What will it take for American consumers to fill up their vehicles with biodiesel?

Americans are far from abandoning their habit of driving SUVs and enduring long commute hours, but biofuels retailer Propel Biofuels hopes it can ease alternative fuels into mainstream habits, even as engineers, scientists, and entrepreneurs still struggle to work out kinks on the production side.

“We’re specifically focused on the last mile of alternative fuel,” said Rob Elam, founder and president of Seattle, Washington-based Propel Biofuels, which said Wednesday it has landed $4.75 million in first round funding. “We don’t do production--we’re focused on availability, easy access for the consumer, and a better experience for consumers.”

Propel Biofuels operates on a retail-end of the chain. With the help of backers @Ventures, Nth Power, and several individual investors, the company plans to own, operate, and manage biodiesel fuel pumps at existing gas stations first in Washington state and eventually in Oregon and California. Although the firm has set up several beta sites, its true test will come this fall when it rolls out eight new biodiesel stations in the Seattle area.

America drivers consumed about 42 billion gallons of diesel at roadside stations in 2005, most of it sold at public pumps, Mr. Elam said. Since both near-pure biodiesel, B99, and a biodiesel/gasoline blend, B20, can be used in any diesel engine, Propel Biofuels aims to attract early adopters of alternative fuels in a region known for its friendly incentive programs and municipal support.

“We believe there’s a segment of the market that’s looking to make that switch,” said Mr. Elam, who founded the company in 2004 along with Michael Kudriavtseff.

The consumer side of alternative fuels is somewhat of a new area for cleantech VCs, who’ve tended to focus on the development and production of ethanol and biodiesel. Matt Horton of @Ventures, which led the deal, sees the deal as part of a “second wave” of cleantech investment.

“There’s been a first wave of technology development,” said Mr. Horton, whose firm @Ventures has invested in two biofuels development startups, Newport Beach, California-based Earthanol and a stealth company. “We see great opportunities now in a second wave of companies with new business models and the ability to take those first wave technologies and really drive them into the market.”

The current reality is that early adopters haven’t had such an easy time finding biodiesel. Gas station owners have generally balked at the capital costs of putting in new pumps. Mr. Elam said his company’s business model eliminates that obstacle. Propel will lease the land for the pumps from the station owner and bring in local industry partners like Imperium Renewables, SeaPort Biofuels, Genesee Fuel and Heating Company and Saybr Contractors to build and supply the pumps. Station owners will share the revenues through the lease agreement, Mr. Elam said.  

Former Starbucks executive VP, Arthur Rubinfeld, will join Propel Biofuels’ board, along with Mr. Horton and Peter Mills, of @Venture, and Nancy Floyd of Nth Power, the company said. Propel launched in 2004 with $200,000 in seed capital, according to Mr. Elam.