Virent Energy Systems of Wisconsin and Shell yesterday announced the successful start of production at the world’s first demonstration plant converting plant sugars into gasoline and gasoline blend components as an alternative to ethanol.

The plant is located in Madison, Wisconsin and is the latest step in a joint biogasoline research and development effort, announced by both companies in March 2008. The demonstration plant has the capacity to produce up to 10,000 gallons of the fuel each year, which will be used for engine and fleet testing. “This is an important milestone in being able to prove the technology is scalable,” Virent CEO Lee Edwards said during a telephone press conference announcement on Tuesday.

Company officials claim the new biofuel can be blended with gasoline in high concentrations for use in standard gasoline engines. The new product has the potential to eliminate the need for specialized infrastructure, engine modifications, and blending equipment necessary for the use of gasoline containing more than 10% ethanol.

Edwards said no timeline has been established yet for a commercial facility to come into production, but it will need to be defined within the next five years. “We have many milestones still to deliver going forward,” he said. “It’s important during 2010 that we learn as much as we can while we complete the fleet testing schedule for this year.”