GreatPoint Energy has completed a $1.25 billion deal to build the first large-scale plant for converting coal to natural gas in China, a sign of how U.S. energy technologies are often being commercialized overseas.
The Wall Street Journal on Friday reported that China Wanxiang Holdings will invest $420 million in Cambridge, Mass.-based GreatPoint Energy, the largest equity investment by a Chinese company in a venture-backed U.S. company. Wanxiang will finance construction of the plant, with the first phase to be completed by 2015, according to the Journal.
The project in China, which the company has been working on for years, will use a process to treat coal with high heat and steam in a gasifier to convert it into natural gas.
The carbon dioxide and other air pollutants, such as mercury, are captured rather than released into the air, making it cleaner than burning coal. The plant in China will capture the CO2 and sell it to oil and gas drillers who inject the gas underground at existing wells, according to the Journal.
The deal is a breakthrough for GreatPoint Energy, which was founded in the mid-2000s and backed by Kleiner Perkins Caufield & Byers and other investors at a time when many venture capital companies expanded beyond traditional fields of IT and life sciences into energy.
Despite raising some $150 million to develop and test their technology as a pilot scale, GreatPoint Energy had until now not been able to find the financing to build at commercial scale. The lack of financing at this point, called the Valley of Death, has led many green-tech startups to seek out government funding and investments from large corporations, many of which are in Asia and Europe.
"I don't think (GreatPoint's) technology would get built into a plant in the U.S. right now," Kleiner Perkins partner Ray Lane told the Journal. "Maybe 10 years ago, maybe 10 years from now, yes, but not now from lack of funding. The banks here wouldn't do it. It's more affordable to develop it in China and Russia." Once one plant is built, banks will be more willing to invest in future projects, he said.
In a newsletter, venture investor David Anthony from 21 Venture said that companies from Europe, the U.S. and Israel will continue to develop clean technologies but China and India will be the leading markets for clean-energy technology products because those countries have acute environmental problems with air, water, and land and need electricity to fuel economic growth.