To: maceng2 who wrote (22518 ) 7/26/2008 8:52:10 AM From: elmatador Respond to of 36917 Three VC firms—Khosla Ventures, Advanced Technology Ventures, and GreatPoint Ventures—jumped at the chance to invest in cellulosic ethanol startup Coskata. Its promise: to derive $1-a-gallon ethanol from trash, chiefly from landfill methane, tires, construction debris, and other municipal waste. The company's biggest selling point for "dump-to-pump" technology is its collection of botulism-related bacteria, which feed on the gas produced by trash and excrete ethanol. Whereas corn-based ethanol yields just 1.3 times the energy used to produce it, Coskata's yield is 7.7. And while corn prices are soaring, garbage is cheap. Todd Kimmel, a principal with Advanced Technology Ventures, founded Coskata in July, 2006, after he bought the rights to those bacteria for an undisclosed sum from the University of Oklahoma and Oklahoma State. Khosla and Advanced Technology Ventures contributed $10 million in first-round financing. In January, General Motors (GM) took a stake, in a deal that valued Coskata at around $500 million, according to people familiar with the transaction. In May, Coskata announced the construction of a 40,000-gallon plant in Pennsylvania to produce ethanol for GM's test fleet. Coskata is also looking to team up with municipalities to set up its bioreactors at local sites. Richard Tobey was so captivated by the dump-to-pump technology that he joined Coskata in 2007 as chief engineer after spending 28 years as a top scientist at Dow Chemical (DOW). He couldn't be happier about his decision. Donning lab goggles at Coskata's 25,000-square-foot research and development facility, Tobey and chief marketing officer Wesley Bolsen sidle up to their glass-encased "bioreactor" like doting parents in a neonatal ward. The lung-like contraption houses a thick plastic tube that feeds waste gas to fibers coated with millions of oxygen-averse bacteria. After gorging on carbon monoxide and hydrogen, the microorganisms pump out ethanol in a surge of bubbles that percolates upward. "They're not picky eaters," says Bolsen, a recent recruit from ethanol engineering outfit ICM. He notes that the bacteria will ingest gas from wood trimmings and even a grim medley known as hurricane debris. They thrive on landfill methane, which is 20 times as destructive to ozone as carbon dioxide. But Coskata still faces a hurdle. Although carbon-rich tires, plastics, and paper are especially conducive to its process, they're surprisingly difficult to obtain in the proper form. Coskata needs materials to be uncontaminated by foods and liquids. Ask Tobey how he'd react if a procession of trucks were to drop pallets of pristine plastic bottles on Coskata's front lawn and he beams: "Oh, that'd be just wonderful. And plastic bags—wow." Instead, countless tons of other untapped assets spill from landfills like Jiffy Pop. Until that changes, Coskata won't reach its full potential. "You can drive a couple of cars on trash-to-energy, but it just doesn't scale against petroleum," says Tadeusz Patzek, an environmental engineering professor at the University of California at Berkeley. "It's like paying down just the interest when society needs to address the massive principal." businessweek.com