CORRECTION: This story has been changed to reflect the point that one of GreenFuel's pilot projects had been restarted, as planned, and operated successfully before being decommissioned last summer.

As GreenFuel Technologies dismantles one of its algae pilot plants in Massachusetts this week, two other biofuel companies have announced plans to build a new algae pilot plant in Israel.

Biofuel companies Seambiotic, based in Tel Aviv, Israel, and Inventure Chemical Technology, based in Seattle, said Wednesday they have formed a joint venture to use carbon-dioxide-fed algae to make ethanol and biodiesel.

The plant will use algae strains from Seambiotic. Founded in 2003, the company has been carrying out research and development at the Israeli Electric Corporation's power station to hone its cultivation of various marine algae species. The station pipes carbon dioxide from smokestacks to algae ponds.

For its part, Inventure will contribute the technology know-how to turn the algae into biofuel. The company already makes biodiesel and ethanol from algae at an R&D site in Seattle.

Inventure also said it is wrapping up an undisclosed amount of second-round financing.

Biofuel in the Sky
Airlines, which are dealing with soaring fuel costs by nickel and diming checked luggage, among other things, also are searching for fuel alternatives.

A few apparently are looking to algae as a possibility.

On Thursday, Air New Zealand, Continental Airlines and Virgin Atlantic Airways said they will join Algal Biomass Organization, an industry-led nonprofit devoted to the commercialization of biofuels made from algae and other aquatic plants. The group, along with organization co-chair Boeing, is among the first of aviation-related members to join since Algal's founding in May.

Virgin previously made headlines by test flying a jumbo jet partially using biofuel, while both Continental and Air New Zealand also have announced plans for similar demonstrations (see The Next Green Frontier: the Sky?, Continental Biofuel Demo Prepares for Takeoff and Weed to Power New Zealand Jets).

Algae's oily properties and ability to double in mass in a few hours has made the aquatic plant an alluring feedstock for biofuels.

But challenges, such as the difficulty of yielding large quantities of algae at an affordable price, have kept companies from producing commercial amounts of fuel from the slime.

GreenFuel Moves On
Cambridge, Mass.-based GreenFuel knows these problems well.

In July, the company shut down its algae greenhouse in Arizona after the algae grew faster than expected (or than it could be harvested), causing the rootless plants to die. GreenFuel then discovered that its system would cost more than twice its targets, according to Xconomy.

But the company said it has turned itself around. The company restarted the project, operated it successfully, and then decommissioned it last summer, according to interim CEO Bob Metcalfe. 

While the company made it clear that it doesn’t expect to mass-produce algae for biofuel for several years, the company hired a new CEO earlier this week, a sign that board members still see potential in the technology, according to Canaccord Adams analyst John Quealy.

Interim CEO Bob Metcalfe also said the company has been operating a 100-square-meter bioreactor in Cambridge, Mass., since October, is constructing a second pilot of the same size, and plans to announce one or two U.S. projects in the coming months, as well as a long-awaited third round of funding (see GreenFuel Closes In on Series C).

-- Editor Jennifer Kho contributed to this story.