June 27, 2014 1:00 pm JST

Research on algae-based biofuels takes off in Japan

SACHIKO DESHIMARU, KOHEI FUJIMURA and OU NIINUMA, Nikkei staff writers

TOKYO -- Japanese companies are racing to develop algae-based fuels as a way to help to curb greenhouse gas emissions and to replace conventional biofuels made from corn and sugar cane.

     Isuzu Motors and the bio-venture firm Euglena said on June 25 that they would start operating bus services using oil extracted from euglenophyceae. This will be the first attempt in Japan at a continued use of the green algae-based biofuel, a step closer to commercializing what can be called "cultivable resources."

     "We would like to create a fuel that uses not even a single drop of petroleum," Euglena President Mitsuru Izumo said at a joint press conference with Isuzu.

    Next month, the two companies will begin to use this newly developed biofuel for a shuttle bus service connecting Isuzu's Fujisawa plant and the nearest railway station, both in Kanagawa Prefecture, south of Tokyo. The fuel is unique in that it mixes light oil with up to 5% euglenophyceae-based oil.

     The two companies are aiming to develop a fuel fully made from euglenophyceae by 2018.

More companies on board     

Biofuels made from plants and other materials absorb carbon dioxide as they grow, so they do not increase the net total of CO2 in the air when they are burned. As such, there has been growing demand for biofuels as a way to fight global warming. Currently, corn and sugar cane are used as the main sources of biofuels, which could send grain prices higher.

     To prevent the depletion of such food resources, green algae such as euglenophyceae are drawing much attention from businesses as an alternative biofuel source. These companies extract oil content accumulated from photosynthesis in the algae. Experts say that algae's oil production per unit area is as much as 700 times more than that of corn, so algae-based fuel is often characterized as a dream resource that can be cultured.

     Euglena was founded as a bioventure company in 2005. JX Nippon Oil & Energy and Hitachi have done joint research with the venture firm to cultivate such biofuels. Moreover, the Japanese airline operator ANA Holdings has extended financial assistance to Euglena, and as such, a number of big companies are placing high hopes on algae's potential.

     Meanwhile, other companies are also making developments in biofuel production. Heavy electric machinery maker IHI is cultivating a minute algae strain, called "Enomoto algae," at its dedicated facility next to its gigantic factory for nuclear power-related products in the Keihin Industrial Zone in Kanagawa Prefecture. It is seen as a favored project by IHI President Tamotsu Saito, and the company has selected candidate sites for cultivating this particular type of algae.

     Auto parts maker Denso is doing research on another strain of algae, while Electric Power Development, better known as J-Power, and plant engineering firm JGC jointly started algae culture tests in April.

     IHI estimates that demand for algae-based fuels will likely be worth 800 billion yen ($7.78 billion) a year by 2020, and such fuels will likely be used mainly for aircraft as other energy sources, such as battery and hydrogen fuel, cannot easily replace jet fuel.

Much to do

Japan has the third-largest level of daily petroleum consumption in the world, after the U.S. and China, according to data by the U.K. oil and gas company BP. Even so, Japan's oil self-sufficiency rate is less than 1%. Should these companies succeed in generating algae-based fuel, this would help boost Japan's self-sufficiency rate.

     However, there remain some major challenges.

     At its shareholders meeting on June 19, Denso's Executive Vice President Masahiko Miyaki addressed a shareholder by saying, "We are still far from being able to drive a single truck (using algae-based fuel), and it is not easy."

     The biggest bottleneck is high production costs. It costs 500 yen to 600 yen per liter using current technology, much higher than the pump price of around 167 yen per liter for conventional gasoline, according to estimates by several companies. 

     Another challenge is how to compete against the U.S. In 2011, the U.S. Navy started using algae-based biofuel for its helicopters. Some passenger airplanes have also adopted the use of such fuel.

     President Barack Obama has stated that algae fuel can replace 17% of imported fuels used for transportation, and his administration has drawn up a development blueprint and is providing large subsidies. Microsoft co-founder Bill Gates and other venture capitalists are also financing the development of algae-based fuels.

     In contrast, these Japanese companies aim to start mass-producing algae-based fuels around 2020.

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