Japan eyes affordable cellulosic ethanol technology

TOKYO (Reuters) - Japan's Ministry of Economy, Trade and Industry said on Wednesday it aimed to introduce new, cost-efficient technology for producing cellulosic ethanol by 2015 to help reduce gasoline demand in the world's third-biggest oil consumer.

METI said one of its main objectives was to cut the cost of producing ethanol from such cellulosic biomass as waste wood and wood chips to 100 yen (91 cents) per liter ($3.45 per gallon) from more than 2,000 yen now.

Another objective is to develop further-reaching technology that would turn soft cellulose such as silver grass, a common grass in Japan, into ethanol at a cost of 40 yen per liter.

METI's director of fuel policy planning, Shigeo Naruse, told reporters that the 40 yen target was set after taking into consideration a U.S. plan to cut costs to around 30-40 yen per liter in 2012.

"We aim to study both technologies at the same time," he said.

METI said producing cellulosic ethanol that would not compete with the food chain was a priority.

A task force of academics and staff from companies such as oil refiners Nippon Oil Corp and Idemitsu Kosan Co Ltd, and automaker Toyota Motor Corp will work on the project.

Experiments on using ethanol made from sugar cane or from a cellulosic ethanol plant have been under way in Japan, but none have proved cost-effective enough to compete with gasoline.

Japan is almost totally dependent on oil imports, and last year produced only 30 kilolitres of biomass ethanol at government-backed pilot plants.

The farm ministry's target is to produce 50,000 kl a year of biomass ethanol by fiscal 2011/12, a challenging plan in a country where costly farm produce has kept usage of green fuels largely at bay.

* NOTE: Price per gallon calculated using U.S. gallons.

(Reporting by Osamu Tsukimori; Editing by Hugh Lawson)