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.