WASHINGTON (Reuters) - Researchers are on track to make cellulosic ethanol cost-competitive with conventional gasoline supplies by 2012, and the U.S. government will award up to $200 million to fund pilot-scale projects in coming weeks, a U.S. Energy Department official said on Monday.
In December President George W. Bush signed into law a bill that would require a five-fold increase in renewable fuels by 2022, and the Energy Department in 2007 rolled out about $1.1 billion in funds to research and build new biofuel refineries in coming years.
To keep food prices from rising too much due to increased demand from making ethanol from corn, the law requires that most of the fuel to be made from cellulosic sources like wood chips, switch grass and cast-away corn husks.
The Energy Department has set a goal for cellulosic ethanol to hold its own against conventional gasoline supplies by 2012.
"We are on our way to meeting that," said Katharine Fredriksen, principal deputy assistant secretary at the Energy Department's Office of Policy and International Affairs, speaking at the Reuters Global Agriculture and Biofuels Summit.
The key to making cellulosic ethanol work is finding tiny enzymes that can break feed stocks like orange rinds and solid waste down into fuel.
Federal subsidies and high crude oil prices have spurred a boom in U.S. ethanol, which comes mostly from corn.
The United States currently uses about 6 billion gallons (22.7 billion liters) of ethanol, about 4 percent of current gasoline usage of 143 billion gallons (541 billion liters) a year. The mandate will rise to 36 billion gallons by 2022 under the new energy law.
Rising ethanol demand has already raised corn prices to the detriment of U.S. chicken and hog farmers.
To take pressure off food prices, the Energy Department is funding research into cellulosic energy sources.
In coming weeks, the department will award up to $200 million over 5 years to fund up to 10 plants that demonstrate different cellulosic production methods, Fredriksen said.
That's on top of $385 million the department has awarded to build six commercial-scale cellulosic ethanol plants, and about $400 million to fund basic research into bioenergy at three research centers.
Of all the ways of making cellulosic ethanol, corn byproducts like husks show the greatest potential for a quick breakthrough, along with woody biomass from pulp and paper factories, Fredriksen said.
Switchgrass - which could be planted where other crops won't grow - will take longer to develop because it's harder to break it down into usable fuel, she said.
(Additional reporting by Russ Blinch and Tom Doggett; Editing by David Gregorio)
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