Investment $$ Still There for Alt Fuels, Other Green Car Tech, Says Venture Group

Qualifying for home mortgages, car loans and other big ticket credit items is getting harder for many to do, and major banks are hoarding cash as they wait for better - or at least more certain - times.

But contrary to a lot of what's passing for conventional wisdom these days, cash for clean-tech projects including alternative fuels and other green transportation technologies still is out there.

It's not as easy to come by as it was just a few months ago, but the head of the National Venture Capital Association says that the private investment community is expected to pump out $30 billion this year, with $4.5 billion of it for clean-tech investments.

The annual total is unchanged from last year, but the amount earmarked for clean technologies is up 50 percent from $3 billion.

"Clean-tech is getting a bigger slice of the same-sized pie," NVCA President Mark Heesen said in an interview with Energy & Environmental News , a subscription-only news service.

Early-stage companies that rely on cash from venture capital investors are heavily buffered from the credit crunch because most venture capital firms are investing money they raised during the past two years, said Heesen.

"We're very different than banks," he explained. "We're about equity, not debt."

One of the most recent to benefit form the flow of venture capital is Cobalt Biofuels , a three-year-old California company aiming to convert non-food plant material into a cellulosic biobutanol fuel .

Cobalt said this week that it just raised $25 million in a new round of private financing, bringing total equity raised to $38 million.

Pinnacle Ventures and VantagePoint Venture Partners, major players in the alt fuels industry, were among existing institutional investors participating in Cobalt's latest funding round. New investors included Life Science Partners and Harris & Harris Group.

Cobalt said it plans to use the new funding to build a 35,000-gallon-a-year pilot bio-refinery next year near its San Francisco Bay-area headquarters. It hopes to follow that with a 2.5-million-gallon-a-year demonstration plant in 2010 and a 25-million-gallon-a-year commercial plant in 2012.

Pamela Contag, cobalt's president and chief executive, told E&E News that the bio-refineries' initial production would be sold to the chemical market as solvent or feedstock, but that the goal is to produce commercial quantities of biobutanol for the much-larger bigger transportation fuels market.

Biobutanol has 90 percent of the energy content of gasoline and can be used an additive or a full replacement for petroleum. And unlike corrosive ethanol, biobutanol can be distributed through existing fuel pipelines and used in its pure form in automobile engines, Contag said.

In the pilot bio-refinery, she said, Cobalt will use a strain of the Clostridium bacteria and other organisms to break down a range of feedstocks, including wood chips, sugar beets and sweet sorghum.

Contag said she hopes to begin generating revenue from the demonstration-scale plant to help line up investors for the commercial operation.

She declined to estimate how much it would cost to build the two larger biorefineries, but added that while raising money is difficult, it becomes easier "when you're near generating revenue."

John O'Dell, Senior Editor

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John O'Dell October 22, 2008, 3:00 AM

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Alternative Fuels, Biofuels, Fuels & Technologies

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Alternative Fuels Investment, Biobutanol, Biofuel, Cellulosic Fuels, Venture Capital