In enzymatic hydrolysis the cellulose structure is selectively converted to glucose by enzymes. The biomass has to be pre-treated, e. g. with a short, dilute acid hydrolysis step in which the structure of the cellulose is disrupted and the hemicellulose is broken down into fermentable sugars. The cellulose is then broken down by cellulases into cellobios which in turn is cleaved by b-glucosidase into glucose. The sugar losses are minimal and the amount of by-products is negligible. An optimal enzyme activity and optimal reaction conditions such as temperature (45-50°C) and pH (4.8) will increase the ethanol yield. An optimal amount of substrate has a positive effect on the reaction rate and sugar yield as well. There are two types of enzymatic hydrolysis: SHF and SSF. There are benefits and drawbacks with both methods, however, the enzymatic hydrolysis method is considered the best method to date of producing ethanol from biomass.

SHF: In the SHF method the pre-treated material is neutralised and subjected to the enzymatic activity of the cellobios and b-glucosidase. After the hydrolysis has stopped, the solid material is filtered off and the hydrolysate is fermented and then distilled. The major drawback of this method is that the enzyme activity is inhibited by the product of its work: cellobios and glucose. This means that the sugar concentration is limited to approximately 6%, giving a maximum theoretical ethanol concentration after fermentation of 3%. This is not economically viable because the cost of distillation increases dramatically when the ethanol concentration drops below 4%. The benefit is that the temperature during hydrolysis can be kept at an optimal level and that the yeast cells can be recovered after fermentation.

SSF: To solve the problem of the low concentration of ethanol in SHF, SSF mixes the pre-treated material with both enzymes and yeast. This means that as soon as glucose is formed, the yeast will consume it and produce ethanol. The result is that the enzymes never ‘sense’ a high glucose or cellobiose concentration giving a higher ethanol concentration. The major drawback is that during hydrolysis the temperature must be held at 35°C due to the presence of the yeast cells, slowing the hydrolysis down and the yeast cells cannot be recovered. Since there is solid material together with the yeast cells neither centrifugation nor filtration is an option for separating the yeast for recovery. Both processes have common drawbacks also: first enzymatic hydrolysis is relatively slow compared to a thermochemical process. This means that the reaction vessels in a large scale production unit will be very large with challenges with agitation and temperature control. Secondly the enzymes are presently too expensive to make the process economically viable. However, it is generally agreed that the cost of the enzymes will drop drastically when large scale production has started. Cellulase can be produced by fungi and bacteria under aerobic and anaerobic conditions and the microorganisms can be both mesophilic or thermophilic. The cellulase can be recovered after the reaction which will improve the yield of the hydrolysis and reduce the enzyme cost (Balat, Balat, and Oz, 2008; Sun and Cheng, 2002).