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Green Energy Sector Weekly Update: The Enormous Potential of Waste to Biofuels

Green Energy Sector Weekly Update: The Enormous Potential of Waste to Biofuels

During the middle ages alchemists tried complex schemes to turn various base metals into gold. The results were inevitably disappointing. G.E.R. recently spent some quality time with people who are attempting to perform the green energy equivalent of medieval alchemy, turning the contemporary world’s least appetizing materials into biofuels.

A chilly Chicago played host to the Municipal Solid Waste to Biofuels Summit this week, and the meeting attracted a diverse group of ambitious developers and would-be developers of waste-to-energy/biofuel projects. In the United States the waste-to-energy segment of the green sector remains largely at the demonstration phase. “We’re about a decade away from being project finance ready,” one attendee told G.E.R.

Although waste to biofuels is not ready for prime time, unlike alchemy, the technology has its roots in actual science. It also has enormous potential. The United States alone produces over 150 million tons of garbage every year, and solid waste can be a real headache for many municipalities. However, if cities could turn their waste into energy, they could turn garbage into a revenue stream. The goal is to turn refuse into a valuable feedstock that a waste-to-energy company could turn into cellulosic biofuels, electricity, or possibly even clean jet fuel.

However, while waste-to-energy makes sense on paper, the sector is currently populated by ambitious developers scrambling to fund pilot or demonstration plants, motivated by growing EPA blending requirements and rising biofuel production.

Dirk Andreas, a former developer of large wind projects at Iberdorla Renewables, who joined Montreal-based waste-to-energy startup Enerkem last November, shared an insightful barometer to the 100 or so conference attendees on where waste-to-energy stands compared to other renewable. “I think 100 people showed up at the first wind conference I ever attended 10 years ago,” he said. “I think at my last wind conference, 18,000 people showed up.”

For the first-to-market startups that came to Chicago this week, access to capital remains an ongoing issue. None of this is surprising considering the continuing fragility of the global economic recovery. The financiers, who only a few years ago had grand visions of turning the Midwest into the Saudi Arabia of corn-based ethanol, are now much more cautious.

Despite the more captious approach of today’s venture capitalists, the world looks much better than it did in September 2008. Marathon Capital’s David Fennema believes that the funding market has improved, but he notes that banks and funders, including private equity and venture capital funds, remain cautious. “Fully contracted projects are able to get cheap capital,” he says, but he also concedes that funding remains hard to get for small startups.

Some waste-to-energy companies have secured some off-take agreements, but most have not been so lucky. They are also hampered by technology that remains largely misunderstood by the funding community. Funders may be open to financing, but companies have to work hard to convince potential partners to loosen the purse strings.

That’s been the first hand experience of Michael Butler, CEO of Seattle-based green-focused investment bank Cascadia Capital. Over the past months he’s been trying to close a $150 million strategic financing deal for a biomass client. He thought the financing would close in December but negotiations are ongoing. “Deals are starting to get done but they are twice as hard,” explains Butler.

Investors are definitely willing to test the waters of the waste-to-energy sector. We know because the  Tiger Infrastructure Partners fund plans to dedicate a third of its capital backing waste-to-energy initiatives. However, it could be a while before they take the plunge completely. In the meantime waste-to-energy developers will secure financing from a hodgepodge of angel investors, state and federal grants and some cash-rich strategic investors (think trash hauler Waste Management, for example).

VC and PE Watch

Former Vice President Al Gore’s Generation Investment Management fund is raising $500 million for a fund that will invest in Asian companies involved in renewable energy and social and environmental sustainability.

Boulder Wind Power, a developer of wind turbine technology, secured $8 million in a Series A round of funding led by New Enterprise Associates.

Angelika Schöchlin, a director at UK private equity firm Terra Firma in Frankfurt, is relocating to Paris to join Antin Infrastructure Partners where she’ll oversee investments across various sectors, including renewable energy projects, a firm spokesman told G.E.R.

Ramblings and Musings

In a presentation to conference attendees, Chadron Edwards, a lawyer with Chadbourne & Parke’s project finance team in New York, noted that in his state of the union a few weeks ago  President Obama said the word “energy” more than several any other words. More than “taxes,” more than the word “security” or even “deficit”.

With Congress set to debate the 2011 federal budget, the president’s newly found focus on energy may indicate that he is willing to fight to make sure green energy funding avoids getting the budget axe.

By. Green Energy Reporter




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