Propel Fuels Raises Funds for Alt-Fuel Stations, Long Road Ahead

Here’s the chicken and egg problem for biofuels: A lack of biofuel pumping stations has hurt the sales of flex fuel cars (cars that run ethanol, the most widely available biofuel), but a lack of flex fuel cars has cramped demand for the biofuel pumping stations. Sigh. Propel Fuels, a Sacramento, Calif.-based company that is looking to brand the alternative fueling experience, hopes to keep on building its stations across California to help crack that problem, and announced this morning that it has raised a $20 million round in funding to expand its network.

As of a year ago, Propel had 11 stations selling E85 (ethanol blended to 85 percent) and biodiesel, and the company also said it could eventually sell electric vehicle charging as well. Propel had five of those stations in the Sacramento, Calif. region, and the other six in its former hometown of Seattle. According to the station locator on Propel’s web site, the company still has 11 stations operating, so it doesn’t seem to have expanded much over the last year. This $20 million round — which includes a $12 million investment from Craton Equity Partners, Nth Power and @Ventures, along with $8 million in debt financing — will help the company add more stations.

Are California residents really clamoring for more alternative fueling stations where they can pump biofuels into their cars? I’m not sure, but the wind has been knocked out of the corn ethanol markets over the past couple of years (see Biofuel Death Watch Map) and customer interest in both E85 and flex fuel vehicles hasn’t seemed to ramp up very quickly. On the other hand several automakers are working on flex fuel models, and a federal working group recently recommended that governments should use more flex fuel vehicles (see this DOE map of density of alternative fueling stations).

Electric vehicles are garnering more attention from car companies and customers, so adding on EV charge points to Propel stations would be a good idea. But then that also puts Propel in competition with companies like Better Place and Coulomb.

Currently Propel has found a market selling its fuel to California state employees, and Propel CEO Rob Elam told me last year that Propel relocated its headquarters to Sacramento last year because the intersection of public policy, public funding and entrenched companies (in the oil and auto industries), is a good place to be for a clean car startup.

Don’t get me wrong, the idea of branding the alternative fueling experience is a very cool one. But I think the road will be difficult. When I first launched Earth2Tech back in 2007, one of the first stories I wrote was about a company called Conserv Fuel that was trying to do the same thing down in Southern California. Conserv’s dynamic CEO, Kristopher Moller, came from a family of traditional gas station owners and had succeeded in convincing then-presidential hopeful Barack Obama to make a speech at his first station (see video clip here).

Last time I talked with Moller the company and brand were really struggling (the web sites are now shut down). Country music celebrity Willie Nelson also tried to brand the biofuel experience with BioWillie biodiesel brand, and that company has had more than its fair share of problems (see The Sad Ballad of BioWillie Biodiesel, and BioWillie’ Chief’s Questionable Comeback). Moller told me last year that he was really frustrated over California regulations that added a lot of extra cost to biofuel pumping, and the just getting the word out with marketing was difficult. This is just not an easy market for a startup. Good luck Propel.