CALLS to provide full compensation to coal-fired energy utilities from the emissions trading scheme are probably based on the premise that there is little or nothing they can do to reduce their emissions. But that may not be the case.
Private Melbourne company MBD Energy is about to introduce technology that allows algae to capture half or more of the greenhouse gases emitted by a power station, at virtually no cost to the utility.
What's more, MBD stands to make a small fortune from the algae by-products: fuel, plastics and meal for livestock.
Managing director Andrew Lawson says testing at James Cook University in Townsville suggests for every two tonnes of carbon captured, the MBD technology can produce almost 1 tonne of algae, of which one-third can be made into oil products and two-thirds into meal. With meal sales about $400/tonne (rival soymeal product sells at about $780/tonne) and oil selling at $800/tonne, that equates to about $570 of revenue from each tonne of algae, or more than $250 for each tonne of CO2 captured.
The significance of this should not be underestimated. Instead of carbon becoming a massive liability and cost, this approach uses carbon to pay for the clean up, and in turn generates large revenue streams.
The first 1ha display plant of its "fuel synthesiser" is to be installed at the Loy Yang A coal-fired power station in the next six months. If the concept is proved over six to 12 months, MBD will move ahead to build a commercial pilot plant over 80ha.
That will require a $25 million investment, but Lawson estimates it will produce earnings before interest, taxes, depreciation and amortisation of $15 million. If that project succeeds, the facility can quickly be scaled up to a $300m demonstration facility.
Australia's largest power station, NSW's Eraring Energy, and a large-scale emitter in Queensland have signed agreements with MBD to instal display plants over the next 12 months.
But Lawson is frustrated that the federal government's carbon pollution reduction scheme only recognises and supports geosequestration. Why seek to bury it at massive cost and with unproven technology, he asks, when it can be recycled and used to generate a new earnings stream?
To illustrate the point, he says a privately funded, $1.2 billion facility could capture half of Loy Yang's carbon emissions and generate $740m of meal income a year and $660m of oil income, as well as carbon credits of about $225m, while using just 10MW of energy. It also recycles water.
A carbon capture and storage facility is at least a decade away, would require a government investment of more than $5 billion, require 300MW of power a year and only generate income from carbon credits. The difference in value creation over 20 years is $26.8bn for the MBD technology and minus $2.6bn from CCS.
The process can possibly capture only half a utility's emissions because it relies on sunlight to cause photosynthesis, but Lawson says more can be captured if future testing with LED lighting proves successful.
The $1.2bn for a massive algae farm may sound costly, but Lawson says this is likely to be funded as a separate infrastructure project, with the utilities having the option to co-invest. Each project of that scale would create 2000 regional jobs.
MBD Energy is in the process of raising about $10m from three cornerstone investors, including an international energy company and a local carbon fund.
A walk on the wild side
NEW Zealand's Aquaflow Bionomics is taking a different approach to algae fuel production, preferring to focus on "wild algae" found in municipal sewage ponds, polluted water courses and farm outflows.
The company has been running a pilot facility of its algae harvester at Blenheim in New Zealand, and has embarked on a fund-raising program in Australia to raise money for the first of up to 16 pilot plants.
Aquaflow says the advantage of its approach over most other algae fuel projects is the absence of large capital costs to build special ponds and controlled environments to protect algae monocultures.
Aquanomics will harvest and process whatever algae is found, and with about two-thirds of the world's water containing some form of algae, its potential resources are vast.
Its technology is a harvester that comes in a 12m container, can readily serve remote communities and is easily scalable.
Director Nick Gerritsen describes it has a "plug and play" technology that simply connects to existing infrastructure.
Like MBD, Aquaflow also expects to make significant income from by-products, mostly through remediated water sales, although its algae has been refined into jet fuel and successfully tested.
Its investor presentation predicts revenue from the sale of its equipment and remediated water will grow from $5.3 million in 2010-11 to $94.4 million in 2014-15, with EBITDA predicted to jump from $110,000m to $33.2m.
Revenue from the sale of green crude developed from the algae and the generation of carbon credits will be extra.
The company is seeking to raise $2.5m in its roadshow, the last round of funding before a possible IPO in the next 12 months.
Its largest shareholder is the Singapore renewable energy investor Pure Power with 19.9 per cent. Honeywell subsidiary UOP has signed a memorandum of understanding to help market the technology and integrate it into its projects.
Granite Power rocks on
ASPIRING geothermal producer Granite Power is conducting an investor roadshow to gauge interest in a potential initial public offering that could raise about $50m before the end of December.
Granite Power wants to raise the money to help fund drilling at two hot fractured rock geothermal projects, one in Gippsland in Victoria and the other near Gladstone in Queensland.
And the company has applied for a $25 million grant under the government's Renewable Energy Development Program. It hopes to be able to showcase heat exchange technology it has developed with the University of Newcastle that increases generation by about 50 per cent.
Managing director Stephen de Belle, former chief executive of iron ore producer Midwest, says there has been strong interest from institutions in Europe, where geothermal is well understood because of the progress of projects in Germany.
De Belle says his company favours the deeper, hotter rocks because they are more commercially attractive. Its resources have estimated temperatures of 200C and are close to the grid and large energy markets. KTM Capital is advising Granite on the potential IPO.