is that minimization of nutrients is less, because there is no leaching (An et al, 2013). The optimization of the photosynthesis of algae is also an important issue. The so called light saturation point is the optimal concentration of irradiation for photosynthesis. Too much UV radiation will cause contamination of the algae in open systems. To reach this perfect saturation point and even distribution of light intensity in the pumps is technically still difficult. Therefore this is one of the issues, where technical revolution will increase the optimization of algae productions. There are also three unavailable losses related to light. These are inactive photon absorption, reflection and respiration, these therefore are normally not taken into account by the optimization of the system (Vijayaraghavan et al, 2009).
Algae characteristics
The microalgae currently mainly used for algae biofuels are Spirulina (Arthrospira Platensis), Dunaliella Salina, Chlorella Vulgaris and Haematococcus Pluvialis. Spirulina is a cyanobacteria and the rest of the microalgae are green algae (Lundquist, 2010). The two most important traits for a successful algae are a high growth rate and a high lipid percentage compared to body mass (Bessemer, 2007). The lipid percentage compared to body mass of algae can grow by autophagy, although limiting resources for algae results in a lower growth rate. The challenge therefore is to optimize the trade off between the two processes in such a way, that resource will be lowered in the end of the growing process of the algae (Bessemer, 2007). At the moment Dunaliella tertiolecta has the most potential to reach the highest growth rate. Even though still little is known about this specific species and it is not used in algae biofuel tests before. Therefore tests on this species need to be done (Campbell, 2009).
Algae are a really diverse group of organism, which presents a lot of opportunities for genetic modification. Some of the focus of the research to genetic modification at the moment are high
photosynthetic conversion efficiency, rapid biomass reproduction, capacity to produce a wide variety of biofuel feedstocks, high percentages of lipid compared to body mass and the adaptation to diverse ecosystems (Radakovits et al, 2010). Tools to genetically modify algae have recently increased and therefore genetic modification is a good tool to optimize the traits of the algae.
6.2.2. Techniques for production Open systems
During world war II attempts to grow algae for food supplements in open ponds were started by Germans. During the 70’s algae were grown in open ponds for commercial ends in Japan, Israel and Eastern Europe (Ugwu et al. 2008). In the US, water treatment was done by developing algal pond systems. Open ponds can be divided into natural waters such as lakes, lagoons or ponds; or artificial waters or containers (Ugwu et al. 2008).
Some disadvantages of open pumps are the dissolution from air into water, which limits the growth. Secondly the flotation of dead and living algae limits the available sunlight. These problems can be overcome by inducing a paddle, which creates water circulation. Pumps containing such a system are
called raceways. The mixed raceway ponds are at the moment on of the most efficient. (Lundquist, 2010)
The mixed raceway ponds are shallow, because of light dispersal the ponds have a depth of only 0.2m.. The biomass density is therefore low (0.3 g DW per liter.), because of this low density cost for harvesting in this ponds are extremely high compared to the costs of the rest of the process. The capital
investment for example is relatively low, which give these ponds high potential to compete economically against alternative biofuels and may be even against petrol (Spolare et al.,2006). Mixed raceways are probably the only type of open water ponds, which is suitable to large scale production (Ugwu et al. 2008). An important condition however is the dependency on an year-round temperature between 20-35 degrees. Capital costs are low, the most expenses are in the harvesting, therefore half-year could be optional, but not favourable. (Bibeau, 2009).
Ecologically, however raceway ponds have difficulties, because the pumps are open. An open system is generally more difficult to predict and control. Furthermore the environmental influence will increases competitors for nutrients and light and parasites. To create a high resilience knowledge about species of the direct environment is necessary (Lundquist, 2010). The possibilities of unlikely events are; outgrowth by other algae. These algae will compete for the nutrients and light. Secondly bacteria and allelopathic interactions, toxicity by bacteria or other organism by biochemicals. As third diseases and infections by bacteria or viruses. And at last grazing by zooplankton (John,2012) Moreover because of this open system more traits are necessary for the algae, these are competitive behaviour, disease/grazer resilience, organic N/C utilization and self-flocculation (John, 2012). Under greenhouse cultivation conditions, an open system could produce up to 21 g/m2/d (Suali & Sarbatly, 2012).
Closed systems
Since the 90’s, several studies increased insights on the multifunctional values of algae, i.e.;effective for carbon dioxide fixation, biosorption of heavy metals and production of cellular compounds. The
problems with open ponds, including uncontrollable environments, evaporation, low volumetric productivities, contamination, limited species suitability and need for large land areas triggered new systems for production of algae oil (Alabi et al., 2009). To overcome these problems, closed systems were developed, ranging from laboratory to industrial scale, with the advantage of more controlled cultivation (Chae et al., 2006). Closed photobioreactors (PBR) have proven higher biomass productivities and control of contaminations. However, until now, only very few of the photobioreactors effectively use solar energy for mass production of algae. Lack of (costs-) efficiency currently seems one of the major backsets for mass algae production (Ugwu et al., 2008). Because they are closed, favourable conditions will have to be created with technology.
Efficient outdoor photobioreactors facilitate a large illuminated surface with a combination of natural and artificial light. Few reactors have proven to be technically efficient for production of algae oil. Tubular reactors that are flat-plate and horizontal photobioreactors seem most efficient, but are hard to scale up. Mass production of algae is possible by compact photobioreactors such as airlift,
bubble-column and stirred-tank photobioreactors, though more artificial light is needed, due to less illumination (Ugwu et al. 2008). Besides light, temperature is an important factor for growth; in
large-scale photoreactors, tempering is only achieved with high technological efforts (Ugwu et al. 2008). A key issue in closed systems such as tubular reactors, for mass production is the reduced growth rate related to stress of pumping. Mixing is necessary for turbulent flow of the algae, for optimizing
catchment of light. By enlarging scales, the flow must be increased, which can consequently damage the cells (Gudin & Chaumunt 1991).
On basis of the most recent technology on PBR, conclusions can be made that, where space, natural light and suitable temperatures lack, algae fuel production in PBR’s a more feasible option than open systems (Alabi et al., 2009).
6.2.3. Price of algae biofuel
Suali & Sarbatly (2010) concluded that that microalgae accumulates up to 73.4% lipid content and when refined to crude oil, can be converted to biodiesel through a transesterification process. The
transesterification process occurs in a reactor where the blended methanol and catalyst react with the triglyceride present in the algal oil. Biofuel as a petrol substitute is obtained through hydrogenation of the crude oil. Of the lipid content, up to 90% can be converted to crude oil. This translates to a 66.06% litre crude oil yield per kilogram of microalgae biomass (Suali et al., 2010). Due to a lack of data, the conversion rate of crude oil to biogasoline will be assumed by us to be 1:1. This allows us to interpret results presented as cost per kilogram of microalgae biomass and convert them to cost per litre of biofuel.
Table 1. Algae biofuel production cost.
Cost Unit presented Article
$5.75/L $3.80/kg Chisti, Y. (2007)
$2.53/L $302.00/bbl Lundquist, T. J., Woertz, I. C., Quinn, N. W. T., & Benemann, J. R. (2010)
$2.59/L $9.84/gal Davis, R., Aden, A., & Pienkos, P. T. (2011) $3.09/L $12.73/gal Richardson, J. W., Johnson, M. D., &
Outlaw, J. L. (2012)
$2.80/L €1.6/kg to €1.8/kg Slade, R., & Bauen, A. (2013)
The data presented in table 1 includes cost per quantity results of other articles. On average the cost decreased by 9.38% annually, assuming that the costs decreased continuously between 2007 and 2010. The costs presented however, vary in situational factors such that the costs appear to be increasing, which would be a violation of the concept of technological improvement.
The data then does not provide a solid base for a prediction of the 2030 price of algae biofuel. However, for this project we will construct the price development as follows: as the production cost decreased by
9.38% annually based on this data, but can not be assumed to decrease by forever, the decrease will diminish over time resulting in a long term projection of the expectation. The technical improvement of the production process then decreases the cost by the square root of the average improvement over the data available. This decrease is entirely based on our judgement alone and does not represent actual ongoing research and development. By this method a price of €1.80/L is obtained by 2030.
Algae biofuel producers can apply for a wastewater treatment credit when their production facility uses wastewater. This credit is able to reduce operating costs significantly and has lead to a 20% production cost decrease in a case considered by Lundquist et al., 2011. Considering this decrease, the lowest production cost currently would be €1.83/L. As this is not available to every production site, we will not include this credit in our price forecast.
The production cost provided by Slade & Bauen (2013) $2.8/L, at todays exchange rate (15th of March, 2015) of 1.05 $/€, that can be converted to €2.67/L. This will serve as the proxy in the present state of competition (6.4.2.).
6.2.4. Ecological impact on environment
The highest ecological impact, when using open systems, will be salinity of the environment. However, in environments with already a high salinity, for example close to the sea, the salinity has little to no impact on the environment (Lundquist, 2010). Compared to other renewable fuels, the ecological impact of algae productions is very low. Especially compared to agriculture the footprint of algae systems is substantially less. Another advantage over agriculture, is that the land does not need to be suitable for agriculture. Although land with low permeable soils are favourable. (Borowitzka, 2010).
Another form of ecological impact can be, due to the species itself. In open systems the species have to be good competitors and therefore spreading to the surrounding environment is likely event to happen causing problems. The invasion of a well adapted species to the environment can cause
extinction, because outcompeting local species for nutrient and sunlight. An ecosystem is an really complex system and interaction of an invasive species can have major impact if the system get unbalanced (Lowe et al.,2000)
The two alternatives to overcome this problem are an low invasiveness capacity of the species or the species should not be an exotic species to the environment (Lundquist, 2010).
6.3. Production capacity within the European Union
6.3.1. Production requirements
As of 2010, the 27 member states of the European Union consumed 92 912 000 000 kg of motor spirit combines. Petrol weighs in at 0.719 kilograms per litre. Converting this to total litres consumed results in a total consumption of 129 223 922 000 litres, or 1 083 729 000 barrels. As algae biofuel is carbon neutral (Chisti, 2007), replacing petrol consumption will directly decrease emissions by equal
percentage. To decrease emissions by 40% in this sector, algae biofuel will have to account for 40% of the fuel demand or 433 491 855 barrels or 51 689 568 800 litres given the 2010 consumption level. As
data on fossil fuel consumption in the EU is often depicted as a trade-off between the increasing
demand in the transportation sector and the decreasing demand in the energy sector. As the population growth in the EU member states is expected to stagnate according to a report by the European
Commission in 2008, we expect the 2030 demand for fossil fuel to be equal to the demand today.
6.3.2. Spatial needs and resources
Design and the type of photobioreactor should, amongst others, depend on the geographical location. For outdoor photobioreactors, weather conditions should be steady, warm temperatures are desired and the more sunlight the better; this makes the tropics an attractive place for cultivation. Also, vast areas of land are required for mass cultivation of algae production in open systems (Ugwo et al. 2008). The question rises whether the European land is suitable for mass production. Especially for outdoor photobioreactors, high solar radiation, a certain CO2 concentration and less strong winters would be beneficial. Since these climate characteristics are mostly found in the south, southern Europe would be more suited for cultivation (appendix E).
The production method that produced the lowest cost of $2.53/L (Lundquist et al., 2010) produced 49 300 barrels per year on a 400 hectare production facility in a space with suitable temperatures. This open, raceway, paddle wheel-mixed pond was in production for 10 months per year. Based on the 433 491 855 barrels per year production requirement, it would take 8 793 of these production facilities, or 35 172 km2. This translates to an area little smaller than Switzerland. Each of these production facilities was constructed at the cost of $101 million, which would add up to a total cost of €819 billion. The highest lipid content is achieved at temperatures between 16 and 30 degrees celsius (Sharma et al., 2012). This limits the use of all year open pond production to a small share of southern Europe as average monthly temperatures fall below 15 degrees celsius north from Valencia, Spain.
As shown in the appendix E, out of map 1, 2 and 3 (Average Temperatures Europe, Land use Spain 2015 and Solar radiation) several conclusions can be made. First of all, ideal yearly average temperatures for algae production only occur in the south of spain. Also, high solarradation levels of approximately 1800 kWh/m2 are found in the south of Spain which is of importance because productivity of algae is
determined by the available solar radiation (Alabi et al., 2009).The landuse map of Spain shows that in the coastal area in the southeast part, a lot of bare, open space is present. Data provided by FAO indicates that this part of Spain has soil with poor quality especially exists out of dry plains, making the land relatively cheap. Infertile soil is not expected to cause significant issues for algae production(Alabi et al., 2009). Moreover, the more central part along the south coast contains arable land. According to the FAO, arable land is land suited for temporary crops, temporary meadows for pasture, and
temporarily fallow. Soil characteristics are of no relevance for a site to be suitable for algae production; temperature, solar radiation and near-shore resources would make this site part of Spain suited for a large artificial open raceway paddle wheel-mixed pond for mass production of algae oil.
More northern parts of Europe are less suited for open ponds due to lack of continuous warm
temperatures and solar radiation and thus would have to implement BPR’s or other strategies for algae production (Benemann, 2008). Thus, spatial analyses is less necessary due to vertical extension
possibilities requiring less space. Investments would have to be higher for providing artificial light and temperatures, more labour, more capital and adding nutrients.
6.4. Competing with petrol
6.4.1. Price of petrol
The European Union imports 33.7% of its crude oil from Russia as per 2012 (Eurostat). Crude oil production is estimated to be between $22 and $26 per barrel in Eastern Siberia. That translates to a production cost of, $24 (on average) divided by 119.24 litre per gallon, $0.20 or €0.19/L. However, crude oil is often not exported as a refined product. The crude oil will therefore first be sold before
refinement. Crude oil is priced at €48.41/bbl as of february 2015, which converts to €0,41/L. The cost of refining this barrel of oil is estimated at 15% of the acquisition cost, or €0.062/L including the cash margin. Finally including an estimated 5% cost of distribution and advertising over the refined product, the cost of production per litre of petrol is €0.497. See appendix C for the calculations.
The oil price of €48.41/bbl as of february 2015 is relatively low compared to €77,61/bbl in October 2014. However, by using least squares regression on the annual oil price data, we obtain an expected price of $67.32/bbl, or €59.75/bbl as of 2030 at todays exchange rate. This will be used as the expected price for our calculations. See appendix D for the calculations. Maintaining the current taxation policy, we obtain the price of petrol for 2030 at €1.60/L.
6.4.2. Present state of competition
By comparing the costs of production, it is determined that algae biofuel, at currently available
technology, is produced at 411.2% of the cost of petrol. However, the market price of petrol (euro 95) in Germany (obtained on the 15th of March, 2015) is €1.38/L. The reason for this high retail price is that the production cost does not include the cash margin the firm imposes in order to make a profit as well as the tax imposed by the respective government. The tax imposed by the German government is €0.6545/L with an additional 19% value-added tax (VAT) over the fuel itself and the fuel tax. Imposing this tax on the estimated cost of production would result in an estimated retail price of €1.37/L, leaving a €0.01 cash margin per litre. In the event that the firm producing algae biofuel would make no profit and would sell at marginal cost, the price would still be at 193.2% of the petrol retail price. To make algae biofuel a product that can compete with petrol, technological advances would have to facilitate a decrease in price of 48.25% and even then, the firm selling it would make zero profits. A decrease in price can occur by other means that technological advancement, namely a subsidy provided by the European Union.
6.5. The need for governmental intervention
6.5.1. Governing tools
As each of the member states of the EU have united their monetary policy, control over variables such as inflation or interest rates are no longer instruments available to the national central banks. Instead, the European Central Bank (ECB) decides on the policy that is considered best for the development of wealth and the stability of the market. These tools are used to intervene in the exchange market. To intervene in the goods market, the EU has a number of tools at its disposal. These tools include taxation, price level control, minimum wage legislation and subsidization Within the EU, taxation and
subsidization (in the form of grants) are coördinated by the Council and the Commission, in compliance with the European Commission Treaty, Article 249, paragraph 1. The following definition of these grants is used on the website of the Commission:
- “Grants are direct financial contributions to finance either an action intended to help achieve an objective forming part of a EU policy or the functioning of a body which pursues an aim of general European interest or has an objective forming part of a EU policy.”
If using governmental instruments, it is not only important to look into the consequences on the budget, cost/benefit side of the instrument implemented, but also what kind of reactions are expected when implementing an instrument. In the case of implementing algae biofuel as an alternative energy source, a conclusion can be drawn that instruments will be necessary to make the introduction of this CO2 neutral alternative feasible. As mentioned before, the costs are currently too high to directly compete with fossil fuel. However, even if investments in technological improvement of the production process are able to decrease the price of algae fuel by 48.31%, it is still questionable if this results in the EU target of reducing greenhouse gas emissions of at least 40% compared to 1990.
According to Sinn (2009), decreasing the effects of climate change by demand-reducing policies, such as subsidizing the greener alternative or taxing fossil fuel, that are intended to flatten the time profile of atmospheric CO2 are paradoxical (Green Paradox). The impact of such policies only steepens the extraction path of fossil fuel rather than flatten it (van der Ploeg & Withagen, 2010). This can be caused from a policy of biofuel subsidies whereby the supply side responses by fossil fuel producers more than offsets any gains from direct substitution to biofuels (Grafton, Kompas and Van Long, 2010). In
accordance with the invisible hand of Adam Smith, the fossil fuel equilibrium price decreases. Hereby, a stronger bargaining position is taken against the alternative energy source. The Green Paradox;
environmental policies that turn increasingly greener over time operated like announced dispossession. They prompt resource owners to try to escape this by accelerating extraction of their fossil fuels, which in turn speeds up the CO2 emissions. (Sinn, 2012)
However this accelerated resource extraction due to increasing carbon taxes is limited to specific conditions and can therefore be overcome by the right policy. In order to avoid even the slightest chance of this paradox, implementation of quantity instruments might be preferable (under assumption that these instruments are implemented properly and by a perfect market without failure) (Edenhofer and Kalkuhl, 2011) or by a supply-side approach (Hoel, 2013). These are policies aimed at reducing the supply of fossil fuel instead of the use of fossil fuel.
Another negative effect of the shift from fossil fuel to algae biofuel is the consequence carbon leakage. As mentioned before, reduction in fossil fuel imports cause the world oil price to fall, leading to an increased fossil energy intensity in the non-participant regions (Felder & Rutherford, 1992).
With this insight, subsidizing the algae biofuel will not be a useful instrument when CO2 emissions need to be reduced globally. Rather an instrument should be used that let fossil fuel owners stop pumping up the resource. An example could be that the ECB does not subsidize the backstop (algae biofuel), but purchase an oil platform and instead of using it as resource, to let it stay in situ. However, the EU target
is to reduce CO2 emissions by 40% in 2030, compared to 1990, and not to decrease global warming or other negative effects. Thus, the reaction of other (non-abating) countries do not need to be taken into account. Therefore, subsidizing the algae will then be probable the best instrument to lower the market price for consumers.
6.5.2. The subsidy case
At a projected production cost of €1.80/L compared to the expected petrol market price of €1.60/L, we can conclude that algae biofuel will not be able to secure a 40% market share by means of competition. Especially considering the sizable tax imposed on petrol, concealing the even lower production cost. If the EU was to mend this price difference by means of price subsidization, it would cost €0.20/L to equate the production cost to the market price, not providing any profits for the algae biofuel
producers. Based on the 2010 consumption level, at 51 689 568 800 litres per year, this would cost €10 337 913 760.00 or €10.34 billion annually. That would mean that the European Union would have to spend 7.13% of the 2015 level, €145 billion budget, every year to maintain the price equality. This conclusion is based on the assumptions that consumers are indifferent between either biofuel or petrol in the event that the price is equal and that producers will only want to produce when they can
compete.
Seeing as the German government imposes a total tax of 65.46%, the tax yield over the
remaining 60% of fuel sold is €50753110989 or €50.7 billion annually, if the entire EU would impose an equal tax rate. Hypothetically, the tax yield would then still be €40.36 billion if the required production was realised and subsidized. This would require cooperation by every member state as the budget of the European Commission would not suffice. It has to be noted however that the subsidy is not the only cost imposed on the governing bodies. In addition to the subsidy, a lack of income due to tax yield decrease can also be perceived as a minus on the governmental balance in accounting terms.
7. Conclusion
In order to determine how the introduction of algae biofuel as an alternative fuel for automobiles can help the EU reach their 2030 emission target we have first considered whether techniques for mass production of algae biofuel and Europe’s land area are convenient enough for implementation.
Production techniques for mass production of algae are performed in open and closed systems but still lack efficiency due to technological setbacks. The trade off between autophagy and growth rate, species types, techniques for mass production and the possibilities of genetically modified algae are the main focus points. By creating closed system pumps, a lot of ecological impacts on the system and space requirements could be overcome and without disturbance from the environment, the system can be better optimized. For example light distribution, temperature, water requirement and nutrient cycle will be better controlled. The open pond production method is close to being able to produce at a
competitive level but the scarce availability of suitable sites, with only Southern Spain as a possible exception, would make realisation impossible before 2030. Closed pond production allows for production across Europe which is a significant advantage.
Subsequently, the question whether algae biofuel would be able to compete with petrol without governmental intervention is analysed. At the prices we have forecasted, algae biofuel would not be able to secure a 40% market share by 2030. In the event the European Union was to intervene on a price level, the governmental tool available to the European Union is subsidy. This would require €10.34 billion annually in order to even prices which, in our opinion, is not too high. Especially considering we have assumed the current taxation policy to persist when it could be used to increase taxation yield and compensate for the subsidy outflow. However, the spatial requirements are the greatest obstacle as the production would have to be concentrated in the southern part of Europe. In addition to that, the €819 billion initial investment is not easily overcome.
Based on this, our recommendation for the European Union is to either fund research and development into higher yield production techniques, or subsidize the price and incentivise the private sector to resolve these issues.
8. Discussion
Even though, from an ecological perspective, closed systems would be favourable, economically this is currently not an option, because closed systems are simply more costly. Moreover, with a closed
production system, competing with fossil fuels will be even more unlikely. A large commercial industry is still not able to compete, because of increased infrastructure (capital) and power (ongoing) (Leite et al, 2013). To achieve a commercial algae biofuels production, the following three points are crucial to focus on. Firstly, there is potential for improvement of biological and engineering aspects of the production process, in order to reduce the costs. Harvesting is the most expensive part of the production process, an increase in efficiency of this process would be highly desirable (Brennan et al, 2010). Secondly, from an economic perspective the focus should be on the trade off between maximizing lipid content versus algal growth rates. Lastly, more room is given through novel low-cost equipment instead of operating cost reductions (Davis et al, 2011). Possibilities to use wastewater to grow algae and use the algae as food for livestock are good examples of overcoming currently economical disadvantages of algae biofuels (Brennan et al, 2010), (Lundquist, 2010).
The results presented in the results section are, although mostly based on empirical data, are also somewhat speculative. The price structure of petrol for instance leaves a €0.01/L cash margin which may not be realistic, as well as the assumption that the other factors determining the oil price are constant. In addition to that, the expected production cost of algae biofuel is based on merely five studies with different production conditions. This greatly undermines the legitimacy of the prediction in our opinion. Generally, speculating on oil prices is ill advised due to the volatility and sensitivity to political and environmental shocks. The research can then be improved by obtaining more data entries on the production costs, based on studies conducted under similar conditions.
Also, the used governing tool outcome in the research is subsidy, because we assumed that the European targets are merely lowering the amount of CO2 emitted. However, if this target is set up with the aim of lowering the undesirable impacts of climate change, which is very likely, another
governmental interventions is probably needed with a supply-side approach. Further research would need to be done on this subject.
The last point of discussion is the CO2-neutrality of algae biofuel. Because of transport, building of the factories and the power for the production process, fossil fuels will still be used, which makes the process not entirely CO2-neutral. Considering the huge amounts of algae biofuel necessary to gain the 2030 EU goals, the amounts of fossil fuels used in the sectors, will still have an negative effect to CO2- neutrality of this product. Because there are no large scales experiments done on algae biofuel production, there is no data available on the impact of the parts in the process, which still use fossil fuels.
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10. Data links
1. Data on the historical price of crude oil, monthly price in euro per barrel.
Indexmundihttp://www.indexmundi.com/commodities/?commodity=crude-oil&months=360¤cy=eur http://www.indexmundi.com/commodities/?commodity=crude-oil-brent¤cy=eur&comm odity=crude-oil
2. Import proportions of crude oil in the European Union per source. Eurostat.
http://ec.europa.eu/eurostat/statistics-explained/index.php/Energy_production_and_imports 3. Gasoline consumption in the European Union. European Commission.
http://www.fueleconomy.gov/feg/pdfs/420r13011_EPA_LD_FE_2013_TRENDS.pdf 4. Data on population growth expectancy. European Commission.
http://europa.eu/rapid/press-release_STAT-08-119_en.htm
5. Data on the historical crude oil price, annual in $/bbl. US Energy Information Administration. http://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm
12. Appendix B Earth Scientific Theories
B.1. Assessment Box of IPCC: scenarios of increasing temperatures.
Key Issues Europe, IPCC 2014B.2. Aggregate oil production graph
Production Curve Peak Oil, Tao & Li 200613. Appendix C Price of petrol
Conversion rate from €/bbl to €/L is 119.25 L/bbl.Petrol price component €/L €/L
Crude oil 0.41 0.5646133468
Refinement 0.0615 0.08469200202
Distribution and Advertisement 0.023575 0.03246526744
Fuel tax 0.6545 0.6545
VAT tax 0.21841925 0.2538914171
Cash margin 0.0136799425 0.01590162033
14. Appendix D. Price of oil
The inflation adjusted oil price at t=0, or 1986 is $17.39 per barrel. Using the least squares analysis method we obtain the following equation representing the oil price behavior over the period between 1986 and 2014, where 1986 is t=0.
Where y denotes the oil price, denotes the Y axis intercept, denotes the coefficient of the slope andα β is the time variable. In 2030, t=34, obtaining the following price for 2030.
χ
29.06 .87 4 67.32 y = $ + 0 * 4 = $
Standard Deviation (y) 29.21368623
Standard Deviation (xy) 25.40279691
Mean y 41.673 Mean x 14.5 B0 29.06450711 B1 0.869551234 t(2030) 44 P(2030) 67.3247614
