Qteros, which has a method for creating ethanol from naturally occurring microbes, has signed a partnership to bring its technology to market in India.

The Marlborough, Mass.-based company is expected to announce on Wednesday a joint product development deal with Pune, India-based Praj Industries.

Qteros initially plans to make ethanol from the byproduct of sugar cane processing.

In two years, Praj and Qteros aim to develop a system using Qteros technology which can be licensed to companies that build cellulosic ethanol plants.

In addition, Qteros said it has raised $22 million, which is the first tranche of a series C round of funding.

Qteros was started as a University of Massachusetts spinoff in 2006 to make ethanol from non-food feedstocks, such as agricultural residue and wood chips. The company founder, Susan Leschine, identified a microbe which has properties that promise to short-cut traditional ethanol production.

The microbe produces the enzymes needed to convert plant matter into sugars and ferment them into ethanol, explained CEO John McCarthy. That streamlined process, called Consolidated Bioprocessing, makes it cheaper than many competing methods, he said.

In the deal with Praj, the two companies will develop an engineering design package which can be licensed to other companies that build ethanol refineries, McCarthy said. Both companies will share in any revenue from licensing, he explained.

Praj has already built about 450 ethanol mills in India, which means that its current customer base is a likely customer for the cellulosic ethanol technology, McCarthy said. Instead of using sugar cane as a feedstock, those plants could create an additional facility to convert bagasse--the by-product from sugar cane ethanol processing--as a feedstock.

The development of cellulosic ethanol on the whole has been disappointing in the U.S., with many companies, including Qteros, falling short of their original targets. In 2007, the U.S. set aggressive targets for "advanced biofuels" which covers ethanol not made from corn but the technology is still not done at commercial scale.

McCarthy said that progress of cellulosic ethanol companies in the U.S. is unlikely to move ahead rapidly given the dependence on government loan guarantees and grants.

He expects the first commercial-scale deployments will be done in Brazil, China, and India where ethanol producers can add cellulosic ethanol refineries to existing plants. Initially, Qteros expects its process to work with sugar cane bagasse and other agricultural residue but ultimately dedicated energy crops will be used.