Value Chain Challenges of The
Biobased Economy
9 October, 2007
ESF Forest
Biorefinery Conf.
Jack Huttner
Vice President,
Biorefinery Business
Development
Switchgrass
Corn stover
Sugarcane
AGENDA
• Background on Genencor
• Strategic Commercial Drivers
• Strategic Technology Developments
• Genencor’s Commercial Strategy
2
Genencor Division at a Glance
Develops and produces enzymes for
industrial applications
¾ History traced to 1982
¾ May 2005: Danisco–Genencor Division:
responsible for production, innovation,
marketing and sales of industrial enzymes.
¾ 9 Bioproducts manufacturing sites
¾ Proven innovator ~3500+ owned and licensed
patents and patent applications
¾ Approximately 1200 Employees Worldwide
3
Genencor’s Products In Everyday Life
Innovative and Cost Effective
Catalysts for Many Major
Industrial Segments
Delivering on the Promise
of Biotechnology for Over
a Two Decades!
– Cleaning
– Textiles
– Carbohydrate Processing
– Fuel Ethanol
– Brewing
– Leather
– Baking
– Pulp and Paper
– Food and Specialties
– Biorefineries
4
Our Vision of the Biobased Economy
We envision a future where biotechnology fulfills many unmet
needs…
–
–
In development and deployment of industrial enzymes
In the production of fuels, chemicals and materials
We envision a future where biotechnology helps create
sustainable industrial activities
We envision a future where biorefineries take their place
alongside oil refineries
5
AGENDA
• Background on Genencor
• Strategic Commercial Drivers
• Strategic Technology Developments
• Genencor’s Commercial Strategy
6
Fuel Ethanol Market Drivers
• Environmental
–
–
–
–
Carbon constraints
Positive energy balance
Ecological efficiency, sustainability
Cellulosics replace starch from food crops
• Societal
– Desire to reduce foreign fuel supply dependence
– Rural economic development
– Desire for local farmer co-ops to become more vertically integrated
• Economic
–
–
–
–
–
High crude oil and gasoline cost
Solid return on investment
Improved economics of production
Tax Incentives
Technological advances and process improvements
7
Why Biofuel from Cellulosics?
US gasoline replacement
160
BGPY gasoline
140
Bush SOTU target: 30% (45BGPY)
120
100
80
12-15 BGPY limit
for starch ethanol
60
40
20
0
0
20
40
60
80
100
120
% Gasoline Replacement.
(All USA information.)
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McKinsey (Riese) Slides
BIO World Congress – March 2007
9
A New Industry Needs A New Paradigm
Cellulosic ethanol will not be like starch ethanol
• Enzyme solutions will be specific to each substrate &
integrated solution
• Enzyme dosing is 50-100x higher than for starch
– Biomass much more recalcitrant to hydrolysis (speed)
• Transportation costs are a significant factor for raw
materials, incl. enzymes
Enzyme production
should be proximate
or co-located with
biorefineries
– Optimal catchment area?
• Readily available (collected) substrates likely early
winners
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Renewable Carbon:
Theoretical Ethanol Yields
Feedstock
ethanol yield / dry ton*
Gallons
Liters
Cane bagasse
112
424
Corn stover
113
428
Rice straw
110
416
82
310
Hardwood sawdust
101
382
Mixed paper
116
439
Forest thinnings
Note: Cellulose & hemicellulose utilized (C6 & C5 sugars)
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Biomass Value Chain Integration Status
Corn stover,
bagasse, pulp, etc.
FEEDSTOCK
Mechanical or
thermo chemical
PRETREATMENT
ENZYME
HYDROLYSIS
Current
GCOR role
No infrastructure for some
No collection implements
Process choice needed
Complex sugars to
simpler sugars
FERMENTATION
Yeast to ethanol (C-6)
END PRODUCTS
FEEDSTOCK
PRETREATMENT
Enzymes tuned to feedstock
& pretreatment
ENZYME
HYDROLYSIS
Need to utilize C5 sugars
Ethanol and other biochemicals
FERMENTATION
END PRODUCT
12
Value Chain Implications
• Feedstock:
– Crop residues
• First plants will be built near existing facilities
• Close ties to conservationists will be required to study effects/maximize yield
– Producers’ share (biomass delivered price @ biorefinery gate???)
– Existing collected biomass feedstocks – will require new business models in mature
industries
– Higher yielding biomass crops will be the natural trajectory
• Enzymes:
– Capacity
• Not likely be built on speculation
• Most likely built near the point of use
• Advances will lower the capacity required over time
– Enzymes technology will have a greater impact than just “cost of enzyme/gal EtOH”
• Total enterprise capital
• Pretreatment and ethanologen design & efficiency
• Operating cost (e.g. energy and raw materials)
13
McKinsey (Riese) Slides
BIO World Congress – March 2007
14
AGENDA
• Background on Genencor
• Strategic Commercial Drivers
• Strategic Technology Developments
• Genencor’s Commercial Strategy
15
35
0.8
30
0.7
0.6
25
0.5
20
0.4
15
0.3
10
ETOH Cost, USD/Litre
Sugar Cost, US Cents/Lb
Context: Sugar & Ethanol Costs
Sugar Cost
ETOH Cost
0.2
5
0.1
0
0
EU
USA
IND
ZAF
AUS
THA
BRA
Source: Itau Corretora, Sugar & Ethanol Sector Report. 17 October, 2006
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Advanced Cellulase Development
Program
• Project Structure and Funding
– U.S. Department of Energy (DOE) funded >$15 million over
a 4-year period beginning in June 2000
– Sub-contract through the National Renewable Energy
Laboratory (NREL)
• Goal: Improved Low Cost Cellulase for Biomass
Conversion to Ethanol
– Original program targeted a 10-fold cellulase cost reduction
– Program achieved a 30-fold reduction
• Awards
– R&D Magazine, Top 100 Innovations, 2004
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Cellulase Cost Reduction: Challenges
•
Multiple Enzymes with various weaknesses
•
•
•
Protein engineering challenges
Novel catalyst identification challenges
Strain assembly challenges
•
Pre-project cellulase strain (Trichoderma) production yield “best in the
industry”…. yet cost of hydrolysis step was far from realistic
commercialization goal
•
Limited knowledge of Trichoderma genomic sequence; limited toolset for
host development
•
Complex, recalcitrant substrate
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Integrated Plan of Action
Production Strain
Enzyme Performance
• Choice of Organism
• Regulation of Expression
• Induction
• De-repression
• Genomics
• Novel Cellulolytic Activities
• Enzyme Discovery
• Generation of Diversity
• Protein Engineering
• Assays and Screens
Cellulase
Cost
Reduction
Production Process
• Host Engineering
• Fermentation Process Development
• Breakthrough Production Economics
• Product Recovery Manufacturing Economics of Scale
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500
450
Combined Enzyme step cost drop ~30X
$/gal EtOH (NREL Metric)
400
350
300
250
2.3X
200
150
100
11X
50
20X
30X
0
0
10
20
30
40
50
60
Program Months
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Biomass Products in the Pipeline
• First true biomass enzyme for cellulosic ethanol production in the
near term
– Potent enzyme complex enhanced for broad substrate application
– Ability to operate in simultaneous saccharification and fermentation (SSF) or two step
sequential hydrolysis and fermentation (SHF)
– Significantly enhanced performance over existing products
• Target market: serving an unmet need
– Process developers designing pilot and demonstration plants
– Allows for process design around known enzyme parameters
• Further improvements are on-going to meet the demand for
– Improved performance
– Lower cost
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AGENDA
• Background on Genencor
• Strategic Commercial Drivers
• Strategic Technology Developments
• Genencor’s Commercial Strategy
22
System (Enterprise) Level Solution
Enzyme hydrolysis is best deployed as part of an
integrated solution…..
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Ranking & Screening Opportunities
• Focus on substrates already collected & processed
–
–
–
–
Sugarcane bagasse
Wood chips, paper pulp, short fiber pulp waste
Grain fibers (corn, wheat, etc.)
Sugar beet pulp
• Efficient logistics needed for substrates that need collection
– Corn stovers & corn cobs
– Wheat straw
– Energy crops
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Exploring New Business Models
Genencor’s value proposition:
We will build and deliver to our partners a sustainable advantage in
protein production and enzyme performance so that the biorefinery
operates at optimal efficiency.
• Enzyme production integrated into the biorefinery
– Dedicated production capacity
– Shared location & infrastructure
• Sharing value
– Enzyme improvements will reduce Capital Expenses & Operating Expenses and
make the biorefinery more profitable
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Complex Issues Now @ Forefront
• Integration of all technologies…..
• Supply Chain
–
–
–
What will drive raw material availability?
What incentives or guarantees will be required?
What is “value” of each player’s contribution
• Demand Chain
–
–
What in addition to ethanol will provide the best value to
investors?
What will it take for them to be accepted in the market?
• Investment
–
–
What is best mechanism to allow regional/local investors
to participate?
What is the role of investment types (angel, traditional,
etc.)
• Derisking funds – federal and state (pioneers face
huge risk)
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Conclusions
• Most cellulosic biomass technology
advancements now being done at the system
level
• New business models & value sharing
schemes are needed
• Enzymes:
– Supply source will be critical
– Tremendous room for improvement at system level
• Feedstock:
– “Chicken and egg” issue may lessen soon for uncollected
feedstocks
– Significant potential for improvement in crop residue and
dedicated crops
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Thank you.
jack.huttner@danisco.com
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