Biofuels that go beyond ethanol

LAS VEGAS (CNNMoney.com) -- Ethanol may be the hot topic when it comes to plant-based power, but it's certainly not alone in the biofuels arena.

There are a host of companies trying to cash in on the push towards renewable energy using different biopower technologies.

While ethanol has been criticized for using food crops as fuel, and for requiring a lot of energy to create an power source that pollutes only a little less than gasoline, a Canadian company believes its "bio oil" can provide power without those disadvantages.

Using wood chips normally discarded from sawmills and other businesses, Vancouver-based Dynamotive (Charts) employs the decades old technology of pyrolysis - heating organic materials without oxygen - to create fuel.

Dynamotive's spokesman Nigel Horsley, exhibiting at a renewable energy trade show in Las Vegas Tuesday, said the difference now is that his company uses a patented process to do pyrolysis quickly and under extreme heat. The technique separates the carbon from the fuel, reducing greenhouse gas emissions.

Horsley said the charcoal-like carbon can then be used as a fertilizer, and the gas produced is recycled back into the system to burn the wood chips.

Uses for Dynamotive's "bio oil" are currently limited to home heating and electricity generation; it's unlikely that it will ever be used in automobiles.

While Dynamotive is far from profitable and relies on incentives to sell the electricity from its small, experimental power plant in Ontario to a local utility, Horsley still believes the heating fuel is competitive with oil, even at $30 a barrel.

Dynamotive isn't the only company eying wood chips as a fuel source. Cellulosic ethanol, a nascent but promising technology that uses any type of plant matter, could also use trees and brush.

The Price Companies, an Arkansas firm that runs wood chipping operations for paper mills, set up a booth at a renewable energy trade show for the first time ever Monday.

"It's going to catch on, and we want to be there when it starts," said Claude Yearwood, a Price manager.

Yearwood said Price currently has 19 chip mills in the U.S., and the average cost to set one up is around $12 million.

None of Price's plants are supplying renewable energy outfits yet, but Yearwood is confident the business will pick up. "I think it's going to be overwhelming," he said.

The production of biofuel often results in the production of biogas, a potential pollutant which is also being put to use as an energy source.

Stepping in to capture that market is Capstone Turbine (Charts), a California-based manufacturer of small turbines that match the scale of many biofuel operations.

Capstone's products generate electricity off of gas generated from sources like landfills, wood chips and animal dung, among others.

"We throw away so much in America, it's silly not to get energy out of it," said Doug Demaret, a Capstone spokesman.

Demaret said the equipment generally costs about $1,000 for every kilowatt hour generated, or about $200,000 to $300,000 for a whole system, on average.

One challenge for Capstone, which like Dynamotive is also not yet profitable, is finding banks to back its projects, Demaret said.

That leaves much of the funding left to venture capital firms, which often insist on a higher stake in the project.

"That can take the economics from being a two year pay-back to a seven year pay back," he said.

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