Two years ago the U.S. DOE began its long and arduous task of technology optimization and risk mitigation for commercial production of cellulosic ethanol. This was done through an award of $385 million to six large-scale projects. Even though the DOE is still cutting checks from this original award allotment, first quarter 2008 has seen a project funding revitalization of sorts as the department moves ahead with more grants totaling $114 million slated for four smaller demonstration projects. And there’s more—the department also issued a few separate grants in recent months to fund specific technology advances. But it’s not just taxpayer money fueling second-generation ethanol schemes, although federal backing certainly helps attract private investment.

“We are tied into a lot of what’s happening in the private arena,” says Larry Russo, biorefinery technology manager within the DOE’s Biomass Program. “There’s been a tremendous amount of private money in the last 18 months—mostly venture capital—flowing into a lot of these projects making them catch fire a little bit, and getting the technologies out there.” But doing the research is not enough. “We need to do the research of course, but then we need to do the pilot testing with our partners, and then scale these things up to get to the point where it can attract financing on its own,” he says. “That’s what we’re doing at DOE—we’re buying down the risk by our involvement.”