The biofuel sector has received mixed signals recently from the U.S. public markets, but companies that focus on the next generation of biofuel technology should fare well in 2008 as the market is set to grow, analysts say.

Last week was a good example of the murkiness—at least for those companies working with current technology.

Grapevine, Texas-based GreenHunter Energy listed on the American Stock Exchange on Wednesday, after earlier completing a reverse merger and raising $19.2 million through private investors. The company’s shares ended Monday up 12.5 percent, at $13.50 a share, from its open last week at $12 a share.

But Seattle, Washington-based Imperium Renewables on Thursday delayed its plans for an initial public offering, in which it hoped to raise up to $345 million. The company cited unfavorable market conditions.

The biofuel industry is experiencing hard times as prices for the feedstock used to make the fuels have risen and margins have declined. There are also shortcomings in the distribution networks for the products, said @Ventures Principal Matt Horton, whose venture firm invests in the sector.

But analysts say these are temporary problems in the market and the overall prospects are still healthy. BCC Research predicts the world biorefinery market will reach annual sales of $155.9 billion in 2012, from an estimated $84.7 billion in 2007.

Despite the sector’s current drawbacks, GreenHunter Energy looks well- positioned, which helps explain its positive reception on the market. The company is focused on biodiesel production, eschewing ethanol-based biofuels. The latter have questionable net-energy benefits—at least with current technology—and more serious distribution hurdles to overcome than biodiesel.

GreenHunter hopes to complete the expansion of its Houston-based biodiesel refinery by April, which at an annual capacity of 105 million gallons will be the largest in the U.S. The refinery is well-placed, in Houston on the Gulf Coast, to import feedstock and export its finished products around the world.

“We can take feedstock from anywhere in the world—wherever it is cheapest—and have the ability to buy in bulk quantity,” said GreenHunter CEO Gary Evans, who worked in the fossil fuels industry for two decades.

The company also has biomass and wind energy projects under development, which could give it a diversified portfolio.

With so much development under way, GreenHunter is still in the red. It had a net loss of $7.4 million through the second quarter of 2007, up from a net loss of nearly 1 million from the same period a year earlier. The company’s revenues at the end of the second quarter of 2007 were just over half a million, up from zero the previous year.

But don’t expect many more biofuel producers to go public soon, said DTN analyst Rick Kment. He said IPOs in the sector in 2008 will most likely come from those focused on research and development of proprietary technology.

Companies, for example, working to make the next generation of feedstock viable, such as algae or jatropha, could be well placed for IPOs this coming year. But first they will have to show that their technology can work at a commercial scale, and none has done that yet.