Algae Tax Credit Will Spur Other Products

By Mary Rosenthal | January 30, 2013

The year got off to a great start for algae when Congress passed legislation that avoided the fiscal cliff and leveled the playing field for producers of algal biofuels. I expect this development will have an impact far beyond the biofuel markets, however.

Thanks to the new legislation, producers of fuels derived from algae, cyanobacteria or lemna (another free-floating aquatic plant with biofuel potential) will be allowed to benefit from the $1.01-per-gallon tax credit that had previously only applied to cellulosic biofuels.

Tax parity with other advanced biofuels has long been a goal of the Algae Biomass Organization, and we are grateful for the hard work of our members who regularly announce new breakthroughs and production milestones. The rapid pace of these announcements and steady outreach to lawmakers has finally pushed Congress to give algae the same tax incentives as other biofuels. Fuel markets are not the only ones that will be affected by this incentive, however. Investors in algae will now be in a better position to reap returns from the unique properties of this biomass that extend beyond algae-derived gasoline, biodiesel, ethanol or aviation fuel.

While production levels ramp up to quantities useful for biofuel production, many algae companies are finding revenue opportunities in algal coproducts. These are often lower-volume products but have higher value, from foods to specialty feeds to chemicals, even cosmetics and pharmaceuticals.

Pharmaceutical powders with active carotenoids that can be derived from algae, for example, can be valued at $300 to $3,000 per kilogram. There are also great possibilities behind the recent announcement that algae can be used to make an alternative to an existing anti-cancer drug with significantly lower production costs. These are just a few of the potential applications for algal biomass that are complementary to fuel production.

The tax parity legislation is also good news for companies developing technologies that use algae biomass for the feed and food products industries. The global animal feed market is expected to exceed 1.5 billion tons per year by 2020, and global demand for aquaculture feed is set to increase substantially over the next 20 years, providing significant opportunities for the various nutrients that can be derived from algae biomass, including omega-3, carbohydrates and proteins.

Companies that have long-term fuel plans can also take advantage of these trends, including Bioprocess Algae, which has commissioned new production facilities in Iowa to produce poultry feed from algae that digest carbon dixoide emissions from an annexed ethanol plant. Cellana in Hawaii has announced a range of algae products that include aquaculture feed that reduces exposure to toxins like mercury or PCBs (polychlorinated biphenyls).

Other markets that will be keeping a sharp eye on the algae industry include those for plastics, chemicals, fertilizers and even some services like wastewater treatment and the mitigation of greenhouse gas emissions. Carbon pricing, for example, is already a fact of life in Europe, Canada and California. Producing algae biomass can reduce a carbon footprint, and has the added benefit of helping the bottom line by turning waste gases into a new revenue stream. Thanks to the new fuel credit, companies like Solutions4CO2, Accelergy and virtually all large-scale algae producers now have another reason to look for partnerships with carbon producing industries. Duke Energy is one energy company seriously looking to the carbon abatement potential of algae.

There have been exciting predictions that in 2013 we will see even more stories about new biomass facilities opening or beginning operations. That will certainly be true for algae, but thanks to algae’s versatility as biomass, and to the new incentives that put algae on a level playing field with other biofuels, we are also likely to also see more stories about new markets being affected by our products.

I expect more than a few surprises.

Author: Mary Rosenthal
Executive Director, Algae Biomass Organization