By Frances Schwartzkopff
Nov. 7 (Bloomberg) -- A solution to the world's energy problems may lie in a Chinese mushroom growing in Novozymes A/S laboratories.
The Danish company's scientists in China, Brazil, Denmark and the U.S. are testing mushrooms and lichen to find one that will turn corn cobs and sugarcane stalks into biofuel. An affordable alternative to gasoline made from plant waste would end concerns that global hunger for energy is driving up food prices worldwide.
Novozymes said it will find the answer by 2010, getting to the market before its closest rival, Danisco A/S.
``We're not going to solve today's energy shortage with food,'' said Per-Henrik Graesberg, a DnB NOR ASA fund manager who directs almost $200 million in renewable energy investments. Graesberg is considering buying Novozymes shares after selling off earlier this year. Second-generation biofuel ``is one of the main reasons'' to invest in the sector, he said.
Fungi like mushrooms and lichen make enzymes to eat rotting logs and decaying leaves. Biofuel producers use the proteins to break down the complex carbohydrates in plant cells into a soup- like mixture of simple sugars that yeast can eat. In a process much like making beer, yeast ferments the mixture, producing ethanol. Enzymes now on the market can't break down the tougher parts of plants effectively enough to be affordable.
Earlier this year, record-high prices for corn and wheat undermined government support for biofuel, which depends on subsidies, and caused shares of enzyme makers to drop. Novozymes, the world's largest maker of enzyme products, lost almost half its value from August 2007 to mid-April in Copenhagen trading. The shares are down about 30 percent this year.
Major Bottleneck
Finding the right enzymes is ``the major bottleneck'' in developing fuel from non-food sources, the Paris-based Organization for Economic Co-operation and Development said in July.
Novozymes stock pared its loss after DuPont Co., the third- largest U.S. chemical company, said it planned to build a pilot plant with Danisco to make second-generation biofuel. Since then, a European Union panel has approved new biofuel standards and the Food and Agriculture Organization of the United Nations called for more research into the energy source.
``In 2010, we will have enzymes commercially available and a process that will allow our customers to produce at around $2.50 per gallon,'' Novozymes Chief Executive Officer Steen Riisgaard said in a September interview in Copenhagen.
The company increased its research department by 13 percent last year, and now almost one in 10 of its 900 scientists and assistants are seeking the right enzyme product that can work in an industrial setting.
Chinese Search
Last May, Novozymes microbiologist Wenping Wu led scientists from farm to farm in northeast China, searching through piles of decaying corn stalks for new kinds of fungi.
The search is daunting because of the sheer number of fungi. Researchers have amassed 480,264 different kinds and say as many as 1.5 million species may exist. Each specializes in feeding at specific points in the cycle of decay, and can have anywhere from two to 100 different enzymes. Some fungi grow worldwide, while factors such as temperature, soil type and altitude limit others.
The perfect enzyme ``is not so easy to find in nature,'' said Wenping, director of Novozymes's department of microbial discovery. ``They survive in nature and do what they need to do, but they don't do what we need.''
Ethanol Production
The amount of ethanol used worldwide for transportation will climb sixfold in a decade, to 12 percent in 2017, the Rome-based FAO said in an October report. Novozymes supplied more than half the enzymes needed last year to convert food into 33 billion liters (8.7 billion gallons) of bio-ethanol. About 62 billion liters was produced overall, the OECD said.
``The No. 1 producer of first-generation biofuel enzymes is Novozymes and will be Novozymes,'' Rune Dahl, an analyst at Sydbank, said. ``Danisco is still the little brother in all aspects.''
In one day scavenging compost outside the city of Changchun, Wenping found 53 different fungi. Only one may turn out to have enzymes that will convert corn waste, said Wenping, who is based at Novozymes's headquarters in Bagsvaerd, Denmark. Scientists tested the fungi's enzymes to measure how long they took to break down coarse, brown plant matter the size of coffee granules, and what sugars were produced.
Novozymes also maps each fungus's genes to locate the instructions for enzyme production. Once found, a process that could take up to six months, researchers will insert the genes into bacteria that are genetically engineered to mass-produce enzymes for even finer testing.
Natural Defenses
The scientists are running up against plants' natural defenses. Lignin, found in corn's stalks and leaves, is made up of the toughest tight-knit cells in the plant, because it's designed to protect the seeds for reproduction and to resist invasion from, among other things, fungi.
Novozymes's researchers are trying to overcome that natural obstacle by tinkering with the enzymes' chemical makeup and mixing together different kinds to see if the combinations break down the sugars more quickly.
In addition to Danisco, the scientists are also racing against companies that are trying to develop biofuels using other methods such as turning biomass into gasoline using high temperatures. Novozymes executives say they have made it plain to the researchers the importance of getting the enzymes to the market before another method is shown to work.
``We put a lot of pressure on them to be out there first,'' said Peder Holk Nielsen, head of Novozymes's enzymes unit. ``This is one of our must-win battles.''
To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzkop@bloomberg.net
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