Potentially dumb question, but why couldn't municipalities collect cut lawn grass for processing into fuel?
Off the top of my head it might have too much moisture content, so it works better for composting than as a fuel source. This gets into another aspect of alternative fuels, namely energy co-generation in incinerators. I remember seeing that cities in Japan get a positive energy balance from their incinerators, enough to provide power for public facilities like swimming pools (i.e., to warm up the water).
Municipal waste streams may provide another energy source, as you indicate.