Industry interview: Dan Simon of Heliae: Part 2
They've launched their "discovery months"By David Schwartz
(Editor's note: This is the second part of a two-part interview with Heliae CEO Dan Simon. Read Part 1.)
How did your ethanol perspective play into the new strategy?
When I left my previous company I had learned enough about the biofuel industry to base any decision for starting the next company on five essential criteria. First, I wanted to have better control of the supply and pricing of my feedstock—similar to an oil company owning the oil down the hole. Second, I wanted to have flexibility in the products I made. You don’t control the price of corn or the market, and you don’t control the products you make with ethanol, because the technology only enabled you to make ethanol and ddgs.
Third, I wanted to find a technology that was truly scalable today. Fourth, I wanted to find a technology that was much more sustainable for future production capacity. And then food vs. fuel was the final requirement—I didn’t want to make fuel at the expense of food.
After looking at the cellulosics and not finding one that met all five, algae became the only technology I investigated that met all five conditions. The Mars family had the same perspective—algae had the potential to make a genuine difference.
When you first got together with the Mars family, what was the business model you were looking at?
We were looking at a jet fuel product and a single feed product coming off the back end. Aside from becoming a jet fuel producer, the Board recognized we were going to discover other opportunities as we scaled the system up to the next level, so we literally had the strategy to discuss it again in nine months, after we had completed the demonstration scale-up. That was part of the business plan for 2011.
So the demonstration facility was built to sample different product possibilities, and then the focus would follow?
That’s what we’re doing right now. The whole goal was build a complete strain-to-tank demonstration plant, learn what has the greatest potential on a commercial scale, then define a product mix. Within the last month or so we completed build-out on the full demonstration facility and are now operating it—making algae jet, algae-based diesel, algae-based chemicals, algae-based carotenoids and omega-3s, and all kinds of other valuable products.
Are these being produced with panel reactors on those two acres?
As we evolved through various types of growing systems we saw that the panel reactors were too expensive to be commercially viable, even though we got incredibly high quality algae. So what we’ve done in our fourth generation of design is develop something that is as inexpensive to build as a pond, but has the productivity and contamination values of a panel reactor.
So what is it?
It’s a precision greenhouse, which we call an “oasis.” Think of it like a long, covered, farming trough—and it can be a closed or semi-closed system. No paddlewheel—we’re going as low energy as we can. To agitate the water we’re using a mechanical flow system.
We’ve developed an instrumentation and control system that has an algorithm that tracks multiple variables, including all the nutrients, and continuously harvests. The harvest procedure is quite simple. Based on the density of the algae it pumps it into another tank. We dewater it, then extract it and then we hydro-treat it.
Is this a proprietary technique?
There are three main areas of intellectual property within Heliae at this time. What we did with ASU was strain-related, and we took over about 20 or 25 of those patent filings for the strains and technologies to grow those strains. And then we developed photobioreactor technology that has now translated into our 4th generation oasis platform, which is another area of our I.P., as well the instrumentation and control system have evolved into its own I.P.
The last area where we are targeting I.P. is our extraction system. We have what we believe is a truly innovative extraction system, highly efficient, very low energy use, low pressure, low temperature, no hexane and we do not lyse the cells. It operates for more than just microalgae; it works with macro-algae and other biomass products.
We are becoming a technology platform company. We’re not trying to be the low cost, big volume provider. We’re here to develop the technology around producing commercially viable algae-based products.
So the business model has changed from a production company to a technology services provider?
Yes. Within the last year the strategy has shifted to becoming a technology process provider focused on food, fuel and chemicals.
Who would be a target customer?
We’ve already signed an MOU with Sky NRG, a refiner and marketer of jet fuels to the aviation industry. We have signed an agreement with Azmark, a company that manufactures jets and jet engines for drones for the military. And we are working on a few other fuel-oriented supply agreements.
On the food side, we’re talking to big agricultural, food and processing companies, the ones who’d be interested in investing into an algae facility—we come in and partner with them. We provide them the licenses and the technologies, the design, construction and operation of the facility, whether they choose to take all of that, or just a piece of it. We see a lot of opportunity in that space.
So what is the next step for Heliae?
We are calling the next few quarters “the discovery months.” We’ve now got the full demonstration-scale facility put together. We’re producing samples. We’re running feed trials and fuel tests to confirm that what we believe we have is truly commercially viable. There’s no real technical barrier anymore, it’s down to scale-up and engineering. So for the next few quarters we are optimizing production systems, running trials, and preparing for the next scale up.
So if I ask you what your five-year projection is at this point it sounds like you can’t go there because it depends on the outcome of this phase?
We are 100 percent confident we are going to deliver the productivity, capex, and opex numbers required to sell algae technology platforms. The strategy may shift a little in terms of product stream, but that’s going to be driven by the market. What’s not going to change is in being a technology platform provider. That’s where we think we fit in this industry.
We don’t think you can build a business that is going to be making a commodity and compete against the big balance sheet players out there. We learned this from the ethanol industry. Their cost of capital, ability to hedge and manage their business with a large asset base, versus a small company like us, is just too great. It’s not worth going after that.
What’s your hunch, then, on what Heliae will be doing in five years?
Ultimately, we’re going to be an integrator. I think we’ll be the best in the world at integrating algae technologies—all the pieces from strain selection to optimization, adaptation, growth, dewatering and extraction. We will continue to develop technologies where we think there are weaknesses.
It is not our expectation that we are going to be the best in any one area; we want to be the best at integrating and providing the whole technology package. Think about Qualcomm in the communications field, Microsoft in software, Schlumberger in the oil and gas world. They’re servicing the industry. They make integrating technologies easy, and that’s what we have in mind. We want to put the package together, create the standard operating procedures, and deliver a package that is simple and profitable for a large company or farmer to operate.
What’s the most important thing you’ve learned about this industry in the year or so you’ve had the high seat at Heliae?
I’ve been founding, developing and building energy and technology oriented businesses for over twenty years, so there’s nothing from the process perspective that’s different to me about developing a proper business model and executing with perfection. What is different for me is that I’ve never been in a business where the market demanded supply so passionately. I’ve never produced any product or delivered any megawatt that was wanted so badly; never been in a business where our prospective customers are coming to us searching for ways to make us move faster. So that’s new for me and says a lot about the potential. I didn’t know that coming on board—I just knew algae met all five conditions and seemed right to me.
When I toured the plant last year, one thing that was impressive was a showcase of about a dozen vials of all the fractionates from algae.
And that’s the unique aspect to our extraction system. We are able to fractionate the cell into multiple streams of lipids, proteins and biomass. We have the option of making two to five products from the process. We end up with soft fractions of different products to leverage the highest absolute value from the biomass.
You seem pretty loyal to Arizona as an algae center.
Arizona should be the technology center of algae. There’s the right climate, the strong support and interest by the government as well as the cities and communities, university partnerships, a lot of non-potable water, over 310 days a year of sun, and available inexpensive, non-arable land. So we see Arizona as becoming a true hub of algae technology in the future. It’s on its way and we want to be one of many success stories – and paint the desert green.
About David Schwartz
David Schwartz is Editor/Publisher and co-founder of AlgaeIndustryMagazine.com, an online industry trade publication focusing on the growth and development of the algae biofuels and co-products industry. A long-term California resident, David has been living in Santa Fe since 2007. Prior to A.I.M. David had an 18-year career as Editor-in-chief of Mix magazine, the professional audio and music industry's leading technology magazine. His educational background includes a BS in Industrial Engineering from Purdue University and an MBA from Indiana University. He received an algae biofuels certification from Santa Fe Community College, the first such program in the United States.