New ethanol venture may lead to cheaper fuel

What if you could turn wood chips, household garbage, sewage sludge or even old tires into fuel for your car?

And, while you're at it, make it cheaper with better mileage than gasoline and environmentally friendly?

That's what Warrenville-based Coskata Inc. aims to do with its partner, General Motors.

Built on former cornfields, Coskata is looking for growth in the burgeoning ethanol industry. But it isn't looking for corn to seed that future growth.

More Coverage Video Coskata CEO and President William Roe on next-generation ethanol

Instead, Coskata's new technology uses wood chips, garbage, old tires and other materials that have cellulose, or plant cells.

"What Coskata represents is the evolution that's under way in the U.S. ethanol industry," said Matt Hartwig, spokesman for Washington, D.C.-based Renewable Fuels Association with 325 member companies. "This next-generation fuel is an example of the ingenuity and innovation in the industry."

GM announced its new partner on Sunday at the North American International Auto Show in Detroit. The ailing auto giant is aiming to bolster the ethanol industry with its undisclosed investment in Coskata and the chance to put the new ethanol on the fast track with possibly 25 ethanol-producing plants built worldwide in the next five years.

GM claims the new technology "will provide stability at the pump and give consumers choice," said Mary Beth Stanek, director of GM's Environment, Energy Safety Policy in Detroit.

Fast growth

Coskata -- named after a wildlife refuge near Nantucket -- has 35 employees who use patented microorganisms to produce ethanol for less than $1 a gallon, about half of today's cost of producing gasoline.

That means consumers could get a less expensive fuel alternative that's better for the environment and provides better gas mileage, said Coskata CEO and President William Roe. He's a 29-year veteran of Naperville-based Nalco water treatment firm, who emerged from retirement to lead this start-up.

"We're coming out of stealth mode under the wings of General Motors," Roe said.

But GM, like the entire auto industry, has been spiraling. Yet drivers still need to buy fuel, Roe said.

"We're talking about an alternative to creating fuels for autos that will be more available and potentially made at lower costs," Roe said.

Coskata is poised to have its first plant built later this year that can produce 40 million gallons of ethanol annually. Another plant by 2011 could make up to 100 million gallons of ethanol annually.

The location of these plants remain under cover, but Roe said they likely will be built in the United States. Subsequent plants could be established in different countries.

Such fast growth is expected to put Coskata's process ahead in the industry, create more jobs and stimulate economic growth, said Roe.

How it started

In June 2006, Coskata was founded by Rathin Datta, founder and chairman of tech manufacturing company, Vertec Biosolvents, and California venture capitalist Todd Kimmel, who obtained the rights to the necessary organisms from Oklahoma State University. The organisms, when processed with the wood chips or other materials, would produce the ethanol.

Coskata's three-step process involves the incoming materials being converted to gas. Next, the gas is fermented and turned into ethanol, thanks to the organisms. Finally, the ethanol is refined and made into fuel.

Coskata received about $10 million from various venture investment groups to start up the company.

By last May, the company established a research and development center in Warrenville.

Another $50 million is being raised from more venture capitalists and GM to continue work and bring the new fuel to market, Kimmel said.

"GM has the wherewithal to get things started," he said.

The corn industry is eager for Coskata's new technology. It could be one of the first to commercialize such an ethanol that's more economical, said Rodney Weinzierl, executive director of Bloomington-based Illinois Corn Growers Association.

"Ethanol from corn, not by itself, isn't a silver bullet to get us off dependence on foreign oil," he said. "It's more like a silver pellet. #8230; But there's no one yet that can compete with corn. If they've figured it out, great."

More production

The U.S. ethanol industry, which primarily relies on corn now, produced 4.9 billion gallons in 2006 and 6.5 billion in 2007. Production is expected to increase to 9 billion this year.

But it has a ways to go to match the 140 billion gallons of gasoline consumed annually, Hartwig said.

E85, a blended fuel with 85 percent ethanol, can be used by about 6.5 million vehicles today. Of that number, GM said it has 2.5 million such vehicles on the road and will increase the number of models annually.

But nearly every car today can use a blend of up to 10 percent ethanol, Hartwig said.

The GM-Coskata partnership comes about a month after President Bush signed the Energy Independence and Security Act, which calls for an increase in biofuels -- from 7.5 billion gallons in 2012 to 36 billion gallons in 2022.

About 21 billion gallons are expected to come from sources other than corn.

"We have a ways to go, but it's coming," Hartwig said.

What it takes

Instead of using corn, Warrenville-based Coskata uses a technology that can extract ethanol from cellulose materials. Here's a look at what can be converted into fuel-grade ethanol.

Material/Ethanol

Four old tires/7 gallons

2 bales of straw or hay/5 gallons

50 pounds of wood chips/5 gallons

Why it's better

Coskata has developed a way to take cellulose materials, such as wood chips, old tires and even municipal waste, and convert it into ethanol fuel for vehicles. Here are some benefits:

bull; For every unit of energy used, this new ethanol generates up to 7.7 times that amount of energy.

bull; Reduces CO2 emissions by up to 84 percent, compared with gasoline.

bull; Process uses less than a gallon of water to make a gallon of ethanol, compared with 3 gallons or more for other processes.

bull; Can be processed anywhere in the world where a carbon-based feedstock is available.

bull; Could lead to joint efforts in markets, such as China, where energy demands are growing

Source: Coskata