Royal DSM NV, the Dutch enzyme maker which last month set up a cellulosic ethanol venture with Poet LLC, is seeking similar tie-ups in Brazil, China and Europe, Chief Executive Officer Feike Sijbesma said.
DSM last month said it’s providing half of the funding for a $250 million plant in Emmetsburg, Iowa, and Poet, the largest U.S. corn-based ethanol producer, is financing the rest. The factory, attached to an existing corn ethanol plant, will make up to 25 million gallons of ethanol from corn stover, the crop’s waste product.
“We want to expand this model into other regions in the world including Brazil,” Sijbesma said today in an interview in London. “Now we talk about the U.S., about corn stover. We can expand this to other regions of the world with other materials. We can go to Brazil, we can go to China, we can go to Europe.”
DSM is betting on so-called second-generation ethanol, which is made from grasses and agricultural waste rather than food crops, as one of two new “growth platforms” that combined can spur $1 billion of revenue for the Heerlen-based company in 2020, Sijbesma said. The new plant, which will open next year, could generate $100 million in sales by 2014, he said.
Sijbesma declined to specify if DSM is in talks with specific potential partners in other parts of the world, saying only: “We know this whole industry. The whole world knows us.”
DSM’s venture with Poet helped force down the shares of Danish rival Novozymes A/S, which had been working with the U.S. distiller. Sijbesma said Poet’s existing contract with Novozymes will be “respected” and then phased out, with DSM supplying both the enzymes and yeast for the Emmetsburg facility. The intention then is to license the technology to other ethanol producers, and Poet’s other plants, he said.
The enzymes used to make cellulosic ethanol currently cost more than 50 cents per gallon, and DSM expects to bring that down to 30-35 cents “in the longer term,” according to Sijbesma. Novozymes Chief Executive Officer Steen Riisgaard said last year that the enzyme costs amounted to about 50 cents per gallon.
The U.S. Environmental Protection Agency sets annual mandates for the amount of cellulosic ethanol that must be blended into gasoline, and has had to reduce the target for the past two years because of a lack of commercial production of the fuel. The mandates will allow for 200 to 300 second-generation plants to be built, according to Sijbesma.
“Every year they will look how much production there is for second-generation biofuels and they will say that amount has to be mixed,” he said.
Riisgaard last year predicted 2013 would be the year second-generation biofuels take off, with the first commercial plants, including plans by Poet, London-based BP Plc and Abengoa SA of Seville, Spain. Sijbesma said DSM was motivated to invest in the Poet facility to help create the market.
“We have talked about second-generation biofuels already for years and it is not happening,” Sijbesma said. “You can have enzymes and yeasts but if it’s not happening, then you can supply to nobody. At the end of the day you need to push the boundary to take a step forward.”