Novozymes, based in Bagsvaerd, Denmark, recently announced it is taking steps to build a demonstration plant for converting agricultural waste into ethanol in China, with the help of partners there. On the same day UOP Honeywell, based in Des Plaines, IL, and Boeing announced plans to work with Chinese partners to develop renewable aviation fuel .

The projects are part of an effort in China to find alternatives to petroleum, which it largely has to import--gas costs over a dollar more in China than it does in the United States. Demand is growing as the number of cars increases from 130 million today to an expected 200 million in ten years. The Novozymes plant, to be built in cooperation with China-based COFCO and Sinopec, will produce 3 million gallons of bioethanol a year. China's agricultural waste could supply about 10 percent of the country's oil consumption by 2020, according to Novozymes.

Ethanol giant POET says it can make ethanol from cellulosic sources--rather than the corn grain it's usually made from in the United States--for costs that are approaching that of corn grain ethanol. Last year, when it started a pilot plant for making ethanol from corn cobs (one of many potential cellulosic sources), it cost $4.13 to make a gallon of ethanol. Now it costs just $2.35 per gallon. In comparison, corn grain ethanol costs about $1.60 to $1.90 a gallon, a cost heavily dependent on the price of corn and natural gas. The company hopes to get costs below $2 a gallon.

That's considerably more than the $1 per gallon figure that some startups are claiming, but who knows if those estimates will pan out. The $2.35 figure from POET seems solid--it comes from a company that knows how to make large amounts of ethanol, and the figure includes all of the relevant costs: "interest, depreciation, wages, benefits, repairs, maintenance, insurance, etc.," according to a company spokesperson. It seems like a good indication that cellulosic ethanol could soon be competitive with conventional ethanol, and fossil fuels.

A number of factors have helped bring costs down, the company says.

· Chemical raw materials required in the process have been reduced, resulting in an operating cost savings of $0.20 per gallon.

· The energy used in the pretreatment process has been reduced by more than half.

· Alternative energy technology has been demonstrated to provide all of the energy for the cellulosic ethanol plant and at least 80 percent of the adjacent corn-based plant.

· Enzyme cost has been cut in half and is expected to continue to decline.

· Through continuous optimization of the process, entire unit operations have been eliminated, reducing overall capital cost by over 40 percent.

This week Qteros, a startup in Marlborough, MA, announced a major milestone. The company, which was a microbiologist founded after discovering an organism that devours woody biomass and other cellulosic materials and excretes ethanol, has shown that the bacteria it uses can produce high concentrations of ethanol. The company says this makes its process for converting cellulosic plant materials into ethanol "more economical than any other process to date."

Increasing the concentration of ethanol lowers the cost of ethanol production in many ways. As the bacteria break down plant matter, they produce a beer-like broth containing ethanol and water. The lower the concentration of ethanol in the water, the more expensive it becomes to distill pure ethanol (more water is needed for the process, and the processing plant needs to be bigger and more expensive).

Qteros's chief technology officer, Kevin Gray, says that for making ethanol from cellulosic sources, the target is to produce a broth with 5 percent ethanol by weight. This is well above the less than 1 percent by weight that the company's organism produced when the company first started working with it, he says. Now Qteros researchers, by optimizing the conditions in which they grow the organism and the nutrients they provide, have increased the broth concentration to 7 percent ethanol by weight (9 percent by volume).

Gray says the new numbers are remarkable because the bacteria are a species of Clostridium, a type of bacteria notorious for low tolerance for ethanol, typically surviving in concentrations of only 2.5 to 3 percent. The concentrations are still far lower than those in corn ethanol production, which can be 18 percent ethanol by weight. But with cellulosic ethanol, the feedstock produces less-concentrated sugar, so such high concentrations aren't possible, according to Gray.

The high concentrations could save roughly 30 percent or more on the cost of the process, compared to the minimum desired level of 5 percent, Gray says. This will add to the other main advantage of Qteros's organism: it produces both the enzymes needed to convert cellulose into sugar and the mechanisms for fermenting sugar to produce ethanol. Most other processes must use costly enzymes produced by one organism paired with another organism for fermentation.

Work remains to be done, however, before the process can be successfully commercialized. Gray says the rate of ethanol production still needs to be increased and the cost of the nutrients decreased.