Inedible Crop Biofuels Need Government Mandate, Novozyme Says

Source: By Louise Downing, Bloomberg • Posted: Wednesday, September 3, 2014

Efforts to spur use of clean fuel from inedible crops will fail unless governments force oil companies to offer it to consumers, according to Novozyme A/S, developer of technology to reduce the cost of biofuel output.

“The issue is access to consumers and you see that clearly in the U.S.,” Chief Executive Officer Peder Holk Nielsen said. “Oil companies don’t promote this technology and they are the only interface to the consumers as they control gas stations.”

In the U.S. the Environmental Protection Agency is eight months past a deadline for a biofuel mandate forcing refiners to add specified amounts of clean fuel each year into motor fuels.

Companies like Chevron Corp., BP Plc, Royal Dutch Shell Group Plc and ExxonMobil have struggled achieve commercial-scale output of non-food biofuel and waste as they need more refining than food plants to break down tough cellulose. Novozymes is developing enzyme technology that cuts costs and raises yields.

“Advanced biofuels will be a very, very hard sell outside those countries where the energy sector is state-controlled unless politicians get on top of it and mandate the use,” Nielsen said. “That doesn’t mean subsidies, it just means that if they don’t mandate the use of it, the oil companies will always conclude that they would rather sell gasoline.”

The first-generation of biofuel made from edible crops has been blamed for raising food prices. The European Union in June proposed to cap the amount such fuel can contribute toward its 2020 target of 10 percent renewable energy in transport at 7 percent. It also proposed that member states set targets for advanced biofuels at 0.5 percent of total transport-energy use.

“A mandate in Europe on advanced biofuels is a battle with the oil companies,” Nielsen said in London. “This comes down to how much does the world really want to replace fossil fuels with renewables. It doesn’t have to be expensive but it will require political will to make it happen.”

Novozymes and Dong Energy AS in July won 39 million euros ($51 million) from the EU to build a plant in Denmark that will use straw to make clean fuel. A final decision on whether to proceed with the facility is expected in the last quarter and depends on whether EU states provide enough support.

The company expects to sell enzymes to at least 15 biomass conversion plants by 2017. It’s already supplying enzymes to a bioethanol facility operated by Beta Renewables SpA in Italy, Nielsen said. He believes Beta will roll-out another 15 to 25 facilities and that would represent about 1 billion Danish kroner ($176 million) in annual sales for Novozymes.

After the initial wave of 25 plants, Nielsen says he hopes advanced biofuels will be cost competitive with gasoline.

“Advanced biofuels is a transformative part of our business, where we see long-term growth,” he said. “Corn ethanol is a great growth journey but it won’t transform the world of industrial biotechnology.”

Novozymes enzymes are also used in pharmaceuticals, food and drink, farming and household goods like cleaning products.