msu phyco2 test plan

MSU-Dow-Phyco2 Full-Scale Test Plan Executive Summary DRAFT 2-July-12 2:37p PT 1

Executive Summary PHYCO2 / Michigan State University / Dow Chemical

18 Month Full-Scale Bioreactor Test Plan

The Opportunity

An innovative process (patent pending) for the accelerated production of algae biomass is

under development by PHYCO2 LLC in conjunction with Michigan State University and Dow

Chemical Company. This summary identifies the necessary steps to build and operate two

full-scale Helix Algae Photobioreactors to demonstrate their ability to grow algae at an

accelerated rate while sequestering CO2.

Market demand for the use of algae biomass in the production of food, pharmaceuticals,

nutraceuticals and fuel oil is increasing. Simultaneously, global social and political

pressure is increasing to reduce levels of emitted CO2.

The Challenge

Current algae production is hamstrung by the use of natural sunlight, which limits the

time of exposure to daylight hours, and geography to warmer regions. PHYCO2 holds the

rights to a potentially game changing technology that can grow algae of any type, any

time, anywhere. With the PHYCO2 bioreactor design, Algae can now be grown 24/7 and

along side any power plant, capturing CO2 emissions anywhere in the world.

Algae Biomass Product Opportunity

Algae based products are in the infancy stage of supplying the markets of fuel, bio-

chemicals, pharmaceuticals, nutraceuticals, food additives and animal feed. Globally, the

current total available markets (TAM) are $2,500B for fuel, and over $1,200B for the rest.

There is substantial social, political and market pressure to incorporate natural based

components into these production processes. Amongst the bio-alternatives, algal biomass

has the greatest promise of economic viability.

Market estimates widely vary, but all carry the same message of potentially large and

growing markets. For instance, just addressing biofuels:

The Algae 2020: market report forecasts algal based biofuels growing from 2018

to 2025 at a 30% clip globally from 1B to 6B gallons produced. This would be a

$20B market at todays prices.


A 2011 study by the US Department of Energy shows a potential by 2022 of

replacing 17% of all imported oil with algae based biofuels. This would represent a

$62B market in the US alone. (Source: National microalgae biofuels production potential and resource demand. Mark S. Wigmosta, 2011)

Market Research Media estimates total biofuel production (algae and other bio

sources) production at 1.9B barrels globally in 2020, growing at a CAGR of 10%

from 2015-2020. This would yield a $240B annual market and growing. And it will

represent only about 6% of the of total global fuel production in 2020. (Source: Market Research Media Global Biofuel Production Forecast 2015-2020)

Thus for algal based biofuels alone we have a market potential range of $20B - $240B in

about 10 years and growing at a double digit rates.

CO2 Sequestration Opportunity

Over a ton of CO2 is released for each MWh produced using coal as the energy source.

Natural gas produces about half that amount. The US produces over 2 trillion tons of CO2

annually using coal-fired power plants, which represents about a fourth of global output.

Many countries have undertaken the challenge of reducing these emission levels using a

variety of incentives, regulations and penalties. Carbon taxes and credits are some of the

mechanisms under serious consideration. Examples: A European commission has gone

as far as to suggest a tax rate of about $40/ton of CO2 produced. For a medium sized

power plant, that would be an annual levy of over $100M, which is on the order of the

entire annual operating cost for the plant. Furthermore, the Australian government has

pegged a value of $25/per ton for a yet to be established carbon credit market. So the

political pressure worldwide is firm and strengthening.


The Technology

Algae production (photosynthesis) requires more

than CO2, water, nutrients and sunlight. It

requires a photobioreactor that combines the

right CO2, water, nutrients and light. Current

processes depend upon large acreage surfaces

(e.g. ponds) to grow algae during daylight only.

This is economically impractical. PHYCO2 has

developed an exclusive (patent pending) process

to grow any algae, any where and any time.

Our innovative algae photo bioreactor is a

vertical system powered by a constant high

intensity LED light source thus allowing 2-3

times the algae biomass production in less than

1/8th the space. It will produce more algae,

more quickly, utilizing less real estate.

The heart of the process is the closed loop

photobioreactor, a 10 foot tall vertical helix

coiled tube (designed in association with B-Side

Plastics and Parker Hannifin) wrapped around a

high intensity LED light source (developed in

jointly with IDT TOSHIBA and J&J Electronics).

Algae are grown inside the helix tube as it continuously circulates around the light source

24/7. Advantages include specifically tuned light sources to maximize growth, flow

dynamics to accelerate growth, indoor operation independent of geography or weather,

and the Photobioreactors are stackable for a minimal footprint resulting in efficient use of

available land.

Accomplished to Date

A scale prototype algae photobioreactor was constructed with the following design objectives:

Reduced Footprint to grow more algae in less space than inefficient ponds or

other methods.

Eliminate Natural Sunlight Requirement by growing algae 24 hours a day indoors.

Increase Production Rate by growing more algae, more quickly, more selectively.

Vertical Expansion For further real estate savings by stacking bioreactors.

Cost Effective For CO2 sequestration and algae production.

Internal testing resulted in successful outcomes of these objectives. The fundamental

technology of growing algae in a continuous flow helix coil photobioreactor with HILED

illumination was proven, and subsequently received confirmatory academic endorsement

in testing, at the Utah State University Energy Dynamics Laboratory in May 2010.

10 feet


Next Steps

With basic design, development and academic endorsement complete, the next step is to

prove the technology to be scalable. This will entail an 18-month project to ultimately

build, test, and validate performance of two (2) full-scale commercial HILED

photobioreactors at the T.B. Simon Power Plant located on campus at Michigan State

University, East Lansing, MI. The project will be conducted in two stages: Initial Assembly

and Full Scale Testing. The total project investment will be just under $1,500,000.

) * + , - . / 0 1 )( )) )* )+ ), )- ). )/ )0PHASE I - Initial Assemply (California/Texas)

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PHASE II - Full Scale Testing (Michigan State University)

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MSU-Dow-Phyco2 Full Scale Photo-Bioreactor Testing - 18 Month Investment

(See detail backup in appendix)

Phase I Initial Assembly (California/Texas)

The first 8 months will see the development, production, and testing of two full-scale

HILED photobioreactors. Working with B-Side Plastics, the helix coil injection molds will

be perfected. Parker-Hannifin will complete development of the special flanges to be used

during final coil assembly. Unique hardware and software components will be specified

and purchased. The high intensity LED light bars for the center of the helix coil designed

by IDT TOSHIBA and J&J Electronics, will be supplied by J&J Electronics. The completed

and tested HILED photobioreactor assemblies will be partially disassembled and

transported to the campus of Michigan State University, East Lansing, MI for reassembly

and installation at the power plant site.

PHASE II Full Scale Testing (Michigan)

In conjunction with the production of the two HILED photobioreactors by B-Side Plastics

and Parker Hannifin in Houston, a 300 sq. ft. site at the Michigan State University power

plant will be prepared to accept the units. This will include the build-out and temperature

control of the space. Also at this time flue gas connections will be plumed from the power

plan exhaust to the test site.


On month 8, the two units will be shipped from Texas to the staging area at the power

plant on campus. Final assembly, testing and test protocol optimization will be developed

by a collaboration of MSU, Dow, and PHYCO2. Once the HILED photobioreactors are

assembled and commissioned for use, full scale testing and begin on month 11.

The units will be monitored and controlled by a computer system, various algae strains

will be tested to determine optimal LED wavelength/duration cycles, and an efficient

harvesting process will be identified. This will complete performance testing and allow

final analysis and reporting of data to more specifically quantitate functional efficiency and

economic opportunity for this technology.

Expected Outcomes Outcomes of this project include the optimization of connectivity to power plant emissions

exhaust system, selection of the most efficient algae strains, determining algae yields,

harvesting frequency, measuring CO2 absorption rates, and improving current design

characteristics of the bioreactors and interconnections.

Scope of Project

Confirm optimal size/shape of HILED photobioreactor helix coil

Establish appropriate water flow rates

Engineer water circulation system

Optimize LED configuration & wavelengths

Optimize LED exposure frequency

Determine power usage requirements

Test two algae species for CO2 absorption and algae production characteristics

Establish appropriate CO2 input flow rates, pressures and temperatures

Determine extent of CO2 input filtering required

Calculate CO2 absorption rates

Optimize and measure algae product production yields

Determine harvesting cycle

Identify algae drying process for end product

Performance Hypotheses to be Validated

Per HILED photobioreactor

Algae Biomass Produced: 0.9 Tons / Year (extrapolated)

CO2 Absorbed: 5 Grams per each gram of dried Algae Biomass produced

Power Consumption: 34 Watts / Hour

Water Consumption: 5 Gallons / Day (15% daily loss of 110 liter capacity)


The Project Team

Don Hubbard Chief Executive Officer, PHYCO2 Attorney. Alex Brown and Sons

Managing Director, Internet and Software Banking. UBS Warburg

Co-Head, Technology Investment Banking, Morgan Stanley

Co-Founder CFO, Chameleon Communications

Head of Merchant Banking for privately held Swiss Asset Management Company

Lieutenant Commander, U.S. Navy (Ret)

Claude Hutchison Chief Operating Officer, PHYCO2 President, Security National Bank

Founder, Chairman & CEO CivicBank of Commerce

Managing Director, Smith & Crowley, Inc

Managing Director, LECG

Regent, University of California

Director, Office of Asset Enterprise Mgt. U.S. Dept of Veterans Affairs

Captain, U.S. Navy (Ret)

Eric Hagopian - Operations Director / Project Manager, PHYCO2 BS Biological Science, San Jose State University Founder of Insulated Shipping Containers, Inc. (ISC).

Invented and patented for ISC the VacIntact, a mechanical device to monitor the integrity of a vacuum in an insulating wall

Operations Manager for MicroScan, Inc., a medical diagnostic manufacturer.

United States Army, Nuclear Weapons Specialist, Secret Clearance

Robert Morgan Chief Technology Officer, PHYCO2 Over 25 years experience designing and working with technology systems

Designed and developed new technologies in the field of algal biomass production

Designed equipment for GHG emissions, capture/sequestration & alternative fuels feedstock FBI training in hazardous materials investigation

Honored California Fire Service Member

United States Coast Guard

Wei Liao, Ph.D., P.E. Assistant Professor, Michigan State University Department of Biosystems & Agricultural Engineering

Ph.D. Washington State University BS & MS, Wuxi University of Light Industry, China Over 10 years experience in fields of bioenergy & bioproducts

Mike Mazor, Ph.D., Fellow & Dow Scientist, Dow Chemical Company Dow Scientist for Energy Efficiency & Sustainability

Ph.D. Physical Chemistry, University of Houston

BS Chemical Engineering, Penn State University


In Conclusion

Clearly there is ever-increasing global pressure to produce more energy with fewer

harmful emissions released into the atmosphere. A prime target is the operation of coal

and natural gas fired electric utility plants, where the sequestration of CO2 would show

immediate environmental benefits. Several technologies to sequester CO2 have been

under development for years; most are very expensive and none, with the exception of

PHYCO2s HILED Photobioreactor technology, have the capability to pay for themselves

with an economic byproduct. The conversion of CO2 into usable algae biomass for food,

medicine or fuel is a scientific breakthrough with the promise of leveraging the value of

the sequestration process. Therefore, for the first time there is an identifiable path to

harvest a useful and marketable product while materially reducing noxious emissions.

The alignment of the scientific resource of Michigan State University, with the support and

guidance of Dow Chemical, and the patent pending technology of PHYCO2 is an ideal

partnership. The technological and economic rewards for the successful completion of this

18-month testing process are enormous; particularly in light of the relatively nominal

investment required to take this next essential step.

Beyond completion of this 18 month full-scale test, PHYCO2 will be positioned to move

forward with one of several scenarios. Possible pathways include:

Partnering with a large diversified company (e.g. Dow Chemical, DuPont, or similar

manufacturing/energy/agribusiness company) to integrate the technology into

ongoing algae production projects.

Commercialize the technology by linking with an emerging company in a strategic

alliance to accelerate the innovation to commercialization process.

Licensing the technology to manufacturing, natural resources or energy companies;

Sell the company outright.


Appendix Project Detail

MSU-Dow-Phyco2 Full Scale Photo-Bioreactor Testing - 18 Month Investment #'/=1(!1;9:;=/;>##'/:1(!1:;::/>9 (/!

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Appendix PHYCO2 Directors & Advisors

Board of Directors

Gregory Hagopian, Santa Maria, CA Chairman BOD, PHYCO2

CEO Fuel Technologies International

Don Hubbard, Maryland CEO, PHYCO2 BA, U.S naval Academy

JD, Maryland School of Law

Claude Hutchison, Jr., Glenbrook, NV COO PHYCO2

BS, University of California, Berkeley MBA, Harvard University

Bruce Tatarian, San Juan Capistrano, CA Principal, Tatarian & Associates

BA Chemistry, Cal State University, Fresno

MBA, Cal State University, Long Beach

JD, Western State University (Member California Bar)

William Clary, Tulsa, OK Managing Director,

MIRATECH Holdings, LLC

BA Chemistry, Carleton College

MS Mechanical Engineering, University of Minnesota

Keith Nahigian, Washington, DC President, Nahigian Strategies

BA, College of Wooster

Karl Seitz, Huntington Beach, CA Principal, Seitz & Associates, LLC

BS Economics,

University of California, Los Angeles MBA Taxation, Golden West University

Certified Public Accountant

Advisory Board

Howard L. Chesneau President Fuel Quality Services, Inc.

25 yrs experience in fuel stability Chairman Atlanta Chapter SAE

Co-Chair ASTM Committee on Microbial

Contamination Member ASTM D2 Committee on fuel

from middle distillates to heavy oil.

Co-Editor ASTM, STP 1005 Distillate Fuel Contamination and Storage

Rafi Fass, Ph.D. Senior Scientist Dept of Biotechnology,

Israel Inst. for Biological Research,

Ness-Ziona, Israel. PhD Biotechnology,

Faculty of Agriculture, The Hebrew University in Rehovot, Israel.

Fields of scientific activity include:

- Applied and environmental biotech, - Microbiology of hydrocarbons fuel

distillates,

- Bioremediation of contaminated soils and water,

- Biotechnology R&D and scaling up of

microbial fermentation processes

Edward English VP & Tech Director Fuel Quality Services, Inc. Experience in nuclear power industry

BS Chemistry, University of Florida 2 yrs Grad Studies, University of Miami

Norman Arikawa Asst Director of Trade Port of Los Angeles

Formerly Chief Accountant, Port of LA

Advises LA Mayors Office of Econ Dev Co-Chair LA Chamber of Commerce

Global Initiatives Committee

Member District Export Council of SoCal


Appendix Letter of Support Dow Chemical Company


Appendix Letter of Support Michigan State University


Appendix Letter of Support Wei Liao, Ph.D., Michigan State University

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msu phyco2 test plan

Documents

b market

b annual market

total biofuel production

use of algae biomass

market pressure

market demand

market estimates

production of food