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Issue Date: April 2013


Big Ideas: Growing Oil

J. Kevin Berner, the president and CEO of Phycal, sees a future in which algae-based biofuel will provide an economical alternative for fueling jets, cargo ships and power plants. The United States Energy Department is betting $51 million the idea will work.
Jason Brill
brill@clevelandmagazine.com

The city of Wahiawa is tucked between the two once-volcanic mountain ranges that originally created Oahu, Hawaii's third-largest island. Del Monte used to grow pineapples north of town, and sometime next year, Highland Heights-based Phycal will use a portion of that site for a new kind of farm: one that cultivates biofuel from algae.

Once it's completed in 2014, the 51-acre energy research and development facility will include more than 30 acres of algae ponds (the four largest will be nearly three-and-a-half football fields long), a processing facility and fields of cassava plants.

"We turn [cassava] into a low-cost sugar and then feed it to the algae and they get fat," explains J. Kevin Berner, the president and CEO of Phycal.

The algae converts that sugar to oil, which is then extracted and turned into biofuel to power jets, cargo ships and even electric-production plants. Berner says the Hawaii site is expected to produce about 100,000 gallons of algae oil each year.

The idea is a marriage of science and economics. Algae doesn't need resources to produce roots, trunks or branches, so all the energy it gets from the sun can be used for consumption and growth.

Berner, a West Point graduate, got a Ph.D. in economics after spending time in the Army. He worked for management consulting firm McKinsey & Co., winding up in its Cleveland office.

"It dawned on me, what I liked most in my life was when I was building something new," he says. "So I looked into doing something entrepreneurial, and energy seemed to be one of the biggest issues that we need to figure out."

He found a U.S. Energy Department program examining the possibilities of algae as a biofuel and assembled a company. He partnered with a plant geneticist who had been working with algae at Ohio State University and licensed the technology from the school.

Phycal received $51 million from the Energy Department to build the Hawaii site, and the company has an agreement to sell its output to oil-burning power plants in the state.

But the biggest potential, Berner says, is in diesel and jet engine fuel. He sees algae-based biofuel competing with fossil fuels when it comes to fueling cargo ships and jets, but he is quick to emphasize his motivation is to compete economically.

"I do not believe for a second that we will get rid of fossil fuels," Berner says. "There are a lot of people in this industry who are primarily motivated by wanting to do good. And to the degree that that is your primary motivation, you probably will not succeed. You change the world by competing on economics."

Berner says algae can compete because of its efficiency. As biofuels become more widely used, the crops that produce them will need places to grow. The single-cell algae require much less space than other biofuel crops such as soybeans.

"There are not a large number of crops that have the potential yield [of algae] that don't also start to cut into the standard of living by using places we need to live off of or feed ourselves," Berner says. "Algae are about as efficient as you can make a plant."


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