Green

The termite's blessing: ZeaChem finds more support

Poor termites. They’ll have no part in the ZeaChem facilities that may someday pump out millions of gallons of cellulosic ethanol, even though it’s the humble bug’s legacy that allowed it all to happen. Lakewood, Colo.-based ZeaChem has raised $34 million more for its process, the most important step of which uses a microorganism from the termite’s digestive tract to break down wood and similar materials into fuel.

ZeaChem chief executive Jim Imbler thinks he’s starting to get an idea of where the cellulosic ethanol industry is going. Larger companies like Valero, an oil refiner that took part in the investment, are beginning to line up to bet on companies with well-developed technologies in this area.

Of course, “well-developed” is relative, as there aren’t yet any major cellulosic ethanol plants operating in the United States. But Imbler says the termite microorganisms that ZeaChem uses are relatively well understood in comparison to the technologies touted by other startups, some of which rely on extremely speculative advancements. In 2009, Imbler says, “Some people who were focused on magic will shake out.”

As for the microorganisms that ZeaChem is seemingly relying on, there’s actually a bit more to the process. The company has developed its own two-step procedure that involves converting raw materials — they prefer a hybrid strain of poplar tree, but can also use feedstocks like corn husks or switchgrass — into both liquid and gaseous forms, which is supposed to yield a higher operating efficiency than doing either alone.

When I talked to ZeaChem last, almost exactly a year ago, it was working to start construction on a one and a half million gallon facility in Oregon. That should take place this year, Imbler says, with production starting early next year.

But there’s plenty of competition in the field. There’s Coskata, which now has plans for a 100 million gallon per year plant in Florida. Range Fuels and others also have their own plants in the works, almost all significantly larger than the one ZeaChem is planning.

In the long run, who wins the race may not be important, because getting the first cellulosic ethanol facilities up and running is supposed to be only a minor prelude to an enormous national effort to build enough capacity for billions of gallons per year of second-generation biofuels.

Critics will suggest that creating cellulosic ethanol is too much of a technical hurdle to ever be done on such a grand scale. Companies like ZeaChem are more optimistic, but Imbler thinks that the next few years won’t go as quickly as the most positive onlookers might hope. Each company must build its first facilities, thoroughly test their processes and prove they can work. “You can have the biggest [government] incentives you want, and nothing will change in 2010,” says Imbler.

But after the initial verification — a process that can easily take two or three years, or longer — the potential exists for an explosion in activity. The industry interest exists, from automotive and fuel companies and, increasingly, chemical companies. More uncertain is how well federal and state governments will support the development.

ZeaChem has taken in over $40 million to date, including its $6 million first round. Besides Valero’s strategic investment, support for this round was led by Globespan Capital Partners and PrairieGold Venture Partners, along with Mohr Davidow Ventures and Firelake Capital.