A California biotechnology company has found a way to turn the waste from microbes eating sugar into biodiesel.

This story from DailyTech.com says that the Amyris Biotechnologies plant is capable of producing 10,000 gallons a year and is being tested in Brazil. In addition, it could make biodiesel even more price competitive:

While biodiesel and biofuels are not exactly a new concept, this is one of the largest test deployments to date of sugar based biodiesel, particularly of a microbial scheme (most biodiesel is formed from plant oils, such as palm oil). The plant aims to produce, with government regulation and carbon taxes, fuel at $60/barrel (approximately $1.43 per gallon). This indicates that their technology may be nearing cost competitiveness with cellulosic ethanol manufacturers — the best of which, Coskata, claims to be on the verge of $1.00 per gallon ethanol.

Advantages of the cellulosic ethanol include being able to come from waste materials unlike the biodiesel that’s formed from sugar crops. However, the biodiesel packs more energy per gallon and the microbes could eventually be genetically engineered to process cellulose as well. It’s hard to tell which solution costs less, given that the target costs for the biodiesel are post-subsidy, while Coskata’s targets are pre-subsidy.

The plant is scheduled to be fully operational by 2011. Right now, it’s probably feasible only in areas of the U.S. that grow sugarcane – Hawaii, Louisiana, Florida… places like that. But the article does point out that a sugarcane-corn hybrid known as corncane might work in more states putting these biodiesel microbes to work in more areas.