Historically low prices of natural gas have, in general, made life tougher for renewable energy companies, but startup Primus Green Energy has turned cheap natural gas into an ally.

The Hillsborough, New Jersey-based company has developed a process for converting biomass into gasoline, jet fuel, and other chemicals. But because its biomass technology isn’t quite ready for prime time and its process works with natural gas, its first demonstration plant will use natural gas as a feedstock.

“We’re using natural gas as either a bridge to biomass or a bridge to natural gas,” says CEO Bob Johnsen, a biofuels veteran who joined the company in March. “We can develop our processes for biomass while concurrently producing product at larger scale.”

The company broke ground on the demonstration plant last week and is seeking to raise $60 million to $70 million for a commercial-scale operation which it hopes to begin building later this year or next year. To date, it raised $40 million from conglomerate Israel Corp. in 2007.

Johnsen, a co-founder of Mascoma and the company which became Verenium, was attracted to Primus Green Energy because the flexibility of its technology and because it’s at stage where it can be scaled up, he says.

The company has modified a 1970s-era process called Methanol to Gasoline (MTG) originally developed by Mobil. Its plants have multiple steps but the core technology is converting synthesis gas, or syngas, into gasoline or jet fuel. That syngas can be made either from biomass, such as wood pellets or miscanthus, or from natural gas using a steam reformer. Because it’s biomass-to-syngas gasifier didn’t achieve the performance needed, the company will move ahead with natural gas first. 

Once the syngas is produced, the gas is treated with catalysts to produce methanol and then fed into a reactor to synthesize the gas into liquid high-octane gasoline or jet fuel. The company has modernized the MTG process and engineered a more efficient system using a combination of its own inventions and off-the-shelf products, executives say.

“The trick is how we’ve integrated the different reactors and the efficiencies we’ve achieved,” said George Boyajian, the company’s vice president of business development. “We decided with the low prices of natural gas, we could build a plant and start generating revenue. At the same time, we haven’t abandoned biomass.”

The company projects it can be competitive at a price of oil as low as $65 per barrel, below today’s prices which are around $80. Its potential customers are refiners which will blend its gasoline or selling directly to airlines, said Johnsen. The company is being brought to the Berlin Air Show to talk to potential investors, he added.

The demonstration plant is designed to validate the company’s costs and work out technical issues, executives say. A year or two ago, a company in Primus Green Energy’s position could have gone public or found funding from late-stage financing firms or government grants. Now, it is seeking strategic investors, such as airlines or refiners, for its first plant, which is expected to make 25 million gallons of fuel per year.

“Everybody knows about the Valley of Death and how difficult it is (scaling up beyond demo scale),” Johnsen said. “Rather than expect our investors to indulge our wishes and wait for certain elements to come together, like the cost of biomass or government incentives, we can take the initiative and make a commercial product with a low-cost feedstock.”