Gevo wants to take closed-down ethanol plants and retrofit them to make an alternative biofuel – biobutanol – from agricultural waste.

On Wednesday, it announced that it has started up one such plant, and that more could be coming soon. Actually, it's been talking about this already--there is an estimated 8 billion gallon ethanol capacity in the U.S. that costs $12 billion to build. It now only has about a $4 billion market value, board member Anup Jacob told us earlier this year – but now the formal annoucement comes.

Gevo said it will be able to make about 1 million gallons a year of biobutanol at a retrofitted ethanol plant in St. Joseph, Mo. It plans to have a commercial-scale facility running by 2011.

And to do more retrofits, the Englewood, Colo.-based startup said it has formed Gevo Development to develop a "fleet" of retrofitted plants.

Gevo has been backed by investors including Khosla Ventures and the Virgin Green Fund (see Clean Solar, Small Desal and Pharma Batteries: A Chat With Virgin Green Fund).  This spring, Gevo got about $40 million in a series D round led by French oil company Total SA, according to The Denver Post.

Biofuel makers have had a tough time growing to the production volumes they have been aiming for, of course. Biofuels made from non-food feedstocks have struggled to reach production volumes, and the corn-based ethanol industry's troubles have been well documented (see Biofuels: Are We There Yet?).

But those woes also mean that there are a lot of shuttered ethanol plants out there, which could provide a big market for Gevo – if it can compete against other well-financed potential buyers. Oil refining giant Valero has bought up the shuttered ethanol plants of bankrupt VeraSun Energy Corp., for example  (see Green Light post).

Another startup, Genomatica, has talked about retrofitting corn-based ethanol plants to make biochemicals (see Genomatica: Microbe-Made Chemicals Could Save Empty Ethanol Plants).

Biobutanol does offer some benefits over more common ethanol. It has a higher energy density than ethanol, can be blended into gasoline more easily and can be transported via existing pipelines, according to the Department of Energy's Alternative Fuels and Advanced Vehicles Data Center.

Gevo said it can also serve as a precursor to biodiesel and jet fuel, as well as chemicals and bioplastics.