The race to produce commercial scale cellulosic ethanol just got another player, and this one could have the backing to go up against any of the biggest competitors on the track.

Wilmington, Del.-based DuPont [1] (NYSE: DD [2]), the No. 3 chemical maker in the U.S., and Copenhagen, Denmark's Danisco, one of the world's largest producers of food ingredients, have formed a joint venture to develop and commercialize a low-cost technology solution for the production of next generation biofuels.

The companies said the venture would integrate technologies from DuPont with technology from Genencor [3], Danisco's Rochester, N.Y.-based biotechnology unit.

"DuPont really represents state of the art technology when it looks to the pretreatment and the fermentation technology, and we on the Danisco-Genencor side have the enzymes technology," said Tom Knutzen, CEO of Danisco, in a conference call.

The companies are putting an initial $140 million into the 50-50 joint venture, called DuPont Danisco Cellulosic Ethanol, to be headquartered in the U.S.

The new venture comes as a number of large companies are investing in cellulosic ethanol.

Most recently, Detroit's General Motors [4] (NYSE: GM [5]) announced its second investment in the next generation biofuel, making an undisclosed investment in Boston-based startup Mascoma [6] (see GM takes stake in Mascoma [7]).

Mascoma raised $61 million in that third round of funding, with another deep pocketed investor, Houston's Marathon Oil (NYSE: MRO [8]), putting $10 million into the round.

Earlier this year, GM invested in Warrenville, Ill.-based Coskata [9], another cellulosic ethanol startup (see Khosla-backed Coskata, EcoMotors come out of stealth [10]).

GM did not disclose its stake in Coskata, calling that investment "significant" at the time.

In January, another supergroup got together on next generation biofuels, with Stuttgart, Germany-based Daimler [11] (NYSE: DAI [12]) partnering with Decatur, Ill.'s Archer Daniels Midland [13] (NYSE: ADM [14]) and Monheim am Rhein, Germany-based Bayer CropScience [15], a unit of Bayer (OTC: BAYRY [16]), to research the use of of jatropha as a feedstock for biodiesel production (see Daimler, ADM, Bayer to look at jatropha [17]).

But Knutzen said he doesn't think DuPont and Danisco are playing catch up, but are ahead of the game.

He said their new venture is "allowing us to have a seamless interaction, and exploit those technologies that are interdependent to come up with a low-cost solution."

And since the venture is expected to license its technology directly to ethanol producers, DuPont and Danisco could end up working with its competitors.

"We're actually open to deploying this technology to, I might say, anybody that's out there that wants to engage with us and utilize this technology," said Knutzen.

The funding will cover the first three years of the venture, which will initially target corn stover and sugar cane bagasse as feedstocks, with the cash going toward research and development and the construction of a pilot plant in the U.S.

That pilot plant is expected to be operational in 2009, with a commercial scale demonstration facility to be up and running by 2012.

The cost of the larger scale plant is not included in the initial funding for the venture and was not disclosed.

"When we talk in the corn cob area, we envision that in today's scenario, a commercial demonstration plant would be in the 20 to 30 million gallon range," said Knutzen.

This isn't the first time the companies have worked together. In 1995, DuPont and Genencor partnered to develop a fermentation biocatalyst that produces propanediol.

The companies said it was one of the first commercial-scale industrial applications of metabolic engineering designed to make a 100 percent renewably sourced material from corn starch.

Under the new venture, in addition to coming up with technology for full scale cellulosic ethanol production plants, DuPont Danisco will also be working on a "bolt-on" package, which could expand the capacity of existing ethanol plants to accept cellulosic feedstocks.

The companies said the venture would initially target markets in the U.S., Brazil, the EU, China and India.