Green Tech

GreenFuel Technologies, one of the first companies to enter the algae biofuels business, is shutting down after running out of money.

Investor Duncan McIntyre of Polaris Venture Partners on Wednesday confirmed GreenFuel Technologies' demise, saying that the company is a "victim of the economy." The closing was reported by Greentech Media earlier on Wednesday.

McIntyre said investors, who have raised more than $70 million for GreenFuel Technologies since 2001, are exploring ways to sell the company's intellectual property and assets.

"The economy is a challenge to this industry so we are shutting our doors," he said. The company's CEO, Simon Upfill-Brown, had been seeking to raise money over the past several months. A company representative said the company doesn't intend to issue any statements on Wednesday.

The initial design of GreenFuel's algae bioreactors on top of a building at the Massachusetts Institute of Technology.

(Credit: GreenFuel Technologies)

The financial situation at GreenFuel Technologies had been degrading since last year, despite the fact that the company had landed a $92 million deal to sell algae-growing greenhouses to a cement maker in Spain.

In January of this year, the company laid off about half its staff, bringing the number of employees to 19. At the time, employees complained that the operation and finances were mismanaged.

Victim of credit crunch or poor execution?
GreenFuel's idea to use specially bred strains of algae to consume large amounts of carbon dioxide to make biodiesel captured the attention of many entrepreneurs and the media. But the company ran into trouble making the transition from pilot test to commercial product, referred to as the "Valley of Death" among investors.

Since 2001, GreenFuel Technologies has had a number of missteps.

Its first pilot project with Arizona Public Service tested ways to feed pollution from a power plant to algae growing in plastic bags. The company discovered that manually harvesting the algae made that process too expensive and had to create another product--a greenhouse for growing algae.

The company also replaced its original CEO with board member Bob Metcalfe, who ran the company until he found a replacement.

Although the biofuels industry as a whole is struggling right now, a number of companies have formed to turn the algae into biofuels, pharmaceutical products, or animal feed.

Algae is considered a promising feedstock for those products because it's rich in oil and can grow on marginal land. But no company has made algae at commercial scale that can be grown and harvested at a price competitive with petroleum-based products.

Algae biofuel outfit GreenFuel Technologies has laid off 19 people, or about half of its staff, another sign of the difficulty that fledgling alternative fuels face.

A company representative confirmed the staff reduction on Monday and said one of GreenFuel's two major customers--the Aurantia cement factory in Spain--remains a customer.

An algae bioreactor from another algae fuel firm, PetroAlgae.

(Credit: PetroAlgae)

GreenFuel has developed a method for growing and harvesting algae in a greenhouse. The idea is to locate the greenhouses near a large carbon dioxide emitter, like a cement factory or power plant, to "feed" the algae. The algae is then harvested, dried, and turned into biodiesel or feed food.

Company CEO Simon Upfill-Brown, who was recruited last year from Dow Chemical to head the 8-year-old firm, told Xconomy that the engineering for its Spanish deal, previously estimated at $92 million, will be outsourced.

"We've got to weather this economic storm as best we can," Upfill-Brown said. "This is the right thing to do."

A person claiming to be a former contract worker at the company said GreenFuel's Aurantia customer was dissatisfied because of several months of delays.

GreenFuel was one of the first companies to get funded to commercialize algae farming, and there are now several companies and researchers studying methods for turning algae into fuel.

But the company has had its missteps. Its first test facility at an Arizona utility produced too much algae, making the harvesting very manual and driving up the cost of operation. It replaced its CEO, putting investor Bob Metcalfe in charge for several months.

GreenFuel isn't alone in running into stumbling blocks, though. Many clean-tech companies are hunkering down, seeking to preserve cash so they can finish developing products.

Biofuel firms seeking to commercialize their technology are particularly vulnerable to the financial industry meltdown. Demonstration plants require large amounts of money to build. But investors have become more risk-averse, making it tougher for relatively unproven firms to demonstrate and fine-tune their technologies.

GreenFuel Technologies on Tuesday is expected to announce what few in the algae fuel business can claim--a paying customer.

The Cambridge, Mass.-based company detailed a multi-year deal worth $92 million to build greenhouses that grow algae, which can be harvested for vegetable oil to make biodiesel or to make animal feed.

An algae bioreactor from another algae fuel firm, PetroAlgae.

(Credit: PetroAlgae)

In the greenhouses, the algae will be fed sunlight and carbon dioxide from the Holcim cement plant near Jerez, Spain.

The project developer is Spain's Aurantia, which specializes in renewable energy. GreenFuel executives have said they are pursuing other deals with large polluters, such as utilities and heavy industry, with other project developers in different parts of the world.

The deal, which has been rumored for months, is a milestone for the 7-year-old company with roots at MIT and for the budding algae industry overall.

GreenFuel Technologies originally tested its algae-growing process in plastic bags with an Arizona utility. That project ran into trouble when the cost of harvesting the algae biomass was too high.

Its greenhouse design--which the company will not discuss in detail--grows algae without tubes and uses an automated harvesting system, according to CEO Simon Upfill-Brown. The water in which the algae grows is recycled.

GreenFuel and Aurantia now have a 100 square-meter prototype operating. It's next stage, slated for completion in about a year, is a 1000-meter installation.

It hopes that by 2011, it will have a full-scale operation, which will take up 100 hectares, or about 250 acres, Upfill-Brown said.

A 100-hectare algae farm would consume about 50,000 metric tons of carbon dioxide per year--about 10 percent of its the cement factory's annual emissions--and grow about 25,000 tones of algae biomass.

Cement makers are some of the largest emitters of carbon dioxide. With the farm, Holcim will get positive PR and take a step toward mandatory emissions cuts, Upfill-Brown said.

He expects that the project developers will choose different strains of algae to optimize for different end products, be it oil or feed.

In the past year, there have several companies formed to make algae for oils for fuels or pharmaceuticals. But thus far, there aren't any companies producing algae for fuel at commercial scale.

"Some people are making clearly outrageous claims. We're at the stage where we can say we are pretty comfortable and very optimistic that we're getting all the way there in phases," he said.

On top of technical challenges, a potential problem with algae ventures is falling petroleum prices, which make it harder to be cost competitive. Struggling biodiesel maker Imperium Renewables is said to have delayed an algae farming venture in Hawaii.

Upfill-Brown said the company expects to raise a series C round of funding in the next month to further develop its greenhouse. It intends to seek out other project developer customers like Aurantia as customers.

Updated at 4:55 a.m. PT with corrected figure for amount of carbon dioxide consumed by a 100 hectare algae farm.

GreenFuel Technologies, a closely watched algae start-up, has hired a new CEO to place interim CEO Bob Metcalfe.

Simon Upfill-Brown will join the company in mid-July from Haltermann Custom Processing, where he was CEO of the chemical manufacturing firm. He was general manager of Haltermann Dow after Dow Chemical bought the company in 2001 until it was spun out this year as a separate company.

Incoming GreenFuel Technologies CEO Simon Upfill-Brown.

(Credit: GreenFuel Technologies)

In a statement, Upfill-Brown said "algae has come of age."

"By developing and scaling our algae farming technologies, we aim to play a huge role in solving the world's energy problems: mitigating CO2 emissions and producing renewable fuels, while adding to feed and food supplies rather than reducing them," he said.

GreenFuel Technologies is one of the first in a wave of companies trying to commercialize algae-based fuel.

It has bioreactors that use large amounts of carbon dioxide--from a power plant or other large emitter--and sunlight to grow algae. The algae is then harvested and then turned into liquid fuel, like biodiesel, or burned for electricity.

The company ran into troubles last year when its pilot test at utility Arizona Public Service did not produce fuel as cost-effectively as anticipated.

It trimmed down its staff and replaced its CEO, putting Ethernet co-inventor Metcalfe--now a partner at venture capital firm Polaris Ventures--in as interim CEO.

Last month, the company said it completed a C round of venture funding and has landed an undisclosed customer for its algae farming technology.

In an interview, Metcalfe said that GreenFuel has a few projects in the works, some of which could be announced in a few weeks.

"We are in project mode now. These are development and scaling projects with partners who want to have an algae farm next to a power plant, a cement plant, or an ethanol plant," he said.

One project in Europe is already under way, although its partner does not want it to be disclosed publicly yet.

One in Phoenix with Arizona Public Service would be much bigger and more serious than its initial demonstration facility, he said.

In addition, GreenFuel Technologies has developed a completely new design for its bioreactors that breaks with the glass tubes and plastic bags used in its tests, Metcalfe said.

Instead, the latest product resembles a green house. But because it's designed to be filled with flue gasses, it's closed off from people.

"We're hoping to quadruple the productivity per square meter," he said, adding that the glass tube design was too expensive and that harvesting algae from the second-generation bioreactor would be more automated.

Finally, Metcalfe made clear that biodiesel is not necessarily the end product of the company's algae farming technology.

Instead, its customers will be able to sell their algae for "feed, food, or fuel," he said.

Updated at 3:25 p.m. PDT following interview with Bob Metcalfe.

GreenFuel Technologies on Wednesday said that it has completed a round of funding to ramp up its algae-farming projects.

The company landed $13.9 million, which was led by Access Private Equity, Draper Fisher Jurvetson, and Polaris Venture Partners.

A portion of the money will retire debt the company borrowed following a corporate shakeup last year that put Bob Metcalfe in as interim-CEO. The remaining $7.6 million in new capital, which completes its series B round, will go to scale up technology projects.

Algae being grown at GreenFuel Technologies' test site at Arizona Public Service power plant.

(Credit: GreenFuel Technologies)

In a statement, Metcalfe said the company will announce a new CEO, a C round of funding, and signed customers for its technology.

GreenFuel also disclosed that one algae-growing project began in January but declined to provide details.

In March, news Web site Xconomy reported that GreenFuel had landed a customer in Europe that could be worth $92 million.

GreenFuel builds bioreactors that grow algae at sites that emit a lot of carbon dioxide. Its first pilot was at an Arizona power plant.

The algae is harvested and can be turned into biodiesel or other forms of biomass that can be converted into electricity or other liquid fuels.

A number of companies are developing algae technologies because of the rising cost of soybeans to make biodiesel and growing concern over growing food crops for fuels.

Makin' algae.

(Credit: GreenFuel Technologies)

With Earth Day upon us again, CNET News.com green reporters sat down and selected five leading companies in five different clean technology categories. Here are the ones to watch in the recycling realm:

1. GreenFuel Technologies: Large oil companies and many academics favor capturing carbon dioxide, turning it into a liquid, and storing it underground. Politically, though, that's a tough sell.

GreenFuel, with a pedigree from Harvard and the Massachusetts Institute of Technology and millions in venture funding, wants to feed captured carbon dioxide to algae, and then turn the algae into biofuel. The company is still fine-tuning its system and had to swap CEOs last year, but it's one of the more intriguing ideas for turning carbon dioxide into a salable product. The world is waiting to see the results from the Arizona test plant, the coming European plant, and the progress on turning algae into food.

Baking soda, made from smoke stack emissions.

(Credit: Michael Kanellos/CNET News.com)

Other carbon dioxide recycling ideas include turning it into baking soda (which start-up Skyonic is working on) and baking powder ( Carbon Sciences).

2. Electronic Recyclers: More than 200 million pounds of electronic waste went to recyclers in California alone in 2007, according to John Shegerian, CEO of Electronic Recyclers, one of the largest e-waste recyclers in the U.S. And roughly 80 million analog TVs will get heaved out in 2008 and 2009. The European Union and four states have already implemented e-waste regulation and more are expected to follow.

The companies make their money in a couple of ways. First, governments pay them to process waste. Second, recyclers are free to refurbish and resell equipment. Third, if the PC must get melted down, the raw materials can be sold as commodities. Other ones to keep an eye on: Multis (a server refurbisher), TechTurn (notebooks), and Manufacturing Recycling Management (a joint venture with Panasonic, Sharp, and Toshiba.)

PCs getting chewed up.

(Credit: James Martin/CNET News.com)

3. Climate Exchange: Climate Exchange was the early pioneer in allowing companies to buy and sell their carbon credits. Most of the company's business has occurred on its European exchange; nearly 7 million tons of carbon emissions exchanged hands a day in the first quarter. The U.S. doesn't have a mandatory carbon cap and trade system yet, but since all three presidential candidates approve of such a system, large companies are buying credits on the Chicago Climate Exchange, which the company bought. The daily average rose from 114 contracts a day traded in 2006 to 1,117 in 2007, an 881 percent increase.

Revenue came to $27 million last year.

4. Ze-Gen: It's the one word business model: trash! The company takes trash, converts it into gases, and then uses the gases to run a turbine to produce electricity. There's a host of these companies out there, each with a slight twist. BioEnergy Solutions and Microgy take one kind of waste, manure, and turn it into methane. The methane gets sold to specific customers or down a pipeline. Onsite Power Systems has showcased how it can convert food into gas. All of these companies are relatively small and new, so it's a real horse race here.

Click here to see all of News.com's Earth Day 2008 stories, photo galleries, and more.

5. Recycled Energy Development: More than half of the electricity generated in the U.S. never gets used. It gets lost during transmission or gets converted to waste heat. RED has created systems for capturing industrial heat efficiently and then converting it to power. Not only does this lower power bills, it allows manufacturers to obtain credits for cutting energy consumption.

RED doesn't sell equipment. Instead, it keeps ownership and runs the business as a service. Expect to hear more about GMZ Energy, which has discovered a more efficient way to convert heat to electricity, and China Energy Recovery.

Correction done on April 4 to the spelling of Bob Metcalfe's name.

GreenFuel Technologies has reached an agreement to build an algae-to-fuel plant in Europe, which could be worth as much as $92 million, according to a report.

Xconomy on Friday reported the deal, saying that it was apparently brokered by former CEO Cary Bullock who was replaced by Bob Metcalfe last year in a company shake-up.

GreenFuel: making green fuels from power plant pollution.

(Credit: Martin LaMonica/CNET Networks)

GreenFuel has developed a bioreactor that grows algae from the carbon dioxide emissions of power plants. The algae is harvested and turned into different types of fuel--either biodiesel or biomass--that can be burned to make electricity.

The company ran into trouble last year when it found that its process was too expensive because it generated too much algae and required too much manual intervention.

The board replaced Bullock as CEO with interim CEO Metcalfe, best known for his contribution to inventing Ethernet and who is now venture capitalist at Polaris Ventures.

The company is operating a pilot plant with the utility Arizona Public Service Company.

The reported deal comes after a few other biofuels companies have gained funding to expand toward commercial-scale plants.

On Friday, Range Fuels said it is has secured $100 million to build a gasification plant that will make ethanol from blue chips.

Also last week, ethanol company Coskata, which General Motors has invested in, was said to have landed $19 million to ramp up its operations.

Update 12:18 p.m. Pacific.In response to a query, GreenFuel's interim CEO Bob Metcalfe said that the company can "neither confirm nor deny these rumors."