Advanced biofuels have been on the cusp of commercialization for years, but high prices and technological challenges have held them back. Is that starting to change?

Photo courtesy Novozymes Novozymes' new plant in Italy is the world's first advanced biofuels facility

Whatever happened to next-generation biofuels? Made from sources like corn stalks or what straw that don’t compete with food, unlike current biofuels, next-generation biofuels were going to be greener and more efficient than corn-based ethanol, which is still the dominant source of biofuel in the U.S. When Congress passed the 2007 energy bill, it expected the country to be producing over 1 billion gallons of next-generation biofuels by 2013. But the advanced biofuel industry has developed far more slowly than lawmakers predicted, leading the Environmental Protection Agency (EPA) to cut the 2013 mandae for cellulosic biofuels to just 4 million gallons—and even that target could be difficult to meet, given that only 142,000 gallons are available now.

It’s not that companies don’t know how to make cellulosic ethanol or biofuel from algae. It’s that they’ve struggled to do so cheaply and at a scale large enough to compete with oil. “The technology just hasn’t matured yet,” says Peder Holk Nielsen, the CEO of the Danish biotech company Novozymes, which has been involved in next-generation biofuel research and development for years. “It’s simply been too expensive.”

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But if the race to create workable next-generation biofuels has slowed, it’s far from over—and there may still be a few surprises.

First Novozymes, which has been developing enzymes for industrial use since the 1920s. Earlier this week Novozymes, in partnership with the Italian biofuels company Beta Renewables, announced the opening of the world’s largest advanced biofuels facility. Built in northern Italy, the plant is the first in the world to be designed and built to produce bioethanol from agricultural residues and energy crops at a commercial scale. The facility will produce over 20 million gallons of cellulosic ethanol a year. “This plant was built with the purpose of demonstrating that the technology is possible,” says Nielsen. “Once we’ve built it, we can optimize it.”

Cellulosic ethanol has been difficult to produce for the same reason that it’s impossible for the human stomach to digest cellulose, the material that makes up the tough cell walls of green plants. It takes specialized enzymes to break down cellulose into simple plant sugars, which can then be converted into fuel. (Humans lack those stomach enzymes, unlike cows, which is what allows them to digest grass.) Novozymes’ role is providing the industrial enzymes needed to break down the tough wheat straw, rice straw and arundo donax—a high-yielding energy crop grown on marginal land—that the Italian plant will be using. Those enzymes aren’t cheap—Nielsen notes that while the enzymes used to make corn ethanol cost 3 to 7 cents per gallons, those used for cellulosic ethanol run 30 to 40 cents a gallon. Bringing down the cost of those enzymes will be key to making cellulosic ethanol more than just a lab experiment. “We’re convinced that over time, it will be cheaper than gasoline,” says Nielsen.

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Novozymes isn’t the only company opening up a cellulosic ethanol facility. In 2014 plants from the ethanol company POET, Dupont and the Spanish firm Abengoa will begin producing next-generation ethanol, and the startup KiOR is already running a commercial plant in Mississippi that turns woody biomass into drop-in fuel. Still, next-generation biofuels companies will face daunting technological and market challenges, as a recent Economist article pointed out:

Some observers doubt whether even the most sophisticated biofuels can compete with fossil fuels in the near future. Daniel Klein-Marcuschamer, a researcher at the Australian Institute for Bioengineering and Nanotechnology, conducted a comprehensive analysis of renewable aviation fuels. He concluded that producing first-generation bio-jet fuel from sugarcane would require oil prices of at least $168 a barrel to be competitive, and that some second-generation algae technologies would require crude oil to soar above $1,000 a barrel (the current price is around $110) to break even. Mr Klein-Marcuschamer has made his model open-source in an effort to help the industry find ways to make biofuels more competitive. Even if second-generation processes can be economically scaled up, however, that might in turn highlight a further problem. To make a significant dent in the 2,500m litres of conventional oil that American refineries churn through each day, biofuel factories would have to be able to get hold of a staggering quantity of feedstock.

That’s one reason why some next-generation biofuel startups have looked to find new markets for their technology. California-based Solazyme uses custom-built algae to develop better biofuels, and it has sold thousands of gallons of its product to the Navy for use in its ships. But while the company has a 30 million gallon facility in Brazil that should be producing algal biofuel by the end of the year, Solazyme has also branched into making oils for higher profit products like cosmetics, food and petrochemicals. “We view ourselves as a company that makes and tailors oils,” says Jonathan Wolfson, Solazyme’s CEO. “We don’t define ourselves as only a biofuels company.”

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To that end, late last month Solazyme announced a deal to supply roughly 3 million gallons of algae-produced oil to the consumer products giant Unilever over the next 12 to 18 months, beginning at the start of next year. Unilever has said it will only use sustainable agricultural raw materials by 2020, and Solazyme’s algal oils fit perfectly into that strategy. “We follow the technology in Silicon Valley,” says Wolfson. “We didn’t know what the technology was capable of, and now we can tailor oils we never would have envisioned.”

Next-generation biofuels still face an uphill battle—and one where uncertain government policy remains a decisive force. Biofuels that are cheap—and don’t compete with food—could still play a major role in helping the world reduce the carbon footprint of transportation. But as smart companies like Solazyme and Novozymes show, biofuels could just be the beginning for this technology.

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