Ethanol giant POET says it can make ethanol from cellulosic sources--rather than the corn grain it's usually made from in the United States--for costs that are approaching that of corn grain ethanol. Last year, when it started a pilot plant for making ethanol from corn cobs (one of many potential cellulosic sources), it cost $4.13 to make a gallon of ethanol. Now it costs just $2.35 per gallon. In comparison, corn grain ethanol costs about $1.60 to $1.90 a gallon, a cost heavily dependent on the price of corn and natural gas. The company hopes to get costs below $2 a gallon.

That's considerably more than the $1 per gallon figure that some startups are claiming, but who knows if those estimates will pan out. The $2.35 figure from POET seems solid--it comes from a company that knows how to make large amounts of ethanol, and the figure includes all of the relevant costs: "interest, depreciation, wages, benefits, repairs, maintenance, insurance, etc.," according to a company spokesperson. It seems like a good indication that cellulosic ethanol could soon be competitive with conventional ethanol, and fossil fuels.

A number of factors have helped bring costs down, the company says.

· Chemical raw materials required in the process have been reduced, resulting in an operating cost savings of $0.20 per gallon.

· The energy used in the pretreatment process has been reduced by more than half.

· Alternative energy technology has been demonstrated to provide all of the energy for the cellulosic ethanol plant and at least 80 percent of the adjacent corn-based plant.

· Enzyme cost has been cut in half and is expected to continue to decline.

· Through continuous optimization of the process, entire unit operations have been eliminated, reducing overall capital cost by over 40 percent.

U.S. policy could do a lot better job supporting renewable energy, according to industry experts at a renewable energy conference today in Washington, DC, hosted by the American Council for Renewable Energy.

John Graham, the president of BP Wind Energy, renewed calls for long-term policy stability, citing sharp drop-offs in wind development as tax credits expired in 1999, 2001, and 2003. Since those credits are expected to expire again in the next few years--and since wind companies have three- to five-year time schedules--the wind industry could soon see another such slowdown, in addition to the hit its taken from the recession. He called on Congress to set up longer term credits, and a cap and trade system, to help wind projects get funding.

Steen Riisgaard, the CEO of Novozymes, based in Denmark, had more specific recommendations for the biofuels industry. He said the current 10 percent limit on the amount of ethanol in gasoline is slowing down the industry in the United States. He said that the EPA should raise what he called this "arbitrary limit" on ethanol content to 15 percent. The current limit effectively puts a cap on the amount of ethanol that can be sold in the U.S. Eventually flex fuel vehicles that run on E85 (85 percent ethanol) could increase the amount of ethanol purchased, but so far sales have been limited by the number of fueling stations that sell ethanol and the number of cars that can run on high percentages of ethanol. If the EPA raises the amount of ethanol that can be incorporated into regular gasoline, the market for ethanol could quickly climb. But higher percentages of ethanol are controversial because they could cause damage in some engines or void warranties.

Riisgaard's other suggestions sounded less controversial. He wants the federal government to require 50 percent of all new vehicles in the next couple of years to be flex fuel vehicles capable of running on 85 percent ethanol (which seems feasible given the low cost of doing this), to require 25 percent of the largest gas stations to install E-85 pumps by 2014 (funded by reducing subsidies to the gasoline industry), and to require federal agencies to buy only flex-fuel vehicles and use only E-85 in new vehicles. Finally he called on the Department of Energy to send out what remains of $480 million already approved for funding advanced biofuels. Do this, he said, and you'll create 100,000 jobs, and keep the rest of the world from overtaking the current U.S. lead in biofuels.

U.S. President Barack Obama and President Hu Jintao of China have announced several agreements for the two countries to cooperate on clean energy. The deals could help smooth the way to a climate change agreement in which both countries agree to reduce greenhouse gas emissions.

China has been dragging its heels over strict cuts in greenhouse gas emissions, especially with the U.S. also so far failing to commit to such cuts. But if China doesn't cut its emissions it will be impossible to meet goals for averting dangerous climate change.

One thing that could help--reduce emissions and convince China to agree to cuts--is sharing the latest technology with China, especially technology for making cleaner power plants. The agreements seem to be a step in that direction.

One deal in particular seems promising. Scientists from both countries will cooperate on developing cleaner coal plants through a new U.S.-China Clean Energy Research Center, which will be jointly funded with $150 million. What's more, a number of U.S. and Chinese corporations have agreed to cooperate, including Peabody Energy, which will help with a project celled GreenGen, and GE Energy, which will help with coal gasification. Both projects could lead to cleaner coal plants that could be paired with technology to capture and sequester carbon dioxide.

Other significant agreements include one to develop natural gas resources, which could reduce greenhouse emissions because burning natural gas releases about half the carbon dioxide as burning coal. Another aims to improve the efficiency of buildings, industry, and consumer appliances. To address growing emissions from cars, both countries will work together to establish standards and roadmaps for the development of electric vehicles.