Late last month, Amyris Biotechnologies opened a plant in Campinas, Brazil, to demonstrate large-scale production of hydrocarbons from sugarcane processed using its engineered microbes. Fuel from the plant will be used for demonstrations and testing in Brazil and other countries. Amyris hopes to take advantage of Brazil’s existing biofuel infrastructure, which has been focused on ethanol, to produce diesel and other chemicals to sell in the country and possibly in the United States and Europe in 2011. The demonstration plant has a capacity of more than 10,000 gallons a year.

Brazil is attractive to Amyris because it is the second-largest producer of ethanol in the world; while the company will make hydrocarbons, not ethanol, it will use the country’s existing infrastructure for growing and processing sugarcane. Amyris, which is based in Emeryville, CA, uses the tools of a new field called synthetic biology to reengineer microbes, including yeast that can ferment sugar to produce hydrocarbons instead of ethanol. Rather than licensing its hydrocarbon-producing yeast to another company, Amyris plans to purchase sugar mills and convert them in order to use its microbes to produce fuels and other chemicals.

The company’s diesel fuel works in today’s engines and matches the performance of petroleum diesel. Burning the fuel produces no sulfur, less carbon monoxide, and fewer nitrogen oxides, particulates, and other emissions, compared with petroleum diesel. Government regulation and carbon taxes may help the company compete, but its goal is a fuel that matches or beats the price of oil–about $60 a barrel. “The greenness of the fuel might drive a few people to it, but we need to be cost competitive,” says Neil Renninger, founder and chief technical officer of Amyris. The biggest expense in making the fuel is the feedstock, which is why Amyris chose Brazil and sugarcane instead of corn and the United States, says Renninger.

As ethanol feedstock, corn costs $1.20 per gallon and sugarcane just $0.85. And sugarcane processing is also significantly cheaper because the fibrous waste left after the sugars are extracted for fermentation is burned to produce electricity. While corn ethanol processing is a net electricity consumer, sugarcane ethanol is a net electricity exporter. “The net energy invested in sugarcane ethanol is not very high and leads to huge gains relative to the gain from corn,” says Lester Lave, a professor of economics and codirector of the Electricity Industry Center at Carnegie Mellon University, in Pittsburgh.

In Amyris’s process, sugarcane stalks are crushed and the juices are then placed in 5,000-liter fermenters with the company’s engineered yeast, which makes a diesel-precursor molecule. (The company has tested the process in 60,000-liter fermenters, but the demonstration plant is not yet operating at this scale.) As the oily molecules are produced, they separate and float to the top of the solution, aided by a centrifuge. The low energy required for this separation, says Renninger, is one of the cost advantages of making hydrocarbons rather than ethanol. Centrifugation requires just one-ten-thousandth of the energy content of the diesel fuel; water-soluble ethanol, by contrast, must be distilled from fermentation solution, a process that takes one-third of its energy content. The hydrocarbons are then hydrogenated at low temperature and low pressure to make diesel or other compounds.

Sugarcane also comes out ahead of corn on environmental measures. Compared with petroleum fuels, the use of corn ethanol leads to a net 10 percent decrease in greenhouse-gas emissions. Burning sugarcane ethanol instead of petroleum leads to a 60 to 80 percent decrease in greenhouse gases, says Renninger. Relative to sugarcane ethanol, the company says, the Amyris fuels made from sugarcane release another 10 percent less.

However, many experts say that it will be far more environmentally beneficial to use biomass other than crops to make biofuels. Techniques for converting fast-growing, fibrous crops like poplar and switchgrass into fermentable sugars are still in development and are currently too expensive. “Cellulosic conversion has to come down in price,” says Helena Chum, a research fellow at the National Renewable Energy Laboratory. Amyris plans to expand into the United States once technologies for doing this conversion economically are further developed. The company’s business strategy–to start producing in Brazil, where costs are low, and then expand when cellulosic technologies are ready–is “very smart,” says Chum.