Since then, the company has been working with strains of S. degradans, identifying sets of enzymes responsible for breaking down a variety of material, from newspapers to dead plants to solid waste. Hutcheson and his colleagues switched on certain genes to increase the activity of these enzymes, and turned off other genes that controlled inhibitory behaviors of the microbe, such as those that tell it to stop feeding. As a result, the genetically modified organism pumps out significantly more enzymes than it normally would.

Laughlin and his colleagues recently ran the organism through a trial and found that the organism chewed through one ton of cellulosic plant fiber, converting the pulp into sugar within 72 hours–a process that normally takes years in the wild. “Right now, we’re working on a 24-to-72-hour timescale,” says Laughlin. “It’s more an economic question to make it faster, but at what cost? So we’re working on a whole host of protocols of processing across different timescales to figure out an optimum run.”

The company is pairing the microbe with a yeast strain that converts sugar into ethanol as the microbe breaks down cellulose. Zymetis’s goal is to develop manufacturing units able to produce around 10 million gallons of ethanol a year–a relatively modest output. But Laughlin says that thinking smaller could lead to more efficient, local production of ethanol, and he envisions partnering with paper mills and solid-waste facilities to produce ethanol on-site.

“If you look at a corn-ethanol plant, it’s this big hulking factory,” says Laughlin. “We’d rather locate smaller efficient plants in a distributed fashion at the locations where this waste fiber is available, and in so doing, we pick up a lot of efficiency, and can get to market faster, and don’t have to farm fiber.” Laughlin says that the company aims to set up a pilot co-location facility with an undisclosed partner by mid-2010.

Qteros, a biotechnology company located in Marlborough, MA, is using similar methods to scale up cellulosic-ethanol production. Researchers there are engineering a microbe that combines the last two stages of ethanol production: converting cellulose into sugar, and turning sugar into ethanol. William Frey, CEO of Qteros, says that Zymetis’s approach keys in on a major challenge in making cellulosic ethanol affordable.

“A big chunk of the cost is associated with pretreatment and also with enzyme hydrolysis,” says Frey. “The industry is looking for technologies that are economic and scalable, and microbial solutions have the ability to reduce the number of steps and cost, and that’s a big piece.”