IN BILL Forsyth's 1983 film classic Local Hero, a Scottish fishing village is turned upside down by the arrival of a Texan oil giant with a lorryload of cash and blueprints for a refinery.

Wissington, near Downham Market in Norfolk, finds itself in a similar position after being singled out by the combined forces of BP, American chemicals giant DuPont and Associated British Foods as the shop window for their latest combined foray into the fast- growing biofuels market.

A hundred years ago, British agriculture was a major producer of road transport fuels - oats and hay for horses. Now with the backing of big business, British farmers are again poised to keep us on the move by producing renewable and sustainable fuels, ethanol, biodiesel and the new kid on the block, biobutanol.

BP and Du Pont said this week they are linking to develop the next generation of alternative fuels in Norfolk, converting an ethanol fermentation plant owned by ABF's British Sugar arm to produce biobutanol.

According to BP, biobutanol answers some of the problems left unsolved by the main biofuel on the market, bioethanol. It can be blended with petrol in higher concentrations, without the need to modify existing vehicles and it is less prone to contamination with water.

That means it is better suited to being used within existing tankers and pipelines, which is a big attraction for a business such as BP with a massive sunk investment in the existing fuel distribution system. It is the latest development in a land-grab by some of the world's biggest energy players and investors that has sceptical observers drawing comparisons with the huge misallocation of resources during the dot.com boom.

From oil majors to investment banks and hedge funds, everyone wants a slice of alternative energy. Whether they will plough money into white elephant infrastructure left behind by events remains to be seen.

The race to find the ''green gold'' of tomorrow is big business. Bruce Huber, head of European technology at investment bank Jefferies, thinks $5bn ( pounds 2.75bn) has been invested in alternative energy projects since the beginning of last year, about 15pc of which has been in biofuels research. He is confident that the investment will pay off, pointing to a forecast by Royal Dutch Shell that only around a third of the world's energy needs will be provided by traditional fossil fuels in 2060. Shell thinks the biggest single energy source then will be the most abundant of all - the sun.

A report to be published by Thomson's Project Finance International next week will show that $35bn of debt has been raised for alternative projects since 2000, with such leading banks as WestLB, CSFB and Goldman Sachs all busy channelling funds into this latest investment boom.

Recently, the flotation of VeraSun, a Dakota-based ethanol producer soared in first dealings, jumping 30pc ahead of its flotation price, which itself was higher than expected. Next week, China Biodiesel floats on Aim, having raised pounds 8m to build a second biofuels plant in Fujian province. It joins a growing cohort of biofuels plays on London's junior market such as Biofuels Corporation and D1.

As Rod Morrison, Thomson's director of Project Finance, says: "The renewables business is moving from cottage industry to mainstream corporate act-ivity. The commercial activity of private developers and funders is accelerating fast.''

The rising price of oil, and trouble round the world have made alternatives viable. All developed countries, even Kyoto-refuseniks such as the US and Australia, now have programmes for cutting CO2 emissions and are using regulation and tax to boost investment in alternatives.

In Japan, petrol must include 3pc ethanol, with a long-term target of 10pc of all auto fuel coming from biomass products by 2030. Europe is aiming at 5.7pc biofuel content by 2010. In America, the E85 blend - 85pc biofuel, is growing in popularity. And technology is moving on apace.

The coincidence of these factors has created a fertile backdrop for an investment goldrush. In the US, 30 new ethanol refineries are being built, to add to the 100 that already consume a fifth of America's corn harvest.

New Energy Finance, a renewables information provider, says biofuels have pushed wind aside as the focus of renewable energy investment. Private equity sponsored investment here hit almost $1bn in the first five months of this year, from next to nothing a year ago. Wind energy investment has gone the other way: from $900m to just $24m. No one would argue against the need to plan ahead for a post-oil world. But sceptics wonder if the benefits of biofuels have been overplayed.

Moreover, well-intentioned legislation and tax-breaks could tie farmers to crops that are no longer at the cutting edge of biofuels technology. They could also encourage home-grown crops such as sugar beet and corn when the most efficient producers of energy are tropical plants such as Brazilian sugar cane and south-east Asian palm oil. We could simply replace oil imports with crop imports.

Biofuels are a leveraged play on the oil price, which could explain why BP's $500m on biofuels research over 10 years is dwarfed by the $50bn on oil exploration and production in the next five. Don't hold your breath for Local Hero 2 in an East Anglian sugar beet factory.