Biofuel investments keep on coming

Developing biofuels continues to be a bright spot in the cleantech world. Two startups, plant genetic engineering company Chromatin and biofuel producer ZeaChem, announced separately on Tuesday that they have raised new rounds of funding.

Chromatin’s plans

Chicago-based Chromatin said it has lined up $10 million – the first close of the D round – from investors including the venture arm of oil giant BP (s BP) and the investing arm of product firm Unilever (s UL). Chromatin has developed a technology to genetically modify energy crops so that they grow fast and abundant, and its plant of choice if sorghum, a grass with some desirable, natural characteristics as a bioenergy feedstock, such as a high tolerance for drought and heat.

Chromatin wants to make money by selling its hybrid sorghum seeds to growers and license its technology to agricultural companies. The plants could be used to produce transportation fuel, electricity or chemicals for other products.

The company’s reach for commercial production may arrive sooner now that more cellulosic biofuel producers are finally getting on with building their first refineries. Generous government grants and loans have helped biofuel companies complete their technology development plans and build pilot and commercial plants. The U.S. Department of Energy last month finalized a $105 million loan guarantee to Poet to build a biofuel refinery in Iowa using corn cobs, husks and leaves, and a $132.4 million loan guarantee to Abengoa Bioenergy to build a plant in Kansas that will cover agricultural wastes such as corn stalks and leaves to fuel.

Mastering the processes of converting biomass to fuel is only one of the steps in boosting the country’s cellulosic biofuel production, however. Producing enough feedstocks is also important and could be a bottleneck for reaching the renewable fuel goals set by the U.S. government. Fuel giant Chevron (s cvx) certainly sees a shortage of feedstocks.

“There is a number of promising conversion technologies, but the limiting step is a lack of large-scale biomass feedstock,” said Des King, president of Chevron Technology Ventures, in an interview last month. King said 100,000 square miles of forests will be needed to produce 1 million barrels of cellulosic biofuel per day. Chevron formed a cellulosic biofuel joint venture called Catchlight Energy with Weyerhaeuser (s WY) in 2008 to take advantage of Weyerhaeuser’s timberland holdings.

Genomics guru Craig Venter and his startup Synthetic Genomics also announced this week that they’re creating a joint venture around using genomics to create crops with a higher yield, lower cost, and better crop protection in an effort to use the crops potentially for biofuels.

However, transportation fuel may not be the first sources of profit for Chromatin’s technology. The company just signed a preliminary agreement with electricity producer Constellation Energy (s CEG) to test Chromatin’s sorghum to produce power at two plants in California. One plant current uses coal, while the other uses agricultural and wood wastes.

Zeachem’s goals

Meanwhile, ZeaChem said it has raised a $19 million Series C round as it marches toward commercializing its process of turning plants into fuel. Like many other biofuel companies, ZeaChem also is exploring the use of its technology for chemicals that can be used in products other than transportation fuel.

The Colorado company plans to bring a demonstration refinery plant online in Oregon by the end of the year, with an annual capacity of 250,000 gallons. ZeaChem recently received a $40 million grant from the U.S. Department of Agriculture to use the demonstration plant to produce blending fuels for cars and jets that run on diesel and other types of petroleum-based fuels. The company expects to produce the first batches of jet and diesel fuels in 2013 and gasoline replacement in 2015.

Birchmere Ventures led the $19 million round, which also came from investors such as Firelake Capital, Globespan Capital Partners and Mohr Davidow Ventures.

Image courtesy of Chromatin, and GigaOM