Tallhamn said in the blog post that the company failed to draw a lead investor “willing to commit enough capital to fill out the round with follow on investors.” His insights are an indicator of the struggles for the entire energy management sector, including potential competitors that Tallhamn used in a slide from the Cleantech Open including Ecofactor, EnergyHub, AlertMe, and Control4.

The investment community’s perspective on this space had become significantly more critical since we got started, and probably for good reasons. A lot of capital has been destroyed in Series A-Z rounds of funding by our competitors, and most investors made it clear that they’d want to see massive traction before committing capital. They were taking a “wait and see” approach.

The business of helping consumers reduce and manage energy consumption in homes and across appliances and devices is such a small market right now, there can’t be too many players going after basically non-existent revenue. OPower, which provides data analytics and software for utilities for energy bills, is one of the few companies in energy management that I know of that is doing well.

Many of the revenues right now depend on scoring utility deals, which can take months and years to implement. Though, there has also been recent attention from the telcos and consumer electronics companies in the energy management space. But as we’ve mentioned pure play energy management gadgets probably won’t be that interesting to consumers — the gadgets will have to do something else, too, like manage your media or run a home security system. Tallhamn said in his blog post: “On a micro level, the average household’s energy costs are so small ($4k on average across electricity and fuel) that any direct to consumer product aiming to reduce them needs to deliver something beyond just savings.”

Hug was taking a free approach, and looking to mine energy information, with Scoble calling Hug the “Mint of your energy bill.” The company had launched a downloadable energy management application for computers that compiled how many minutes your computer slept and basically called your attention to how much energy you were saving. That app was only a “trojan horse” into a plan to grab a greater piece of the energy management sector, and the company’s idea was to start building a user base before the smart energy devices hit the market, “so that we’d be in a great position for becoming the leading supplier of analytics and control software once they had arrived,” writes Tallhamn.

But alas, you can’t build a product without funding. Tallhamn writes:

Knowing when to push through and when to call it quits is probably one of the hardest things for an entrepreneur, and while I’ll never know for sure, I feel quite confident that this was the right decision for everyone involved.

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Coskata has gotten a letter of intent from the U.S. Department of Agriculture for a $250 million loan guarantee to build a plant to make ethanol from woody biomass. The plant will have the capacity to make 55 million gallons per year. Coskata’s plant plans seriously stalled during the recession, and Coskata has been waiting for this loan guarantee to come through. The company is well-known for touting a $1 per gallon production price and its backers including Khosla Ventures, General Motors, and Advanced Technology Ventures.

The USDA also awarded Enerkem a conditional commitment for an $80 million loan guarantee to build a 10 million-gallon-per-year refinery for making ethanol out of municipal solid waste. Enerkem, which uses a thermochemical trash-to-syngas process, was already awarded a $50 million Department of Energy grant, and also raised funding from trash giant Waste Management, Cycle Capital, Rho Ventures, Braemar Energy Ventures and BDR Capital.

At the same time, the U.S. Department of Energy (DOE) is awarding a $241 million loan guarantee — its first for a biofuel plant — to Diamond Green Diesel. The guarantee will help Valero build a plant in Louisiana that will make 137 million gallons of biofuel per year primarily from animal fats and used cooking oil.

The USDA said it’s not done doling out financial help to biofuel producers. It plans to announce new rules “soon” that will make more money available from the loan guarantee program, which originated from a 2008 Farm Bill.

Lining up money to build refineries has been a huge hurdle for a slew of biofuel companies in the past two years. The recession is only partly to blame. Many of these companies have encountered technical problems for converting plants and wastes into fuel. Investors once flocked to these startup companies, especially when the federal government announced goals to gradually increase the nation’s supply of renewable fuel until it hits 36 billion in 2022.

Well, hitting the goals has proven a lot more difficult. Congress initially set 100 million gallons as the 2010 target for cellulosic biofuel, but the Environmental Protection Agency cut that to 6.5 million gallons. It appears the industry might have produced less than 1 million gallons last year, reported ClimateWire, citing an estimate by a government analyst.

Just last week, reports emerged that Range Fuels, backed by venture capital firms such as Khosla Ventures, was laying off workers and shutting down its refinery in Georgia in order to tackle technical problems and raise more money. Colorado-based Range Fuels received an $80 million loan guarantee from the USDA to help fund its refinery, which began production by making methanol instead of ethanol last year.

Perhaps the USDA will see quicker success from its latest bets. Aside from Coskata and Enerkem, the agency also touted a loan guarantee conditional commitment for a $75 million loan guarantee to INEOS Bio and its partner New Planet Energy, which it first announced a few weeks ago.

INEOS Bio (which is the biofuel arm of petrochemical giant INEOS) and developer New Planet Energy say they will use the loan guarantee to build the “INEOS BioEnergy Center,” near Vero Beach, Florida, that will produce 8 million gallons of advanced biofuels and 6 MW of biomass power from plant waste and trash per year. The companies say the center will begin producing biofuels and bioenergy in 2012, and will create 175 jobs during the construction process and 50 jobs when the center is completed.

Loan guarantees are important awards for companies looking to build plants for these next-gen biofuel projects. A loan guarantee essentially is a promise by the government to back a loan if the company can’t pay it, and it enables companies to finance projects with a better interest rate and at a lower cost.

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The Agua Caliente project will use panels from First Solar, is set for completion in 2014 and is supposed to create 400 construction jobs. Northern California utility PG&E plans to buy the electricity from the project. NRG plans to invest up to $800 million in equity in the project, and the deal between First Solar and NRG requires that First Solar installs, operates and maintains the project.

This is the third big round of DOE loan guarantees for the solar industry. Last summer, the DOE awarded close to $2 billion in loan guarantees to Spanish solar company Abengoa Solar and Colorado-based solar panel maker Abound Solar. Abengoa Solar was awarded a $1.45 billion loan guarantee to help it build Solana, a solar thermal, trough-based, solar farm that is under contract to sell power to Arizona utility APS in Gila Bend, Arizona. BrightSource also received a $1.37 billion loan guarantee to build out BrightSource’s Ivanpah solar project, which is the first new solar thermal power plant being built in California’s deserts in 20 years.

Loan guarantees essentially serve as a promise by the government to make good on a loan if the company can’t, and typically enable better interest rates and lower costs than would otherwise be available to a company for project financing. As DOE Loan Chief Jonathan Silver told us recently, it takes about six months “soup to nuts” to get these applications processed and finalized.

These types of solar projects make sense for the DOE loan guarantee program, because these are the first projects from some of these solar firms in the U.S. The idea is to get a company like BrightSource across the so-called “valley of death,” between proving the technology and building out and scaling up actual plants. Solar projects also offer construction jobs and good press.

Silver told us recently that the “first couple biofuels deals” will be announced “shortly” for the loan guarantee program, and that biofuels will likely be among the next several loan guarantees issued. In the coming year, he said, we’re also likely to see “additional interest” in nuclear and “advanced fossil fuel technologies,” such as “clean coal” and carbon capture.

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To get an initial clue into what GM Ventures might be attracted to, just look at the companies it has backed: electric vehicle maker Bright Automotive, battery startup Sakti3, and wireless charging firm Powermat. Yeah, all over the map. But Lauckner explained how the investments fit in its five key sectors to focus on: automotive cleantech (electric and low-carbon cars), infotainment, smart materials (light weight, phase change, forming tech), other automotive tech (like advanced sensors), and alternatives to traditional business models (like car sharing). The mission statement of GM Ventures is basically a spinoff of the mission statement of GM: Help GM build the best vehicles.

Rather than compete with venture capitalists, Lauckner said GM Ventures would actually be more eager to invest in startups that already had some sort of venture interest. “Venture capitalists have a lot of valuable experience that we can learn from, including knowing when to cut things and move on, working with management, and doing due diligence,” said Lauckner.

In terms of startups, Lauckner said GM Ventures is commonly investing as a customer, so the startup wouldn’t only get equity but often, a commercial relationship, which could be crucial for an early stage company. In addition, Lauckner said if GM starts working on the technology with a company at an early stage, GM can likely help the startup “shave the lead time off of the product development process,” by months or more.

Other benefits (beyond the obvious equity) would include GM being able to raise the profile of the company. We can “de-risk the equity structure of the company. We can take a lot of risk out of that from the beginning.” As a bonus, automotive testing and R&D is also an expensive undertaking and GM can help startups use its facilities and expensive tools.

On the flip side, what does GM get in return? Lauckner said it’s not common for GM to demand exclusive deals, but GM wants “a head start,” or basically a 12-month to 18-month exclusive lead time, before the startup starts selling the tech to other auto competitors. “We’ve done that for a couple [startups] and it works pretty well.”

GM has also taken the unusual step of licensing cathode technology from Argonne National Labs, and Lauckner said “the national labs do some tremendous work. It’s intellectual property at this moment, so it has it be turned into a product, but it’s extremely promising.”

Will GM Ventures be able to invest $100 million into helping GM produce the best cars in the world? Well, it certainly won’t hurt.

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There was good reason to expect a lower valuation from the Englewood, Colo.-based startup, Lux research analyst Samhitha Udupa told us in August. The company generated $660,000 and lost $19.89 million in 2009, and had accumulated a deficit of $50.3 million as of March 31, 2010. Still, Lux has put Gevo among its top-ranked biofuel startups for the past two years, giving it high marks for its innovative retrofit model toward cheaper production costs.

Gevo, which has backing from Khosla Ventures and Virgin Green Fund, wants to retrofit old corn ethanol plants to turn cellulosic feedstocks like agriculture waste into isobutanol, a fuel additive and precursor to plastics and other products. The startup is retrofitting an ethanol plant in Luverne, Minn. to produce about 18 million gallons of isobutanol per year, and says its retrofit model could allow it to scale up to 50 million gallons-per-year for about $24 million, or 100 million gallons for $40 million to $45 million.

Empty ethanol plants aren’t necessarily hard to come by — oil refining giant Valero bought up seven plants from bankrupt corn-to-ethanol maker VeraSun in 2009. If Gevo meets its new IPO targets, it could command a market value of $349 million, according to Renaissance Capital. The company booked $2 million in sales for the fiscal year ending in September 2010 and has said it has letters of intent from customers including chemical company Lanxess, French oil giant Total’s subsidiary Total Petrochemicals USA, plastic maker Toray Industries, airline company United Air Lines and oil industry technology developer CDtech.

One big question is whether Gevo will tackle the biofuel market right away, or focus on providing isobutanol for the plastics and chemicals industries. The company got EPA clearance to sell its isobutanol as a fuel additive in November, but it is also looking to supply makers of plastics, fibers, rubber and other polymers.

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Report author Andrew Soare interviewed more than 300 executives for the report, and finds that startups in the field have started to distinguish themselves as winners or losers in terms of larger rounds of investment and corporate partnerships. At the same time, startups are changing their game plans to better fit the difficult market, shifting focus to specialty chemicals and postponing plans for mass-producing biofuels that will have to compete against oil on price.

So who’s on top? As with its report last year on the biofuel sector, Lux pulls together data on revenue per employee, patents, performance metrics, production capacity and the like to place contenders in terms of maturity and potential. Winners in both categories included net-generation biofuel stock market bellwether Amyris, cellulosic waste-to-isobutanol startup Gevo, algae-to-fuel startup Solazyme, long-time cellulosic ethanol developers Mascoma and Poet, and two startups making succinic acid and butanol — U.S.-Canadian firm BioAmber (formerly DNP Green Technology) and China’s Cathay Biotechnologies.

As for low-ranking companies, Lux didn’t pull punches, putting some dozen little-known names in its immature, unpromising quadrant, indicating the judgment that they’re “highly risky as investment, licensing, partnership, or merger and acquisition target(s).” Those included two “caution” warnings for U.K.-based ethanol producer TMO Renewables and French biocatalyst developer Proteus.

Many of the top-ranking startups have deep partnerships with established players in the field. Cellulosic ethanol maker Mascoma just got $50 million from oil refining giant Valero to build a plant in Michigan, along with an agreement to buy the fuel from it. Amyris has backing from French oil giant Total and P&G, Gevo has letters of intent from Total subsidiary Total Petrochemicals and United Air Lines, and Solazyme has investment from Chevron and a partnership with European food and consumer products giant Unilever.

They’re not alone, of course. Craig Venter’s Synthetic Genomics got $300 million from ExxonMobil for algae biofuel research, LS9 has backing from Chevron and products giant Procter & Gamble, and Codexis has pharmaceutical partnerships and a piece of Shell’s massive Brazilian biofuel partnership.

The Lux report breaks down startups according to technologies: fermentation, gasification, synthetic biology, chemical processes, crop enhancement, and algae processes. Some headline-level conclusions include:

• Fermentation’s digestion is improving. Companies like TetraVitae and Genomatica are engineering organisms that can eat more and more feedstocks and pump out more and more valuable chemicals, like succinic acid and butanol. Companies emerging from the biotechnology sector like Amyris and Verdezyne are also producing interesting new chemicals.
• Gasification is good for waste. It looks like heat beats bugs for converting trash into useful hydrocarbons. Even though that uses a lot more energy, it could be worth its while if startups can squeeze efficiencies out of the process. And remember that trash doesn’t cost anything — in fact, processors can usually get paid by the ton for taking it off the hands of government and private trash management authorities.
• Algae hasn’t proven anything yet. Lux says that only a handful of algae-based biofuel startups will survive — the report singles out Solazyme and Algenol — amidst a host of competitors that haven’t solved the key problems of harvesting and processing algae in a cost-effective manner.

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Image courtesy of Argonne National Laboratory via Creative Commons license.

The financing isn’t KLD Energy’s first. Last Summer the electric vehicle tech maker raised $4.9 million in equity, and then another $2.8 million in equity and debt earlier this month. KLD also announced a $1 million Series A financing round in 2009, and regulatory filings show a pair of $2 million equity raises during the first few months of 2010.

KLD Energy makes an electric drive system that includes a battery, battery management system, electric motor and motor controller. The company says its technology can give electric two- and three-wheeled vehicles speed and performance capabilities on par with gas-powered counterparts. KLD’s system has no transmission, has high frequency and low RPM, and uses a computerized controller.

Ferber told us last summer that KLD planned to build its business by first deploying its system in electric three-wheelers and scooters internationally (starting in Asia and South America), and targeting the electric scooter market in the U.S. through a deal with Vietnamese scooter manufacturer Sufat (with a starting scooter price of $3,288). KLD Energy offers the technology for licensing, while its subsidiary KLD Motors America manufactures electric motors using a nano-crystalline composite material at a facility in Vinh Phuc, Vietnam.

As we’ve noted before, companies that move early and fast to dominate the EV market in China — which has significant government support on its side and could reach $220 billion by 2030 — could use the country as a springboard for a broader international play.

But remember it’s not exactly easy to be a startup electric scooter maker. The business costs a lot of capital (as you can see by the fund-raising), and it’s a field that has no shortage of casualties (Vectrix closed up shop in 2009 but has more recently emerged). There’s also a lot of competition from players like Brammo, Zero Motorcycles, UltraMotors, Mission Motors, and Vectrix (and that’s only the startups).

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As Swoboda explained it to me, Intematix has developed an LED product that layers phosphor onto a material that separates it from the blue LED energy source, so LEDs made with ChromaLit have their blue light and white light separated. In most traditional LEDs, blue chips are actually coated with the phosphor compound. The result of ChromaLit, according to Intematix, is that LED makers can have more flexibility with lighting quality, and color, and can make LEDs that are both more efficient and have a lower cost.

“Rarely do LED makers talk about improvements in the phosphor performance,” says Swoboda. They’ve only focused on the chip performance, which is why he thinks the product will be so interesting to the LED manufacturers.

Well, that’s the pitch anyway. Eleven-year-old Intematix will be selling ChromaLit to LED makers, but didn’t announce any major customers at launch time. The proof in how revolutionary the product is will lie in how many LED maker customers Intematix signs up.

Intematix was formed over a decade ago to work on something called “combinatorial synthesis, which is a process of doing accelerated materials discovery and development,” explained Swoboda to me. But, yeah, as you can expect, that’s a rather broad process, and revenues are in successful niche applications. It wasn’t until 2005 that Intematix focused on phosphors and solid-state lighting.

Over the decade, the company has raised several rounds of VC financing, though Swoboda declined to name how much, from investors including Draper Fisher Jurvetson and Crosslink Capital. Swoboda tells me that Intematix is also looking to raise a “pre-IPO” or mezzanine round in the first quarter of 2011, which could help the company’s potential IPO at a later date.

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Well, those are the visions. However, there are major hurdles to implementing these ideas. Here are the road blocks:

Infrastructure Investment

First and foremost, there will be a colossal investment needed for both clean power and electric car infrastructure to make their way onto the market, and both will take a lot of time. Author and professor Vaclav Smil has explained in his recent book that an all-electric U.S. fleet would conservatively need 980 TWh of electricity per year to run, which was 25 percent of the U.S. electricity generation in 2008. Smil thinks utilities wouldn’t realistically be able to build that additional amount of electricity generation within two decades.

In addition, that extra generation would have to come from clean power to be carbon-reductive. As anyone who has followed the utility-scale solar market knows, it takes years for utility-scale solar projects to move from drawing board to supplying electricity. In the case of BrightSource Energy’s inaugural solar thermal project Ivanpah, it has taken over three years to just get regulatory approval, and now here come all the environmental protests.

California’s utilities have struggled to meet the state mandate that says they need to buy 20 percent of their electricity supply from clean power by 2010. Most utilities weren’t likely to make that deadline, but state regulation gives them until the end of 2013 to comply. Meanwhile, the utilities will have to make sure they line up enough contracts or install their own projects to meet the 33 percent goal by 2020. And this is just in California, which has an aggressive state mandate.

Utility scale wind is a more mature market, but wind installations slowed in the U.S. considerably in 2010 due to the slowed economy. In addition, because of intermittency, Smil and other researchers think wind could never be a dominant form of clean power. In fact, it’s far from clear if solar and wind will be able to provide baseload power (provides energy 24/7), and the U.S. will have to rely on other forms of clean power like nuclear, geothermal, and hydro.

From a plug-in vehicle market perspective, perhaps it’s not such a bad thing that clean power will take such a long time to get built out. Because plug-in car adoption will take just as long. Bloomberg New Energy Finance predicts there will be 1.6 million plug-in cars sold by 2015, rising to 7.6 million by 2020. In 2010, the U.S. had about 245 million passenger cars, SUVs, vans, and light trucks.

EV + Clean Power

Clearly, it’s going to take decades for both clean power and electric vehicles to make a sizable dent in the U.S. infrastructure. In the mean time, some utilities and companies are looking at ways to use or sell clean power for electric vehicle projects.

SAP and German utility MVV Energie are starting a pilot project using 30 corporate SAP electric vehicles that will be powered exclusively by the utility’s clean power. MVV Energie will be building and operating the smart charging stations that are capable of filling electric cars exclusively with certified green energy.

Better Place, the electric vehicle infrastructure company, plans to incorporate clean power into its networks, particularly in its launch region in Israel. In 2008, when Better Place CEO and founder Shai Agassi announced the Israel Better Place launch, he said the infrastructure will be powered by “batteries, that get their energy from green sustainable electricity sources.” (We’re thinking that’ll be mostly solar, given Israel’s climate).

Batteries as Aid for the Power Grid

While we’re waiting for EVs to be powered by the sun, electric car batteries could be an aid to getting clean power onto the grid. A network of electric cars could offer the potential of distributed energy storage and grid services like load balancing or frequency regulation.

The power grid works by constantly balancing supply and demand (generation and load) and must be kept at a 60 Hz frequency. That’s a complex and difficult task given today’s grid has little energy storage capacity. So if the frequency goes too high or low, the utility must respond by shifting generation and load. For example, PJM, a regional transmission organization serving a population of 51 million, pings generators to control regulation as often as hundreds of times per day. Electric vehicle batteries could act as the real-time, distributed intelligent frequency regulators, replacing generators.

PJM has a project with the University of Delaware using electric vehicles in a demand response program, but John Gartner, an analyst with Pike Research, says, “We don’t see this as a commercial application until at least 2015.” However, after the issues are resolved, the arrival of electric vehicles will provide greater flexibility for utilities to integrate higher percentages of wind and solar power, says Gartner.

Image courtesy of Better Place.

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The story quoted Bud Klepper, who’s not only Range Fuels’ technical advisor but also the original founder of the company that became Range Fuels (previously called Kergy). Klepper told the publication that Range Fuels is laying off most of its employees at its plant near Soperton, Ga, after it makes a single batch of ethanol, and the company will shut down the plant while it tackles technical problems and raises more money.

We guess that when the company told us earlier this week that it expected to start producing ethanol this week, it really meant it would produce just a single batch, followed by throwing in the towel on the plant and workers. That’s kind of like saying I’m going to start writing my novel this week, and then typing the title and calling it a day.

Range Fuels company spokesman Patrick Wright told us earlier this week that the company was letting go “a handful of people in Colorado and Georgia,” but he declined to disclose the number or reasons. Wright also said the company plans to meet a 2011 production goal set by the U.S. Environmental Agency.

Range Fuels, which is backed by investors including Khosla Ventures, has gotten quite a bit of public money to get its first commercial plant up and running. The U.S. Department of Energy awarded the company a grant of $76 million in 2007 to finance the Georgia plant. The U.S. Department of Agriculture approved a loan guarantee of $80 million, and that allowed the company to secure an $80 million bond in 2010 to fund the plant’s construction as well.

In between, the company raised a private B round of over $100 million from investors including Khosla, Passport Capital, BlueMountain, Leaf Clean Energy Company and Pacific Capital Group (with participation by the California Employee Retirement System).

Range Fuels is one of five companies that the U.S. Environmental Protection Agency has projected will be able to contribute to a total of 6.6 million gallons of cellulosic biofuel in 2011. A 2007 law required that the EPA set mandates for different types of fuels that can be blended into gasoline and diesel. Those mandates are supposed to lead the country to produce 36 billion gallons in 2022. Lawmakers nurtured ambitious goals to wean the country off the use of fossil fuels for transportation.

However, meeting those goals has proven clearly proven to be extremely difficult, mainly because many biofuel companies with promising technologies ran into technical problems or were unable to raise the hundreds of millions of dollars needed to build a commercial plant. Or both.

Congress initially set 100 million gallons as the 2010 target for cellulosic biofuel, but the EPA cut that to 6.5 million gallons. It appears that the industry might have produced less than 1 million gallons last year, reported ClimateWire on Tuesday, citing an estimate by a government analyst.

The EPA expects Range Fuels to produce 100,000 gallons of cellulosic ethanol and 2.9 million gallons of methanol at its Georgia plant in 2011. Although methanol doesn’t meet the current definition of cellulosic biofuel, the EPA said it’s considering changing that. The agency already counted Range Fuels’ projected methanol production in its 2011 goal.

Range Fuels began producing methanol last summer. At the time, Aldous said the plant had “less than 10 million gallons” of annual production capacity, but the plan was to expand it to 60 million gallons. Construction was to start this summer.

Aldous told the Colorado newspaper the Daily Camera this week that the recession and what he called a “public apathy toward green fuels” have hampered the company’s progress. The newspaper also said there was a “problem with the feed system at its plant.”

Aside from Range Fuels, the other four producers that could contribute to the 2011 pool are DuPont Danisco, Fiberight, KL Energy and KiOR.

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