E3 BioFuels announced yesterday that they would open the first "closed-loop ethanol plant" later this year. Closed loop means that all of the power comes from renewable resources (in this case, cow manure), instead of fossil fuels. E3 BioFuels' 25-million-gallon a year ethanol plant, coming to Mead, Nebraska this December, is being built as part of a complex that also includes a beef cattle feedlot. The system uses anaerobic digesters to turn grain to ethanol on-site. Vinod Khosla wrote about this plant in his recent WIRED article.
To be sure, you still need to feed the cows and grow the corn, steps which could be done using fossil fuels (and probably explains why E3 Biofuels' statement about their process says it " virtually eliminates the need for fossil fuels in the production of ethanol"), but it's very promising to see this sort of cohesive planning and recycling in ethanol production. If you want more information on the closed-loop system, click here.
[Source: E3 BioFuels]