Ottawa establishes $500M for biofuels

Canada’s burgeoning biofuels industry is getting a boost this fall with a government-sponsored $500 million fund dedicated to investing in new fuel production facilities and technologies.

The NextGen Biofuels Fund will exclusively fund Canadian businesses that develop renewable biomass-based fuels. The fund will provide up to 40% of project costs for ventures that can demonstrate that their technology and processes are scalable.

The initiative is the latest major federal investment in cleantech that will be managed by Sustainable Development Technology Canada, an Ottawa-based non-profit that was launched in 2001. The organization also runs the $550 million SD Tech Fund, which invests in projects that address climate change, air quality, clean water and clean soil.

James Stanford, chairman of the SDTC, says that the new fund’s focus on biofuel is in part a recognition that Canada, with its vast territory and richness of natural resources, has abundant supplies of biomass. He sees the fund “encouraging the growth and retention of home-grown technologies” to turn raw materials into renewable fuel.

Canada is considered a ripe supplier of cellulose-based feedstocks, which have an energy content that is significantly higher than conventional biofuel materials, according to SDTC. Cellulose feedstocks include agricultural wastes, plant wastes from industrial processes, trees, and energy crops grown specifically for fuel production, such as switchgrass.Nick Parker, chairman and founder of the Cleantech Venture Network, acknowledges that although Richard Branson, Vinod Khosla and other notable investors are making major commitments to this space, the NextGen fund is the largest dedicated pool of capital yet assembled for biofuels.The launch of the biofuels fund comes as activity in the overall cleantech sector is growing in Canada. Last year, VCs invested about $119 million in Canadian cleantech companies, according to Canada’s Venture Capital & Private Equity Association (CVCA), an industry group that uses data from Thomson Financial (publisher of PE Week). That’s nearly double the $65 million invested two years previously. This year, venture investing in Canadian cleantech companies is on the rise again, with funding in the first half of the year reaching $76 million, according to the CVCA. —Joanna Glasner