Home / Chapter 6 – Setting Up Shop - Design, Engineering and Construction of Algae Biofuels Projects

Chapter 6 – Setting Up Shop - Design, Engineering and Construction of Algae Biofuels Projects

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The role of algae in the renewable fuels space is principally as a feedstock brought in at the front end of a biofuels generation process.  Algae offers some options that other biofuels production processes cannot easily match.  At a corn-based ethanol plant, for example, the feedstock is typically grown off-site and brought into the plant for pretreatment (crushing in a hammer mill).  Algae can be grown and pretreated off-site by a third party to remove water and extract oil (the “extraction process”), but it can also be grown, pretreated, and used to produce biofuel at a single processing facility.  If this complete end-to-end process is implemented, the plant will have three distinct parts to support the following distinct processes:  (1) the algae or microalgae growth and harvesting process, (2) the extraction process, and (3) the biofuels production process in which the algae oil is converted to biofuel.  The developer may elect to build all three parts of the plant using a single contractor, or may elect to enter into multiple construction agreements for different parts of the plant.  The developer’s decision will depend on the availability of appropriate contractors in the marketplace.  The information set forth in this chapter should apply no matter what decision the developer makes.

This chapter provides an overview of the contractual structures that apply to the construction of an algae biofuels production facility, including design and engineering, procurement, construction, and related technology licensing agreements, as well as the construction of ancillary facilities that may need to be integrated either upstream or downstream with the principal conversion facility.  This overview is written from the perspective of an algae biofuels project developer; however, the information set forth below should interest design and engineering, construction, and procurement contractors as well.  As with any complex negotiated transaction, there is a large amount of value to be gained or lost by all parties, and often the potential exists for using creative legal strategies to increase value for those on both sides of the table.

Construction-Related Agreements
Preliminary Design and Engineering Services
EPC Contractual Structure
Scope of Work
Completion and Start-Up Obligations
Performance Guarantees and Warranty Obligations
Limitation of Liability
Project Financing
Performance and Payment Guarantee Issues
Liens and Releases Issues
Insurance and Indemnity Issues


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