LanzaTech taps carbon monoxide emissions to produce ethanol

At first glance, LanzaTech‘s plan to use bacterial fermentation to convert waste gas emissions into bio-ethanol doesn’t seem all that different from the waste-to-biofuel processes developed by other startups, like SequesCO and GreenFuel Technologies.

Trap a large quantity of emissions from a power plant, pipe them to algae or bacteria contained in either a pond or bioreactor, add a few nutrients and voila! You now have a ready supply of biofuels. Unlike its competitors, however, Auckland, New Zealand-based LanzaTech proposes using carbon monoxide as its primary feedstock, instead of CO2. Even at this early stage, it has already received the blessing of Khosla Ventures — to the tune of $3.5 million.

The company’s goal is to turn emission-intensive industries like steel and rubber — basically any industry that produces hydrogen and carbon monoxide emissions — into low cost, high volume producers of ethanol by retrofitting them with its proprietary fermentation process. Its brand of ethanol would replace up to 90 percent of a car’s gasoline supply and would not require any engine modifications.

While LanzaTech has remained mum on the details, one can speculate that it must be cheap, fast and scalable enough to have attracted Khosla’s interest. For one thing, carbon monoxide is dirt cheap and readily available. The global steel industry alone emits half a ton of carbon monoxide per ton of steel produced.

Key to the firm’s success will be the performance of its bacteria, specifically their growth rates and conversion efficiency. It will be in good shape if it can keep the costs of its fermentation process down, particularly as it continues to modify its bacteria, and if its plants scale up well. Several better-capitalized companies, such as Amyris Biotechnologies and LS9, which are engineering microbes to make hydrocarbon-based fuels from plant sources, are already inking major deals and building pilot facilities.

Not to be outdone, LanzaTech has just raised another $9.3 million from New Zealand’s government funding agency, the Foundation for Research, Science and Technology (FRST), to be distributed over the next 5 years. It plans on using the grant to set up a pilot plant within the coming year; it hopes to have a scaled up demonstration facility ready by 2013. It will also use some of the proceeds to research alternatives to ethanol.

LanzaTech has also received the backing of The Warehouse, New Zealand’s largest department store retailer.