Aquaflow Bionomic in Brief
"Our theory is that you should be able to make the wastewater drinkable again. So you end up with a fuel source and clean water."
Vicki Buck, Director, Aquaflow Bionomic
As the world tries to wean itself off expensive and polluting fossil fuels, a New Zealand alternative energy pioneer is envisaging a novel fuel supply network. In the future, if Barrie Leay has anything to do with how things turn out, each town or large dairy farm or industrial plant could have its own oil refinery. But rather than rely on a supply of crude from a Saudi Arabian prince, they will be extracting oil from algae grown on waste water ponds. To put it crudely, they'll be turning poo into black gold.
Leay is chairman of and a major shareholder in Aquaflow Bionomic, which since March has been converting algae from the Blenheim sewage treatment plant, at the top of the South Island. The biorefinery the company has developed will produce thousands of litres of bio-crude oil per annum. What's more, the refinery technology can be implemented at a scale small enough to fit in a shipping container. Vicki Buck, former mayor of Christchurch, is also backer and frequent spokesperson for the company.
"Conceptually we've come from a completely different position than the oil industry," Leay says. "The oil industry builds gigantic tankers and ships vast quantities of fuel all the way across the world to a refinery. We asked ourselves why would you want to do that if you've got a widely dispersed source of basic substrate, in terms of algae, which is everywhere. Instead, why not build distributed generation?"
These small refineries are to the country's Marsden Point oil refinery what a Blackberry or laptop computer are to a centralised mainframe, Leay says.
"If we can manufacture fuel, for instance, on pond systems or dairy farms or meat works, why do we need to cart all that to a central plant like Marsden Point. Why not convert it locally and put it straight into the fuel chain for whatever vehicles would use it - for instance, milk tankers or tractors or aircrafts at local airports. We're looking at a completely different model from the oil industry."
An additional benefit is that the wastewater is purified in the process. "Our theory is that you should be able to make the wastewater drinkable again. So you end up with a fuel source and clean water," says Buck.
She says that she has come to love algae, although it's smelly, slimy and revolting-looking. "It really is actually beautiful stuff! And you're taking a waste product and turning it into something useful."
Other must be thinking the same. Buck, Leay - and the third founder, entrepreneur Nick Gerritson - were successful earlier this year in raising investment from Singapore-based energy company Pure Power, which took a 19.9 percent stake in AquaFlow. Interest in the end product has come from airlines and fuel companies.
Leay is no stranger to the energy sector. He is a former executive director of the Electricity Supply Association, the chairman of wind turbine manufacturer Windflow Technology, and played a key role in reform of the electricity sector. Originally a geologist, he began investigating biofuels about 20 years ago.
"I'm a geologist from way back. When I was at university [in Britain] we were listening to talk about peak oil at that time - back in the 1950s. So the concept of peak oil has been there all my life. It's only been a question of whether people believed it and how long it would take. Well, it's here."
The difference between refining oil from algae and that pumped from beneath the earth's surface is that Aquaflow is "just taking a few million years out of the process". Harvesting algae is creating energy from "new sunlight", whereas oil and gas taken from the ground is the product of "old sunlight".
Leay is happy to talk in general terms about Aquaflow's method, but not the specifics, which since the middle of last year have been subject to a number of international patent applications. Aquaflow is not the only company working in the area.
"The fundamental difference is that we're going in the opposite direction of everyone else working with algae. Everybody else appears to have gone for the monoculture, isolating out specific algae species."
An oil-rich monoculture could in theory deliver a higher yield, but Leay says the reality is that it's difficult and costly to avoid contamination by other algae. Aquaflow decided to harvest wild algae instead, successfully producing the first wild algae bio-diesel in 2006.
A key part of what Aquaflow has developed are "fish traps", or filters, for removing algae from the waste water. Leay won't reveal the inner workings of the fish traps. "All I can tell you is that we did try a significant number of technologies, none of which worked, so we had to develop our own."
The oil conversion process is also shrouded in secrecy. "Again," says Leay, "that's very much proprietary information. All I can say is that the work that had been done historically was all around the lipid oils. We've gone very much further than the extraction of lipid oils."
The company has customers for its fuel, Leay says, but he won't disclose names. "We clearly will go for the maximum value in the market and that may not in the long term be just with the fuel industry at all. We have a lot of interest from companies for all sorts of other uses that fossil oil is used for.
Key Business Insights
The science of alternative energy is on the brink of creating a 'disruptive technology' with huge potential for New Zealand and the world.
The term 'disruptive technologies', coined by US business academic Clayton Christensen, is used to describe the radical intervention of technology in any industry. Christensen's popular book The Innovator's Dilemma shows how every industry has at some point suffered major upheaval: from horse to car, from gas lamps to electric streetlights, from mainframe computers to PCs.
That's nothing new. But Christensen has two important insights. First, the industry incumbents (such as horse breeders) always misinterpret the threat (cars) as trivial. The first cars broke down, the first photocopiers were too expensive, the first electric lamps had no power infrastructure. Incumbents typically protect their advantage by circling the wagons and laughing at their new competitors – until one day the car beats a horse. And the rest is history.
The second insight is that customers often aren't the best people to know a disruptive technology when they see it. And companies who slavishly follow their customers' demands often miss the opportunity that technology brings.
Back to Aquaflow. It's processes, which are the subject of international patent applications, completely redraw the energy distribution network. Instead of producing fuel from crude oil in huge refineries, Aquaflow's technology is on a scale small enough that it can be used wherever waste water is being treated, and ingenious enough to extract oil from algae that grows in the wild.
The technology's scalability and portability means it can be exported around the world and, since the resulting second-generation biofuel's feedstock is a natural by-product of waste water treatment, it can be produced without displacing food crops.
What's more, with minimal further treatment, waste water from which algae has been harvested can be made fit for drinking. The residue from the refining process is also a rich fertiliser.
Aquaflow Bionomic is simultaneously providing renewable energy, cleaning up waste water and producing an agricultural fertiliser - a truly disruptive technology.
What disruptive threats await you and your industry? Have you dismissed them too quickly as trivial? And what disruptions are you working on that could change the rules of your industry?
The web has an abundance of resources for those wanting to know how to recognise a disruptive technology when they stumble across one:
Innovation Zen is a series of useful links, ranging from books to blogs, interesting sites and the like:
For a fascinating interview with Clayton Christensen:
For a contra view on disruption read this blog:
Not all biofuels are created equal. There's a growing realisation that converting land used for growing food crops to raising crops for biofuels is doing more harm than good. Hence the world is beginning to differentiate between those "first-generation" biofuels and "second-generation" feedstocks such as algae. The US Government renewable energy lab explains the concepts:
For a comprehensive look at the New Zealand government thinking on biofuels see this page from EECA:
The views expressed in this customer story and additional resources are not necessarily those held by IBM New Zealand Limited and IBM does not warrant the accuracy and correctness of any of the information contained in the article.