Real Enough to Investors: Clean Coal Startup Powerspan Raises $50M

Clean coal technology is the political football of the day. As soon as one side claims it’s absolutely necessary, the other says it doesn’t exist — or vice versa. But a consortium is ready to bet on the concept, with institutional investor AllianceBernstein, oil and engineering firm Fluor, legendary currency speculator George Soros, gas company Tenaska and several others sinking $50 million into Powerspan at a valuation of $150 million.

Powerspan uses an ammonia-based technology to capture CO2 from coal plant smokestacks, which to the layman will mean exactly nothing. However, the technical details hardly matter, provided the process, called ECO2, passes its pilot testing phase, which it’s going through at plants operated by Basin Electric Power Cooperative, FirstEnergy and NRG Energy. That’s because neither Powerspan nor anyone else can avoid the really costly step final step in the process –an energy-intensive compression of the CO2 and subsequent pumping into old oil and gas fields or your mother-in-law’s back yard, whichever is closest.

Utilities running coal plants have been really resistant to the idea of installing this technology, because it can drive up power costs by as much as 50 percent. So many investors, fearing a protracted battle, have kept their distance from carbon capture investments.

But $50 million is no small amount to put in a startup, and some really smart investors are present in the round, which besides Soros and the engineering outfits includes two that I’m familiar with, private equity firm Angeleno Group and venture capitalist RockPort Capital. Those firms typically don’t make any ill-considered moves, and have plenty of background in cleantech.

Could it be that the Environmental Protection Agency’s recent endangerment finding for CO2 helped close this round for Powerspan? Even if the timing is incidental, this investment may well kick off a period of intense interest in clean coal tech, especially as cap-and-trade legislation shapes up under President Obama.