The demonstration plant will be in Freeport, Texas.

According to Technology Review, these bacteria do create small amounts of ethanol naturally. In the wild though, it has to be in a dark environment (or anaerobic). Apparently this method doesn’t require the “harvesting” of the algea in order to obtain the ethanol. The harvesting of algae has proven a challenge in complexity (and price) for other algae-ethanol startups.

They say that they expect to be able to produce ethanol for $1.25 per gallon and as a side benefit for each gallon of ethanol produced they have a byproduct of fresh water (remember salt water was one necessary part going into this process.)

In some parts of the world this really could solve multiple problems – fuel availability and more importantly fresh water availability. It would be interesting to see this process compared against other desalination processes.

–Update–

Today I saw this story about a startup that claims to have a process that can generate as much as 20,000 gallons of biofuel per acre per year using algae microorganisms. The company is Joule Biotechnologies and they’re based in Cambrige, MA. With this process genetically engineered algae microorganisms use energy from the sun, consume carbon dioxide and water and create ethanol or other hydrocarbon. Their plans are a pilot project in the Southwest next year with commercial quantities available by 2010 and large scale by 2011. According to the article production on this scale and this method could provide competitive prices even if oil is selling as low as $50 per barrel. (Currently in the 60-70/barrel range.)

They go out of their way to clarify that this is not algae that they are using, but genetically engineered micro-organisms. The product does not have to be refined, and the micro-organisms don’t have to be harvested to obtain the fuel. (Certainly good news for the algae micro-organisms…..)

A fungus that lives inside trees in the Patagonian rain forest naturally makes a mix of hydrocarbons that bears a striking resemblance to diesel, biologists announced today. And the fungus can grow on cellulose, a major component of tree trunks, blades of grass and stalks that is the most abundant carbon-based plant material on Earth.

“When we looked at the gas analysis, I was flabbergasted,” said Gary Strobel, a plant scientist at Montana State University, and the lead author of a paper in Microbiology describing the find. “We were looking at the essence of diesel fuel.”

What’s fantastic about this is that it could basically synthesize diesel fuel from any cellulose matter (the waste matter from corn plants for example) allowing us to make use of the OTHER components of plants for food or whatever other purposes we need.

Amongst the impacts and bottom line to take out of this: 1) no ideas yet as to production scales of this 2) essentially make diesel a (hydrocarbon) from cellulose, 3) is petroleum then REALLY a “fossil fuel” or could it be produced from a similar process… 4) the ultimate benefit of this may come from the genome research that’s already started on this fungus.

Currently yields of the crop have been quite variable. In other words from one year to the next they are not getting consistent output. More troubling though is the toxicity of the plant and the labor intensive harvesting. Harvesting must be done by hand because the nuts ripen at different times. The nuts and leaves are toxic and require careful handling by farmers and I assume those that have been hired to pick the nuts. Also, processing plants will need to take special precautions in part due to the toxic fumes or vapour created when crushing the nuts. GREAT! sign me up for that! No, seriously. It sounds as though in several years the Jatropha nut may be a viable biofuel source but we will need to be certain to keep in mind safe handling and processing practices. Taking ALL of that into account it makes me wonder if the price of making this biofuel wouldn’t be too expensive to be competitive.