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Mascoma Snags $49.5M in Public Funds for Cellulosic Ethanol Plant

Cellulosic ethanol startup Mascoma announced today that it has raised $49.5 million to build its first commercial cellulosic ethanol plant in Michigan’s Upper Peninsula. Of the funds, $26 million is in the form of a previously announced grant from the Department of Energy, while the remaining $23.5 million is from the state of Michigan. Boston-based Mascoma says it is in the process of getting permits for the plant, with construction likely to start at the Kinross, Mich., site within a year and ethanol production expected another 18 months later.

Using wood chips as its feedstock, the plant is forecast to produce 20 million gallons of cellulosic ethanol a year in its first phase, a number that could subsequently double. But first Mascoma still needs to raise “hundreds of millions of dollars” more, CEO Bruce Jamerson said on a conference call.

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The $26 million from the DOE was originally for a 5-million-gallon-a-year switchgrass demonstration plant to be built with the University of Tennessee, but that partnership fell apart in July over disagreements between the school and the startup over the size and scope of the project, Mascoma tells us. The company renegotiated with the DOE and got permission to use the grant for a commercial-scale plant in Michigan instead.

We’ve updated our map of 11 startups racing to build cellulosic ethanol plants (embedded above) with today’s news. Jamerson noted that today’s announcement won’t effect Mascoma’s Rome, N.Y., pilot plant, which is still on schedule to begin producing 500,000 gallons of ethanol annually next year.

Mascoma executives were joined on the call by Michigan’s governor, its senators and a congressman, all of whom trumpeted the extension of the renewable energy tax credits passed late last week. The government officials also highlighted the perks cellulosic ethanol enjoys under the most recent Farm Bill, which provides for a $1.01-a-gallon incentive for the fuel. The bill upped the federal renewable fuel standard, which mandates the production of 36 billion gallons of biofuel by 2022, 16 billion of which is to be from cellulosic feedstocks. Michigan Gov. Jennifer Granholm also said that Mascoma could still tap the bill’s $325 million in loan guarantees for biorefinery construction.

Mascoma has raised nearly $100 million in capital from a long list of investors including: GM, Khosla Ventures, Flagship Ventures, General Catalyst Partners, Kleiner Perkins Caufield & Byers, Vantage Point Venture Partners, Atlas Venture and Pinnacle Ventures. The celluslosic ethanol startup also has received three separate grants from the DOE totaling more than $30 million – $4.9 million for organism development, the $26 million for this plant and an undisclosed fraction of a $125 million bioenergy grant through the Oak Ridge National Laboratory. Mascoma has also collected from state governments, with $14.8 million from New York and $23.5 million from Michigan. All told, the company, founded in 2006, has raised well over $150 million.