Ze-gen Pulls in $17.6M for Waste to Power, Raises Funding Target

Ze-gen, a startup working to produce synthesis gas fuel from wood debris (and potentially old railroad ties and other solid waste), has raised some $17.6 million of a planned $25.6 million equity round, according to an amended offering filed with with regulators today. This marks an expansion of the Series B fund raising target that Ze-gen originally set at $20 million just over a year ago. According to the filing, the funds will be used for “general working capital.”

Founded in 2004, Ze-gen once expected to begin construction on a commercial-scale facility by the end of 2008, and launch commercial production before the end of 2009. But by early last year, the Boston, Mass.-based startup told us it had bumped that benchmark to the latter half of 2010. The $20 million Series B round was supposed to help Ze-gen move into commercial production.

At this point the company has a research and demonstration facility in New Bedford, Mass. that opened in 2007, but it has not announced any big customers. Ze-gen CEO and president Bill Davis described to CNET’s Martin LaMonica recently some of Ze-gen’s challenges as an outsider in the green energy business, trying to sell the idea of making energy from garbage:

“The problem is nobody really cares. The Department of Energy is primarily concerned with technologies that can deliver a quadrillion units of energy and we’re not one of them. We’re not solar, not wind, not clean coal, and not ethanol…It’s easy to have a technology category that basically falls through the cracks of the traditional funding mechanism.”

But while Ze-gen’s technology may hold some unique challenges, the company has plenty of company from other gasification and biofuel startups racing to show they have more than a good idea — but also a technology and business model that will be competitive at commercial scale.

As Lux Research put it in a report released yesterday, which compared the strengths and risks of various biofuel startups, Ze-gen’s processes could potentially lower costs and “increase gasification’s feedstock flexibility,” enabling the company to “follow the highest-margin markets downstream.” That’s the theory. But, according to Lux, Ze-gen’s processes, “haven’t yet realized those cost savings in real-world large-scale installations,” so “proof of their value is still forthcoming.” Lux ranked the company as “wait and see.”

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