Race for key biofuel breakthrough intensifies

By Teis Hald Jensen - Analysis

COPENHAGEN (Reuters) - Enzyme makers Novozymes (NZYMb.CO: Quote, Profile, Research, Stock Buzz) and Danisco (DCO.CO: Quote, Profile, Research, Stock Buzz) are likely to step up a research battle to be first with a key technology to free bioethanol from its dependency on food and create a new billion-dollar industry.

The two Danish companies, market leaders in first generation bioethanol enzymes, are racing to develop a next-generation product to allow ethanol production from food waste inedible by humans, such as corn cobs, sugar cane leftovers and straw.

The global market for so-called cellulosic ethanol enzymes could be worth some $8.8 billion (42 billion Danish crowns) by 2020, according to analyst Martin Sikorski from Cheuvreux -- a huge sum given that the global market for all types of enzymes is now only worth around 15 billion crowns.

"So there is a reason for all this hype and excitement," Sikorski said.

He bases his estimate on Danisco's expectation that global demand for cellulosic ethanol will hit 35 billion gallons in 2020 and Novozymes' forecast that the enzyme price will fall to 20-30 U.S. cents a gallon of cellulosic ethanol in 2020 from 40-50 cents per gallon in 2010.

Commodity analyst Alan Bullion from F.O. Licht expects cellulosic ethanol to be produced on a commercial scale in three to four years and to reach the politically set goal of 21 billion gallons annually in the United States in six to seven.

Brazil is also expected to be a major producer of the new biofuel, primarily from sugar cane bagasse -- the remains of the plant after the sugar is removed.

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