"New" ethanol to face crunch time under a Chu DOE

NEW YORK (Reuters) - The next U.S. energy secretary, a long-standing champion of producing ethanol from non-food crops rather than corn, could face hurdles in moving the next-generation biofuel from the laboratory to the gasoline station.

Steven Chu, Obama’s pick for the head of the Department of Energy, is a steadfast supporter of next-generation biofuels such as cellulosic ethanol, expected to be made from the tough woody bits of crops like grasses and fast growing trees as well as plant and timber waste.

A 2007 report co-chaired by Chu, and commissioned by the governments of China and Brazil, called for “intensive research” into production of cellulosic, which relies on technology like isolating microbes, or using large amounts of heat and steam, to break down the tough bits into fuel.

Chu, the head of the Lawrence Berkeley National Laboratory and a Nobel physics laureate, also helped organize the Energy Biosciences Institute, a lab focusing on next-generation biofuels funded with $500 million from oil major BP Plc.

He has been a staunch opponent of the current U.S. corn-based ethanol system, which was widely blamed for spiking food and grain prices this summer, calling it “not the right crop for biofuels,” at a conference this spring in the country’s agriculture heartland.

Corn ethanol has also been criticized for environmental problems such as helping to lead to a “dead zone” in the Gulf of Mexico as the extra fertilizer the grain requires washes from fields to the Mississippi River to the ocean.

But next-generation biofuels are no quick fix. They are more expensive than gasoline, a problem that was tricky when oil hit $147 a barrel over the summer, but even more difficult now as it trades under $50 a barrel.

“Assuming that developers can isolate the microbes to develop the fuel ... we might still face a considerable hurdle in moving it to an industrial-scale process,” said Tim Evans, an energy analyst for Citi Futures Perspective in New York.

U.S. mandates call for the blending of 100 million gallons of cellulosic ethanol, or about the output of one of the roughly 170 U.S. corn-based ethanol plants, into gasoline by 2010. That compares to the mandate’s requirement of blending 12 billion gallons per year of corn-based ethanol in 2010.

“The heat is on to see if there is actually support behind the mandate,” said Sander Cohan, a motor fuels analyst at Energy Security Analysis Inc, in Boston.

He said Chu will likely find he has to convince Congress that cellulosic biofuels deserve more research and development money.

Chu could also lead development of biofuels beyond cellulosic. The 2007 report he co-chaired also called for investments in development of butanol, “or other forms of biofuels that may be superior to ethanol.”

Butanol, a fuel touted as more efficient and more easily shipped than ethanol that can be made from corn or sugar cane, is being developed by chemicals maker DuPont Inc and BP.

Editing by Christian Wiessner