Thursday, May 29, 2008

The Scum that Could Save the World

There's a new hero on the horizon in the war on terror. Is it a bird? Is it a plane? No, it's....pond scum.

Actually it's genetically engineered algae from a company called Sapphire Energy. Sapphire is developing the capacity to produce 91 octane gasoline that is fully compatible with existing infrastructure and vehicles, using algae, sunlight and CO2.

Unlike other bio fuels, Sapphire's product does not displace food crops. In fact, because its main components are CO2, sunlight and water that can be very low quality, dirty water, production facilities can be located on some of the most un-sought after real estate on the planet. Also, unlike other alternative fuels, the production is infinitely scalable. That is it can be ramped up to meet demand without limitations based on available land or location of raw materials. One could conceivable build multi-story complexes, even where space is tight.

How does this relate to the war on terror? The jihad is fueled by petrol. We currently send about 600 billion dollars a year overseas to accommodate our energy needs and that doesn't include the money we spend defending our global pipeline. Much of this money winds up in the hands of our enemies. We're financing the war against ourselves. A reliable, renewable, mass produce-able alternative to crude could put an end to all of that.

Sapphire is still in its infancy, but they're moving fast. They have attracted some major venture capital and hope to have their product on the market within 3 years. If they are successful, it wont take that long for their technology to have an impact. If oil's days are numbered, how do you think OPEC will react to a realization that their "100 year supply" of proven oil reserves will only have value for less than a decade?

That brings up the one defense the traditional oil market has: lower prices. Oil producers have shown the capacity to produce and sell their product at $20/barrel or lower. If they were to rapidly adjust prices in a defensive maneuver, they could put a damper on enthusiasm for and investment in alternatives. However, if technologies like Sapphire's are commercially developed before that, they will be able to match such price drops.

The key to the changing landscape has been a trend quietly developing in the scientific and industrial world toward recognizing that microbes are far more efficient than machinery at refining raw materials into usable commodities. With some genetic tweaking by some brilliant human beings, this technology will be applied to fields far beyond energy. It's already being used to produce medicines and the possibilities are immense for other products and commodities.

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