British biotech company Green Biologics is revving up with $3.2 million for its work on a next-generation alternative fuel.

The startup said Wednesday it raised £1.58 million from the likes of Carbon Trust Investments and Oxford Capital Partners.

Green Biologics will use the funding to expand its pilot demonstration and to further develop the company's technology to make butanol using a range of bio-based waste products.

Butanol, an alcohol-based fuel, is produced by a naturally occurring microbe during a sugar- fermentation process. The waste Green Biologics uses comes from paper and food industries, among others.

Butanol was first commercialized in the UK during the World War I, but was pushed aside in the 1960s when cheaper petrochemical processing emerged.

Today, butanol is primarily used as a solvent. But Green Biologics says the time is right for the liquid to make a comeback as a fuel.

The company is working to "re-commercialize" butanol by using novel microbes, waste feedstocks and advanced high-temperature fermentation processes.

With its new "biobutanol," Green Biologics said it's aiming for a two- to three-fold reduction in cost compared to renewable fuels like ethanol, which in the United States is usually made from corn.

In efforts to kick its addiction to foreign oil, the United States has been pushing hard to support the growth of ethanol (see Biofuels Get Financing Downpour). The country is the largest producer of the alcohol-based fuel, churning out 4.86 billion gallons in 2006.

But ethanol, as well as other alternative fuels like biodiesel, has limitations.

"These biofuels do not fit neatly into the existing fuel infrastructure," said Edward Green, Green Biologics' founder and CEO, in a statement.

For example, ethanol can't be sent along existing oil pipelines and needs to travel by truck or train to distribution terminals for blending.

In theory, biobutanol could be blended at the refinery and sent along by pipeline.

Biobutanol also provides more energy than ethanol.

The Biobutonal Push

Last year, BP and DuPont said they would team up to develop, produce and market next-generation biofuels. Their first product, biobutanol, is expected to hit markets by the end of 2007.

And, according to a report by Jefferies & Company, DuPont expects second-generation biobutanol, which is targeted for 2010, to be economical compared to crude oil when priced around $30 to$40 per barrel.

Other companies trying to put biobutanol on to the mass market include Pasadena, Calif.-based Gevo. The company, which develops biofuels, including butanol, scored an undisclosed amount of funding from Khosla Ventures and Virgin Fuels.

But don't let all the big-name interest fool you. Biobutanol still has some lofty hurdles to overcome before it makes its mass-market debut. Among them are manufacturing difficulties and their accompanying high price tags.

So, are biobutanol and ethanol manufacturers gearing up for an alternative-fuel face-off?

"It's not either/or," said Peter Hemken, head of DuPont Bio-Based Materials, at the Fuel Ethanol Workshop in St. Louis in June. "I think all these biofuel technologies will be practiced to some extent or another."

Hemken said it's going to take a slew of technologies to meet U.S. President George W. Bush's call for 35 billion gallons of renewable and alternative fuels by 2017.

But there is a limit to how many fuels one gas station will carry, so some will get more market share than others.

"And as we go forward, it will be the technology that has the best performance from the standpoint of environmental considerations, as well as economics that will have a greater share," Hemken said.