By Fiona Harvey, Environment Correspondent

It did not take long for biofuels to turn from one of the darlings of the environmental movement to the bugbear.

As recently as 2004, green groups such as Friends of the Earth were calling for an expansion of biofuels to make road transport greener. Biofuels, derived from plants, are carbon-neutral over their lifetime – the plants absorb carbon dioxide from the atmosphere as they grow, which is released back into the atmosphere as they are burned. This makes them one of the few “clean” alternatives to petrol as a transport fuel.

But when food prices started to rise sharply last year, environmental groups and development charities were among the first to blame biofuels as a major factor, and they called for an immediate moratorium on the production of ethanol.

The biofuel industry, however, was working on an answer – one that could even solve the squeeze on their profits as the cost of their raw material has soared.

That answer is a second generation of biofuels made from waste products – straw, husks, weeds – with the same calorific qualities as ethanol or biodiesel, making them suitable for use in vehicles. These offer the promise of clean fuels that would fulfil the strictest environmental criteria while not competing with food for fertile land.

Companies are pursuing two ways of making these new fuels. One is a continuation of the brewing process that converts grain or sugar to ethanol: the enzymes that break down grains are set to work on the straw or “corn stover” – the waste material left over when the maize has been taken off the plant.

Perfecting this biological method is difficult: fermenting starch or sugar into alcohol is easy, but waste products contain much larger amounts of lignin, which makes up the tough cell walls of plants and is harder to break down. The process is also costly.

The other method, just as complex, is the thermal method, by which the waste products are heated to produce a synthetic gas, which is then put through something like the Fischer-Tropsch process, whereby it is recombined to form a liquid fuel.

Lee Clements, investment manager at Impax Asset Management, favours the latter, which produces a fuel that more closely resembles mineral petrol or diesel. “It’s quite possible that both technologies will be used commercially, but that one will dominate,” he says.

A third possibility, which is regarded as more exotic, is making biofuels from algae. Certain types of algae produce substances that can be turned into fuels, using carbon dioxide as a feedstock. Riggs Eckelberry, chief executive of Origin Oil, says his company is looking at several strains of algae which can be harnessed in this way. He plans to start shipping standardised containers full of algae which customers can use to set up their own biofuel refineries.

Plants could also be genetically engineered to make them easier to turn into biofuels, for instance by making crops that produce the enzymes needed to break down lignin within their own cells.

Mariam Sticklen, of the department of crop and soil sciences at Michigan State University, says: “Plant genetic engineering promises to have key roles in decreasing biofuel production costs.” Companies such as Syngenta and Monsanto are beginning to come up with crop varieties with such qualities.

So far, second-generation biofuels from waste products have been produced in the laboratory, at great expense, but have not been demonstrated on a large scale.

Biofuels companies insist that they are close to commercialisation. Several companies are working on demonstration facilities: Range Fuels is building a factory in the US using a two-step thermo-chemical conversion process; Iogen has built a facility to process 40 tonnes of wheat straw a day; Verenium commissioned what it said was the US’s first second-generation demonstration facility in May; Virent is expanding from its small biorefinery that uses a catalytic process to make biofuels. Mr Eckelberry expects to start shipping commercial products in 2010.

Mr Clements of Impax says it could take another three to five years to ramp up production to full commercial scale. By then, he thinks, cellulosic ethanol and other second-generation biofuels will be able to compete on cost with fossil fuels.

Sceptics point out, however, how long it has taken just to get this far. Scientists have been working on such second-generation biofuels since the early 1970s, although much of the research was shelved when oil price pressures eased.

Copyright The Financial Times Limited 2008

Posted on Tuesday, September 16th, 2008 at 3:25 pm and is filed under biofuels.
Tags: biofuels, ethanol, transport fuel.