Trash-to-ethanol company gets $19.5 million more

Coskata, a start-up that wants to make ethanol out of tires and other stuff found in the dump, has raised $19.5 million in a second round of funding, according to SEC documents scoured by Private Equity Week.

Earlier this year, General Motors announced it had invested in the company and that Coskata would build a demo ethanol plant by the end of the year that would be capable of producing 40,000 gallons of fuel a year. GM will buy the fuel.

Coskata's ultimate goal is to make fuel for $1 a gallon. (After taxes, subsidies and transportation costs, the price goes up, but most people are aiming at around $1.15 to $1.50 per gallon at the pump.) It hopes to have a 100-million gallon a year plant by 2011.

A whole host of start-ups are in the midst of raising money or building cellulosic ethanol plants. Each company has its own processes and feedstocks, and the key to success (or failure) for most of them will be how cheaply and efficiently they can produce fuel at high volumes. Mascoma, for instance, converts grasses and wood chips into fuel through biological fermentation. Range Fuels, meanwhile, converts wood into fuel through thermochemical processes similar to those for converting coal into a liquid. Then there is ZeaChem, which converts wood into acetic acid and mixes the acetic acid with hydrogen to make fuel.

Coskata--which uses both thermochemical and biological processes--says it can beat competitors in the price of feedstock. (See .) Trash is incredibly cheap, which the company claims gives them a cost advantage over some other cellulosic companies who will be buying trees and farmed grasses. Coskata will also use crops, but a significant portion of its feedstock will come from materials with little market value. (Competitors, however, claim that cooking heterogeneous materials into a fuel is complex and hence adds processing costs.)

Coskata, which was developed at universities in Oklahoma, says it can get more than 100 gallons of fuel out of a ton of byproducts. ZeaChem claims they can get 160 gallons. Other companies are somewhat vague when it comes to numbers, taking a common strategic position.

A lot of these companies also share investors, so don't rule out mergers. Coskata, Mascoma, and Range Fuels all received funds from Khosla Ventures, as did Gevo, Amyris Biotechnologies, LS9, and a few others. It's a cozy world. In a few years, the world will know who is right.

You're nothing but trash!

(Credit: Coskata )