Funders Commit $100 Million More for GreatPoint’s Coal-to-Gas Technology

9/21/07Follow @wroush

Not so many decades ago, natural gas was considered a nuisance—a dangerous explosive to be vented from underground pockets and flared so that miners and drillers could get at the good stuff, oil and coal. But today natural gas is seen as coal’s cleaner cousin, and one Cambridge startup, GreatPoint Energy, has spent the last two years and $37 million in venture funding perfecting a technology that actually turns one into the other. This week the company closed a massive $100 million Series C round, bringing it the cash to demonstrate its coal gasification process on a near-commercial scale.

The same venture capital firms involved in GreatPoint’s first two venture rounds—Advanced Technology Ventures (ATV), Draper Fisher Jurvetson, Khosla Ventures, and Kleiner Perkins Caufield & Byers—are back for this round, according to reports at PEHub and CNET. But the new infusion comes mainly Citi Sustainable Development, the alternative energy investing wing of Citibank, and a number of industrial partners including Dow Chemical, power-project developer AES, and Suncor Energy, owner of the Sunoco chain of gas stations. These strategic investors “will form an ecosystem around GreatPoint that will be really important for them,” says Bill Wiberg, general partner at ATV.

In the reactors developed by GreatPoint, pressurized steam fluidizes coal into particles that are then exposed to a proprietary catalyst that cracks the carbon bonds in the coal. A series of chemical reactions eventually results in a mixture of methane and carbon dioxide. (Rather than releasing the CO2 into the atmosphere, GreatPoint plans to capture it and sell it to oil-exploration companies, which will pump it back underground as part of a process to displace and extract the remaining oil in fields with declining production.) The methanation process occurs under relatively low temperatures, meaning reactors can be built more cheaply than those in traditional gasification plants, and it works on low-quality, lower-cost sources such as lignites, tar sands, and pet coke (a hard black cake similar to coal). As a result, GreatPoint thinks it can produce Bluegas at about 60 percent of the cost of natural gas.

GreatPoint officials did not return phone calls Friday afternoon. But ATV’s Wiberg told Xconomy that the early-round investors were encouraged by data from GreatPoint’s pilot facility in Des Plaines, IL. “They have been running both coal and pet coke and have had excellent results,” Wiberg says. “That was a really big part of the validation that all of the investors were looking for as we went into the Series C. The challenge now is to begin to scale up, and the funds are going to be used to construct a larger-scale demonstration facility and begin the engineering planning for the first real commercial plant. We expect this money will fully satisfy the requirements for the demo plant.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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