The long-term impact of yesterday startling announcement by Standard & Poor’s that it was downgrading United States Government bonds to one notch below AAA, a rating that the US had maintained since 1917, has yet to be seen on Wall Street.

But there is little doubt that it will spook the investor community, all of whom are looking for the next Big Thing to park their cash and hopefully make piles more money.

One of the few financial markets certain to prosper over the next decade is that of renewable biofuels. The ASTM as certified them for civilian aircraft used, and the Pentagon is busy scrambling to fulfil federal mandates are upping their use of biofuel: the Air Force is to get 50 per cent of its fuel needs from biofuel in 2015, and the Navy at decade later.

But, where to go for the most reliable feedstock? In Pentagon test, three leading contenders have emerged – camelina, jatropha and algae. While all three have their merits, “micro” algae still seems like the longest shot, remaining largely within the realm of the Pentagon’s Defence Advanced Research Projects Agency laboratories, and most analysts believe that it will be some time before we see pond scum fuelling the Pentagon’s aircraft and warships.

Now however, disillusioned scientific researchers in India, having spent more than two years investigating microalgae, have directed their research elsewhere, resulting in a start-up company that may eventually resemble nothing so much as the early days of Xerox and Apple Computers.

Sea6 Energy, an Indian start-up company based in Chennai, (formerly Madras), the capital of the Indian state of Tamil Nadu, located on the Coromandel Coast of the Bay of Bengal, have begun experimenting with macro algae, more commonly known as seaweed.

Sea6 Energy’s founders, four postgraduate students and their professor at the Indian Institute of Technology Madras, eventually concluded that algae’s possibilities as a biofuel feedstock lay many years in the future, noting that the micro-organism needs significant amounts of fresh water, large amounts of nutrients and significant areas of land for establishing growing ponds. Sea6 Energy chairman Shrikumar Suryanarayan noted simply, “We were preparing to abandon the project when we realized that we were chasing the wrong idea.”

Suryanarayan and his team noted that seaweed has a number of advantages over its microscopic cousin, particularly since it grows in shallow ocean waters and doesn’t need land, water or nutrients, as the ocean provides them.

Sea6 Energy was formed in July 2010 when Shrikumar and a few IIT Madras alumni contributed about $20,000 in start-up funds.

Sea6 Energy’s location has a number of advantages, including the fact that technology for its cultivating seaweed is already well established, as it is being grown along the Tamil Nadu coast as a raw material for some cosmetics. Multination Pepsi had also hired people in coastal Tamil Nadu to cultivate seaweed for its food products.

The new start up faced a number of technical problems. Tamil Nadu farmers cultivate seaweed on floating bamboo rafts in calm waters. In order to ramp up the scale to industrial production, Sea6 realised that bamboo rafts break because they were rigid structures, developing instead an offshore farming system, based on a marine plastics polymer, within six months of the company’s incorporation, for which it has filed a provisional patent application.

Sea6 energy’s structures would allow seaweed to be cultivated in rougher waters, where it could not be done earlier, potentially opening up vast stretches of coastline for farming and providing increased employment opportunities to rural communities.

Sea6 Energy is now tackling the problem of finding a biological method to break down the plant into sugars and then converting the sugars into alcohol. Seaweed biomass is rich in carbohydrates, which can be converted into sugars. Unlike plants, seaweed contains no lignin and is easier to break down. Sea6 needs a microorganism that works in seawater and its research has discovered a few.

Converting the sugars into alcohol or other fuels is the easiest task. “Once you have sugars,” says KB Ramachandran, professor of biotechnology at IIT Madras, who is involved with the company, “we can make any petrochemical product.”

Macro algae produce oil directly and when compared to plants, the economics and technology are loaded heavily in favour of seaweed; while sugarcane produces 30 tons in a hectare, a similar area can produce 100 tons of seaweed.

Sea6 Energy estimates would need $1.1-$1.34 million over the next four years to develop a farm of one square kilometre with a demonstration plant that produces ethanol and other petrochemical products.

Sea6 Energy noted that, “Seaweeds, technically known as macro-algae, offer an unmatched potential for scalability by growing directly on the ocean surface and extracting nutrients from flowing water.”

So, gentle readers, do the potential “scalability” of potentially investing in such a project. India has approximately 4,000 miles of coastline, bounded as it is on three sides by seas, and 0.13 million square kilometres of territorial waters. That is as lot of aquatic biomass.

Remember, you read it here first.

Dr. Daly wrote this piece from London for Washington, DC-based OilPrice.com.

John Daly