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Algae may not work as a replacement for gasoline, but entrepreneurs are finding new ways to weaponiz͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
 
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May 26, 2023
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Net Zero

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Tim McDonnell
Tim McDonnell

Hi everyone, welcome back to Net Zero.

Algae-based fuels, like nuclear fusion, are one of those ostensibly planet-saving technologies that have been “just around the corner” for 30-plus years. In that time, investors have come and gone (usually without their money). Most recent was ExxonMobil, which bailed on a decade of work on algae earlier this year. But, also like fusion, genuine breakthroughs in commercializing algae climate solutions might really be around the corner this time — just not for the same end uses that were once the focus.

Also today, a scoop on a new climate priority for Congressional Democrats, and why the maker of Fiats and Jeeps is hedging its bets on EV battery chemistry.

If you like what you’re reading, spread the word.

Warmups

🟡 Semafor scoop: Congressional Democrats are urging the U.S. Department of Transportation to dedicate $700 million to building charging and refueling infrastructure for electric and hydrogen-powered heavy-duty trucks on the West Coast. Their request was outlined in a letter, shared with Semafor, that was sent today by Pete Aguilar and other lawmakers to Transportation Secretary Pete Buttigieg. The project is essential to achieve a mandate adopted by California requiring some new trucks to be zero-emissions by next year, and fully eliminating the sale of traditional-engine trucks by 2036.

— For more from Capitol Hill, subscribe to our daily U.S. politics newsletter, Principals.

The U.S. Department of Energy withheld a $200 million grant to Microvast, a Texas-based battery company, after Republican lawmakers raised concerns about the company’s Chinese subsidiary. DOE didn’t specifically cite the China connection as a reason for withholding the grant, but the decision nevertheless sends a warning to other U.S. battery companies to distance themselves from China as much as possible. Microvast’s stock price collapsed by half after the announcement.

Negotiations on raising the U.S. debt ceiling are closing in on a deal that, among other elements, would ease the process for building interstate electricity transmission lines. That part of the deal would be a win for the White House and Congressional Democrats, but requires a tradeoff sought by Republicans of weakening the process for producing federal environmental impact statements. If the deal passes, it would avert a devastating default, but leave much more work on permitting reform still to come.

Three of Europe’s biggest insurers and one of Japan’s dropped out of a global net zero alliance for the insurance industry, over concerns that membership could expose them to prosecution in the U.S. for antitrust law violations. Net zero groups for banks, asset managers, and other financial institutions have also lost members recently because of liability risks and disagreements over the strictness of their decarbonization strategies.

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Evidence

Global investment in solar energy will top investment in oil production for the first time this year, according to a new International Energy Agency report. Clean energy investment in general is leading fossil fuels by a wider margin every year, the report found — but fossil fuel investment still needs to fall by about half from its current levels by 2030 to be on track for net zero by mid-century.

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Tim McDonnell

Algae and seaweed are ready for a climate comeback

REUTERS/Nir Elias

THE FACTS

For decades, algae and seaweed were trumpeted as potentially revolutionary biofuels that would replace gasoline — only to suffer repeated setbacks and struggles to scale. But now a new generation of entrepreneurs is working to craft new climate solutions out of them.

In February, when ExxonMobil pulled the plug on a decade-long, $350 million research program to produce biofuels from algae, it felt like the final nail in the coffin for a prospective crude oil replacement that had been good for green marketing and not much else. But since then, other investors — including Chevron and the U.S. Department of Energy — have stepped up to finance new algae biofuel ventures, with a different focus: aviation fuels. And startups are now banking multimillion-dollar fundraising rounds to use algae and seaweed in other ways too — as a replacement for petroleum-based plastics and as a methane-cutting additive to cattle feed.

“Seaweed old hands are very averse to hype,” said Steven Hermans, an independent researcher and consultant in the seaweed and algae industry. “But it is a bit different this time, because there’s a lot more diversity in the things people are trying to do.”

TIM’S VIEW

Algae and seaweed do have a lot of promise as a climate solution — just not as a replacement for gasoline.

The problem with Exxon’s biofuels program was that it was never able to deliver at a price point that could be competitive with gasoline, said Matthew Posewitz, a bioenergy researcher at Colorado School of Mines whose work was funded by Exxon for nearly a decade. The Exxon program made significant strides toward growing algae fast enough and with enough of the lipids needed to produce fuel, he said. But it started to feel like a futile exercise once it became clear that the solution to cutting cars’ carbon emissions was to electrify them, not use alternative fuels.

Exxon’s withdrawal was just the latest setback for the algae biofuels industry, which since the early 2000s has burned hundreds of millions of dollars in venture capital with the promise of creating a low-carbon liquid fuel that, unlike corn-based ethanol, doesn’t compete for land with food crops. But algae is temperamental to grow, requires intensive breeding to produce high concentrations of lipids, and is cumbersome to harvest, leaving behind a string of bankrupt startups. A few things are different now, said Posewitz, which means the Exxon efforts haven’t gone entirely to waste.

For biofuels, the biggest target market has shifted to aviation fuel, which still looks promising because airplanes can’t be easily electrified. The California-based algae biofuels producer Viridos, after being ditched by Exxon, drew $25 million from Chevron, United Airlines, and the Bill Gates-backed firm Breakthrough Energy Ventures, and is aiming to produce commercial volumes of algae-based aviation fuel within two years. The U.S. Energy Department is also rolling out millions of dollars in grant funding for algae biofuels with a focus on aviation fuel.

The U.S. Inflation Reduction Act helped the sector by increasing tax credits for bio-based aviation fuels, with the aim of pushing U.S. production from about 15 million gallons per year today to 3 billion by 2030. Algae projects, which consume huge volumes of CO2, could also qualify for IRA carbon removal tax credits, and if used in the production of fertilizer or livestock feed would qualify for funding from a new $20 billion pool at the Department of Agriculture.

A growing number of startups are also looking beyond micro-algae grown in ponds to macro-algae, better known as kelp or seaweed, which can be used for bioplastics, fertilizers, livestock feed, and other applications. Since 2020, seaweed and algae startups have raised nearly half a billion dollars, according to Hermans’ database. The appeal is that kelp can be raised in huge volumes directly in the ocean, where real estate is limitless and the required nutrients are free.

“Algae and seaweed are like a mind virus,” said Alex Brown, CEO of Alga Biosciences, which produces a seaweed-based, methane-reducing additive for cattle feed. “Once you start thinking about them from a climate perspective, it’s hard not to get obsessed.”

ROOM FOR DISAGREEMENT

Micro-algae and seaweed have numerous technical hurdles still to overcome, and the industry as a whole is in a chicken-and-egg dilemma: There’s insufficient investment in production and processing because the market demand is unproven, but without that investment algae products will struggle to compete on price with petroleum products. “If you don’t work the kinks out early, the money will go away quickly,” Posewitz warned.

THE VIEW FROM AUSTRALIA

Livestock methane reduction is one of the most promising new applications for seaweed. FutureFeed, a Brisbane-based startup, patented a method for mixing cattle feed with just a few grams of a seaweed variety called Asparagopsis, per kilo of feed, producing a chemical reaction in cows that almost completely eliminates methane-laden farts and burps, and causes the cows to gain weight more efficiently. Although the feed is more expensive than normal feed, CEO Alex Baker said farmers could sell carbon credits based on their cows to offset the expense, noting that meat retailers are increasingly willing to pay a premium for low-emissions products.

NOTABLE

  • Seaweed cultivation in the U.S. faces an obstacle renewables developers know well: Permitting reform. According to Hermans, the time to receive a permit for offshore kelp-cultivation in California has doubled since 2018, to nearly seven years.
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One Good Text

Rajiv Shah is the President of the Rockefeller Foundation. Read his full exchange with Semafor’s Prashant Rao.

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Semafor Stat

Gigawatts of solar that will be installed in China this year, according to Bloomberg, beating the total installed cumulatively in the U.S. The rapid pace of solar buildout in China means global solar capacity is now on track to hit the target needed to reach net zero by mid-century.

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Green Shoots
Courtesy Lyten

Stellantis is hedging its EV battery bets. On Thursday the Amsterdam-based automaker, whose brands include Fiat, Jeep, and Chrysler, said it will invest in the California battery-startup Lyten, which is developing batteries designed to use fewer of the critical minerals that are essential to traditional lithium ion batteries. Lyten’s EV battery chemistry uses sulfur, which can carry much more energy per unit of weight than lithium ion batteries. Sulfur is usually unusable for EV batteries because it degrades quickly during recharging, but Lyten engineered a way to avert that using graphene, a derivative of natural gas. The company is aiming for the EV batteries to be commercially available after 2025.

Most importantly, using sulfur means the batteries don’t need to use any nickel, manganese, or cobalt — minerals that are in very short supply and are highly concentrated in China, the Democratic Republic of Congo, and other countries that U.S. and European automakers are keen to distance themselves from.

To hedge against geopolitical risks and physical limitations on mining, automakers are rushing to diversify the chemistries used in their batteries, Lyten chief sustainability officer Keith Norman said: “The automakers have very aggressive growth targets they need to hit. But they clearly see the risks in that strategy.”

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Hot on Semafor
  • What happens if the U.S. government actually defaults? “Nothing good,” BlackRock’s Rick Rieder tells Liz Hoffman.
  • American right-wingers last year criticized Disney for being “woke” by casting a Black actress as Ariel in the live-action remake of The Little Mermaid. Now, Chinese nationalists are doing the same, Diego Mendoza reported.
  • A South African company illegally loaded a consignment of arms on a Russian vessel docked at a South African naval base, Sam Mkokeli reported.
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— Tim (with Kadia Goba, Prashant Rao, and Jeronimo Gonzalez)

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