DETROIT General Motors Corp (GM.N) 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,
GM said the process developed by Coskata relies on gasification and patented microorganisms to produce cellulosic ethanol for less than $1 a gallon, about half the cost of producing gasoline.
Founded in 2006 with backing from venture capitalists including Vinod Khosla, a top Silicon Valley investor, Coskata is one of a handful of U.S. companies trying to develop commercially viable cellulosic ethanol.
Another is Range Fuels, which is building a biorefinery in Georgia to produce ethanol from sawdust, pine and wood bits.
"Whether Coskata is successful or not, the important thing is that there are companies out there trying to produce cellulosic ethanol," said Nathaniel Green, senior energy analyst at the Natural Resource Defense Council. "At some point, someone is going to be successful."
Coskata said its process uses less than one gallon of water for every gallon of ethanol produced and reduces carbon dioxide emissions by 84 percent compared with gasoline.
Tests carried out by Argonne National Laboratory showed the ethanol generates 7.7 times the energy used to produce it, compared with 1.3 times for corn-based ethanol, Coskata said.
Coskata vice president Richard Tovery said by the end of 2008 the company will have a location for its first production plant, which will cost between $300 million and $400 million and produce 100 million gallons of ethanol a year by 2011.
GM said it aims to use the ethanol to revamp efforts to persuade more American drivers to use E85 biofuel -- an 85 percent ethanol and 15 percent gasoline mix -- in its FlexFuel vehicles. The company currently has 2.5 million FlexFuel vehicles on the road, mostly overseas.
So far, however, there are only around 1,400 E85 pumps in the United States out a total of more than 170,000 gas pumps.
Mary Beth Stanek, director of environment, energy and safety policy at GM, said the company aims to aggressively market the cellulosic ethanol with gas retailers nationwide.
"We have to get (E85) pumps into key markets," she said. "We think we'll be able to market it at a price that's attractive to retailers."