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Butanol is a renewable biofuel that is set to debut at U.S. pumps next year, and hopes to challenge ethanol's dominance of the $26 billion market.

Just as with ethanol it can be produced from corn or sugar cane, but butanol has a far higher energy density and is easier for refiners to mix with gasoline.

Gevo, financed by Total, and Richard Branson (through Virgin Green Fund), is currently running a plant in Luverne, Minn., and Butamax Advanced Biofuel, a company funded by DuPont and BP, is working on the retrofit of an old ethanol plant nearby, to convert it for the commercial production of butanol.

Branson explained that butanol "is the future of renewable fuels. It's also hugely versatile so can be created to produce gasoline fuel blends, rubbers, solvents, plastics and jet fuels, which give us scope to enter into a range of markets."

Bloomberg reported that butanol has been around for decades as a byproduct of oil refining, but that the ability to make it from crops has made it useful as a form of renewable energy. Butamax explained that by using corn, sugar cane, or cellulosic biomass, a biobutanol fuel can be distilled.

Paul Beckwith, the CEO of Butamax, said work has "advanced steadily, and we now are at the phase where we are commercializing the technology. We are spending significant sums of money. The technology is being implemented as we speak."

Sheila Williams, a spokeswoman for BP, said that "biobutanol is a drop-in fuel molecule that represents the next significant change required to meet the growth in demand for lower carbon, renewable fuels for transportation." However,"commercializing an all-new energy technology properly takes time, despite being one of the most advanced biofuels."

Butamax has already gathered several ethanol producers (such as Big River Resources and Siouxland Ethanol) with a combined production capacity of nearly 900 million gallons, which are willing to switch their facilities to produce butanol once the technology is viable.

Butanol also trumps ethanol for the fact that it is much less corrosive, and can also be blended with gasoline to a higher concentration. U.S. law limits the ethanol content of gasoline to 15% for any cars built since 2001, and many older cars have to use weaker concentrations. Due to butanol's higher energy density it can be blended with gasoline at 16%.