After Carlsbad, CA-based Verdezyne disclosed last month that it plans to raise more than $15 million in venture funding, I arranged to sit down with Damien Perriman, the company’s vice president of business development.

As it turns out, the startup that was founded in 2005 as CODA Genomics has essentially re-engineered itself over the past 18 months. The company overhauled its core business strategy, recruited a new CEO, E. William Radany, along with a new management team, changed its name, and moved its headquarters from Orange County to Carlsbad, CA, about 28 miles north of San Diego. In changing its name to Verdezyne, the company created an identity that is better aligned with its revised focus on the “green design” of biofuels and industrial chemicals.

The company initially was focused on technology spun out from UC Irvine that used specialized computer algorithms to design synthetic DNA. The company offered its services in Computationally Optimized DNA Assembly, or CODA, to help drug discovery teams at pharmaceutical customers like Eli Lilly and Genentech design synthetic genes that could be used to maximize the production of certain proteins for their biotech drug manufacturing processes.

Perriman, who joined Verdezyne in February, tells me, “Our investors made a decision in 2008 that we could make a lot more money by doing the production ourselves.”

With its extensive experience in computational biology and bioinformatics, Verdezyne saw the value in creating high-diversity libraries of genes, so that various genes could be inserted into fast-dividing yeast cells (and other micro-organisms), essentially programming the microbes to produce enzymes it would not otherwise produce. Verdezyne landed a federal grant last month to help build out its genomic library.

“We prefer to work with yeast,” Perriman says, “but we can work with any fungi or bacterial organism.”

The company, which now has 26 employees, has identified three primary markets for its technology.

The first and most obvious target is an …Next Page »

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It’s petrol from poop: Marlborough, MA-based Qteros today unveiled a joint development agreement with Israeli commodities recycler Applied CleanTech under which the two companies are using Qteros’ modified microorganisms to turn Applied CleanTech’s “Recyllose” feedstock, which is made from the solid matter in municipal wastewater, into ethanol for vehicle fuel and other uses. The process “produces high-quality alternative energy sources for the production of electricity or ethanol, while reducing sludge formation and lowering wastewater treatment plant costs and increasing plant capacity,” Qteros said in a statement.

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Joule Biotechnologies is officially launching today to reveal technology that is designed to mimic photosynthesis to produce liquid fuels and chemicals. The startup says it can produce ethanol at prices competitive with fossil fuels while avoiding some of the pitfalls of making ethanol with corn, switch grass, or other plant materials.

The firm says its method taps key ingredients of photosynthesis—namely sunlight and carbon dioxide—to make ethanol. The Cambridge, MA-based company plans to prove that the method, which has been demonstrated in the lab, can work on a commercial scale in 2010, Joule Biotechnologies CEO Bill Sims tells Xconomy. Though partners at Flagship Ventures in Cambridge formed the startup in 2007, Sims says that Joule has waited to reveal itself until it had a proven process and technology.

If it proves commercially viable, Joule’s process could clear some of the expense and technical hurdles associated with traditional ethanol and other alternative fuel production. Biofuels, for one, are typically made from crops like corn and soybeans that require lots of water and agricultural land to grow. And while cellulosic biofuels made from wood or grass and algae-based methods reduce water and land needs, they are currently more expensive than fossil fuels or have yet to become commercially viable. Joule is among a new generation of clean energy developers that aim to overcome hurdles of producing alternative fuels by tapping the power of the sun and other cheap and abundant resources. Lots of people are hoping that these efforts lead to breakthroughs that cut down on pollution from fossil fuels and, at least in the U.S., reduce dependence on foreign oil.

“We have a vision of finally bringing reality to the idea of energy independence,” Sims says, “and in order to do that we have to have a source of renewable fuel that has unlimited supply.”

Joule points out that its system doesn’t require fresh water and agricultural land like traditional biofuel production. Sims described the function of the firm’s main device, called the SolarConverter, that facilitates the production process. The converter contains a mixture of brackish water, nutrients, and genetically engineered organisms. Carbon dioxide gas is fed into the mixture, and the device is designed to expose the organisms in the mixture to the sun, Sims explains. The organisms are photosynthetic, meaning that they absorb light energy and carbon dioxide to form compounds. Joule has engineered its organisms to secrete ethanol and hydrocarbons and chemicals.

Sims declined to say which specific photosynthetic organisms his firm engineers for its process, but he did reveal that the organisms are not algae, which many companies are …Next Page »

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Cruising north on Interstate-5 in a Chevy Equinox hardly sounds like a reason to be excited, but I felt lighter than air yesterday. That may just be an effect of the hydrogen fueling the car, or perhaps just the giddy sensation that comes from driving the future of General Motors on the same day their future looks so uncertain. Whatever the cause, my heart was beating loudly as I drove the 40 miles or so from Ft. Lewis to Seattle in a caravan of other hydrogen fuel cell cars. My heart was definitely much louder than the practically inaudible sound of the fuel stack converting hydrogen to electricity and water.

The Equinox is a compact sport utility vehicle, sort of like a minivan for people who don’t want to drive minivans. This Equinox is one of eight hydrogen powered cars from Daimler, General Motors, Honda, Hyundai-Kia, Nissan, Toyota and Volkswagen traveling north from Chula Vista, CA to Vancouver, BC as part of the second annual Hydrogen Road tour. The cars, which left on May 26 and will finish their tour on June 3, are stopping at 28 cities along the way to give people a chance to try out the cars and learn about hydrogen fuel cells. To put it simply, hydrogen fuel cells work like batteries, with the hydrogen ionizing into electrons and protons. The electrons are forced through a circuit, creating an electric current. The waste products coming out the end of the tailpipe are just water and a little bit of heat—much cleaner than internal combustion exhaust.

One cell produces very little voltage, but stacked together they do quite well. The Equinox I drove could produce 94 kW, reach highway speeds of as much as 100 miles an hour (electronically regulated to prevent overtaxing the fuel cells), and go 150 miles on just 4.2 kilograms of compressed hydrogen.

I got the experience of what it’s like to drive one of these cars this morning, when I drove down to Fort Lewis near Tacoma, WA. Fort Lewis was chosen as one of the sites to stop at because the military is building a hydrogen fuel maker from a wastewater treatment plant and plans to have a shuttle bus and 19 forklifts that run on hydrogen gas sometime in the next couple of years.

Fort Lewis also currently is expanding its use of other alternate fuels such as biodiesel and ethanol. “We’re trying everything to see what’s best,” says Miriam Easley, sustainability outreach coordinator at Fort Lewis. With the military rather than civilians in charge, much can get done quickly, including testing different alternative fuels in a semi-closed economy. “If anybody can get it right, the military can get it right,” said Col. Cynthia Murphy, garrison commander at Fort Lewis.

Much of the future of alternate fuel vehicles depends on the infrastructure available to support them. If there were enough places for people to fuel hydrogen powered cars, people would be more willing to buy them. But to create demand for the fueling stations, the cars have to be already sold. “It’s a chicken and egg question,” said Dawn McKenzie, and assistant manager of product communications for GM and one of my passengers as I drove. This is a thorny problem for car manufacturers. Washington does not currently have any hydrogen stations, but it does offer other types of alternative fuel. After driving back to Seattle, we went to one of them, a Propel station providing both ethanol and biodiesel.

Compared to hybrid vehicles like the Prius this felt more like a gasoline powered car, albeit quieter. There’s no abrupt transition like in the Prius between the battery and gasoline engine. If it weren’t for a small indicator light, it would be hard to tell if the car was even on.

Perhaps the most important and most subtle aspect of driving a hydrogen car is that it really is not that different in feeling from driving a regular car. But it is quieter, more economical and decidedly more environmentally-friendly than standard gasoline engines. It’s easy to imagine a transition in America to these kinds of cars. It’s a hope that keeps me buoyant.

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Boston-based Mascoma, a startup developing techniques for making ethanol from high-cellulose feedstock such as wood chips, said yesterday it will consolidate its operations in a new office building and R&D facility in Lebanon, NH, near the Dartmouth College location where the company was founded, and where the majority of its workers are already employed.

The move will mean closing the company’s current headquarters on Soldiers Field Road in Boston and reducing the company’s staff by 12 to 15 employees. The cutbacks are the result of  “elimination of redundant functions and inability of some staff to relocate,” the company said. The move will take place by September.

With everyone at the company under one roof, R&D, engineering, and business development staff will be able to work together more closely, the company said. “The move will provide three things: it will make our production process scale-up easier, provide operating efficiencies, and lower costs,” Mascoma chairman and CEO Bruce Jamerson said in a statement. “I am also looking forward to spending more time with our scientific staff as our technology migrates from the lab into production.”

The company also said consolidating will allow Mascoma to reduce its carbon footprint by eliminating trips between offices. The cuts won’t affect operations at the company’s demonstration facility in Rome, NY, or its plans to build a commercial-scale facility with partner Frontier Renewable Resources in Kinross, MI.

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Three local venture firms put on what amounted to a university startup fair at the Charles Hotel in Harvard Square yesterday. I went hoping for a peek at a few of the companies that could be pulling down Series A rounds a year or two from now.

Now in its second year, the invitation-only University Research & Entrepreneurship Symposium was organized by Atlas Venture, Flybridge Capital Partners, and General Catalyst and sponsored by Boston-based law firm Goodwin Procter. The firms formatted the event so that university research teams with hot, potentially commercializable technologies had a chance to give their best 12-minute pitches to a large collection of venture capitalists and corporate representatives from all over the region. Attendees had one track to hear about nine companies in the life sciences industry, and other track for nine more infotech- and energy-oriented companies. The research teams weren’t just from places like Harvard and MIT, but represented 15 different institutions from around the country.

Eight of the presenting teams were from New England. One, Boston-based Novophage, is a company that Ryan already covered; it’s working on “engineered bacteriophages” to combat antibiotic-resistant bacteria such as MRSA. I couldn’t be in two places at once, so I had to skip presentations by three of the remaining seven local teams. But the following is a quick rundown of the four local presentations I did hear. All of these groups are in the lab-bench or seed-funding stage, and are looking for venture capital to get to the next step in the commercialization process.

Making Ethanol from Soybean Hulls—Without Destroying the Protein

Jonathan Mielenz of Oak Ridge National Laboratory in Tennessee and Dartmouth College in Hanover, NH, talked about a project with Dartmouth engineers John Bardsley and Charles Wyman to study soybean hulls as a potential raw material in the fermentation of ethanol.

Soybeans are used to make soy oil and other food products, and their hulls, which have a high protein content, are usually used as feedstock for cattle. That would seem to make them a bad choice as a source of biomass-derived ethanol; indeed, a lot of the effort in ethanol production these days is going into technologies, like ideas being developed at local firms like Mascoma and Verenium, that use non-food, high-cellulose sources such as wood chips or switchgrass.

But Mielenz said his group has come up with a simple way to ferment the sugars in soybean hulls without destroying the protein. The high-temperature pretreatment to which most other high-cellulose biomass is subjected before fermentation would break down the proteins in soybean hulls, Mielenz said. Simply by skipping this step, Mielenz says, his startup—which doesn’t have a name yet—found it was able to extract the sugars in the hulls without disrupting the amino acid sequences in their proteins, thus preserving their value as feed.

Selling the remains of the fermentation as feed could help bring down the net cost of ethanol production and make biofuels more competitive with fossil-based fuels, Mielenz argued.

Cheaper, More Powerful Methanol Fuel Cells

Nathan Ashcraft, a PhD candidate in the laboratory of Paula Hammond in the Chemical Engineering department at MIT, gave a talk about DyPol, a startup looking to commercialize a new, more efficient type of membrane for methanol-based fuel cells.

A methanol fuel cell works by exposing methanol on the anode side of the cell to a membrane where a catalyst such as platinum splits off protons and electrons. The electrons exit the cell to form an electric current while the protons travel through the membrane, meeting oxygen from air on the cathode side of the membrane to produce water as a waste product. DuPont makes the leading membrane material for methanol fuel cells, a polymer called Nafion. But Nafion has a few weaknesses, Ashcraft said; it’s costly to make; it depends a toxic fluorination process; and it’s easily permeated by raw methanol, reducing its efficiency.

Ashcraft and colleagues in the Hammond Lab, collaborating with a number of other labs around MIT, have devised a way to build polymer membranes layer by layer, allowing them to blend polymers that couldn’t otherwise be used together. The layers are less permeable to methanol, and can be created in a non-toxic, water-based solution. Prototype fuel cells built using the new membranes have 53 percent greater energy output than …Next Page »

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Who’s Who in San Diego cleantech innovation?

At Xconomy San Diego, we wanted to answer that question as completely as possible, so we put together an accounting of all the local companies that are creating new ways to make biofuels, clean the environment, and improve the energy efficiency of our vehicles, homes, and businesses. In preparing our list, we owe a debt of gratitude to the nonprofit industry group Cleantech San Diego, which has compiled on its website a comprehensive inventory of every company under the sun with ties to the cleantech and renewable energy industries. We winnowed that list down to just the companies that are focused squarely on technological innovation (as opposed to other players in the cleantech arena, such as solar panel installers and engineering consultants).

Of course, our list likely isn’t comprehensive, and like so many good things, it will be outdated soon. If you know any companies we missed, please send us an e-mail addressed to “editors at xconomy.com”  (And if your interests lie further north, Xconomy Seattle recently published its guide to the cleantech clusters of the Pacific Northwest, breaking out separate lists for Washington, Oregon, and British Columbia.)

Achates Power (San Diego, CA)
This venture-backed startup is developing a fuel-efficient, cleaner-burning diesel engine, based on a two-cycle, opposed-piston internal combustion design.

AdaptiveARC (San Diego, CA)
This waste-to-clean-energy startup is developing an arc-plasma reactor and related technologies and services that offer an alternative to landfills.

Allylix (San Diego, CA)
Allylix has developed technology to synthesize terpenes, a class of hydrocarbons naturally produced by conifers and other plants. The company has licensed its technology to an unnamed cleantech company to develop and commercialize terpene fuels and fuel additives.

Ambient Control Systems (El Cajon, CA)
Ambient has developed a customized solar energy device with a computerized energy management and control system to power and operate remote sensor and surveillance networks.

American Biodiesel and Community Fuels (Encinitas, CA)
This company conducts biofuels research and development, using animal fats, vegetable oils, waste oils, and other …Next Page »

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Verenium (NASDAQ: VRNM), a biofuels startup based in Cambridge, MA, and San Diego, warned in an annual 10-K income statement filed with the SEC yesterday that independent accountants hired by the firm have raised “substantial doubt about our ability to continue as a going concern.”

Losses are piling up from the company’s research and development on specialty enzymes that convert high-cellulose materials such as sugar cane into ethanol, as well as site development for a planned demonstration facility in Jennings, LA. The company’s net losses in 2008 totaled $185.5 million, according to the SEC filing, resulting in an accumulated deficit of $622.6 million since the beginning of 2006 and a working capital deficit of $23.8 million.

“If we are not able to reduce or defer our expenditures, secure additional sources of revenue or otherwise secure additional funding, we may be unable to continue as a going concern, and we may be forced to restructure or significantly curtail our operations, file for bankruptcy or cease operations,” the company said in the regulatory filing. It also said, however, that it expects to be able to raise the cash it needs “through a combination of corporate partnerships and collaborations, federal, state and local grant funding and loan guarantees, selling or financing assets, incremental product sales and the sale of equity or debt securities.”

Verenium, formed in 2006 from the merger of Cambridge, MA-based Celunol and San Diego-based Diversa, already has a longstanding partnership with British Petroleum, which committed $90 million to Verenium late last year and agreed to put up another $22.5 million in February for a joint venture  to build an ethanol plant based on the firm’s technology in Highlands County, FL. (The company said in January it had also won a $7 million grant from the state of Florida to help build that plant.)

But the company’s accountants said in the regulatory filing that the payments from BP may not be sufficient to cover Verenium’s planned operating expense, capital expenditures, and debt payments.

Public companies are obliged to share worst-case scenarios in their financial filings. But because it’s listed on the NASDAQ exchange, Verenium was under an additional obligation to call special attention to the “going concern” warning, which it did in a terse press release yesterday.

NASDAQ rules also forced Verenium to disclose in December that it was in danger of being delisted by the exchange, which requires listed companies to maintain a market capitalization of at least $50 million or total assets and total revenue of $50 million each in the most recently completed fiscal year. The company said in January that it was back in compliance on that score.

In early trading today, Verenium’s stock was hovering at around 30 cents, down about 8 percent from Monday’s close.

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It was the best of times and worst of times for the life sciences in San Diego last week. Stalwarts Cadence Pharmaceuticals and Vertex Pharmaceuticals raised cash to expand their businesses, while La Jolla Pharmaceutical and 4-D Neuroimaging basically went in the opposite direction. Biofuels also were back in the news, along with the unmanned Predator surveillance aircraft, so read on!

—San Diego-based Histogen CEO Gail Naughton was the “mane” attraction when she presented preliminary results of a hair re-growth study last week at the 4th Annual Stem Cell Summit in New York. In early results from a five-month trial, Naughton says the biotech’s injectable ReGenica compound stimulated new hair growth in men after 12 weeks.

—Cadence Pharmaceuticals (NASDAQ: CADX) said last week it’s raising $86.6 million in a private sale of 12 million shares, which will be used to build its sales force and to market its new drug candidate, Acetavance. The San Diego biotech is working on an application for FDA approval of the drug, which is a form of the painkiller acetaminophen (the main ingredient in Tylenol) developed for intravenous use in hospitals.

—Vertex Pharmaceuticals (NASDAQ: VRTX), which has 200 employees in San Diego and 1,300 at its headquarters in Cambridge, MA, is raising $320 million in a secondary offering of stock. The biotech is in the final, extremely expensive phase of developing new drug candidates for treating hepatitis C and cystic fibrosis.

—In a subsequent interview, Vertex chief financial officer Ian Smith told Luke the offering also marks a shift to “blue-blood” investment firms that prefer …Next Page »

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Verenium (NASDAQ: VRNM), a Cambridge, MA, startup whose proprietary microbes break down high-cellulose material like sugar cane into ethanol, said yesterday that it has established a joint venture with British Petroleum (NYSE: BP) to build commercial-scale biofuel plants in the United States. BP, which owns 50 percent of the new company, is contributing $22.5 million to the venture. Verenium says it is contributing “development assets,” including two biofuel plant projects that have not yet broken ground but are valued at an additional $22.5 million.

Initially to be based in Cambridge, the joint venture will include employees from both Verenium and BP. Its first plant is likely to be in Highlands County, FL, where plans call for the construction of a facility capable of producing 36 million gallons of ethanol per year. The new company’s first task will be to secure funding for the plant, which is projected to cost $250 to $300 million; it got a start last month by procuring a $7 million grant from the State of Florida. BP and Verenium expect to start construction next year.

The two companies have a longstanding relationship. Last August, BP agreed to pay Verenium up to $90 million over an 18-month period for access to its microbes, which are called ethanologens and are reported to be more effective than conventional yeasts at fermenting high-cellulose, non-food materials. The companies said at the time that they hoped to form a joint venture aimed at building commercial-scale cellulosic ethanol plants. It’s not clear whether the $22.5 million BP is investing in the joint venture is part of, or in addition to, the $90 million it committed to Verenium in August.

“This next stage in our relationship with Verenium demonstrates our real commitment to making cellulosic ethanol a reality in the U.S. fuels market in the near term,” Sue Ellerbusch, president of BP Biofuels North America, said in a statement. “BP and Verenium together have the technological know-how, engineering capability and market expertise required to demonstrate that we can deliver better, more sustainable biofuels, more quickly.”

Verenium was formed in 2006 from the merger of Cambridge, MA-based Celunol and San Diego-based Diversa, and still has about 180 employees in San Diego. On December 5, the NASDAQ stock exchange warned Verenium that its stock would be delisted within 30 days unless it came back into compliance with a requirement that listed companies maintain a market capitalization of at least $50 million. The company said on January 13 that it had met this requirement.

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In an announcement yesterday, Cambridge, MA-based biofuels startup Verenium said it had won a $7 million grant from the state of Florida to help build a next-generation cellulosic ethanol plant in Highlands County, FL. The plant will use Verenium’s specialty enzymes to turn renewable grasses grown adjacent to the plant site into as much as 36 million gallons of ethanol per year, the company said. The grant was awarded under the Florida Agriculture and Consumer Services Commission’s $25 million “Farm to Fuel” initiative.

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The first full week of 2009 was a busy one for deals in the Northwest. There were some big ones in biotech, software, mobile, and cleantech.

—Luke reported Seattle-based ZymoGenetics (NASDAQ: ZGEN) has hit a “home run” with a global partnership with the drug giant Bristol-Myers Squibb, worth up to $1.1 billion, to co-develop an experimental treatment for hepatitis C. The deal gives ZymoGenetics an immediate infusion of $85 million in cash and another $20 million in licensing fees this year, plus potential milestone payments.

—Microsoft (NASDAQ: MSFT) took part in a $24 million funding round for the user-interface company N-trig, based in Kfar Saba, Israel. Other investors included Aurum Ventures, Challenger, Canaan Partners, and Evergreen Venture Partners. N-trig makes technologies for pen and touch-based screens used in laptops and mobile devices.

—Ryan reported that Bellevue, WA-based venture firms Ignition Partners and Trilogy Equity Partners have invested $7.5 million in a second round of financing for FIREapps, a Scottsdale, AZ, maker of software that helps companies manage their exposure to foreign currencies. FIREapps also received debt financing from Silicon Valley Bank.

—Portland, OR-based AboutUs raised $2.5 million in Series A funding from Seattle’s Voyager Capital. The financing comes on the heels of an additional $2.5 million in angel investments the company has raised to this point. AboutUs is creating a collaborative, Wiki-based guide to websites and businesses.

—ZeaChem, a Colorado-based clean fuel company, has raised $34 million from investors, led by Globespan Capital Partners and PrairieGold Venture Partners, to fund a green fuels refinery plant in Boardman, OR. ZeaChem is developing technology to convert inedible plant matter into ethanol, as Rachel reported.

—Microsoft landed a deal to provide its Internet search service on Verizon Wireless cell phones, beating out competitors Google and Yahoo. The five-year agreement is rumored to be worth upwards of $500 million, paid to Verizon.

—MOD Systems, a digital-media delivery firm in Seattle, closed deals with Paramount Digital Entertainment and Warner Bros. to distribute videos via downloads to SD memory cards in retail stores. Terms of the deals weren’t announced.

—Kirkland, WA-based Neural Audio, a digital sound company, has been acquired by DTS (NASDAQ: DTSI), an entertainment tech firm in Agoura Hills, CA, for $7.5 million up front plus another $7.5 million in potential milestone payments. Neural Audio focuses on sound processing for playback of music and audio tracks for movies, broadcast programs, and video games.

—Planar Systems (NASDAQ: PLNR), a Beaverton, OR, maker of displays and monitors, sold its remaining interest in its digital signage business to CS Software Holdings. Terms of the sale were not disclosed.

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ZeaChem, a Colorado-based clean fuel company, announced that they have raised $34 million from investors, led by Globespan Capital Partners and PrairieGold Venture Partners, to fund a green fuels refinery plant in Oregon. The company is developing technology to convert inedible plant matter into ethanol. ZeaChem announced last year that the plant will be built on a tree farm in Boardman, OR, which will supply poplar trees for refining. The plant will initially produce 1.5 million gallons of fuel per year, company officials said.

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Verenium said late today it has fallen out of compliance for companies listed on the Nasdaq Global Market. The Cambridge-based developer of cellulosic ethanol disclosed in a regulatory filing late today that Nasdaq requires listed companies to maintain a market capitalization of at least $50 million or total assets and total revenue of $50 million each in the most recently completed fiscal year. The company, which was formed in the 2006 combination of Celunol and San Diego’s Diversa, has 30 calendar days to get back in compliance.

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Coskata, the Warrenville, IL, cellulosic ethanol startup that debuted with a bang at the Detroit Auto Show last January, has raised $40 million in additional capital in a Series C round led by the Blackstone Group’s new Cleantech Venture Fund, according to a report yesterday by Dan Primack at Private Equity Hub.

The private equity firm, which has offices in New York, Boston, and several other cities, was joined in the round by previous Coskata investors Advanced Technology Ventures of Waltham, MA, and Palo Alto, CA; Globespan Capital Partners of Boston, Palo Alto, and Tokyo, Japan; Greatpoint Ventures of Cambridge, MA; and Khosla Ventures of Menlo Park, CA.

Coskata has now raised around $76 million. GM, which contributed an undisclosed amount to the startup’s B round, was not part of the C round.

Primack reports that Blackstone and Coskata see the latest round as a bridge that will help the company survive until it can obtain financing for a large-scale ethanol production facility. Most of the money will go into finishing the small pilot plant Coskata is building in Pennsylvania to test its technology, which involves gasifying municipal waste and other hydrocarbon-rich materials and then using bacteria to ferment the resulting gas. The company says it will eventually be able to produce ethanol for under $1 a gallon (though some energy experts have questioned that claim).

“It’s important to get that first 100 million gallon plant up and running…in order to show how everything really works at scale,” Coskata CEO Bill Roe told Primack. But the startup probably wouldn’t attempt to build a plant of that size on its own, Roe said—rather, it would license the technology to a partner.

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InEnTec, the Bend, OR-based company that uses a high-heat process to turn chemical waste into renewable fuels, has gotten a $150 million equity commitment from Lakeside Energy to build a commercial plant in Michigan.

Lakeside, a Chicago investment firm, is providing the cash along with American Securities, a New York-based private equity company. The money will be used to build what they call a plasma enhanced melter gasification plant that will be located at a Dow Corning facility in Midland, MI, according to a statement. Dow has signed a 10-year contract to use InEnTec’s technology to process its chemical wastes into reusable fuel. The plant will be able to produce 11 million BTU’s per hour of syngas, which is as clean as natural gas, InEnTec said.

The InEnTec technology has its origins at MIT and the Pacific Northwest National Laboratory in Richland, WA, as I wrote back in July. The company’s gasification technology is also being used as a key piece of a refinery being built in Reno, NV, which aims to use gasification to turn municipal garbage into ethanol.

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After years of disappointment, Mike Lewis is finding encouragement in small signs that business is coming back to life for Pearson Fuels.

Lewis opened Pearson Fuels in a blighted San Diego neighborhood in 2003, with financial backing from the owners of a local Ford dealership, where he had worked in finance. It was part of an ambitious $15 million “Regional Transportation Center” regarded by state and federal energy officials as a model for promoting the use of alternative fuels.

The centerpiece was a futuristic automobile showroom operated by Pearson Ford that sold Think electric cars and alternative-fuel vehicles then made by Ford.

The adjacent Pearson Fuels service station, built and operated by Lewis, sold nine kinds of fuels, including conventional gasoline, ethanol, biodiesel, propane and different grades of compressed natural gas.

By 2004, however, Ford stopped making alternative fuel vehicles and the gleaming showroom, which is now empty, lost its reason for being. Lewis continued to operate Pearson Fuels, but the service station sold mostly conventional gasoline.

I met Lewis as a reporter for the San Diego Union-Tribune earlier this year, when the price for unleaded gasoline was soaring beyond $4 a gallon. Amid a resurgence of interest in alternative fuels, I described his entrepreneurial quest here.

Lewis remains convinced that alternative fuels will prove to be a good business over time. But even as millions of venture dollars pour into the development of new biofuels each quarter, he still sees enormous challenges in developing a viable market.

“You have to be very cautious about investing in a government-induced market,” Lewis said. “That’s what we did, and it was a mistake.”

Now Lewis is seeing a gradual comeback in what was once a moribund alternative fuels business.

Lewis is one of the few ethanol suppliers in California, and he has been working to expand the market by helping new service station owners get the necessary permits to install ethanol pumps. In exchange for his consulting services, he gets a long-term contract to supply ethanol to the station.

Yesterday, the San Diego ethanol entrepreneur was in Riverside County at groundbreaking ceremonies for two new ethanol fuel service stations in Beaumont and Perris. The day before, he was in Carlsbad for the grand opening of a new alternative fuel station in Carlsbad—the second in San Diego County. A third is expected to open in Oceanside in two more weeks

Next week, he plans to attend similar ribbon-cutting ceremonies at new Chevron stations in the East Bay communities of Concord and Hayward. During the construction of each station, Lewis supervised the permitting and installation of pumps that sell E-85, a mixture of 85 percent ethanol and 15 percent gasoline

By the end of October, there will be exactly five service stations in the entire state that sell E-85 fuel. Pearson Fuels has long-term contracts to supply ethanol for all five, and Lewis is working to get E-85 pumps installed at eight more.

You might think that puts Lewis in an enviable situation. In California, there are an estimated 500,000 “Flex-Fuel Vehicles” that have the capability of running on either E-85 or unleaded gasoline.

But developing this business takes an unusual kind of perseverance.

At the Pearson Fuels station in San Diego, the only station that Pearson owns, Lewis sold 38,000 gallons of E-85 in June, when the alternative fuel was at least 90 cents cheaper per gallon than regular unleaded gasoline.

Since then, gasoline prices have fallen. Now E-85 is only about 20 cents cheaper per gallon. Lewis says he only sold about 18,000 gallons of E-85 last month.

So while soaring gasoline prices have made 2008 the best year ever for alternative fuel sales, Lewis says all that really means is that it’s just been his least unprofitable year—so far.

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By shifting a $26 million Department of Energy grant originally intended for a Tennessee biofuels plant to another project in the upper peninsula of Michigan, Cambridge-MA based Mascoma has persuaded the state to pony up an additional $8.5 million in grants, according to company announcement yesterday. The State of Michigan has now committed $23.5 million for the $250 million plant, where Mascoma plans convert high-cellulose material such as wood chips into ethanol.

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Debate Continues on Biofuels Versus Food

Some critics of biofuels contend that the growing demand for ethanol made from corn is helping to drive up food prices and could divert farmland from growing food to growing fuel. Others argue that much of the recent spike in food prices was caused by soaring oil costs and drought. Policy Innovations says that, if production costs come down enough, ethanol could eventually be a winning fuel source.

New Bacteria Could Ease Cellulosic Ethanol Production

One complaint about making ethanol from corn kernels is that it’s inefficient; all that effort (and water and fertilizer) goes into growing corn, and then most of the biomass—the leaves and the stalks—gets thrown away. Adding enzymes to break down the cellulose allows all the biomass to be used, but drives up costs. Now Technology Review tells us that researchers at Dartmouth say they’ve developed a microbe that can digest the cellulose and turn it into ethanol with less need for enzymes.

Google, Others, Invest in Satellite Internet

Google is one of a group of investors pouring $60 million into a startup company that hopes to use satellites to deliver Internet access to developing countries. O3b Networks, based in the U.K.’s Channel Islands, plans to launch up to 16 satellites by the end of 2010, according to the Wall Street Journal. The satellites could provide service to Africa, the Middle East, and parts of Latin America.

High-Bandwidth Access Coming, But Not to America

In the Netherlands, Internet service providers are on the verge of providing customers with download and upload speeds of 1 gigabyte per second. In the U.S., meanwhile, service providers are talking about caps on how much data users can download. GigaOm argues that high-bandwidth fiber-optic access to the home is coming around the world, and that American service providers will make their money back sooner if they bite the bullet and invest in fiber-to-the-home connections.

Making Clouds Could Fight Global Warming

How’s this for an innovative way to counter global warming? Build a fleet of 1,500 automated ships that travel the world sucking up seawater and spewing it into the atmosphere to create denser clouds that reflect more sunlight and cool down the planet. Scientific American says atmospheric physicist John Latham, of the National Center for Atmospheric Research in Boulder, CO, is floating the proposal, which could cost upwards of $2.6 billion.

America Catches Up on Wireless Innovation

Time was when the U.S. lagged well behind Europe and Asia in the use of cell phones and the kinds of wireless applications that were available. But now, according to BusinessWeek, the U.S. is catching up, thanks in part to its strength in software development. Just this past year, the magazine reports, the U.S. surpassed Western Europe in the number of subscribers to high-speed 3G networks.

Company Claims Unclonable RFID Chips

Radio frequency identification tags, implanted in everything from products to pets promise a way to digitally keep track of the physical world, but there’s been concern that hackers could mess with the system by cloning chips, copying their data to other chips. Now a Palo Alto, CA, company, Verayo, says it has made chips that can’t be cloned, reports Daily Tech. The technology, developed at MIT, uses the physical features of a chip to create a unique code that must be input for the chip to work.

Bank Hopes to Make a Splash with Tidal Energy

Investment bank Morgan Stanley has increased its investment in the development of tidal energy systems. The bank says its tidal project developer, Current Resources, has been acquired by Singapore-based Atlantis Resources, a maker of tidal turbines, Earth2Tech reports. Terms of the transaction were not disclosed, but it makes Morgan Stanley the largest shareholder in Atlantis.

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This is the last of my articles taking cleantech investing to task sector by sector (keep the hate mail coming, hippies!). The next few will focus on some areas I really like, including storage, solar thermal, water, and others. But first, a bit more constructive bludgeoning.

This is a bit of a “two for one special” looking at biofuels and wind—two forms of clean energy poised to wreck the environment they are purported to save. These dual titans of uselessness are powered by hype and corporate sugar daddies using influence on Capitol Hill in ways that would make even oil company executives blush. The VC community has avoided wind pretty well (with PE and traditional investment firms more than picking up the slack) but man, they have got quite the teenage crush on biofuels.

I’ll note from the top that some of these arguments are the very same ones I have with solar, and they apply to some extent to all new energy technologies. They’re about the cost of potential entry, if you will.

First wind, which has been getting a lot of attention lately, partly due to those late-night TV commercials from Texas oil baron T. Boone Pickens (who seems to have taken the place of Ron Popeil and the rotisserie-oven ads I so love). Pickens has a huge investment in wind and a plan to replace natural-gas-produced electricity that’s so ambitious that even the Sierra Club’s number crunchers find it unrealistic.

Wind power is rather straightforward: build a big propeller and put it up on an even bigger pole. The spinning of the blades generates 1 to 2 megawatts of power per turbine; wind farms generally consist of hundreds of turbines. But behind this simplicity is a highly engineered and heavily maintained system. Much like power from solar photovoltaic cells, wind power has serious downsides—such as being ugly, land-intensive, hugely dependent on subsidies, and unreliable.

How unreliable? Current industry estimates claim wind “can” work 30-40 percent of the time over the course of a year. But actual output is all that matters, and real-world experience shows that annual outputs of 15 to 30 percent of capacity are more typical. The wind just doesn’t blow as often at the right speed as a grid power system needs. The Searsburg wind farm in Vermont, for instance, produces no electricity at all 40 percent of the time.

Wind farms also require huge amounts of land, which is then rendered fairly useless for other purposes. Some wind farm proponents counter this by noting that monstrous wind turbines are actually a tourist attraction. Yes, and what family vacation isn’t built around a three-day drive out to rural Texas to watch giant blades create noise, vibrations, and seizure-inducing strobe effects, while slicing up bats and birds in a manner that would warm the hearts of the Khmer Rouge? Screw Disneyland, kids, we’re going to Uncle Boone’s Wonderiffic Wind Farm for vacation!

And more often than not, wind farms are built in pristine wilderness, on ecologically fragile ridgelines—places that, without the wind farm, might actually be attractive hiking or nature-observation areas. Getting the leviathan-like wind turbines out to these remote and beautiful locations requires huge trucks running over new roads ripped through the forest or prairie.

And at the beginning of this whole circle of destruction, don’t forget that wind turbines need to be manufactured. Football-field-length propellers don’t grow on trees. As with solar, it takes lots of energy to power those factories, which also use huge amounts of mined metals, petroleum-based plastics and lubricants, and tons and tons of concrete. And you ‘d be hard pressed to find dirtier industries than steel, plastics, and cement production and mining.

I know what you’re saying: “Well, every new energy source is going to need manufacturing and industrial development.” I agree, but the point is that we shouldn’t forget to factor that into the overall environmental impact. The oil, gas, and coal industries are already built out. It’s just like looking at the overall sustainability of buying a new Prius, when keeping your five-year-old Celica well tuned and on the road is actually better for the planet.

When you look at the portion of our energy requirements covered by wind power—less than 1 percent—it ends up being the most heavily subsidized of all energy sources. Ed Feo of Milbank Tweed recently noted that two-thirds of the economic value of wind projects come from tax breaks and subsidies from the federal government. And he was being generous, not adding that a wind farm operation can get another 10 percent in breaks from the coffers of state governments. That ’s quite a racket.

It may not surprise you to learn the wind industry as we know it was structured by a little company called Enron (Enron Wind is now GE Wind, by the way). And investors know it’s just a giant subsidies racket. Navigant Consulting, which advises on renewable energy technology, estimated that investments in wind and solar power in 2009 would amount to $26.6 billion with government handouts, but would fall to $7 billion without them. Ultimately the cost of these tax breaks and subsidies shifts costs from wind farm owners to ordinary taxpayers and electric customers.

And the biofuels industry. Urgghh! It’s little more than a scam perpetrated by …Next Page »

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