With gas prices going through the roof, the rush to alternative energy sources has taken on a new life. Ethanol has been been one of the most touted alternatives to fossil fuels. Most of the government initiatives in this area have been ill considered at best serving only as additional farm subsidies. But ethanol production has its problems.

Mainly the problems with ethanol as an alternative are simple. There is not enough acreage to produce enough of it even if were easy to produce. One of the main sources of ethanol is corn which also happens to be a staple in the diet of millions. Driving up the price of corn is not a good thing. Lastly, with current production methods, it takes almost as much energy to produce ethanol as is contained in the ethanol itself and this energy comes from, you guessed it, fossil fuels.

So, in order to make ethanol a viable additive to fossil fuels (I won’t say alternative because it does not seem feasible) a few things need to happen. The source for the ethanol needs to be organics that are not common with the food supply. Ideally these should be sources of biomass that are not currently useful such as the left-overs from agriculture and switch-grass. Further, it needs to be cheap and use significantly less energy to produce the ethanol than current methods.

A little startup in Warrenville, IL thinks it has the answer. And guess what, General Motors thinks they might be right. From MIT’s Technology Review:

Coskata’s technology could be a big deal. Today, almost all ethanol made in the United States comes from corn grain; because cultivating corn requires a lot of land, water, and energy, corn-derived ethanol does little to reduce greenhouse-gas emissions and can actually cause other environmental damage, such as water pollution. Alternative etha­nol sources, such as switchgrass, wood chips, and municipal waste, would require far fewer resources. But so far, technology for processing such materials has proved very expensive. That’s why Coskata’s low-cost technique has caught the attention of major investors, including General Motors, which earlier this year announced a partnership with the startup to help deploy its technology on the commercial scale worldwide.
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Combining thermochemical and biological approaches in a hybrid system can make ethanol processing cheaper by increasing yields and allowing the use of inexpensive feedstocks. But Coskata’s process has another advantage, too: it’s fast.
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Coskata continues working on its bacteria, trying to increase the amount of etha­nol they can produce…Even as Coskata continues to improve its microbes, it is planning to move the fuel production process out of the lab and scale it up to the commercial level. With the help of GM and other partners, the company will build a facility that’s able to produce 40,000 gallons of ethanol per year. Coskata representatives say construction will begin within the year. The company’s bioreactors should make it easy to adapt the technology to a larger scale, Tobey says; they can simply be lined up in parallel to achieve the needed output volumes. The next two or three years will reveal whether Coskata’s process can start to replace significant amounts of gasoline with cheap ethanol.

Startups like these are where the real innovation occurs. Multi-billion dollar subsidies to corn growers are a waste of money and steer us down the wrong path. Rather than subsidize any particular technology to the tune of billions, the government should do something smarter. How about putting up a prize that gives $5 billion dollars to the first guy who can produce ethanol from regular biomass for 50c a gallon with a process that can scale. Then you might get some real innovation and value for our money.

I don’t know if Coskata’s process is a winner or not. But my faith is with the little guy trying to make a buck.