ORLANDO - Novozymes, a Denmark-based manufacturer of industrial enzymes, said it has developed a new enzyme that will enable cellulosic ethanol producers to make the fuel for less than $2 a gallon. 

The company announced the breakthrough in Denmark and at the National Ethanol Conference in Orlando this week.

According to the company, Novozymes' new Cellic CTec2 enzymes will allow the biofuel industry to produce cellulosic ethanol at a price below $2 per gallon for the initial commercial-scale plants that are scheduled to be in operation in 2011. This cost is on par with gasoline and conventional ethanol at current U.S. market prices. 

"We have been working on this for the past 10 years and promised our customers and the market to be ready by 2010," said Novozymes CEO Steen Riisgaard. "I'm extremely pleased to announce that we're ready. The enzymes are ready. Biofuel producers now have a critical component to turn agricultural waste into a competitive alternative to gasoline." 

Major advances in enzyme development have reduced the enzyme cost for cellulosic ethanol by 80 percent over the past two years, and enzyme costs are now down to approximately 50 cents per gallon of cellulosic ethanol, the company said. 

Novozymes added that it has allocated unprecedented resources to the project, and has also received development grants totaling $29.3 million from the U.S. Department of Energy. 

Novozymes has partnered with leading companies in the biofuel industry, such as POET, Greenfield Ethanol, Inbicon, Lignol, ICM, M&G, CTC, COFCO, Sinopec and PRAJ, to help accelerate process technology development and implementation. 

With further improvements in enzyme efficiency, Novozymes said it expects the cost to produce cellulosic biofuel to be further reduced. 

"Cellulosic ethanol will be cheaper," Riisgaard said. "Our partners expect production costs to fall below USD 2.00 per gallon once their first commercial scale plants are fully operational, and the cost will continue to drop in the future." 

Cellulosic ethanol uses enzymes to break down cellulose in biomass into sugars that can be fermented into ethanol. Cellic CTec2 has proven to work on many different feedstock types, including corn cobs and stalks, wheat straw, sugarcane bagasse and woodchips, Novozymes said. 

A number of pilot- and demonstration-scale facilities are in operation all over the world, while large-scale commercial facilities are under construction and scheduled to be operational in 2011.