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Whenever discussion moves to what is happening in renewable energy, at some
point a category that I call the "algae of the week" will come up.
You see, just about once a week, somebody contacts me about a laboratory
"breakthrough." There is a subset of researchers out there just fascinated with
the possibility that something breeding in a test tube could hold the solution
to the energy problem.
Well, I may have to start taking this "algae of the week" phenomenon more
seriously. In fact, there may be something here of much greater substance than
my rather critical view lets on.
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To be fair, once you move beyond initial experimentation, this algae isn't
grown in laboratories at all, but in carefully controlled environments. But two
problems have existed to lessen the profitability of the approach. The first
deals with the environment necessary to grow the algae. The second concerns how
to make harvesting more efficient.
Algae may seem to grow quite readily in nature. However, to obtain the volume
necessary to turn it into energy is a rather difficult proposition with three
major requirements. First, you need a stable environment. That is decisive,
since both carbon dioxide and nutrients must be introduced. Second, the process
requires a lot of light, and that light must be evenly distributed over the
entire culture area. Third, algae has a hard, protective outer layer. That
layer must be "cracked," in what is usually an energy-intensive process.
That last factor alone becomes the deal-killer in most attempts.
It involves a well-known concept in energy management. We used to call it the
energy profit ratio (EPR). Today, it is usually called energy returned on
energy invested (EROEI). If you need to use up a lot of energy to produce only
a small amount of energy in return, the entire process is largely useless.
The conclusion is usually a no-brainer. If one barrel of oil equivalent is
needed to produce one barrel, the EROEI is 1. If it is less than 1, more energy
is consumed than is produced - and unless a nation is in the middle of a war or
similar national crisis, that could not be justified. Most algae approaches in
the real world (not the laboratory) have given us results of way less than 1.
And then there is the similarly energy-intensive and highly challenging need to
harvest. Try skimming only certain material from the surface of a swamp, and
you get the idea...
But algae could suddenly be back on the list of possible (and renewable) energy
sources, now that a micro-cap company may be offering solutions to all of these
problems.
New Technology and Carbon Caps May Change the Story. Its approach significantly
lowers the cost of growing algae, while the company's Single-Step Extraction™
process and mobile algae extraction lab MAX ONE are doing the same on the side
of harvesting costs. OriginOil's latest advance even allows for the separate
harvesting of hydrogen, thus introducing a secondary revenue stream from the
process.
I am NOT recommending that you run right out and buy OOIL. This remains a new
concept; the company is still largely in its early stages; and it has never
come close to running at a profit.
Currently trading at 15 cents a share, it will certainly need breakthroughs on
the investment and contract side before it really takes off.
However, there is positive news on that front.
OOIL announced on September 2nd that private, Melbourne-based MBD Energy will
adopt the harvesting technology and may become a primary user. And it is one of
the connections between these two companies that may hold a major upside for
OOIL.
MBD is positioning itself to be a major player in the Australian carbon capture
and storage market, as well as moving heavily into the alternative energy field.
Growing algae requires considerable amounts of carbon dioxide. And Australia
and the U.S. are both looking for ways to lessen carbon emissions. Washington
is likely to introduce either carbon taxes or cap and trade or both ("Two Ways
to Profit from the Coming Carbon Cap"), although not until after the current
election cycle.
In short, the business of finding uses for the captured carbon dioxide is going
to become a big one.
Despite my skepticism, seems growing energy slime may work in nicely after
all...
Before I sign off for the week, an update: Several months ago, I told you about
how my contacts at Chinese Sinopec Corp. (NYSE:SNP) were talking about moving
into shale gas ("China's Back-Door Push Into Our Front Yard").
This morning, SI and American major Chevron Corp. (NYSE:CVX) announced just
that. The two companies will begin development of Chinese shale gas deposits.
This may change the entire energy picture in Asia.
I'll keep an eye on developments and, as always, keep you up to speed on
investment opportunities.
