Compressed air is a decades-old technology which takes excess energy from a power plant or renewable energy and uses it to run air compressors, which pump air into tanks or underground caverns where it’s stored under pressure. When the air is released, it powers a turbine, creating electricity. There’s only a handful of compressed air energy storage projects in the world, including one in Alabama and one in Germany.

But over the past couple of years a couple starts have emerged that are creating a next-generation — more efficient — version of the this technology. LightSail Energy is one of these firms and uses a water spray in the air compression process. SustainX and General Compression, based in Massachusetts are two others.

SustainX has been planning on starting construction on a 1 MW compressed air energy storage project, likely at a coal plant, in conjunction with power company AES, its first customer. In late 2009, the Department of Energy awarded SustainX a $5.39 million grant to help it reach that commercialization goal.

General Compression is also working on its first project in Texas with partner and investor ConocoPhillips. General Compression raised a $54.5 Million series B in the Summer of 2011 from Northwater Capital Management, US Renewables Group, Duke Energy, and Serious Change.

According to this New York Times article, which cites Lux Research, the worldwide market for energy storage could be as large as $31.5 billion by 2017.

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The California company, founded in 2009, announced Wednesday that it’s projecting a biofuel production cost of $1.50 per gallon at a plant that can produce 10 million gallons per year. Cool Planet is looking to raise around $100 million for that first 10 million-gallon facility and for production and other corporate expenses. That first plant would have a capital cost of $50 million, said Howard Janzen, CEO of Cool Planet. At those estimates the biofuel could be produced for less than the price of crude oil.

The company hopes to complete the project and start delivering fuel in the first half of 2014. Janzen said some of the company’s investors will be the ones in line to get the first shipments from that plant, though he declined to disclose their names. The plant is planned for the U.S., but the location hasn’t been settled, said Janzen.

A plant of 10 million gallons seems small, given many biofuel makers want to build commercial plants at twice the size. But Cool Planet figures the way to reduce costs, such as transporting energy crops, is to build many smaller plants that are close to the feedstock source. They should be within a 30-mile radius, says Janzen.

All this sounds like a good plan, and almost too good to be true. Janzen said the company’s investors were very skeptical before they put up the money, too. Janzen declined to say how much Cool Planet has raised.

Google is completing a field trial at its Mountain View headquarters using gasoline with a 5 percent blend of Cool Planet’s biofuel. Google has used the blended fuel to log 2,490 miles in one car, which is just slightly less than 2,514 miles in a car that uses 100 percent conventional gasoline. The car with the biofuel passed 5 smog tests and its emissions were “virtually identical” to the gasoline-only car, Cool Planet said.

Cool Planet has come up with a technology that is quite different than the fermentation and other chemical processes that are under development. The company uses high heat and pressure to compress woodchips, crop wastes or other feedstock in an oxygen-free environment. The desired temperature is around 350 degrees Celsius and the pressure at 150 psi. This process creates vapor that is then converted to fuel. The process also generates biochar, which then goes through a gasifying process to get more vapor that can be converted into fuel.

The remaining biochar residue can then be sold as fertilizer, a component of water filters or even a wood pellet substitute, Janzen said. So the amount of biochar that can be produced can be adjusted depending on whether the company wants to sell more biochar or fuel. In general, a 10 million-gallon plant can produce about 10,000 tons of biochar. The company is working on finding buyers for its biochar.

Biochar production serves a way for Cool Planet to sequester carbon emissions. If biochar is used as fertilizer, then its carbon will stay in the soil instead of being released into the atmosphere. As a result, Cool Planet claims that its entire fuel production process in effect reduces carbon emissions by a significant amount.

The startup already has a pilot production line at its headquarters that can make 50,000 gallons of biofuel per year, and it’s building a larger plant nearby that will be able to yield 400,000 gallons per year.

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CoolPlanet BioFuels makes what the company calls negative carbon fuels, using a technology it calls biomass fractionator. The technology essentially takes nonfood biomass (plant waste, energy crops, etc.) and turns it into a drop-in replacement for gas and diesel. That process sounds similar to what biofuel company KiOR is doing.

KiOR uses a catalyst to carbonize biomass (called its Biomass Catalytic Cracking Process), which was originally developed to help the oil industry break down heavy crude oil into more-easily refined products for the oil industry. Drop-in replacements for gas and diesel will be more attractive to the oil industry, because they can use the current infrastructure for transport and use.

BP has invested in a variety of biofuel companies including Verdezyne, which engineers yeast that eats plant sugars and excretes biofuel and biochemicals, and Synthetic Genomics, Craig Venter’s firm that is using genetics to tweak algae to produce fuel. BP also has a joint development agreement with Martek Biosciences to work on making microbial oils for biofuels, and earlier this year BP spent $98 million acquiring the biofuel arm of Verenium, a startup that makes enzymes that break down cellulosic biomass into sugars.

While there are dozens (likely hundreds) of next-gen biofuel companies, almost none of them have produced biofuels at any scale. The Environmental Protection Agency said this week that once again, only a tiny fraction of the biofuels required by the U.S. mandate will come from next-gen cellulosic biofuels: less than one-tenth of 1 percent, according to the Wall Street Journal. The mandate was for 3 percent.

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These types of materials are called thermoelectrics, and a variety of startups and researchers are looking at ways to incorporate thermoelectrics into devices to boost power capacity of systems and to make these devices more efficient. Other thermoelectric startups include Alphabet Energy, newcomer Silicium Energy, Phononic Devices, Transphorm, and Applied Methodologies.

Solar products are a natural fit for thermoelectric materials, as getting the sun’s rays from the point of the panel or mirror to the point of useful electricity is an inefficient process. Trying to capture any heat wasted in the system can make the solar power process more efficient. Transphorm has teamed up with Enphase Energy to develop a solar power conversion device.

GMZ Energy raised its $14 million funding round from a lot of well-known names including Mitsui Ventures, I2BF Global Ventures, Energy Technology Ventures (the JV from GE, NRG Energy and ConocoPhillips), Kleiner Perkins Caufield & Byers and BP Alternative Energy. Transphorm is backed by Google Ventures, Kleiner Perkins, Foundation Capital, Lux Capital and George Soros’ investment fund Quantum Strategic Partners. Phononic is funded by Venrock and Oak Investment Partners. Alphabet Energy has money from TPG Biotech, Claremont Creek Ventures and CalCEF Clean Energy Angel Fund.

A lot of these companies are using nanotechnology, and specifically carbon nanotubes and silicon nanowires, to produce these thermoelectric materials. GMZ also is using nanotech to produce the materials that will be embedded in the solar hot water heater, as well as used for other applications in the auto and industrial sectors.

Image courtesy of Aroid.

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Dow Jones reports that startups in the “energy and utility industry” raised $566 million in 29 deals, which was less than half the amount raised by energy startups in the second quarter of 2010. Clean-power companies were responsible for $540 million and 27 deals out of that total, according to Dow Jones.

Clearly generalist venture capitalists that had dabbled in energy investing over the past couple of years have shifted away from energy. Earlier this year Mass High Tech published a report that studied 10 venture firms that made five or more new cleantech deals between 2003 and 2008 and then completely pulled back from new cleantech investments after 2008.

Corporate investors are moving in, partly taking up some of the drop in energy investing. Jessica Canning, the global research director for Dow Jones VentureSource, was quoted in the release as saying, “As fewer venture dollars are committed, we see energy companies raising funding from corporations, the government and other types of investors.”

The amount of new corporate investors in greentech is one bright spot in energy investing. Last month natural gas company Chesapeake Energy announced that it plans to invest up to $1 billion into technologies that can use natural gas instead of oil. NRG Energy, ConocoPhillips and GE announced a new $300 million back in January. GM launched an inaugural $100 million auto-tech fund last year. Intel Capital has been investing in tech, including solar and energy efficiency, for years, and oil companies like Valero, BP, Chevron and Exxon have all made small investments into mostly biofuels.

While generalist VCs are moving away from cleantech, a variety of investors are doubling down or are creating new types of funds, like moving to later-stage investing or focusing on the intersection of IT and green. Former First Solar CEO Michael Ahearn has a new $300 million fund; Silver Lake recruited Adam Grosser, Cathy Zoi and Raj Atluru for its inaugural Kraftwerk fund; and big players like VantagePoint Venture Partners, Khosla Ventures and Kleiner Perkins continue to invest.

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The company made news recently by announcing a partnership with chemical giant Dow Chemical to turn sugar into a bio acrylic acid — the petroleum-based version of acrylic acid is used in plastics, paint products and diapers. When I interviewed the company a couple years ago, they explained the company’s innovation as a speedy full genome search and gene modification technology platform that is 1,000 to 5,000 times faster than conventional methods.

In conjunction with the Department of Energy’s ARPA-E program, which gives small grants to high-risk early-stage companies, OPX is also working on engineering a microorganism that makes biodiesel from hydrogen and carbon dioxide. The DOE gave OPX $6 million for this research. Previous investors in OPX include Mohr Davidow Ventures.

A few other next-gen biofuel companies have been funded in recent months including CoolPlanetBiofuels, which attracted investment from Google and a consortium including GE, NRG Energy and ConocoPhillips. Another one is Enerkem, which gasifies various forms of waste — everything from old telephone poles to mixed municipal garbage — and then turns that syngas into various fuels including methanol and ethanol. Enerkem gained funds from oil refiner Valero and trash king Waste Management.

While using bio feedstocks — like sugar, waste, energy crops — to power vehicles in large numbers is a long way off, so-called biofuel companies are now finding some success selling biochemicals. In addition to OPX and its bio acrylic acid, companies like Solzayme and Amyris are tackling bio chemicals first, before turning to fuel.

These smaller, but seemingly abundant, specialty chemical, cosmetic, nutraceutical and pharmaceutical markets are giving companies some of their first revenues and commercialization agreements. As a result, biofuel companies are some of the only ones that have waded into the public market in the greentech field, and companies that have gone public in recent months include KiOR, Gevo, Amyris and Solzayme.

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Emefcy, which is using naturally occurring bacteria to treat wastewater and produce electricity, is getting an undisclosed amount from Energy Technology Ventures as well as Pond Venture Partners, Plan B Ventures and Israel Cleantech Ventures.

The Israeli startup, founded in 2008, said it will use the money to develop the technology and deploy it commercially by the end of this year. Emefcy will market its process to cities and owners of industrial systems, from food to pharmaceutical processing plants.

Emefcy is developing a microbial fuel cell that uses wastewater as fuel to produce electricity. The company claims its process is less energy intensive than aerobic or anaerobic digestion technologies. The process also yields treated wastewater that can find other uses. Recycling wastewater has a mass appeal for countries in parched regions of the world, such as the Middle East.

The idea to produce energy from wastewater, particularly from human wastewater, isn’t new and has been explored by other companies and academic researchers around the world. The Bill & Melinda Gates Foundation recently gave $1.5 million to a research project at Columbia University to develop a waste-to-energy technology to make water treatment cheaper for poor communities and to minimize wastewater contamination of local rivers and lakes. Many research institutions and companies also are studying and developing microbial fuel cells.

The same cost savings and environmental benefits are driving similar innovations in other parts of the world. Wastewater treatment today uses 2 percent of the world’s electricity supply, or 80,000 MW, at a cost of $40 billion per year, according to the press release about Emefcy’s funding. Deploying wastewater-to-energy technology isn’t cheap, so driving down that expense could help the technology get deployed more widely.

Emefcy is the first non-U.S. company that has lined up investment from Energy Technology Ventures, which made its debut in January this year. GE, NRG and ConocoPhillips said they will invest $300 million via the fund in a wide variety of technology areas, from solar to coal conversion. The fund’s portfolio companies include Alta Devices (ultra-thin solar cells), CoolPlanetBioFuels (biomass to fuels), and Ciris Energy (coal-to-methane conversion).

Image courtesy of Emefcy

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Compressed air is a decades-old technology which takes excess energy from a power plant or renewable energy project and uses it to run air compressors, which pump air into tanks or underground caverns where it’s stored under pressure. When the air is released, it powers a turbine, creating electricity. Essentially, compressing and storing the energy acts like a battery for a utility, which can pair the energy storage tech with variable clean power, like wind, which only blows at certain times.

There’s only a handful of compressed air energy storage projects in the world, including one in Alabama and one in Germany, but startups like General Compression are working on next-generation technology, building pilot projects and moving toward commercialization. SustainX is another company working on this technology and moving toward commercial-scale projects.

General Compression announced it was raising a $17 million Series A round in February 2010, and close to $10 million back in 2007. Previous investors include US Renewables Group and Duke Energy , and the company also received a $750,000 grant from the Department of Energy’s high-risk, early-stage, ARPA-E program. General Compression’s two Series A filings add up to $14.25 million in funding, so a small part of this Series B round could have been included back in that February 2010 announcement. (I’ll update this post when I hear more).

According to previous press releases from General Compression, the company intended to build and install its first storage unit in 2010, and its first commercial-scale project in 2011. I’m also waiting to hear back from General Compression on more details of its funding and progress. Update: General Compression says its first project is currently under construction in Texas with partner and investor ConocoPhillips. The company says its technology has a 70- to 75-percent round-trip efficiency, and because the units can respond in less than 30 seconds and cycle between compression and expansion quickly, they can be used to back up wind farm power.

SustainX CEO Thomas Zarrella and founder Dax Kepshire told me in March that by the middle of next year, the company will start construction on a one MW compressed air energy storage project, likely at a coal plant, in conjunction with power company AES, its first customer. SustainX has already built a 40 kW project at its headquarters in West Lebanon, N.H., which Zarrella said has proven the technology.

To build the pilot, SustainX raised money from RockPort Capital, Polaris Venture Partners, and Angeli Parvi, and recently received attention from GE  via its Ecomagination Challenge. In late 2009, the Department of Energy awarded SustainX a $5.39 million grant to help it reach that commercialization goal.

SustainX says its secret sauce is in how it uses a water spray to keep the air at a constant temperature through the compression and storing process. In January, the company announced a patent for that technology, and says it holds three patents around its technology. I’m not sure if General Compression uses a similar water technology or not.

If these startups can provide low-cost and useful compressed energy storage for utilities, it would be a major breakthrough. The idea is that compressed air energy storage can be cheaper — over the lifetime of the system — than other energy storage options like batteries. The systems also don’t require potentially toxic chemicals like batteries do, and aren’t site-specific like pumped hydro is (you need a hill).

Image courtesy of SustainX.

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Existing investors Kleiner Perkins Caufield & Byers, JAFCO and Nth Power also joined the financing, and this latest round brings Hara’s funds to $45 million. In addition to the funding, Hara said Kleiner’s Ray Lane has become Chairman of the Board.

Hara officially launched back in May 2009, when the energy, carbon and resource management space was a little less crowded, though the company was already a year and a half old then. Hara’s Software-as-a-Service product gives companies and municipalities the ability to itemize and track all of the inputs (water, electricity, chemicals) and outputs (the product, greenhouse gases, wastewater) that make up their business processes. By identifying both the inputs and outputs, Hara can then suggest how to optimize the overall system, enabling the customer to save a substantial amount of money and reduce waste.

For an average midsize company, Hara’s Environmental and Energy Management software tracks about 1,000 objects (like a truck or a machine) with an accompanying 26,000 lines of data on things like time the item is used, and the fuel source used, etc. The pricing of the software is based on how many objects are tracked, and the software is supposed to deliver a customer a return on investment in three to 12 months via savings from cutting energy, fuel and other resources. Three types of organizations are really good targets for Hara’s tool: power companies (oil, natural gas, etc.) spending millions on energy, companies with deep supply chains like Walmart, and public sectors and cities looking to meet and implement mandates.

Hara says it has more than 50 large customers for its software, including News Corp., Coca-Cola and content distribution company Akamai, and Hara’s strategic investors can no doubt open many more doors for the company.

Hara needed this type of investment and help from these large players to stay ahead in a market that is filled with software giants like SAP and power companies like Avista Corp.  and its subsidiary Advantage IQ. Two years ago, massive software company SAP bought two-year-old startup Clear Standards, which sold software to manage carbon emissions, energy consumption, and water use. Since then, Advantage IQ acquired Building Knowledge Networks and The Loyalton Group, and demand response player EnerNOC bought eQuilibrium Solutions.

The barrier to entry in this market isn’t that high (anyone can build software and sell it), but it’s more about convincing customers that the product actually works and can save them money. Seems like Hara has been successful on this front, and earlier this year, Groom Energy released a report on the top 10 carbon software players in the market, and named Hara as one of the few startups on the list.

As Groom Energy noted in its report, the resource software market has been maturing and has seen fewer acquisitions and venture fundings in recent months. A lot of these companies started to emerge or beef up their software in 2008, as many thought the U.S. would finally enact carbon legislation. But despite the lack of federal carbon legislation, the market for energy and carbon software has grown 400 percent over 2010 and is predicted to grow 300 percent in 2011, says Groom Energy.

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The corporate titans have formed Energy Technology Ventures and plan to put the money in about 30 “venture- and growth-stage” companies. Most of them will be in North America, Europe and Israel. The fund managers say they want to cast a wide net to invest in renewable power generation, smart grid, energy efficiency, oil, natural gas, coal and nuclear energy, emission controls, water and biofuels.

NRG and Conoco said the fund represents their first foray into the world of venture capital investing. GE isn’t a newbie here, and it likes to line up partners to pool money and no doubt other resources in hunting for technology deals. Last year, the company announced a $200 million smart grid fund with a bunch of venture capital firms.

The Energy Technology Fund already has made three bets: Alta Devices (materials for converting sunlight to electricity), CoolPlanetBioFuels (biomass to fuels), and Ciris Energy (coal-to-methane conversion). The amounts weren’t disclosed. Santa Clara, Calif.-based Alta Device, which is pretty mum about its work, received investment from GE last year as well.

Corporate VCs have always been a big part of technology investments, and many of them are increasingly putting focus on energy. General Motors launched its first venture capital fund last year. The automaker wants to use the $100 million fund to support not only technologies for building cars but also software for infotainment and new business models (such as car sharing). Earlier this week, GM Ventures said it had invested $7 million in battery startup Envia Systems.

Last year, corporate VCs, including Intel Capital, Shell and Cargill Ventures, contributed to some of the top cleantech deals. All these forays into energy investment came at a time when federal and state governments have put up billions of dollars and passed policies to support renewable energy, smart grid and other clean energy research and deployment. In his State of the Union address earlier this week, President Obama set a goal of generating 80 percent of the nation’s electricity from cleaner sources by 2035. He also wants to see 1 million electric cars on the road by 2015.

Although NRG is new to investing in companies, it’s been active in putting money into solar, wind, nuclear and electric car charting projects. The company, a wholesale electricity producer who also owns two utilities, plans to buy First Solar’s 290 MW Agua Caliente Solar project in Arizona once negotiations for a $967 million loan guarantee is complete. NRG plans to invest up to $800 million in equity in that project. The company also has committed up to $750 million for solar energy projects by SunPower and BrightSource Energy.

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Photo courtesy of Tracy O.