The technology to produce so-called second-generation bioethanol has moved beyond the research phase and is ready to be used if policymakers back it with incentives, Danish industry leaders said on Wednesday.

Second-generation bioethanol is made of plant waste, such as straw, corn cobs, sugarcane bagasse, instead of from food crops like corn or sugarcane itself as with first-generation fuel.

Like first-generation biofuels, second-generation bioethanol can be blended with gasoline to run cars and help meet targets for green energy. But production is still in its infancy.

Steen Riisgaard, head of Danish industrial enzymes maker Novozymes - a supplier to biofuel produers - urged European policymakers to recognize that the technology has matured and create the right regulatory framework to support it.

"My plea to Europe is that the technology is basically ready for deployment, and it will only be deployed if the frame conditions...are the right ones," he told a bioethanol conference in the Danish capital.

His remarks came before a report that the U.S. Environmental Protection Agency would clear the way to boost the limit on ethanol in gasoline to 15% from 10% in newer cars.

Riisgaard said a recent study showed that the EU could replace 62% of its annual gasoline consumption with next-generation biofuels by 2020.

Anders Eldrup, chief executive of Danish state-owned Dong Energy, agreed that the technology is ready, pointing to a demonstration plant built in Denmark by Dong's Inbicon unit that converts straw into bioethanol as an example.

That plant, which started up last year, is designed to produce 5.4 million liters of bioethanol annually, and the fuel will soon be available in a blend with gasoline at Statoil petrol stations in Denmark.

To reach real industrial scale, however, such a plant would need to be 10 times bigger, Eldrup told Reuters.

"It's definitely ready," Zia Hag, senior analyst at the U.S. Department of Energy, told the conference referring to the technology of the second-generation fuel industry overall.

Risgaard said a 25-million-gallon-per-year plant being developed in Iowa by U.S. ethanol producer Poet - a Novozymes customer- was the most advanced in the industry.

Novozymes and rival Danish enzymes producer Danisco have a near duopoly in supplying enzymes to biofuel producers. Enzymes are used to convert biomass into sugars - a critical step in producing cellulosic ethanol from non-food feedstocks.

Risgaard said lack of a market for such feedstocks, also called "residuals," was a problem for the industry but he said such a market could develop and noted that straw had been collected in Denmark for years for energy production.

Straw To Fuel
Dong Energy, which burns straw with coal to generate electricity, aims to phase out coal-fired power production so it already sees oversupply of straw.

Eldrup told Reuters in an interview the company wants to continue putting that straw to work - in biofuel instead of power generation if policymakers set the right tax framework.

"We hope we can make a big full-scale plant in Denmark if framework conditions are right," he said. "The tax rules have to be adjusted because today they give the most advantage when we burn the biomass," he said.

In addition to producing second-generation biofuel, Dong's Inbicon has sold its technology for preheating biomass to Japan's Mitsui and to some U.S. producers, and Eldrup said such technology exports could become an important business.