August 24, 2009

Novozymes A/S, already the world's largest supplier of industrial enzymes, is gearing up for pole position in China as the country ponders its strategy for second-generation biofuels production.

 

Bagsvaerd, Denmark-based Novozymes, which was spun out of Danish pharmaceutical company Novo Nordisk in 2000, is working with Chinese partners to contribute to the country's adoption of non-food renewable fuels to meet growing demand for fuels without competing with the food supply.

 

"We've been invited by the National Development and Reform Commission to, with Xinhua University and General Motors [Co.]...create a roadmap for cellulosic fuel for China," said Steen Riisgaard, chief executive of Novozymes, in an interview with Clean Technology Insight.

 

Novozymes also entered into a cooperation agreement in February 2009 with China Petroleum & Chemical Corp. or Sinopec, and China National Cereals, Oil & Foodstuff Corp., or Cofco, to develop commercial-scale ethanol production from agricultural waste, specifically corn stalks and cobs.

 

As it prepares to roll out commercial volumes of its enzymes designed to break down cellulosic materials next year, Novozymes believes that China's adoption of the technology would make the country a producer of second-generation ethanol at competitive prices by 2015.

 

"Gasoline is more expensive in China and construction is cheaper," said Riisgaard. "We've put our heads together and say that in five years China will be a competitive producer."

 

According to a McKinsey & Co. report commissioned by Novozymes, cellulosic ethanol can potentially replace 31 million tonnes of gasoline in China by 2020, or about 10 percent of gasoline consumption in the country.

 

To achieve that output, investments of approximately 90 billion yuan (US$13 billion) are needed in the next five years, the study says. The industry will also require a steady supply of biomass, which means the engagement of farmers, who in turn will take the cue from the government involvement in the endeavour.

 

Novozymes believes that involvement is likely, especially as China prepares for the United Nations Climate Change Conference in Copenhagen later this year. The country, which is under pressure to reduce emissions, could come armed with its cellulosic ethanol plan to appease critics, said Riisgaard.

 

"As I read it, [China] will somehow combine it with the negotiations on climate change," he said. "I believe they'll want to come with the technology."

 

Already, the involvement of Cofco and Sinopec, and the interest of the NRDC, signal some of the challenges over biomass supply and refineries' construction can be overcome in the timeframe predicted by Novozymes, he said.

 

Cofco is a state-owned, large grains and oils trader and food manufacturer in China, and is already building a pilot cellulosic ethanol plant. The company is a producer of corn-based ethanol and is ideally set up to establish a system to collect corn stover for cellulosic ethanol processing, said Riisgaard.

 

Sinopec has deep engineering know-how and fuel distribution capabilities that would help integrate cellulosic ethanol into the fuel mix, he said.

 

Novozymes and its partners will present the roadmap to the NDRC in September, Riisgaard said. The NDRC is the Chinese government's agency in charge of setting policies for economic and social development. It operates under the State Council, the highest executive office in the country, the staff of which will also be offered a presentation by Novozymes and its partners on cellulosic fuel, said Riisgaard.

 

The roadmap document builds on the McKinsey study, which predicts that around 6 million jobs could be created in rural areas by 2020, with the setting up of a second-generation ethanol industry. The report said the industry could also create up to RMB96 billion in engineering and construction investments in the next decade. The study also found that China has the potential to supply 200 million tonnes of agricultural crops residue to produce 55 million tonnes of cellulosic ethanol.

 

Novozymes is no novice in China, and has been producing and selling enzymes in the country since 1995. China is Novozymes' second largest market after the US, with clients in the detergent, baking, textile, leather and corn-ethanol industries.

 

The company has been developing enzymes to tackle cellulosic materials to help production shift into the next generation of non-food renewable fuels.

 

The enzymes are a major cost of cellulosic ethanol but Novozymes' products are achieving enough of a productivity rate that it will allow production of cellulosic ethanol at $2.25 per gallon next year, said Riisgaard. With the existing subsidies in the US, that means cellulosic ethanol is competitive with crude oil prices at US$60 per barrel, he said.

 

The achieved productivity also means it will take fewer loads of Novozymes' products for processing the cellulosic material. That means that facilities won't require on-site enzyme production, as the industry had believed would be the case, thus reducing the construction cost.

 

As an example of how much enzymes are required for ethanol production, it takes approximately 20 tonnes of enzymes for a 50 million to 100 million refinery of corn ethanol, or deliveries two to three times a week, depending on the facility's size.

 

At first, it will take twice the amount of enzymes to process cellulosic materials into sugars as these are more complex structures, but over time Novozymes hopes its research will lead to ever-greater levels of efficiency.