Here’s a way to make ethanol pay.

Ineos Bio, which emerged from research that began at the University of Arkansas in the 1980s, is fine-tuning the critical operations on a plant in Florida that, ideally, will produce liquid fuel and electricity from vegetative waste.

The plant, which could open in the first half of 2012—, ill be capable of generating 8 million gallons of fuel a year and 6 megawatts of electricity. Only 4 megawatts are needed to run the plant: the rest can be fed to the grid.

“We think it will export about 2 megawatts,” said Mark Niederschulte, COO.

The trick is in harnessing waste heat, one of the largest untapped sources of energy in the U.S. Ineos first takes vegetative waste -- palm fronds, lawn clippings, agricultural bits -- and converts it into a synthetic gas and steam at high temperatures.

The synthetic gas gets fed into fermentation tanks, where microbes convert it to ethanol. The gas, however, can’t be fed directly to the microbes. The heat would kill them. Instead, Ineos captures the steam and heat and runs it through a turbine. Generating its own power from production operations, of course, cuts the operating cost and ultimate cost of the fuel.

In some ways, Ineos has taken the opposite tack of biofuel competitors, Niederschulte argues. Many biofuel companies have concentrated on devising a superbug or a process for creating fuel.

As it turns out, that's actually the easier part. The more looming challenge is how to take a novel process commercial. A small commercial plant can run $200 million to $300 million, said Niederschulte.

Ineos Bio benefits by being part of Ineos, an international chemical conglomerate with $45 billion in revenue a year. (In a similar vein, Genencor, the multibillion-dollar enzyme maker from Denmark, has pushed into biorubber.)

Recent history has not been kind to biofuel makers. The 2008 slump scared investors away from large, capital-hungry projects as did depressed oil prices. As a result, many firms in the space have diversified into green chemicals or food additives.

Power production represents a new twist. With the right feed-in tariffs, exploiting waste heat could become the needed magic ingredient.