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As much as we debate the prospects of an

algae-fuel future, companies are already making big money out of the green stuff. While some keep their focus on

algae fuel, others are finding lucrative corners of the algae industry in a number of unlikely products: infant formulas,

nutritional supplements–even cookies and milk. Oil at $100 a Gallon Greg Bafalis came

on as CEO of Aurora Algae in June. Aurora is building six acre-sized

ponds in Australia now, and hopes to begin construction on large scale

ponds, totaling 1,000 acres, in 2012. Aurora Biofuels, as it was once

known, was founded four years ago; it officially changed its name in

August to signify a change in focus to the supplements market. “It’s a funny thing: we discovered that there’s a lot of higher

value products than just biofuel. Our focus now, because it’s a very

valuable commodity, is Omega-3 EPA oil. Omega-3 oil in fish comes from the algae themselves.

The algae produces it, and the fish eats the algae. This cuts out the

middle man, and it doesn’t have a fishy taste or smell. “Diesel fuel, on a wholesale basis, is probably selling around $2.50 a

gallon. In contrast, Omega-3 oil sells anywhere from 100 dollars to 300

dollars per gallon. If you go into a supplement store lately and try

to buy fish oil tablets, if you track that back on a per gallon basis,

you’re talking in the neighborhood of $1,000 dollars per gallon on a

retail basis. Why sell a $2.50-a-gallon product when you could sell a

$100-a-gallon product? “The science and the costs are not there to justify focusing on

biofuels right now. But over time we’ll create efficiencies and produce

better yield. As a businessman I’m always going to take the highest value.

As I saturate that market, I’ll expand into other markets.”

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An Algae Infant Formula Peter Nitze, COO

of Martek Biosciences Corporation, joined the company in 2005, having

previously worked in senior management positions at Honeywell and GE. Martek has been in the algae game longer than most other

companies, which helps explain its healthy balance sheet. “In the late ’80s we identified a strain of algae that we discovered

was a high producer of DHA, an Omega-3 fatty acid known at the time to

be present in fairly high concentrations in breast milk and to play a

role in infant development. Infant formula sold at the time did not have

DHA in it, and we saw an opportunity to produce infant formula that

more closely mimicked breast milk. Thereafter we discovered a process

for developing ARA, an Omega-6 fatty acid from fungus. “Things took off after we received a GRAS–“generally recognized as

safe”–from the FDA. The year after that, in 2002, Mead Johnson launched

the first U.S.-based infant formula containing our DHA and ARA, and

that’s when things really took off. Other infant formula companies

jumped on the bandwagon, and we’ve been growing ever since. Now

virtually all of the major multinationals use our DHA and/or ARA in all

U.S.-based products and many international products. Over 95% of all

infant formula sold in the U.S. uses our DHA/ARA. We went from nothing

in 2001 to profits of $140 million in 2003; what we’ll do this year is

over $300 million.” Algae Milk and Cookies



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Jonathan Wolfson is

CEO of the California-based Solazyme, which has been around since 2003.

It produces oils and bioproducts. In November, Solazyme announced a partnership

with a French starch company that will help it produce and market its algae-based dietary products. “We actually have a product we call ‘algal flour.’ We call it flour

because it’s a dried powder, but ultimately it has a very different

content than the normal flour you’re thinking of. What it actually

contains is a powdered, heart-healthy oil, that has a profile similar to

olive oil. It includes protein and a type of dietary fiber. “Algal flour can be used to replace eggs, oil, and butter. We use it

to make bakery products: breads, pastas, cookies, cakes. It could end up

replacing eggs, oil, and butter even in things like ice cream or beverages. What you end up with has a far lower fat content and

lower calorie content, in some cases reducing fat by up to 75% and

essentially removing all cholesterol as well.” Fly the Algae Skies Jason Pyle, CEO of

Sapphire Energy, has degrees in engineering, physics, molecular and

cellular physiology, and medicine. Sapphire has its eyes on the algae fuel

prize, but says a detour through other products will

be helpful. “Our belief is that the pursuit of liquid transport fuel is unique,

and there is no route through other products to get there. Once you’re

selling cosmetics products, then you’re a cosmetics business. So we made

a very deliberate decision at Sapphire to avoid getting distracted with

different kinds of algae products.

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“We started with the idea that the only replacement for the three

major liquid transportation fuels–gasoline, diesel, and jet–would be

actually gasoline, diesel, and jet. There are dozens of alternative

energy schemes, but the U.S. possesses an $8 trillion

infrastructure to deliver liquid fuels to consumers. When we came at

this problem, we said the actual product that has to be the end state of

Sapphire’s work has to be the product everyone uses today. These are

not mimics; these are identical. “By late 2008, we had created a version of Jet A, a specified product

by the Federal Aviation Administration. In January 2009, that

product was used in a demonstration with Boeing and Continental Airlines

to fly a 737 out of Houston. They took it over the ocean and formed a

series of test maneuvers on a 90-minute test flight. It was the first

time a renewable fuel was flown on a commercial two-engine plane. “In December of 2009 we received a joint Department of Energy and

Department of Agriculture award for 104.5 million dollars in order to

construct the world’s first algae commercial demonstration facility;

we’ll be in full-blown construction at the beginning of 2011. Our goal

with the government is to demonstrate the full commercial viability for

algae fuel.” Making “Nuisance” Algae Useful Robert Fulton III,

founder of Compact Contractors for America, LLC, also has grand schemes

to bring algae jet fuel to market. In the short term, he has an

intriguing idea for developing lower-grade fuel cheaply to power

buildings. “There’s quite a bit–probably about the size of Massachusetts–in

the form of nuisance algae. There’s a huge reservoir of potential fuel

there. The problem is so great, many people poison lakes and streams

trying to kill it off. Well, we’re able to use the harvested nuisance

algae, dry it, and use it for power applications. Even though it’s not

as energy dense as gasoline or aviation-quality fuel, you get it so

cheap that it makes sense to burn it.

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“We’ve got people interested, but nobody’s cut us a check. [Laughs.]

It’s like the first time somebody discovered gunpowder. ‘What do you

mean, powders burn? No, they don’t.'” [Images: Solazyme, Aurora Algae, Flickr user eutrophication&hypoxia]