When Mascoma originally announced it was building the first switchgrass-based ethanol plant in the United States with the University of Tennessee last September, it had grand plans. It expected to raise enough money to build a 5-million-gallon-per-year pilot plant and eventually grow it into a commercial plant.

But now, the company will play a smaller role in the project after it failed to raise as much money as it had hoped, a University of Tennessee official said Monday.

"We had anticipated that the project would look somewhat different, and they would provide a significant capital funding to the project," said Kelly Tiller, director of operations at the university's Office of Bioenergy Programs. "That's not the expectation we have now."

Tiller's comment echoed what the university's executive vice president David Millhorn told the university's Board of Trustees last Friday, according to the Knoxville News Sentinel. "UT began to assume a larger leadership role in the project, with Mascoma now as, rather than a partner, a technology provider," Millhorn said.

The plant also will be smaller than expected, capable of producing between 2 million and 4 million gallons per year rather than the 5 million announced in September, and will be completed in 2010, the university said. In the September announcement, Mascoma had expected to begin construction in 2007 and have the plant operational by 2009.

Mascoma hasn't disclosed how much money it had planned to invest in the project. Company officials also wouldn't answer questions about Millhorn's remark. The company issued a statement saying it's still involved in the project, but won't say more until it finalizes the project's details with the university.

The changing dynamics of the partnership reflects the difficulties many companies face in raising enough money to commercialize even cellulosic ethanol, which is made from nonfood-based feedstock, such as wood chips and rice straw.

Economic downturns and the controversy surrounding corn ethanol production have chilled investors' interest in ethanol overall, analysts said (see Plans for Two Cellulosic Ethanol Plants Scrapped and Another Ethanol Plant Gets Cancelled). 

Mascoma's future looked bright when it trumpeted its plan to build the refinery with the university last year, along with two other projects with different partners in New York and Michigan.

In May, the company said it had raised $61 million in a third round of funding, adding Marathon Oil to its roster of investors (see More Money for Mascoma). At the time, Mascoma said it had received a total of about $100 million in equity investments from all three rounds, in addition to more than $100 million in state and federal grants.

The university is teaming up with Mascoma to promote cellulosic-ethanol production in the state of Tennessee. The state has given $70.5 million for building and operating the pilot plant, as well as for research and supporting switchgrass farming from within 50 miles of the plant in Monroe County.

Farmers are expected to plant 700 acres of switchgrass this year and to increase the size to between 6,000 and 8,000 acres by 2010, Tiller said. The idea of planting crops for fuel has concerned some environmentalists, who say it will reduce the amount of land used to grow food (see Oklahoma Switches to Switchgrass).

The U.S. Department of Energy also is dishing out up to $26 million for the pilot facility's construction and operation.

Mascoma's changing role in the project has some impact on the project, though it doesn't affect the university's mission, Tiller said.

"Our objective is to demonstrate a scale large enough for commercial development but small enough to conduct research and introduce new technologies," Tiller said.

The university also has set up a for-profit company called Genera Energy to manage the manufacturing plant.

Tiller declined to say how the university might make money from its research-and-development efforts, including whether it plans to enter the commercial market.