Ottawa backs biggest biofuel fund

Ottawa has poured half a billion Canadian dollars into the largest biofuel fund in the world, open to companies ready for large, demonstration scale projects of next generation biofuels.

The CDN $500 million NextGen Biofuels Fund, announced late yesterday, is managed by Sustainable Development Technology Canada, a not-for-profit, arm's length foundation started in 2001.

"The key component of the Biofuels Fund is that we are looking at second generation," Vicky Sharpe, president and CEO of Sustainable Development Technology Canada, told the Cleantech Group.

"It's cellulose based technology that we believe holds much greater long-term promise for both fuel production and co-product production, with valuable chemicals as byproducts," she said, adding, "and obviously an environmentally superior option without the issue on irrigation or fertilizing for food crops that makes it less environmentally sound."

Canada has a renewable fuel standard of 5 percent bio-ethanol by 2010, and 2 percent bio-diesel by 2012, which factored into the decision to launch a next generation biofuel fund.

"They would like to be able to attain that RFS target using a more sustainable approach," said Sharpe.

The Biofuels Fund will support up to 40 percent of eligible project costs, to a maximum of CDN $200 million, for the establishment of first of kind facilities from companies that have already demonstrated their technology at the pre-commercial pilot scale.

"While Richard Branson, Vinod Khosla and others are making major commitments to this space, this is largest dedicated pool of capital yet assembled for next generation biofuels," said Nicholas Parker, chairman and founder of the Cleantech Network (see Gevo lands high profile funding). The Cleantech Network is the owner of the Cleantech Group.

Although the fund is for Canadian projects, companies based outside of Canada are welcome to set up shop in the country in order to participate in the program. Sharpe said they've already received some inquiries from companies in the U.S.

Under its first, much broader, SD Tech Fund, the foundation has already completed ten funding rounds and allocated a total of CDN $279 million to 124 clean technology startups in Canada.

The Tech Fund is also backed by Ottawa, to the tune of CDN $550 million. The fund supports projects that address climate change, air quality, clean water, and clean soil.

"About 30 percent of the applications that SDTC received in its first fund are biomass related or bio-economy related. So we see a lot of good companies with good technology," said Sharpe.

In addition to being located in Canada, the foundation said companies looking for cash from the Biofuels Fund should use feedstocks that are or could be representative of Canadian biomass.

Highmark Renewables in Alberta and Bio Vision Technology in Nova Scotia are two companies that fit that bill. They both received cash under the first fund, and are likely to consider trying for some Loonies under the new fund.

While there's plenty of corn stover, wheat grass, and switch grass in Canada, these two companies are working with Canada's other prime currencies, wood and cattle.

Highmark is working with cattle feedlots, using manure to produce energy, bio-based fertilizer and reusable water.

Bio Vision is using a thermal reactor to convert woodlot wastes into feedstocks that can then be processed into fuel ethanol or other products such as biodegradable plastics and building materials.

"This new fund is explicitly designed to complement the first fund, and try and drive through to market some of the high-capital equipment type projects," she said.

Projects can last up to six years under the Biofuel Fund, and cash is expected to continue to be given out to applicants until March 31, 2017.

Companies will have 10 years to repay the contribution once their project is complete.

Ottawa allocated the cash for the new fund under its Federal Conservative 2007 Budget in March, as part of a CDN $4.5 billion environmental investment package designed to address issues around clean air, land, and water, as well as reduce greenhouse gases and combat climate change.

If applicants get their paperwork in early, and have all their ducks in a row, we could see a new project announced by the end of the year.

"It really depends on what phase in the project the applicants are," said Sharpe. "If they come in at the very early stages, they may have a good technology. It's completed its pre-commercial volumes of the fuel, but it's not figured out exactly where it's going to site the technology, it's not figured out its feedstock contracts, it's not got all of its investors in place."

"So for them to be able to meet what we need to know before the board can make a decision would take a bit longer."

SDTC's Sharpe is to keynote the Cleantech Network's upcoming Toronto Cleantech Forum.