Biofuel fuel pump

Danish companies see a big business potential in helping to curb the world's reliance on petrochemicals.

Danish companies see a big business potential in helping to curb the world’s reliance on petrochemicals.

Danisco AS and Novozymes AS, which together cover 70% of the world market for enzymes that go into making second-generation ethanol, are collaborating with ethanol producer Inbicon AS in manufacturing a biofuel that is being sold across Denmark.

The new fuel blend, which costs about ten U.S. cents more a gallon than regular gas, has been sold since late October by about 100 Statoil gas stations. “The extra cost is a bit more than normal, but not much. “It’s about the price of one Coke for a full tank,” says Danish motorist Carl, 44, who declined to give his full name.


The new fuel is a blend of gasoline and second-generation ethanol. If the experiment succeeds, it could become part of a business worth billions of dollars, say energy analysts.

The two companies supply enzymes to Inbicon, which produces the ethanol at a plant in western Zealand, Denmark. Whereas first-generation ethanol is made from plant products, such as corn, wheat and sugar beets, that could otherwise be used for food or feed, second-generation ethanol is made from agricultural waste materials—straw husks and leaves—and therefore avoids being embroiled in any fuel-versus-food controversy.

“We need to find ways to change the chemicals that go into the machines we use, in a way where we’re not dependent on oil,” says Tom Knutzen, Danisco’s chief executive, who believes developing second-generation ethanol will pay huge business dividends. “It’s humongous,” he says.

The two most common forms of biofuels are biodiesel and ethanol. Biodiesel, made by combining alcohol with vegetable oils or animal fats and recycled cooking grease, remains the biofuel of choice in Europe, while Ethanol is widely used in the U.S. As a result, Danisco wants to establish a significant presence in the U.S. market.

According to the Renewable Fuel Standard program implemented in 2005 and reconfirmed by President Barack Obama’s administration, 36 billion gallons of renewable fuels for use in the U.S. will be produced yearly by 2022, and Denmark wants a share. Currently, U.S. production of first-generation ethanol is about 12 billion gallons a year. But much of the gap is expected to be filled by second-generation ethanol—a business that management consultant McKinsey & Co. forecasts will be worth from $75 billion to $140 billion world-wide by 2020.

Aside from being Inbicon’s supplier, Danisco has a joint venture with DuPont Co. to develop second-generation ethanol. Mr. Knutzen says results from the trials of this project will be presented next year and he expects a commercial plant to be up and running in the U.S. by 2013. So far, Danisco and DuPont have invested $140 million since the joint venture was founded in 2008, he says.

Statoil’s second-generation ethanol project isn’t the only one of its kind. BP PLC, and Royal Dutch Shell are among other companies investing into advanced biofuels. BP bought a stake in Brazil’s Tropical BioEnergia SA and has said that it plans to transfer technology for second-generation ethanol to its mills in Brazil for the 2013-14 crop season. Shell has a joint venture with Brazil’s Cosan SA Industria e Comercio to accelerate the development of second-generation ethanol from cellulosic agricultural waste, although Shell says the project remains at an early stage.

In the Danish experiment to see if second-generation ethanol can replace traditional fuels at the pump, motorists using the Statoil stations now have the choice of Bio95 2G as well as regular gas and diesel that are sold alongside. Statoil says the experiment is already considered a success—on the grounds that the biofuel is now available and that despite the higher price consumers are buying it. The next step is to have more plants producing second-generation ethanol, Statoil says.

Involvement with a new biofuel is all quite a change for Danisco, which was founded in 1989 after the merger of several Danish companies with roots stretching back to 19th century sugars and distillery firms.

The 48-year old Mr. Knutzen runs Danisco out of an old sugar warehouse, now refurbished into the company’s headquarters, in Copenhagen.

Danisco sold the last vestiges of its sugar business last year and today makes its money by supplying enzymes, dairy cultures and enablers—emulsifiers that bind together vegetable oil and water—to the global food industries. Today, Danisco food ingredients or enzymes are included in ice cream and yoghurt, as well as laundry detergent and other products.

Now the company wants to put its knowledge of enzymes into getting the planet “off the oil,” Mr. Knutzen says.

It’s no easy task. To extract ethanol from plant waste is a tricky process. The enzymes, proteins that speed up the chemical process, are used to transform the plant waste into fermentable sugar and then into sustainable fuel. But with regard to second-generation ethanol, the big challenge is no longer the technology but developing a raw material supply chain, Mr. Knutzen says. Commercial plants will require large amounts of biomass that need to be harvested, transported and stored, he adds.

Mr. Knutzen says Danisco has an important role to play in reducing the world’s dependency on petrochemicals. “Of course, it not a question of one technology solving everything. You need all kinds of technologies, wind power, solar power, etc. But second-generation ethanol, for example, definitely takes care of the transportation sector. And that is a big part of the world’s sustainable future.”

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