Solazyme Inc (NASDAQ:SZYM)’s foresight years ago is now allowing it to reap significant benefits, but that doesn’t change the fact that photosynthetic technologies remain the Holy Grail of chemical production. Here is how the two compare:
| Attribute or Potential Attribute | Photosynthetic Algae System | Heterotrophic Algae System |
|---|---|---|
| Scale boundary | Virtually limitless | Bioreactor size, supporting equipment size/efficiency |
| Control over growth | Difficult in open ponds/runways; Easier in photobioreactors but size limited | Very good control over growing environment |
| Production per acre | Very high | Higher than traditional agriculture, but lower than photosynthetic algae |
| Contamination risk | High (major current drawback) | Easier to manage in bioreactor |
| Production cost | Very low (potentially zero or negative) | Lower than petroleum or agribusiness chemicals, but higher than photosynthetic algae |
| Capital cost | Very high for open ponds/runways, Low for photobioreactors | Medium and more predictable |
Just as Exxon Mobil Corporation (NYSE:XOM) sees the ridiculous potential of photosynthetic algae, agribusiness giants see the potential to boost their top and bottom lines with Solazyme’s more predictable heterotrophic technology. Bunge Ltd (NYSE:BG) owns half of the 100,000 metric ton facility being constructed between the two in Brazil as well as half of the 200,000 metric tons being planned elsewhere worldwide. Why sell sugar or ferment it into ethanol when you can ferment it into higher value chemicals being developed by Solazyme Inc (NASDAQ:SZYM)? Similarly, why drill for expensive and increasingly heavy crude oil when you can grow sweet crude at low cost with waste carbon, wastewater, and free sunlight?
Foolish bottom line
Exxon Mobil Corporation (NYSE:XOM) and SGI will go back to the whiteboards in their attempts to commercialize their sun-loving algae. The announcement isn’t as much of a failure as you may think, although it is true that we will not have algal fuels from the two by 2019. However, society could have algal fuels from Solazyme Inc (NASDAQ:SZYM) by 2019 — even if that isn’t its priority right now. The company is getting along just fine in closed systems and currently building 125,000 metric tons of annual commercial-scale capacity with an additional 325,000 metric tons on the table with various partners. Perhaps Exxon should have pledged $600 million to Solazyme. At least it would have had something to show for it.
The article Exxon Discovers What Solazyme Already Knew originally appeared on Fool.com and is written by Maxx Chatsko.
Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool owns shares of Solazyme.
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