BP, Soros Fund invest in ethanol-making microbe

BOSTON--Oil giant BP and George Soros' investment firm are putting millions of dollars into a company that has isolated a microbe that can create ethanol.

Qteros, formerly called SunEthanol, on Tuesday announced the $25 million series B round of funding, which was led by venture capital firm Venrock and Battery Ventures. Other investors were BP, Soros Fund Management, and first-round investors Long River Ventures and Camros Capital.

(Credit: Qteros )

Massachusetts Gov. Deval Patrick--a clean-energy industry backer--announced the funding and new company name at the Fourth Conference on Clean Energy here Tuesday.

The basis of Qteros is the Q Microbe, a micro-organism discovered in the woods near the Quabbin Reservoir in western Massachusetts by University of Massachusetts professor and now Qteros chief scientist Susan Leschine.

The naturally occurring bug is able to efficiently produce ethanol from the cellulose in plants, according to Qteros. The company has spent the past year breeding different strains of the bug to enhance certain characteristics and make it more productive.

The money it raised will be used for further product development and to build a pilot ethanol facility next year, using agriculture residues, sugar cane bagasse, and corn stover as feedstocks. After that, it intends to do a larger demonstration facility in 2010 and then operate a commercial-scale plant in 2011.

The microbial approach to making ethanol, called consolidated bioprocessing, is a potential breakthrough in cellulosic ethanol production.

Many start-up biofuels firms are developing different methods for converting wood chips, grasses, and agriculture or forest residue into the liquid fuel ethanol, which is a gasoline additive.

By using microbes to make cellulosic ethanol, Qteros intends to streamline a multi-step process and entirely eliminate the use of expensive enzymes, which can account for roughly 30 percent of production costs.

"Using the Q Microbe as a keystone piece eliminates large amounts of capital, large amounts of cost, and makes the process economic," said Qteros CEO William Frey who led BP's biofuels business before joining the company.

Another company pursuing a similar path is Mascoma, a well-funded ethanol company spun out of the Dartmouth College. It, too, is developing micro-organisms to make ethanol without enyzmes, but its scientists are genetically engineering the microbes.

Qteros Executive Vice President Jef Sharp said that optimizing a naturally occurring microbe alllows Qteros to make ethanol "without the lengthy, expensive, and genetic engineering requirements of taking another bug to do it."

Rather than build ethanol plants itself, Qteros plans to license its technology to ethanol producers which plan to diversify from corn ethanol into other feedstocks, said Frey.