Feds Hand Out $600M for Next-Gen Biofuel Plants

Despite the crumbling of the first generation of biofuel projects (corn-based ethanol), the U.S. government is in full support of the next generation of biofuels, particularly cellulosic ethanol and algae fuel. This morning Department of Energy Secretary Steven Chu and Agriculture Secretary Tom Vilsack announced more than $600 million in funding for advanced biorefinery projects.

The bulk of the funds, $564 million, will come from the stimulus package to help speed up the development and commercialization of 19 biorefinery projects, developed by older firms like Archer Daniels Midland and ICM, as well startups we’ve covered like algae fuel makers Sapphire Energy and Solazyme, cellulosic ethanol makers ZeaChem, and synthetic fuel maker Amyris Biotechnologies.

Of that $564 million, $483 million will go to 14 pilot-scale and four demonstration-scale projects, and $81 million will be spent on a biorefinery project developed by BlueFire, which was also awarded DOE funding back in 2007. BlueFire CEO Arnold Klann told us last year that over the next five years the company wanted to build 20 plants near landfills, which could generate 3 billion gallons of ethanol per year by 2017. Those plans subsequently faced the credit crunch, however, and Klann told Reuters last year that the economy could slow down the schedule.

Given that 14 of the projects funded in this round are at the pilot-scale, with most projects receiving about $20 million to $25 million each, it’s clear that the DOE is willing to invest small chunks of funding in relatively early stage technology. Six-year-old Solazyme, one of the leaders in the algae fuel space with almost $80 million in venture capital backing, received a grant of a little under $22 million, but doesn’t expect to commercialize its technology until the 2012-2013 time frame. The DOE didn’t fund companies in the cellulosic ethanol industry that are the furthest along in their commercial deployment, like Range Fuels, Verenium and POET.

The DOE says the $564 million in public funding will generate more than $700 million in private funds, creating a total of $1.3 billion for these 19 plants. (A bunch of these firms we previously listed on out 11 Companies Racing to Build Cellulosic Ethanol Plants in the U.S.).

In addition to the 19 grants for projects, Agriculture Secretary Vilsack announced that the USDA plans to award algae fuel company Sapphire Energy a $54.5 million loan guarantee for its algae biorefinery project to be built in Columbus, New Mexico. That guarantee comes under the Biorefinery Assistance Program created in the 2008 Farm Bill. Sapphire Energy has some pretty grand ambitions. The company was founded in 2007 and says it is ramping up its algae fuel production estimates to 1 million gallons of algae-based diesel and jet fuel per year by 2011. By 2018, Sapphire says that it will crank out up to 100 million gallons per year, and by 2025, that number will soar to 1 billion gallons per year. That would be about 3 percent of the total amount of renewable fuels that the U.S. has mandated for production by 2025.

One thing to remember, even though the U.S. government is handing out $600 million for advanced biofuels, this funding pales in comparison to the $4 billion allocated for the smart grid buildout, and the billions being handed out for advanced green car loans. A big question to consider is how far this funding can take some of these firms — given that commercialized advanced biofuel plants can cost hundreds of millions to a billion dollars to build, a $25 million grant for a pilot project will only help move that plant partway to the next stage.

Read More of Our Coverage of These Firms:

Sapphire Energy: Sapphire Energy: The Gorilla of Algae Fuel?, Sapphire Racks Up Another Win for Airline Algae, Sapphire Squeezes High Octane Gas from Algae, PHOTOS: Plug-In Hybrid Algae-Fuel Car Kicks off Road Trip.

Solazyme: The Politics of Algae: Solazyme & Schwarzenegger, How Good Is Algae Fuel At Fighting Climate Change? Totally Depends, Algae Fuel Funding: Solazyme Hits $76M, Still Not Commercial.

ZeaChem: ZeaChem’s Lab: From Termite-Gut Bugs to Biofuel, ZeaChem Piles On $34M for Cellulosic Ethanol Plant, Baby Steps in Hard Times for Cellulosic Ethanol Makers.

Amyris Biotechnology: Amyris Closes in on $60M Round for Synthetic Diesel, Amyris Opens Synthetic Diesel Pilot Plant, Primer: What You Need to Know About Brazilian Biofuels, Kleiner Perkins’ 5 Biofuel Bets.

Image I took at ZeaChem’s facility.