Is it truly Green?
7 types and between 30,000 to 1 million sub-types: the number of the magnificent plant-animal hybrid species - Algae. Despite the number of available species, only a few hundred strains have been chemically examined and even fewer cultivated for industrial production of biofuels, pharmaceuticals, food, alternative materials and nutraceuticals. While versatile in its use cases, it has been equally challenging to scale up these applications. At Peak, we have begun our thesis on two popular use cases of Algae - Packaging and Alternate Protein. It looks like the green in the material is just not focused on its color but environmental benefits as well. However, we are yet to completely understand the space as early stage investors. Before we take you on our journey of learning about this space, basics first!
What are macro and microalgae?
Algae are a diverse group of aquatic organisms that have the ability to conduct photosynthesis. Algae are divided into two categories - Macroalgae and Microalgae. Seaweeds are the most commonly known macroalgae because of their application in food in form of Nori in sushi while microalgae are commonly attributed as pond scum and the algal blooms in lakes.
Algae grows 10 times more rapidly than terrestrial plants, and less than a tenth of the land is needed to produce an equivalent amount of biomass. It grows on non-productive and non-arable land, so it doesn't compete with other crops for land. Because it doesn't require fresh water, it can be fertilized more efficiently than land crops, and you can avoid the intensive water usage, wasteful fertilizer runoff, and downstream eutrophication associated with modern agriculture. But above all, Algae offers a much needed quality to modern day problems - ability to sequester carbon. Research says 1 acre of algae can remove up to 2.7 tons per day of CO₂. Certain species of microalgae have also been shown to efficiently remove CO₂ in environments at a rate of 10–50 times higher than terrestrial plants.
Abundant use cases
Macro Algae is more commonly known for its use as a gelling, thickening, and stabilizing agent in food products. Seaweeds are cultivated all over the world as a source of carrageenan, agar, and alginates. In countries like Korea, Japan, and China, seaweeds are directly consumed in the form of salads and soups and sometimes eaten fresh. Recently seaweeds powders and extracts have been used to fortify products like noodles, pasta, milk, bread, and other animal-based food products. Some seaweeds can contain up to 100 times more vitamins and minerals per unit dry matter than plant or animal-based foods. Several studies demonstrate that algae can be exploited for their antioxidants, antibacterial, antiviral, antidiabetic, antifungal, anti-inflammatory, immunomodulating, neuroprotective, anticoagulant, prebiotic and anticancer properties.
Microalgae has been associated with biofuel production as an alternative sustainable energy source. The ability to capture CO2 from the atmosphere and use sunlight as an energy source made microalgae an attractive option for renewable fuel production. However, depending on the species, microalgae can be rich sources of carbohydrate, protein, lipids, and other bioactive compounds. Nutraceutical products like beta carotene, astaxanthin, antioxidants, sterols, and polyunsaturated fatty acids have been derived from microalgae, and demand high selling prices.
Now that we know the basics, let’s resume with the main content - our views on Algae.
Algae as a Protein Source
We aren’t talking about the nutrition you get by eating seaweed with sushi. Startups around the world have been extracting nutrients from both macro and micro algae and using it to develop a variety of vegan / plant based meat and dairy products. We have seen a heightened interest in such startups in the European and South-East Asian regions. According to research it's because many places in these regions lie close to the coast - an ideal location for algae cultivation. The lab results that the startups have published have been promising. But the truth remains that the production of protein extracts, concentrates, or isolates from algal sources is still at its infancy. The main reasons for this are R&D and manufacturing costs. A GFI report has stated the issues in the industry. Here is a summary:
Cost competitiveness: Currently, algal proteins are not cost-competitive with crop-based proteins as further optimization of strains, cost-efficient engineering systems, and development of large scale manufacturing capability are required. The largest component of manufacturing costs lies with the use of bioreactors to multiply the growth of microalgae.
Research and Development: Since proteins need to be extracted from algal biomass, especially for use as functional ingredients in plant-based food products, the cell wall needs to be broken for proteins to be released. The energy consumption during cell disruption adds to operating costs. Hence, selecting strains and species with less rigid cell walls would be beneficial from a cost perspective. These strains need to be researched upon
The same report also emphasizes on how India can be a leading Algae protein hub. “India has a unique advantage as a global bio-manufacturing hub and can be an industry leader in algae-based products with the right balance of academic research and funding from the government, corporate sector, and venture capital firms. The geographical and climatic conditions in India are also favorable for the cultivation of microalgae and seaweed. With the help of existing technical expertise and channeling investments in technological development and academic research across the value chain, India can lead the way to cost-efficient, functional applications of algae in the alternative protein sector, and a new generation of delicious, nutritious, and sustainable meat, egg, dairy and seafood replacements.”
Algae as an Alternative Material
The need for an alternate material for plastic packaging is globally well known. Several startups have been experimenting with algae based products - whether its bioplastics or a novel material made out of ingredients found in macro algae. We are particularly excited about the latter. Algae based packaging startups have been incubated around the world. Most of them are still at a lab scale stage but progressively experimenting to replace multiple forms of plastic packaging. The packaging is completely bio-based and biodegradable. Different startups have been using different strains of macro algae to extract the ingredients that form the base of the material. While this material looks promising, we do see a few issues.
Macro algae cultivation: In 2020, a report from the Food and Agriculture Organization of the U.N. described seaweed farming as being “dominated by countries in East and Southeast Asia”. While seaweed farming does exist in other parts of the world, startups across the globe have been trying to establish a supply chain of seaweed in south east Asia. This has resulted in a logistical and carbon emission issue. Cultivation of seaweed, production of the packaging and final consumption of it are spread across the globe. Is this truly sustainable? The solution to this will arise from increased local production capacity of seaweed which we have been seeing due to the rise in popularity of seaweed as a sustainable resource.
Functional efficiency of the material: Algae packaging made out of seaweed extracts have not yet been able to achieve the functional efficiency of plastics. They are unable to store liquids and many of the variants that have been created lack the strength and quality of plastic. So far this has been a hindrance in its adoption and scalability. However, many startups are working with multinational corporations in overcoming these challenges.
Our Verdict So Far
While we love the versatility of algae and see the potential of its use as a sustainable alternative across industries - we have concerns about its long term sustainability as an alternative material.
Carbon Sequestration: A lot of stakeholders have been promoting algae as a carbon sequestration wonder. However, as a natural law - the carbon can only be sequestered till the time the algae is in its natural state and alive. For instance, once algae based packaging degrades, it will release all the carbon back into the environment. This goes against the idea of sequestration.
Algae Cultivation: There are also concerns about how and where to grow algae. Both - the growth of macro and micro algae have their own sets of challenges when wild grown or cultivated. In the natural environment, significant increases in algae harm water quality and decrease the oxygen that fish and other aquatic life need to survive. During cultivation, macro algae requires access to sea water which means that the farms need to be closely situated next to the coastal regions. While there are various methods of growing microalgae the most sought out method to use micro algae for protein production is the use of bioreactors. Bioreactors are not only CAPEX heavy but are also energy intensive, hence raising the question of whether algae protein is truly sustainable.
Too much of anything is good for nothing - so might be the case with algae. While the challenges of its cultivation are already being addressed by newer technologies, the use of algae as a carbon sequestration source will need to be used mindfully. In order to determine whether the use of algae against the present alternatives is truly sustainable, we would need to analyze the life cycle assessments in terms of environmental impact. In case you are one of those geeking out on this subject, please reach out to us firstname.lastname@example.org so that we can share your enthusiasm! In the meantime, we will keep sharing updates on our developing views.