Ethanol and biodiesel may not be worlds apart…

I have spent the last few days in scenic Florida at the NBB’s 2012 conference. It has been an interesting event, part time to see old friends and industry veterans, part opportunity to hear about the industry from both NBB’s and Big Petroleum’s perspectives, and finally time to see what wares the larger technology vendors have augmented their armouries with in the last year or two.

I have received invitations from several ethanol producers in the last few months interested in the co-locating a Promethean-scale biodiesel plant next to their ethanol production facility. This has historically been a challenging sort of partnership for the for both biodiesel and ethanol producers alike given the intertwined states of current technology and economic conditions.

A current factoid is that there is more than 2 billion gallons of biodiesel capacity ready today with a market size of 1.3 billion gallons (given RFS 2 mandated production targets). With that quantity of excess capacity, I do not believe that any new large-scale greenfield biodiesel plants need to be built anytime soon. Even with site-sourced feedstock, its axiomatic that the investment in a new facility is unnecessary with the quantity of willing and able buyers that are out there for DDG-derived oil.

At the moment the most logical model for those plants interested in processing DDG-derived oil remains sourcing and transporting it from logistically tenable ethanol plants. This also allows the plant to leverage it’s current fuel blending and distribution infrastructure, which is feasible, yet obviously tangential, to the core business of the manufacturer.

And then there is the additional issue of the technical complexity of converting corn oil into biodiesel. The fact is inedible corn oil is difficult to process into biodiesel feedstock. Coupled with the ever-evolving set of ASTM specifications for biodiesel and plant installation now runs the risk of having to upgrade there equipment early enough that it ruins any amortization assumptions made to support timely ROI (return-on-investment).

That said, I do believe that there is a bright future for the ethanol industry to create plants that make specialty chemicals out of byproduct streams. That is one reason I believe I have been receiving so many paid invitations; we have a good deal of experience in developing products out of our byproduct streams.

Make it a better place!

Todd

Coopetitive Biodiesel

I believe in coopetition!

Coopetition is how I define cooperation between ordinarily unlikely allies; competitors.

The biofuels industry at the best of times is challenging. In times like these it is a formidable thing to simply survive and to thrive requires a visionary approach to the business coupled with strong execution.

At times reaching out to your competitors can be frustrating. I often need to confront secrecy, the air of superiority, reluctance and failure all in the same call.

It takes a commitment to compromise, the ability to create a value proposition for both sides, the willingness to risk strengthening your competitor to strengthen your organization.

Most are too short-sighted to see the value of coopetitive relationships, and I must admit that they are not always the best path to short-term industry dominance.

At any rate I will not be deterred from attempting to cultivate competitive advantage from cooperative competition.

Make it a better place!

Todd

Maximizing the Biofuels Cooperative Opportunity

This is part two of a three-part blog designed to explore opportunities for cooperatives to thrive in the newly emerging sustainable energy sector. In Part 1, I discussed the basic principles of cooperative formation and outlined an initial niche-based value-opportunity for cooperative activities as equity-ready organizations. In Part 2 I discuss more specifically a focus for cooperatives as local manufacturers and distributors of biodiesel solutions services.

The bioenergy industry is in its infancy.  That is not to say that the technologies that will make up the first generation of widely adopted energy solutions are new or yet to be created.  Many of the techology sets experiencing greater exceptance are simply variations on old themes, for example windmills for wind power generation, solar panels, and alternative fuels like ethanol and biodiesel.

I will assert, without burdening myself with detailed supporting argument, that a cooperative organization could serve as a valuable industry participant in any of the sustainable energy production sectors mentioned above, as well as in the future next generation fuels currently being researched, such as biobutanol or cellulosic ethanol.

For example, there are a variety of biodiesel cooperatives currently dispersed throught the nation. Many are focused strictly on distribution, while others are focused on production from straight vegetable oil (SVO) or waste vegetable oil (WVO). Very few producers, in either the commercial corporation or cooperative stratas, are focused on using grease or renderings, in part because of the challenges related to collecting and processing grease in sufficient quantities to yield worthwhile amounts of biodiesel. Some great examples of these are Piedmont Biofuels, a well-known producer and distributor, as well as Biofuel Oasis which serves as a distributor of high-quality biodiesel. 

Of course there are others, but I mention these two because they are ready examples of how differing models can sustain themselves. ( To learn more about these two feel free to visit their respective web sites and/or give them a call. True to form they are courteous and friendly, and willing to answer questions if time allows.) 

So what exactly is the niche opportunity for cooperatives in the bioenergy sector? A cooperative can serve as both catalyst and agent of change in the emerging bioenergy industry. It can champion and act on specific agendas. In reality the latter is no different than the capabilities of an individual or other forms of business organizations. What differentiates the cooperative is its basis in the egalitarian support of its membership and its necessary reliance on the community of consumers to sustain it.

Traditional corporations are driven by maximizing returns (profits) to shareholders. Cooperatives are driven by maximizing value to membership, and the members are able to decide what they value at a given moment. There is perhaps an inherent tension here, because decisions made in the moment are often counter to sustainability.

The above is the advantage and the potential bane of a cooperative organization. In the emerging markets it is increasingly necessary that for cooperatives to sustain themselves and create winning results, they must operate with greater rigor, both in the decision-making process and in the execution of plans and initiatives.  In essence, it is my opinion that the cooperatives of the future need to conduct themselves in such a way as they can manage to become sophisticated businesses.

In Part 3 of this discussion I will continue to discuss how tomorrow’s cooperative might function to maximize sustainability while maintaining the core identity of its membership.

Todd