A new startup called KiOR has a promising strategy for producing biofuels.

Ethanol, by far the most common biofuel today, has a number of drawbacks. It can’t be transported in pipelines designed for gasoline and diesel, and it contains far less energy than gasoline, resulting in significantly decreased mileage.

A number of companies seem to be taking note, investing in the development of fuels that contain more energy than ethanol and that can use existing pipelines, making them much easier to distribute in large quantities. BP is interested in another alcohol, butanol. (See “BP’s Bet on Butanol.”) Other companies are developing organisms that can convert sugars into synthetic hydrocarbons. (See “Building Better Biofuels” and “Making Gasoline from Bacteria.”)

Today’s announcement highlights the latest effort in this direction. KiOR, which is being funded by Khosla Ventures, will make biocrude that can be refined at existing oil refineries. The startup will focus on producing biofuels from cellulosic sources, which are attractive because they are cheap, can be used to produce much more fuel per acre than corn grain can, and have less impact on the environment.