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General Motors Corp. (GM) announced on Sunday that it was buying a stake in Coskata, Inc., a company working on providing cellulosic ethanol, an alternative fuel for automobiles.

Getting past the obvious marketing ploy of the effort, let's look at it from a practical perspective.

First, Ethanol is being pushed as the savior from dependence on oil in automobiles. The problem is at this time it's pretty much a bunch of hype. There's no doubt that the use of corn-based ethanol is available on a small scale in the United States, it runs far less efficiently than gasoline, getting about 25 percent less a gallon, and the price is skyrocketing based on supply and demand. It has also caused more problems than it's worth worldwide, as its caused food shortages and drove up costs.

The only way to transport it is by truck, as it can't be sent through pipelines, so that increases the costs as well.

There's also the availability of sugarcane-produced ethanol from Brazil, but the tariffs on that pretty much makes it irrelevant as far as U.S consumers go.

What's Different with Coskata?

So what's the big deal then? Coskata, Inc. is working on a way to produce cellulosic ethanol, which is a fuel which can be produced from a variety of materials like wood, waste, switchgrass, among many other things.

While the ethanol produced from this process is basically the same as from corn or sugar, the processing of the material is more intense, so at this time the cost is even higher than its counterpart.

The process involves using gasification and microorganisms to produce the cellulosic ethanol at what GM claims will be less than $1 a gallon. At this time that is close to half of what it takes to produce gasoline. Even so, it's about twice the cost of producing ethanol from corn or sugar, which is still cost prohibitive for the average consumer.

One major problem with all of this is the up and down nature of the market. Every time there are signs the cost of oil is going up, all these types of actions are taken. Once the price settles down, interest wanes and it's back to business as usual.

Some think the energy bill signed by President George W. Bush last month which will force oil refiners to blend 36 billion gallons of renewable fuels into America's fuel supply by 2022 makes this a winner. It will require 36 billion gallons in use by that date, and of that, 16 billion must be from cellulosic ethanol.

The problem is that is like telling someone 5'10" tall they have to grow to 6'4". While it may be a law, it doesn't mean it's going to happen. It's not a matter of compliance, but of practical reality. I'm not saying it can't work, I'm saying there are so many variables and unintended consequences that could come out of this, that it could force all of it to change; law or not.

According to GM, Coskata may have this type of alternative fuel available by 2011. That's the absolute earliest. At that time they expect to be producing about 100 million gallons a year.

What's happening here is two things. The signing of the energy bill into law by President Bush is an attempt to create a market for cellulosic ethanol. With that in mind, General Motors is buying into a company that claims to have a way to commercially produce it.

The announcement at this time is a marketing ploy to make GM look environmentally friendly. When I say ploy, I don't mean it's not real, just at this time it's all wishful thinking and theory. Only time will tell if this is real as far as being commercially viable.

One other major obstacle is the installment of gas pumps using E85 (85 percent ethanol), the label of ethanol-based fuel. At this time of the over 170,000 gas pumps in the U.S., only 1,400 are E85 pumps.

Ethanol has a long way to go before businesses and people will be willing to adopt it.