Put A Termite In Your Tank

Bio breakthroughs are promising much better ways to make ethanol

Mark Emalfarb didn't set out to cure America's addiction to oil. He just wanted a better enzyme to soften blue jeans. The search led him to a new fungus in the wilds of eastern Russia, and then to a serendipitous mutation that turned the organism into a biofactory capable of churning out vast amounts of enzymes that can give denim a prized lived-in look. "By accident, we came by the world's most prolific fungus," he says.

That fungus and its talent for munching on plant fiber is now helping to bring about a radical transformation: a switch from oil and gasoline to fuels from plants. On Nov.2, Emalfarb's company, Dyadic International Inc. in Jupiter, Fla., signed a deal with Spanish energy giant Abengoa to use the fungus to make fuel. A pilot facility is being built in Nebraska. In contrast to traditional corn-based ethanol, the raw material is agricultural waste. Such facilities can run on cornstalks, straw, wood, wastepaper, and just about any other material rich in cellulose.

Experiments like this one come at a critical juncture. Corn ethanol factories are springing up across the U.S., in part because of billions of dollars in subsidies. But the dirty little secret is that it takes the energy equivalent of about 7 gallons of gasoline to make just 10 gallons of corn ethanol. Moreover, farmers figure that the most the U.S. could produce without sending corn prices soaring is about 14 billion gallons a year, up from nearly 5 billion in 2006. As the public grows more aware of these shortcomings, some critics are questioning the entire category of plant-based fuels.

Yet if efforts such as Abengoa's can be scaled up efficiently, America's forests, agricultural waste, and 40 to 60 million acres of prairie grass could supply 100 billion gallons or more of fuel per year—while slashing greenhouse gas emissions. That would replace more than half the 150 billion gallons of gasoline now used annually, greatly reducing oil imports. It "will happen much faster than most people think," predicts Michigan State biochemical engineer Bruce E. Dale. "And it will be enormous, remaking our national energy policy and transforming agriculture."

That's why, despite skepticism in certain quarters, cellulose-based biofuels have become the darling of an unlikely coalition of national security hawks, environmentalists, venture capitalists, and major companies such as Dupont (DD ) and BP PLC (BP ). Dupont is teaming up with ethanol producer Broin on a pilot plant in Iowa and with BP to make another fuel called butanol. "Every Monday, I wake up and think I have an idea of how big this is," says John Pierce, vice-president for bio-based technology at Dupont. "By the end of the day, I have to recalibrate upward." In Jennings, La., Celunol is about to open the spigot on the first drop of ethanol from sugarcane waste. And Canada's Iogen Corp. is planning a full-scale plant to produce millions of gallons of ethanol from wheat straw.

Making fuel from cellulosic plant material is more complicated and costly than producing ethanol from corn, but an ongoing wave of discovery and innovation is changing that. Researchers are scrutinizing each step in the recipe, from source crops to enzymes and yeasts hand-tailored to break apart plant fibers and convert them into alcohol.

Scientists are scouring China for strains of tall grasses and tinkering with plants' genes to make better energy crops. They are collecting termites in Costa Rica, hoping to harness the bugs' ability to digest cellulose. Several groups have studied a fungus discovered during World War II that ate up the Army's cotton tents. Richard Hamilton, CEO of Thousand Oaks (Calif.)-based Ceres Inc., compares the progress to TV makers' struggle to perfect flat-panel displays. The first few factories "will be godawful expensive, but we're early on the learning curve. We've only scratched the surface of what a lot of us think is possible," he says.

Ceres is one of several companies searching for the right crops. Two candidates are switchgrass, which once carpeted U.S. prairies, and an Asian grass called miscanthas. Both are perennials, so farmers would have to do little more than harvest them. The plants' deep roots improve the soil while storing carbon to combat global warming. In such grasses, or in sources like wood, the energy is locked up in cellulose and a similar substance called hemicellulose, which together constitute 70% to 85% of the plant. The first trick is softening up the plant to make the cellulose easier to digest. Michigan State's Dale has invented a promising approach a bit like using a spritz of hot, pressurized ammonia.

The next challenge is breaking apart the chains of sugar molecules that make up cellulose. That's where enzymes from fungi, the guts of termites, or the labs of genetic engineers come in. Recent work has lowered the cost of this step thirtyfold, to about 50 cents per gallon of ethanol produced. "We now are not far away from the goal of 10 cents per gallon," says Glenn E. Nedwin, chief scientific officer at Dyadic.

The last task is one familiar to moonshiners: fermenting the sugar into alcohol. The twist is that the sugars from cellulose and hemicellulose are different, so scientists are creating more talented fermenting organisms, such as genetically engineered E. coli, to handle the added complexity. "That problem is close to solved," says Lee R. Lynd, a professor at Dartmouth and chief scientific officer of venture capital-backed Mascoma Corp. in Cambridge, Mass.

Lynd and Mascoma, however, are dreaming bigger. They have coaxed microorganisms to digest cellulose and ferment the resulting sugar in one bubbling cauldron, instead of in two separate steps. If the system pans out, "it is a game-changer. It will revolutionize the industry," says Lynd. On Nov. 29 the company announced a deal with Tamarack Energy Inc. to develop pilot plants.

Whatever the process, there's no need to stop with ethanol, adds Stanford University biologist Chris Somerville. Butanol and other substances more similar to gasoline offer certain advantages over ethanol. For investors, the beauty is that any of these approaches can piggyback on the corn ethanol infrastructure. "If we did not have corn ethanol priming the pump, it would be too risky for me to invest in cellulosic ethanol," says venture capitalist Vinod Khosla.

Will the road to the future be powered by biofuels? The technology is there. So are the incentives, with oil prices expected to be above $70 per barrel in 2007. "This will absolutely change the way we power our automobiles," says Hamilton.

By John Carey and Adam Aston

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