GM eyes breakthrough in cellulosic ethanol

By Nick Carey

DETROIT (Reuters) - General Motors Corp said on Sunday it has bought a stake in start-up biofuel company Coskata Inc. which has developed a commercially viable process to bring cellulose-based ethanol to the market in 2011.

"We are very excited about what this breakthrough will mean to the viability of biofuels and, more importantly, to our ability to reduce dependence on petroleum," GM Chief Executive Rick Wagoner said in a statement.

GM said it would not disclose the size of the stake or how much it had invested in Coskata.

"Cellulosic ethanol has a significant amount of potential," said David Friedman, a research director at the Union of Concerned Scientists. "But we'll have to wait until GM releases the data behind this and they actually launch production."

Cellulosic ethanol production currently costs about double that of traditional U.S. ethanol, a plant-based distilled alcohol derived mostly from corn in the United States and from sugar in Brazil.

The new U.S. energy bill signed into law by President George W. Bush in December mandates a huge jump in biofuels production for America's automobiles - 36 billion gallons by 2022, with 16 billion gallons from cellulosic ethanol.

"That bill sent a signal to ethanol producers that there will be a demand for their product," said Matt Hartwig, spokesman for trade group the Renewable Fuels Association. "The GM announcement underscores the ethanol industry is rapidly developing to meet that demand."

Cellulose is a structural material contained in nearly every plant, tree, and bush all over the world without agricultural effort or cost needed to make it grow. Switchgrass and wood chips are the main such "biomass" materials being researched today to produce cellulosic ethanol, which is identical to corn or sugar ethanol but needs more processing,