When is 2nd generation coming ?7th Inter-Parliamentary Meeting on Renewable Energy

05-10-2007

Biofuels now …

… next, biomass to ethanol …

… biomass challenges …

… Beyond biofuels

AGENDA

Biofuels now …

Global bioethanol production growing stronglyGlobal bioethanol production growing strongly

0

2000

4000

6000

8000

10000

12000

14000

16000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Mio

Gal

ROW

China

Europe

North America

Brazil

Sources: US Energy Information Administration, F.O. Licht, Novozymes estimatesSources: US Energy Information Administration, F.O. Licht, Novozymes estimates

0

1

2

3

4

5

6

7

8

9

Billi

on G

allo

ns

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

U.S. Fuel Ethanol Production

USA Bioethanol boomEstimated

2007 production ~ 6.5bn

gal.

1

Source: 1 – U.S. Energy Information Administration/ Renewable Fuels Association; 2 - SJH & Company Inc.; 3 – Novozymes est.

1 Gallon = 3,785 liters

Jan 7, 2007

In operation 110

Construction 79

Proposed >200

American ethanol plants

Novozymes and biofuels

~10% of total revenues in 2006, ~12% of total H1 2007 revenues

20-25% growth over next 3-4 years

Largest supplier of enzymes to the fuel ethanol industry

Mainly an US business but Europe & Asia nice growth from lower levels

Collaborations in Biomass with industry leaders Poet Energy in the US COFCO in China Abengoa in Europe CTC in Brazil

… next, biomass to ethanol …

- There is a limit as to how much ethanol you can produce from grain and sugar

- You can produce much more ethanol from biomass

- If the ambitious objectives are to be carried out, we need to base production on biomass in order to produce sufficient amounts of ethanol

- Better utilization of agricultural production

- Biomass has superior environmental advantages because a larger part of the plant is used

Why biomass-based ethanol?

BIOETHANOL AND CO2 REDUCTION

Reduction of CO2 emission from producing and combusting 1MJ fuel 20

30

40

10

0Gasoline Conv. boilerCHP tech.

60

70

80

50

Energy fromstraw

2ndgeneration

85% savin

g

70% savin

g

45% savin

g

30% savin

g

Gasoline 1st gen. wheat starchg/MJ

2nd gen. wheat straw

Natural Gas

Oil Based < 10 ppm sulfur

2nd generation of biofuelbased on biomass

1st generation grain-based bio-ethanol & biodiesel

OilBased

<500 ppmsulfur

2005 10F 20F 30F

Hydrogen regenerative

~23%

~35%

~38%

~4%

2030 global vision for biofuel

Source: McKinsey Analysis

Latest quote from President Bush: “35 billion by

2017”

Cellulosic ethanol is taking off

Cellulosic ethanol developing worldwide

Three main regions have a head start in cellulosic ethanol:

the USA, China and Europe

All on-going pilot/demonstration plant projects experience very basic feedstock / logistics issues (supply chain, grinding, conveying, mixing…)

USA: New RFS of 35 bill. gal. by 2015 ~9-10% of total road transport fuel consumption 2030 target of 30% alternative fuels 6 to 8 final contenders for the DoE grant on the construction of 2 to 3 commercial

bio-refineries Overall, corn stover / fibers and wheat straw are the two types of feedstock

considered to hold the most potential Other companies are looking at woody substrates (sawdust, wood trimmings, soft

wood (pine trees, poplars), hard wood) or rice straw, citrus peels and urban waste Energy crops are being considered POET-Novozymes partnership No pilot plan running yet… but several will start up by the end of 2007

Cellulosic ethanol in Europe

EU Energy Strategy - 2020 targets: 20% renewable energy 20% reduction in GHG emissions 20% energy savings compared to

projections 10% binding min. target for biofuels

EU Biofuel directive: Encouarges member states to reach 5,75%

biofuel before 2010 Only 1,4% has been reached, but Member

States show increasing commitment Some EU Members have a biofuel share of 1+

%: AT, FR, SE, DE

Cellulostic ethanol status: A few pilot plants will run in 2007 and one

larger scale demonstration plant Main feedstock: wheat straw The drive is more technological and

opportunistic

Cellulosic ethanol in China

• E-10 required in nine provinces

• Current production ~0.25 billion gallons per year (2.3% of total Chinese consumption)

• Goal of 7.5% ethanol in 2010

• An enormous sense of urgency!

• A number of companies are going ahead in the cellulosic ethanol field (organisms, pre-treatment…)…only four companies have officially been granted a license to produce ethanol (subsidies for cellulosic ethanol are pending)

• COFCO – NZ partnership

Provinces:HeilongjiangJilinLiaoning

Province: HenanHebei

Provinces: HubeiShandongJiangsuAnhui

Cellulosic ethanol in the remaining worldLatin America•85% of all cars sold in Brazil are FFVs•Strong industry growth•Legislation on burning creating significant additional biomass increasing awareness of bagasse as an important biofuel resource

•Brazil focussing on export opportunities, target is 10% of the global demand

•International recognition of Brazil as key supplier and example of a sustainable fuel economy

•Major agricultural land expansion potential

•NZ partnership with CTC

Japan & Korea•Japan will be a net importer of ethanol from Brazil

•Biofuel target of 500 mill l. in place by 2010

•Limited feedstock availability due to limited agriculture. Wood is the primary possibility

South East Asia & Indian Sub.•Political drive for ethanol production from local feedstocks•Political instability limiting implementation of long term biofuel policy

•Biodiesel dominates the landscape due to feedstock availability

•Food for fuel debate will foster alternative feedstocks incl. lignocellulosic bionmass

Africa & Middle

East:•Potential major region for growing crops, incl. sugar cane

•No biofuels effort so far

… biomass challenges …

Cornstover

Enzymatichydrolysis

Glucose

Fermentation

Ethanol

Pre-treatment

Pre-treatedcorn

stover

What about the cost structure?

Showstopper?

Enzyme cost no longer dominates the picture

- Cost comparison after the BioEnergy Project: grain vs. biomass in USD/gallon ethanol, April, 2005*

-$1,00

$0,00

$1,00

$2,00

$3,00

$4,00

$5,00

$6,00

$7,00

Starch* Cellulose 1999 Cellulose 2005

*Modified from “Determining the Cost of Producing Ethanol from Corn Starch and Lignocellulosic Feedstocks”, NREL/TP-580-28893 joint USDA, NREL study released in October 2000.

Major cost reduction In enzyme price

Estimate for Nth-plant production, current cost based on lab-scale is $2-3/gal

Proteomic analysis of a cellulase producer

CDH

EG I

GH61C

EG IV

GH74

GH61D

CBH ICBH II

CBH I

EG V

SOD

GH61F

EG IIIGH61G

EG II

GH61B

Understanding GH61 ?

Pre-treatmen

t

EnzymeHydrolys

is

Fermen-tation

Collection

Recovery/

distillation

Enzymes are one of the keys to the process, but are no longer the major

barrier for biomass conversion

Biomass

FuelEthanol

From starch to sugar -> biomass based fuel ethanol

• Ethanol from cellulosic feedstock - market and technical leadership in the development of processes for the conversion of cellulosic biomass to economically viable ethanol. Pre-treatment, hydrolysis and fermentation expertise

• Extensive leverage from our manufacturing, R&D and marketing capabilities in Europe, North America, Latin America, India and China

• ”Cellulase Cost Reduction for Bioethanol” with the DoE as a subcontractor funded at 17.8 million USD

• Current further cellulase performance improvement through an unprecedented R&D effort

• Development of several hemicellulases

• Most importantly putting our enzymes to work through partnerships

Novozymes and cellulosic ethanol

How far to go before 2nd generation ethanol will be commercial?

The process need be up scaled from lab to factory Further reduction in overall process costs required First pilot plants are starting Larger scale demonstration plants on-line within 2-3 years Commercial plants on-line within 4-5 years

…… Beyond Biofuels

The future potential for sustainable solutions

Bio-PDO™ -DuPont/Tate& Lyle Joint Venture

Tomorrow has already started! Loudon Facility-

DuPont Tate & Lyle BioProducts October 2006

Conclusion

Novozymes is committed to actively participate in the commercial development of a viable biomass-to-ethanol process

Enzyme costs have been viewed as the major barrier for biomass conversion - this is no longer the case even though improvements still need to be achieved to make it an economically viable process

Continued enzyme research has delivered improved performance which translates into lower costs

Enzymes need to be integrated into the process developments in order to truly optimize the costs in conjunction with other parameters. We are teaming up with strong partners with complementary technologies and with whom we can develop the best solutions to achieve commercial success