GreenFuel Technologies Lays Off Half Its Staff

GreenFuel Technologies Corp., one of the oldest algae-to-biofuel startups that seemed to be on the upswing recently after some high-profile setbacks, reportedly laid off 19 people, nearly half its staff, on Monday.

News of the layoffs came from Greenfuel CEO Simon Upfill-Brown on Monday and were confirmed by a public relations representative for the company.

While it was unclear how the layoffs would affect the company’s future, they could spell trouble for the Cambridge, Mass.-based company’s plans to build a test project in Spain into a full-scale algae-to-fuel production facility (see GreenFuel Farms 100 Square Meters of Algae).

GreenFuel said in October that the project with Aurantia SA in Spain was expected to grow into a $92 million greenhouse able to produce 25,000 tons of algae per year — enough to make about 1.3 million gallons of algal oil per year — by 2011.

But the history of the startup, founded in 2001 with the promise of growing algae in closed bioreactors using carbon dioxide from power plants and other sources, has been murky.

In 2007, a project to grow algae in an Arizona greenhouse went awry when the algae grew faster than they could be harvested and died off. The company also found its system would cost more than twice its target.

That led to the company laying off about half its staff of 50 at the time and hiring Ethernet inventor Bob Metcalfe as interim CEO. Metcalfe led the restarting and decommissioning of the Arizona project after what he said was a successful trial, and helped the company raise $13.9 million in funding from VCs including Access Private Equity, Draper Fisher Jurvetson and Polaris Venture Partners.

In July — shortly after Metcalfe said GreenFuel was seeking a series C round of funding and was looking into two projects in the United States (see GreenFuel Closes In on Series C), GreenFuel named former Dow Chemical executive Upfill-Brown as its new CEO. Since then, GreenFuel hasn’t announced any more funding or any U.S. projects.

Upfill-Brown did cite several aspects of the Spanish project that were meant to be improvements on its first trials in Arizona, when he talked to Greentech Media in October.

The Arizona project, for example, used carbon dioxide from peaker natural gas-fired plants, meaning it had only an intermittent supply, while the Spanish project is fed by emissions from a Holcim cement plant near Jerez, Spain, which has a more constant operation schedule, he said. GreenFuel also had developed an automatic harvester for the Spanish project, an improvement over harvesting by hand in Arizona, he said.

Still, while about 50 companies are seeking different ways to grow algae and use it to make biofuel, none have so far produced commercial quantities at prices that could compete with petroleum-based fuels (see Solix: Another Me-Too Algae Company Raises $10.5M).

That’s not for lack of trying, though. Algae-to-biofuel startups pulled in $179.5 million in investment through the first three quarters of 2008, according to the Cleantech Group. That’s out of a total VC investment of $358.55 million in biofuels for 2008, according to Greentech Media’s Venture Power Report.