The “next generation” of ethanol has been in development for decades, but significant progress has been hard to come by — and may still be a long way off.

Few dispute the need for a better source than corn.

What all this stuff is really doing is turning solar power into liquid fuel; it’s just a matter of how efficiently that works.   

Even corn ethanol’s most ardent supporters say it can’t completely replace petroleum as a fuel.  There is no way to grow that much corn — and besides, devoting the entire crop to fuel would severely exacerbate world hunger.

Corn ethanol isn’t very efficient either.  Basically, ethanol producers extract the sugar in corn and turn it into fuel.  And every gallon of corn ethanol takes more than half a gallon of petroleum, or equivalent, to produce.   

Two steps forward, one step back.

Sugar cane is much better, but doesn’t grow in large parts of the United States.

To get real energy gains, (12 steps forward, say) with potentially big domestic crops, ethanol could be made from the cellulose in grass, trash or trees.

 “And there are people working on that right now, but it has not been easy,” said Bill Kovarik, a journalism professor at Radford University in Radford, Va. “In fact there have been people working on this since the 1920s.”

People like Larry Walker, a professor of biological and environmental engineering at Cornell University in New York.

“When I look at a field of grasses or a field of trees, the first thing that pops into my mind is, “Ah!  70 percent sugars!” said Walker, who has been studying the issue for 25 years.

But getting out that sugar, that energy, is difficult because it’s locked up in plant fiber.

“You think about wood, that we build houses with … you wouldn’t want that material to fall apart real rapidly would you?   And that’s by design.  It’s the structural component of plants that we are going after,” Walker said.

It can be done, of course, but not nearly cheaply enough to make cellulosic ethanol competitive with other fuels.   And, though a number of small plants are operating, making ethanol from things like corn cobs and stalks or woodchips,  nobody’s making anywhere near the volume of the stuff anticipated just a few years ago.  

It’s not for lack of federal support.  Companies get more than double the federal tax money for blending cellulosic ethanol in gasoline as they do for corn-based ethanol.

But the reality of sluggish production has forced the Environmental Protection Agency to drop its cellulosic ethanol production mandate this year from 100 million gallons to 6.5 million gallons.   That compares to about 13 billion gallons of corn ethanol.  

It’s not just that cellulose is hard to break down.   The possible raw sources of it — again, grass, trees and trash — are bulky.   They’re cumbersome and expensive to ship, and difficult to store.  

Given all of that, Walker said, producing cellulosic commercially is a tall order.

“That’s going to require a lot of things to fall into place.   Technology, business models, capital,” Walker said.

Walker’s talking about billions upon billions of dollars in investment capital that just isn’t there now.   

It’s hard to get investors interested in the ground floor of so called “second generation” biofuels, because those early plants are sure to make mistakes.   Many will likely fail.   What’s more, the fledgling market for cellulosic ethanol rests squarely on federal support, which could always vanish.  

Still, Walker said he’s optimistic the obstacles to a cellulosic ethanol industry will fall in time, as the energy situation becomes more and more urgent.  

David Swenson, an economics professor at Iowa State University in Ames, is not so sure.  He said the drive to come up with a viable alternative to liquid biofuel, may crash.

“All anybody has been able to think about is just, produce liquid fuel, produce liquid fuel, produce liquid fuel. Well, the one thing we knew how to do to produce liquid fuel is to make corn ethanol.  We were really good at that … we suck at everything else.   We have to have a plan B, and we haven’t been talking about plan B,” he said.

True, there’s biodiesel, the oil-based fuel made, in the United States, primarily from soybeans. Algae is seen as a promising alternative feedstock for diesel fuel — but again, going from an idea that should work, to one that actually does work, economically, has proven much trickier than most people anticipated.   

In the meantime the United States is going to keep producing corn ethanol, lots of it. The one year extension of the blending credit and tariffs supporting corn ethanol cleared the lame-duck session of Congress. The EPA’s mandate to use it grows again in 2011.   

And a viable commercial cellulosic ethanol industry to replace, or even supplement the one based on corn, seems almost as remote as ever.

More from this special report

Hope or Hoax: The Truth Behind the American Ethanol Debate