Venture capitalists fuel Altra's ethanol development drive.

It has become clear that ethanol and biofuels are no longer the pie-in-the-sky pipe dreams of environmentalists.

Microsoft Inc. founder Bill Gates has come onboard with investments, President Bush has talked it up and even many conservatives are sold on it. Just ask R. James Woolsey, a Booz Allen Hamilton vice president and former CIA director, who uses solar power to run his small farm.

"We've got the tree-huggers, the do-gooders, the sod-busters, the cheap hawks, the evangelicals, and Willie Nelson (in favor of biofuels)," Woolsey says. "Now I probably ought to add the Silicon Valley entrepreneurs and the venture capitalists."

He's right about that. Altra Inc., the Los Angeles-based developer of renewable fuel projects, has just completed a second round of equity funding that raised more than $120 million.

In addition to Altra's lead investors, Kleiner Perkins Canfield & Byers, Omninet Private Equity, Sage Capital Partners L.P., Angeleno Group LLC and Khosla Ventures, included in this round are several prominent private equity firms and financial investors including Duff Ackerman and Goodrich LLC and Advanced Equities Inc.

Altra completed its initial equity funding in April and has now raised or is completing the placement of more than $250 million in equity and debt financing.

Altra has been in the business of developing renewable biofuels since 2004. Instability in the Middle East and rapidly rising Asian demand for oil has fueled interest in alternative power in the United States, where the biofuel industry has been growing faster than 20 percent per year for the past 5 years. Altra is capitalizing on the mandate for renewable fuels provided by the sweeping energy bill passed by Congress in 2005.

Altra's plan is to bring biofuel refineries online quickly. It has completed the acquisition of California's only large-scale operating ethanol plant--30 million gallons per year--up north in Goshen. Altra has begun development of a larger 60 million-gallon per year ethanol facility in Coshocton, Ohio, which will serve the East Coast and is expected to be completed next September.

Long limited to small volumes, ethanol could finally come into its own, thanks to cellulosic technology, which generates ethanol from agricultural waste like switchgrass, cornstalks and sugarcane. Cellulosic technology could make the fuel cheaper, more available, and more sustainable.

But true ethanol acceptance is still a long way from reality. So far, only a handful of pilot plants and one demonstration plant have been built. And then there are difficulties of growing and collecting cellulose crops, transporting the fuel (ethanol can't be transported through existing oil pipelines), persuading gasoline stations to dedicate pumps to ethanol, and expanding the number of cars that can use ethanol fuels.

Still, it represents one hope of breaking the world's 84-million-barrel-per-day oil habit.