Genomatica has come up with a new microbe that can turn sugar into an industrial solvent with a $2 billion worldwide market – and it believes idled ethanol plants will be perfect places to do it.

The San Diego-based company announced Wednesday that it has genetically engineered microbes to digest sugar and excrete methyl ethyl ketone, or MEK, a solvent with uses including plastics and textiles manufacturing and as an ingredient in paint remover, lacquer and varnishes.

And because the process Genomatica has come up with is so similar to the fermentation and distillation process used to make ethanol from corn or sugarcane, the company is now seeking owners of shuttered ethanol plants to switch to making bio-solvent instead.

"Our MEK process will work with the same system" as used to make ethanol, "even the same temperatures," Genomatica CEO Christopher Gann said Tuesday.

The only big change is to decide how to avoid putting genetically modified microbes out into the world, intermixed with the dry grain product that's left over in some corn-to-ethanol production plants, he said. But given the price premium MEK holds over ethanol, it's possible plant owners will choose to burn that leftover dry grain for heating purposes rather than sell it for a little extra cash, he said.

While ethanol sells for about $1.50 a gallon plus a $1-per-gallon federal subsidy – a price that's led to ethanol plant closures around the nation – MEK sells for $4.50 to $6 a gallon, Gann said (see VeraSun Files For Bankruptcy).

About three billion pounds of the stuff are produced worldwide every year, and the United States imports about a quarter of the 400 million pounds of MEK it uses every year, giving new domestic producers a potentially lucrative market, he noted.

That could make converting to MEK production "a very compelling value proposition" for owners of shuttered ethanol plants, he said. Genomatica is in early discussions with several of them, and hopes to have its MEK-making process ready for implementation in a plant by next year, he said.

MEK is the second industrial chemical for Genomatica, which started in 2000 as a designer of molecular modeling software and switched to genetically engineering microbes in 2007.

Last year Genomatica announced it had engineered microbes to make 1,4-Butanediol, or BDO, which is used in spandex and plastics for the auto and electronics industries (see Genomatica Gets Microbes to Make Industrial Chemicals).

Genomatica is designing a BDO production test plant expected to cost about $15 million, which it hopes to have up and running by next year, Gann said. That will be a key to getting prospective customer to license the genetic engineering and process technology from Genomatica, which is how it intends to make money.

Genomatica will be looking to raise $20 million or more to finance that BDO test plant and keep working on its MEK process, Gann said. The company has raised a total of $23.5 million in two rounds with investors including Mohr Davidow Ventures, Alloy Ventures and Draper Fisher Jurvetson.

Several companies are looking at using microbes, genetically engineered or otherwise, to make biofuels like ethanol, biodiesel or synthetic petroleum (see Amyris: We're Better Than Biodiesel, Ethanol or Gas and LS9 Seeks Up to $100M Under New CEO).

But Genomatica is targeting industrial chemicals because, while they may have a smaller market than fuels, they are also higher value, Gann said.

Of course, there's a catch – crude oil is the conventional feedstock for most of the chemicals Genomatica wants to make with microbes. Gann told Greentech Media in September that its microbe-made BDO could compete with BDO made with oil even if oil fell to $50 a barrel – but oil has been trading at less than $40 a barrel in recent days.

The math still works with lower oil prices, Gann said Tuesday, because the price of sugar and corn have been falling as well. If lawmakers decide to offer bio-chemicals tax incentives similar to those now offered to biofuels, that could make the proposition even sweeter, he said.

Seattle-based Blue Marble Energy is another company looking at using microbes to make industrial chemicals. But it's targeting algae as a feedstock and uses an "acid gas and ammonia" extraction system to make products such as methane, hydrogen, esters and anhydrous ammonia.

But like Genomatica, Blue Marble is looking at existing environments as part of its business plan – specifically, it wants to grow algae in wastewater treatment facilities (see Startup to Craft Industrial Chemicals From Human Sewage – Yeah!).