Easy-To-Digest Enzyme Costs

Naureen S. Malik of Dow Jones writes:

NEW YORK (Dow Jones)—As the pursuit of biofuels not sourced from food crops intensifies, attention has zoomed in on small but consequential players: enzymes. These protein molecules are pivotal in the process that breaks down plant cells in order to extract sugars that later ferment into ethanol, a fuel that’s blended into gasoline across many parts of the U.S. While enzymes used to convert corn into ethanol are commonplace and relatively cheap, more powerful ones are needed to tap into the energy stored in corn stalks and other “cellulosic” products.

Bioengineering of enzymes to optimize the amount of sugar--and, thus, energy--they extract from various feedstocks “will be a game changer,” said Poul Ruben Andersen, director of biofuels marketing at Denmark-based Novozymes A/S (NVZMY, NZYM-B.KO), the world’s largest producer of enzymes. In addition to biofuel production, enzymes are used in the manufacture of paper, animal feed and detergents. Novozymes, which was spun off from pharmaceutical giant Novo Nordisk A/S (NVO) in 2000, is joined by Genencor, a division of food- and biotech company Danisco A/S (DNSCY, DCO.KO); Dyadic International Inc. (DYAI) of Jupiter, Fla.; and Canada’s Iogen Corp.

Enzymes are cellulosic-ethanol producers’ second-biggest expense after feedstocks, said Jim McMillan, research manager at the U.S. Department of Energy’s National Renewable Energy Laboratory. For cellulosic ethanol to be competitive with corn-based ethanol and gasoline, “you can’t be spending $4 a gallon on enzymes,” McMillan said. March futures contracts for ethanol were recently trading at $1.782 a gallon on the Chicago Board of Trade and gasoline was at $1.977 a gallon on the New York Mercantile Exchange.

Researchers are zeroing in on a type of fungus called trichoderma that secretes the enzymes themselves in a liquid form. No stranger to industrial use, trichoderma was used to produce the enzymes that replaced pumice stones to soften “stonewash” jeans.

The cost of enzymes used to make corn-based ethanol has fallen from $3-$4 a gallon in the mid-1990s to 70 cents today, said Gerson Santos, director of new technologies at Netherlands-based Abengoa Bioenergy S.A. (ABG.MC). A corn-ethanol producer that’s worked with Dyadic since 2006, Abengoa plans to break ground on a cellulosic ethanol plant later in 2010. Abengoa is close to bringing the overall cost of a gallon of cellulosic ethanol down to $2.

Meanwhile, POET, the world’s largest ethanol producer, has been experimenting with cocktails of enzymes from various companies, including Novozymes, said Dr. Mark Stowers, POET’s vice president of research and development. He expects cellulosic ethanol costs to fall below $2 a gallon by the time POET’s commercial-scale cellulosic plant, using corn cobs, starts production in 2011, down from $2.35 a gallon in pilot testing.

The Energy Department aims to bring the enzyme cost down to 12 cents a gallon of cellulosic ethanol. “It could be the largest single market for enzymes, period, if it was fully scaled up,” McMillan said, estimating that every billion gallons of cellulosic ethanol would require $100 million in enzymes. The Energy Department awarded $33.8 million in grants related to cellulosic ethanol in 2008.

Novozyme’s Anderson said the company’s cellulosic-ethanol enzymes costs close to $2.25 a gallon, down from $4-$6 a gallon a few years ago. Corn-ethanol enzymes account for 18% of Novozyme’s $1.6 billion sales in 2009.

“The opportunities for cellulosic ethanol are considerably larger than 18% of our sales,” he said.