Mushrooms may hold key to solving Energy crisis

A solution to the world's energy problems may lie in a Chinese mushroom growing in Novozymes A/S laboratories.

The Danish company's scientists in China, Brazil, Denmark and the U.S. are testing mushrooms and lichen to find one that will turn corn cobs and sugarcane stalks into biofuel. An affordable alternative to gasoline made from plant waste would end concerns that global hunger for energy is driving up food prices worldwide.

Novozymes said it will find the answer by 2010, getting to the market before its closest rival, Danisco A/S.

``We're not going to solve today's energy shortage with food,'' said Per-Henrik Graesberg, a DnB NOR ASA fund manager who directs almost $200 million in renewable energy investments. Graesberg is considering buying Novozymes shares after selling off earlier this year. Second-generation biofuel ``is one of the main reasons'' to invest in the sector, he said.

Fungi like mushrooms and lichen make enzymes to eat rotting logs and decaying leaves. Biofuel producers use the proteins to break down the complex carbohydrates in plant cells into a soup- like mixture of simple sugars that yeast can eat. In a process much like making beer, yeast ferments the mixture, producing ethanol. Enzymes now on the market can't break down the tougher parts of plants effectively enough to be affordable.

Earlier this year, record-high prices for corn and wheat undermined government support for biofuel, which depends on subsidies, and caused shares of enzyme makers to drop. Novozymes, the world's largest maker of enzyme products, lost almost half its value from August 2007 to mid-April in Copenhagen trading. The shares are down about 30 percent this year.