Dutch biofuels startup Bioecon and Khosla Ventures have launched a joint venture called Kior, which will commercialize Bioecon's process for converting agricultural waste directly into "biocrude," a mixture of small hydrocarbon molecules that can be processed into fuels such as gasoline or diesel in existing oil refineries. The process, Kior claims, boasts numerous advantages over other methods of producing biofuels: it could prove relatively cheap, relies on a nontoxic catalyst, taps into the present fuel-refining and transportation infrastructure, and produces clean-burning fuels that can be used in existing engines.

Biofuels are widely seen as a key stepping-stone on the path from fossil fuels to renewable energy sources, particularly for transportation. Their use could also reduce emissions of carbon dioxide and other greenhouse gases. But ethanol, the most widely produced biofuel, contains little energy compared with gasoline or diesel. And a great deal of energy goes into its production: growing the grain from which it is fermented, distilling it, and transporting it. Many biofuels boosters have pinned their hopes on finding ways to produce ethanol from cellulose, the tough polymer that makes up much of plant stems and wood. In practice, though, cellulose must be broken down into simple sugars before it can be fermented into ethanol or converted into synthetic gas and turned into fuels. Despite three decades of research, these remain difficult, expensive, and energy-intensive processes that are not yet commercially viable. Additionally, recent research shows that ethanol, which is highly volatile, may actually exacerbate smog problems when it evaporates directly into the air instead of burning in vehicle engines.

The way to make cellulosic biofuels viable, says Bioecon's founder, Paul O'Connor, is to use catalysts to convert biomass into a hydrocarbon biocrude that can be processed into gasoline and diesel in existing petroleum refineries. After decades developing catalysts for the petroleum industry, O'Connor started Bioecon in early 2006 to develop methods for converting biomass directly into biofuels. His first success is a catalytic process that can convert cellulosic biomass into short-chain hydrocarbons about six to thirteen carbon atoms long. Khosla Ventures agreed to provide an undisclosed amount of series A funding to spinoff Kior in order to commercialize the process. Vinod Khosla, founder of the venture fund, believes that converting biomass into liquid transportation fuels is key to decreasing greenhouse-gas emissions and compensating for dwindling petroleum reserves. Khosla is funding a number of biofuels startups with competing technologies and says that Kior's approach is unique. "They have some very clever proprietary catalytic approaches that are pretty compelling," he says. "They can produce relatively cheap crude oil--that's attractive."

The most effective method of converting biomass into fuel is to subject it to high temperatures and high pressure to produce synthetic gas, or syngas. In the presence of a catalyst, the syngas reacts to produce fuels such as ethanol or methanol (used as an additive in biodiesel). But this is a costly process, and catalysts able to withstand the high temperature of the syngas are expensive and frequently toxic.

Attempts to produce fuel by directly exposing agricultural cellulose to a catalyst have had little success because most of the cellulose is trapped inside plant stems and stalks. O'Connor says that while the Bioecon researchers are developing new catalysts, their "biomass cracking" process is the real breakthrough. Using proprietary methods, they have been able to insert a catalyst inside the structure of the biomass, improving the contact between the materials and increasing the efficiency of the process. While O'Connor won't go into details, he says that the most basic version of the technique might involve impregnating the biomass with a solution containing the catalyst; the catalyst would then be recrystallized. "What we're doing now is improving the method to make it easier and cheaper," O'Connor says.