We have been studying the corn ethanol market closely the last few years. There are some interesting trends in the market and the makeup of the industry.
The corn ethanol market is maturing and you can see that in a couple key indicators. The latest RFS2 indicates a significant drop in production and slow down in the construction of corn ethanol capacity. It appears that the capacity is in line with the RFS demand.
The new capacity coming on line or under construction plus the existing capacity is actually went down in 2009 and is projected to stay down in 2010.
The RFS mandate for corn ethanol is 12 billion gallons per year (BGY) in 2010 and rises to 15 BGY in 2015. This should mean a reasonably stable period for corn ethanol capacity in the US. The RFS allows for a slow and steady growth rate. This will help to reduce the wild speculative market affects on corn and help to keep ethanol at reasonable price for producers and users.
What about the ethanol producer's profitability? Ethanol profitability is a simple equation. The price must be higher than the input costs plus the operating cost. The two highest input costs are corn and natural gas (or other energy source used for heat generation).
The price of oil could go very low again and drag ethanol prices down. If the currently fragile world economy is supporting near $80 per barrel oil what will it be when the economy picks up again? I don't think we are going to see $30 oil for quite some time. Take a read of other blogs like R Squared energy blog for another opinion. The price of oil is probably on it's way up before down. Ethanol should track with a similar ratio to crude.
The price of corn could go up. We think that we are definitely going to see higher corn prices. The price of corn has a new floor. You can't expect the increased demand from corn ethanol to not affect the market. I don't think corn is not going to fall below $3.00 for a long time and maybe not in our lifetime. I think that is a good thing. The higher price of corn has effectively eliminated a great deal of the agricultural price subsidies. I think the increases in corn will be modest because the commercial and speculative demand is not going to shoot up like it did in the ethanol expansion of 2006-2008. I also think that the corn increase will be mostly offset by the increases in ethanol prices as oil rises.
The price of natural gas could go up considerably. Every $1 change in the price of gas changes the cost by about $3,000,000 per year. A swing in gas can really hurt especially if the margins are thin already. The good thing about natural gas is there is an abundant supply. We produce the majority of the natural gas we need and Canada has huge supplies backing this up for many years. The natural gas prices tend to fluctuate with the temperature and weather conditions mainly because of supply constraints. We feel that while there will still be periods of high gas prices we won't see them go up and stay high for extended periods of time.
We think these 3 factors combine to produce a reasonable ethanol market for the next 5 years. It may not be see the highs of 2006 and 2006 but we probably won't see the lows of 2008 and 2009. We think ethanol should provide reasonable return on investment and grow with the RFS demands.
Friday, February 19, 2010
Thursday, February 11, 2010
The Never Ending Cycle of Renewable Energy Trade Offs
We are fairly diligent in our review of information regarding biofuels, renewable energy, biomass, etc. I am always amazed at the comments which bring up new and inventive ways in which these technologies are "potentially harming" the environment and our economy.
I wanted to share some observations that have stuck out in my mind over the years.
1. Biofuels are causing habitat reductions for orangutans. There are no doubt habitat reductions for many species but let's be realistic. How much are biofuels really contributing compared to urban sprawl and the standard of living increases in countries?
2. Food vs. fuel. I will not get into detail on this other than make a couple comments. How many food shortages would be prevented if we stopped all corn ethanol production? How much would the US agricultural community be affected if the 30% of the corn which is now locally bought and converted to higher value products was sold overseas at commodity prices? When you look at the price of food on the shelves how much is related to raw agricultural products and how much is related to processing costs and distribution? How much has the biodiesel and corn ethanol production helped us to move towards a greener future? Isn't there some value in trying? It is better than setting on our hands waiting for a perfect solution.
3. Removing forest and agricultural biomass for energy production will harm the land. This is correct. Removing biomass without first understanding and considering the effects can harm the land. Landowners and policy makers have been regulating the management of land with economic or policy based decisions for many years. It is not in any stakeholders best interest to harm the land.
4. The best solution may never make economical sense. I know there are cleaner and more efficient means of generating power and fuels. If they don't make economic sense they are not going to scale and displace a significant portion of capacity. This also goes for making environmentally "dirty" processes clean. Dare I say clean coal technology.
The point is nothing is perfect. We seem to forget the environmental harm fossil fuels create just because they are widely used and main stream sources of energy. We also think that renewable energy should cost the same as fossil fuel derives sources.
Renewable energy solutions are not and will probably never be perfect or the lowest cost. We have to be striving to make each solution better than the last.
I wanted to share some observations that have stuck out in my mind over the years.
1. Biofuels are causing habitat reductions for orangutans. There are no doubt habitat reductions for many species but let's be realistic. How much are biofuels really contributing compared to urban sprawl and the standard of living increases in countries?
2. Food vs. fuel. I will not get into detail on this other than make a couple comments. How many food shortages would be prevented if we stopped all corn ethanol production? How much would the US agricultural community be affected if the 30% of the corn which is now locally bought and converted to higher value products was sold overseas at commodity prices? When you look at the price of food on the shelves how much is related to raw agricultural products and how much is related to processing costs and distribution? How much has the biodiesel and corn ethanol production helped us to move towards a greener future? Isn't there some value in trying? It is better than setting on our hands waiting for a perfect solution.
3. Removing forest and agricultural biomass for energy production will harm the land. This is correct. Removing biomass without first understanding and considering the effects can harm the land. Landowners and policy makers have been regulating the management of land with economic or policy based decisions for many years. It is not in any stakeholders best interest to harm the land.
4. The best solution may never make economical sense. I know there are cleaner and more efficient means of generating power and fuels. If they don't make economic sense they are not going to scale and displace a significant portion of capacity. This also goes for making environmentally "dirty" processes clean. Dare I say clean coal technology.
The point is nothing is perfect. We seem to forget the environmental harm fossil fuels create just because they are widely used and main stream sources of energy. We also think that renewable energy should cost the same as fossil fuel derives sources.
Renewable energy solutions are not and will probably never be perfect or the lowest cost. We have to be striving to make each solution better than the last.
Monday, January 25, 2010
Biomass Supply Challenges for the Renewable Industry
I wanted to share a little of the information from a white paper we wrote last year which combined and analyzed information from a few of the government studies which have been published regarding biomass supply. The paper identifies some of the biomass sources and talks about how as we develop commercial scale biomass based projects the sustainable production and logistics of providing biomass is going to be the major contributor to the success of the project outside the processing technology itself. If you are interested in receiving the “Feedstock Supply Solutions for Biomass Based Renewable Energy Companies and Rural Economic Development” white paper drop me a note and I will send a copy.
In this white paper we discuss how the actual demand for biomass is may go well beyond the billion tons per year as mentioned in these studies as economic conversion technologies develop. We contend that it will be 1.2 - 2.0 billion tons per year in the foreseeable future depending on our desire to reduce dependence on fossil fuels. It also details existing biomass resources and opportunities.
Let's take a quick look at the biomass sources.
Forest Biomass - The DOE/USDA Billion - Ton report shows 368 million tons of forest resources available annually in the US. This breaks down into 141 million tons in use already, 139 million tons available with better land management, and 88 million tons not currently utilized. This leaves 227 million tons potential forest based biomass for use.
Municipal Solid Waste (MSW) - MSW Municipal solid waste is getting much attention as a potential feedstock for renewable applications. MSW has some very attractive qualities. It is a feedstock which is generated in center of population. The use of MSW has tremendous greenhouse gas benefits with reductions in methane production and landfill storage requirements. MSW has it's own challenges as a feedstock. We have not studied MSW in detail as it is not currently a part of our operating plans. If future conversion methods for MSW can economically generate liquid fuels or syngas it will be very beneficial.
Agricultural Resources - The DOE and USDA joint report, “Biomass as a Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply,” lays out in great detail three possible scenarios for the availability of biomass feedstock from agricultural lands. In the first scenario with moderate yield increase and no perennial energy crops indicates about 421 million tons annual capacity. In the highest capacity scenario with high yield increases and perennial energy crops the annual capacity is 997 million tons per year. This indicates that agricultural resources can be utilized to produce a significant and possibly the largest portion of our biomass energy feedstock.
The economical challenge with all biomass sources is the delivered price to the conversion facilities. The aggregation and transportation can quickly drive the prices for biomass feedstock out of the economical price range for the conversion facility. The existing market demand is also a concern in biomass sourcing. If a facility will increase regional demand for biomass significantly there will likely be an increase biomass prices overall. Knowing the other uses for biomass and their acceptable levels of feedstock cost is also very important. The facility operator who requires the lowest cost feedstock in the region will surely experience economic troubles down the road.
In order for the biomass industry to grow and survive long term the biomass feedstock supply chain stakeholders need to focus on increasing the production per acre and reducing the total costs to the conversion facility. Conversion facility owners and operators also need to participate in the feedstock supply chain by supporting the producers and developing technologies which will help them reduce the overall costs of biomass to the facilities.
The consistent economical feedstock supply for biomass based operations will continue to be the major challenge in scaling and industry growth. Companies that do not understand the biomass capacity and sourcing very well will not survive.
In this white paper we discuss how the actual demand for biomass is may go well beyond the billion tons per year as mentioned in these studies as economic conversion technologies develop. We contend that it will be 1.2 - 2.0 billion tons per year in the foreseeable future depending on our desire to reduce dependence on fossil fuels. It also details existing biomass resources and opportunities.
Let's take a quick look at the biomass sources.
Forest Biomass - The DOE/USDA Billion - Ton report shows 368 million tons of forest resources available annually in the US. This breaks down into 141 million tons in use already, 139 million tons available with better land management, and 88 million tons not currently utilized. This leaves 227 million tons potential forest based biomass for use.
Municipal Solid Waste (MSW) - MSW Municipal solid waste is getting much attention as a potential feedstock for renewable applications. MSW has some very attractive qualities. It is a feedstock which is generated in center of population. The use of MSW has tremendous greenhouse gas benefits with reductions in methane production and landfill storage requirements. MSW has it's own challenges as a feedstock. We have not studied MSW in detail as it is not currently a part of our operating plans. If future conversion methods for MSW can economically generate liquid fuels or syngas it will be very beneficial.
Agricultural Resources - The DOE and USDA joint report, “Biomass as a Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply,” lays out in great detail three possible scenarios for the availability of biomass feedstock from agricultural lands. In the first scenario with moderate yield increase and no perennial energy crops indicates about 421 million tons annual capacity. In the highest capacity scenario with high yield increases and perennial energy crops the annual capacity is 997 million tons per year. This indicates that agricultural resources can be utilized to produce a significant and possibly the largest portion of our biomass energy feedstock.
The economical challenge with all biomass sources is the delivered price to the conversion facilities. The aggregation and transportation can quickly drive the prices for biomass feedstock out of the economical price range for the conversion facility. The existing market demand is also a concern in biomass sourcing. If a facility will increase regional demand for biomass significantly there will likely be an increase biomass prices overall. Knowing the other uses for biomass and their acceptable levels of feedstock cost is also very important. The facility operator who requires the lowest cost feedstock in the region will surely experience economic troubles down the road.
In order for the biomass industry to grow and survive long term the biomass feedstock supply chain stakeholders need to focus on increasing the production per acre and reducing the total costs to the conversion facility. Conversion facility owners and operators also need to participate in the feedstock supply chain by supporting the producers and developing technologies which will help them reduce the overall costs of biomass to the facilities.
The consistent economical feedstock supply for biomass based operations will continue to be the major challenge in scaling and industry growth. Companies that do not understand the biomass capacity and sourcing very well will not survive.
Tuesday, January 5, 2010
Is 2010 going to be the year renewable energy goes main stream?
The growth of renewable energy has been filled with stops and starts over the last decade. The economic turmoil of 2008 and 2009 slowed the progression of renewable energy projects and especially projects requiring significant equity investment.
Wind energy has taken a firm hold and is really beginning to make a difference. There are more wind projects coming on line and when electricity demand increases wind power is ready for more expansion.
The corn ethanol industry which was hammered in 2008 by high corn and energy prices seems to be coming back a bit with the purchase of distressed assets by Valero and others along with many plants running at full production and making some money. If commodity prices remain somewhat stable in 2010 it should be a decent year for ethanol producers.
Several cellulosic ethanol companies are saying they will have demonstration scale plants on line in 2010 and some are even going to commercial scale. I wish them well but will not hold me breath. I think there is a big shakeout coming in 2011 when some of these companies simply have not been able to prove their technologies commercially viable. All the DOE money in the world won't make a company successful in the long term if the process is not competitive. I hope there are at least a few of these companies who have something to sell at the end of the day. That will be great news.
Drop in replacement fuels may arguably be the most exciting renewable area for the foreseeable future. Torrefaction and pyrolysis hold huge potential for replacing fossil fuels in power generation and crude oil applications. The economics of these processes in main stream applications will hopefully be tested in 2010.
If carbon cap and trade legislation passes these two technologies may move forward very quickly.
I don't think about about solar power much living in the Pacific Northwest but solar power generation has really made some good progress in 2009. I think we will see the expansion of rooftop arrays and larger generating sites simply because the conversion is getting more efficient and there are companies "managing" the solutions rather than having to figure it out yourself.
Who knows what 2010 holds for renewable energy? With a little nudge from the government and some advances in technology we may see some good results in 2010.
Wind energy has taken a firm hold and is really beginning to make a difference. There are more wind projects coming on line and when electricity demand increases wind power is ready for more expansion.
The corn ethanol industry which was hammered in 2008 by high corn and energy prices seems to be coming back a bit with the purchase of distressed assets by Valero and others along with many plants running at full production and making some money. If commodity prices remain somewhat stable in 2010 it should be a decent year for ethanol producers.
Several cellulosic ethanol companies are saying they will have demonstration scale plants on line in 2010 and some are even going to commercial scale. I wish them well but will not hold me breath. I think there is a big shakeout coming in 2011 when some of these companies simply have not been able to prove their technologies commercially viable. All the DOE money in the world won't make a company successful in the long term if the process is not competitive. I hope there are at least a few of these companies who have something to sell at the end of the day. That will be great news.
Drop in replacement fuels may arguably be the most exciting renewable area for the foreseeable future. Torrefaction and pyrolysis hold huge potential for replacing fossil fuels in power generation and crude oil applications. The economics of these processes in main stream applications will hopefully be tested in 2010.
If carbon cap and trade legislation passes these two technologies may move forward very quickly.
I don't think about about solar power much living in the Pacific Northwest but solar power generation has really made some good progress in 2009. I think we will see the expansion of rooftop arrays and larger generating sites simply because the conversion is getting more efficient and there are companies "managing" the solutions rather than having to figure it out yourself.
Who knows what 2010 holds for renewable energy? With a little nudge from the government and some advances in technology we may see some good results in 2010.
Thursday, December 31, 2009
Establishing the US Renewable Energy Industry
Our dependence on fossil fuels is simply based on the scalability and low cost options these fuel sources provide. Crude oil, coal, and natural gas provide very good sources of transportable energy.
Today we realize that whether we like it or not the use of fossil fuels is pumping CO2 and other contaminants in our atmosphere. In the US we also have a tremendous appetite for fossil fuels which necessitates the dependence on energy from some countries which to put it nicely have a “love-hate” relationship with the US. If these countries decided to stop selling energy to the US it would mean significant changes to our lives.
We have imported 3+ billion barrels of crude oil annually since 2000. We produce about 2 billion barrels of crude oil domestically. Renewable Energy is competing with large highly developed supply chains and conversion technologies. Crude, coal, and natural gas have been used for decades. Over time these supply chains and conversion processes have become very large, efficient, and deliver good value.
It is difficult or not possible for many renewable energy technologies to compete with fossil fuels since they are either relatively young or have been used sporadically. They simply have not had the time and/or money to develop cost effective processes and large supply chains.
These environmental and economic factors should be leading us to aggressively pursue and support renewable energy opportunities. The government has an opportunity to step up its role in the development of a lasting renewable industry.
Currently we have 38 CZARS give or take. Renewable energy at least deserves an executive position (maybe even a cabinet position) with clear and simple goals? Reducing our dependence on foreign energy and producing more energy in a sustainable manner.
The US needs a path forward which ensures that renewable energy and traditional fossil fuel based energy interests are aligned with a common goal of reducing our fossil fuel usage and environmental impact. The economic factors may not be enough to move renewable energy forward and similar to other national interests a clear plan needs to be developed and executed.
Wednesday, December 2, 2009
EverGreen Renewable
EverGreen Renewable was established in 2006 by several business associates who wanted to put their efforts into developing renewable energy and fuels in the Northwestern US.
Our first efforts were directed towards developing a corn based ethanol facility in Central Washington. In late 2007 we decided that the corn ethanol market was becoming saturated and that we would not build the facility. This was probably a good decision. Nearly all of the ethanol facilities located outside traditional corn producing areas have gone bankrupt along with some major ethanol industry leaders.
The ethanol facility provided first hand exposure to biomass power production and the agricultural resources in Central Washington. We knew we wanted to develop renewable energy projects in this region. We learned a great deal from the ethanol facility and continued our search for the appropriate biomass project(s). We have a simple foundation for our plans. If you are going to build a biomass based conversion facility you will need economical feedstock. Economical feedstock results from high production per acre with low input and aggregation costs. The collection area and inputs need to be minimized for the economics to work. In agricultural regions this brought us to dedicated energy crops and subsequently to miscanthus x giganteus. Miscanthus is a high yielding dedicated energy crop used widely in Europe for co-firing in power production. It is a perennial grass which once established is productive for 15+ years. Miscanthus gives the producers a long term high yield crop. This then provides the stable feedstock supply for conversion facilities who need the biomass and want to lower the risk of the capital investment. We will talk about miscanthus, the economics, and the research, and other types of biomass in later posts.
We have researched and/or contacted many (well over 50) of the leading cellulosic ethanol/advanced biofuels/biomass conversion/renewable energy companies to really understand the status of their technology. We wanted to find the best commercially available technology top convert the biomass into higher value products. We have found that after billions of dollars of private investment and government assistance many of these companies will have a hard time ever getting to commercial scale. Some are closer than others, some have very deep pockets which will help them get farther, and some are banking on breakthroughs to make the economics of their technology work. If you want to read a really good blog on these technologies take a look at the R-Squared Energy Blog by Robert Rapier. He as some of the best information on these technologies you will find anywhere. We may also provide a company list with our comments from a business perspective in a later post.
What have we learned?
1. Biomass is not free or cheap. It will continue to be valuable and increase in value as the conversion opportunities are developed. If someone is selling technology based on free or cheap biomass I would dig deep and understand why it will always be free or cheap. When you find that biomass let us know.
2. Drop in solutions are higher value than energy equivalent alternatives. Let's learn form the ethanol and biodiesel industry. If it looks like chicken, tastes like chicken and has the same composition as chicken you can sell it as chicken, and everyone knows chicken. Synthetic fuels, biocoal, and renewable oils upgradeable to ASTM equivalent transportation fuels produce known products, use the existing infrastructure, and are leveraging the existing markets to create demand. People want renewable alternatives. Familiar substitutions allow renewable alternatives to penetrate large markets.
3. Evaluating technologies requires significant due diligence and financial modeling. Technology developers are not necessarily ready to answer questions that become critical when operating a commercial scale facility. If you get a "financial model" from a technology developer a detailed analysis may show many cost estimates left out and/or contain unrealistic operating assumptions. Missing and/or incorrect assumptions can swing the operating costs into the red quickly. If you are going to commercialize a technology you have to know the operating limits and affects of price volatility. If you can't understand the market and how the company will make money in good and bad times walk away. You will be happy later.
4. No one technology will dominate the biomass energy industry. Biomass is a regional resource. Transporting raw biomass long distances is simply not economical. Biomass will be converted near the source to the highest value product possible. This will vary with the regional demand for biomass based products. A biomass facility in Southern California may produce synthetic fuels and chemicals while a facility in Wyoming may produce biocoal for export to power production facilities. A facility in Canada near pine beetle infested timber may produce wood pellets. There are so many potential biomass applications and demand for drop in substitutes that economically viable technologies will find success in the appropriate locations.
5. Commercial projects are not easy to finance. If you are going to develop a commercial project you may spend $3-$5 million dollars before you buy any property or equipment. There is a great deal of time and effort involved in just getting ready for project financing. If an investor is going to put down $20+ million equity dollars to help fund the construction they will need to have feedstock and off take controlled for the life of the debt or until their exit. The debt participants will also need these to provide the construction financing. They will all want independent verification of your analysis and information so be prepared to hire good consultants.
6. It takes perseverance but in the end it pays off. If you are going to commercialize biomass based renewable energy you are going to need to first make sure you know what you are talking about. People will spot someone winging it a mile away. If you can't walk into a room and effectively explain your ideas to a group of people who had no idea what you are talking about prior to meeting you are not prepared for the road ahead. I cannot tell you how many presentations we have given and how many questions we have answered about what we are doing but I can tell you that if you have done your homework and you are legitimately bringing good renewable business ideas to the group you are addressing it will generate interest which will generate contacts which will generate funds. When you get calls form people who have "heard about your company" and want to talk it is starting to pay off.
Where are we going?
We have spent the better part of the last 3 years "getting up to speed". We are now ready to execute our plans. We have presented our business plans in front of many local and regional groups. We have met with academic, scientific, governmental, and private stakeholders to understand their objectives so we can try to align their goals with our plans. We have gained the understanding and support of these stakeholders to ensure that our projects will have their support moving forward while helping stakeholders further their goals as well.
EverGreen Renewable has several opportunities in various stages of development which will provide biomass supply and conversion for millions of tons of biomass annually. In future blogs we will detail these plans as they unfold and our thoughts on different aspects affecting the renewable energy industry.
Our first efforts were directed towards developing a corn based ethanol facility in Central Washington. In late 2007 we decided that the corn ethanol market was becoming saturated and that we would not build the facility. This was probably a good decision. Nearly all of the ethanol facilities located outside traditional corn producing areas have gone bankrupt along with some major ethanol industry leaders.
The ethanol facility provided first hand exposure to biomass power production and the agricultural resources in Central Washington. We knew we wanted to develop renewable energy projects in this region. We learned a great deal from the ethanol facility and continued our search for the appropriate biomass project(s). We have a simple foundation for our plans. If you are going to build a biomass based conversion facility you will need economical feedstock. Economical feedstock results from high production per acre with low input and aggregation costs. The collection area and inputs need to be minimized for the economics to work. In agricultural regions this brought us to dedicated energy crops and subsequently to miscanthus x giganteus. Miscanthus is a high yielding dedicated energy crop used widely in Europe for co-firing in power production. It is a perennial grass which once established is productive for 15+ years. Miscanthus gives the producers a long term high yield crop. This then provides the stable feedstock supply for conversion facilities who need the biomass and want to lower the risk of the capital investment. We will talk about miscanthus, the economics, and the research, and other types of biomass in later posts.
We have researched and/or contacted many (well over 50) of the leading cellulosic ethanol/advanced biofuels/biomass conversion/renewable energy companies to really understand the status of their technology. We wanted to find the best commercially available technology top convert the biomass into higher value products. We have found that after billions of dollars of private investment and government assistance many of these companies will have a hard time ever getting to commercial scale. Some are closer than others, some have very deep pockets which will help them get farther, and some are banking on breakthroughs to make the economics of their technology work. If you want to read a really good blog on these technologies take a look at the R-Squared Energy Blog by Robert Rapier. He as some of the best information on these technologies you will find anywhere. We may also provide a company list with our comments from a business perspective in a later post.
What have we learned?
1. Biomass is not free or cheap. It will continue to be valuable and increase in value as the conversion opportunities are developed. If someone is selling technology based on free or cheap biomass I would dig deep and understand why it will always be free or cheap. When you find that biomass let us know.
2. Drop in solutions are higher value than energy equivalent alternatives. Let's learn form the ethanol and biodiesel industry. If it looks like chicken, tastes like chicken and has the same composition as chicken you can sell it as chicken, and everyone knows chicken. Synthetic fuels, biocoal, and renewable oils upgradeable to ASTM equivalent transportation fuels produce known products, use the existing infrastructure, and are leveraging the existing markets to create demand. People want renewable alternatives. Familiar substitutions allow renewable alternatives to penetrate large markets.
3. Evaluating technologies requires significant due diligence and financial modeling. Technology developers are not necessarily ready to answer questions that become critical when operating a commercial scale facility. If you get a "financial model" from a technology developer a detailed analysis may show many cost estimates left out and/or contain unrealistic operating assumptions. Missing and/or incorrect assumptions can swing the operating costs into the red quickly. If you are going to commercialize a technology you have to know the operating limits and affects of price volatility. If you can't understand the market and how the company will make money in good and bad times walk away. You will be happy later.
4. No one technology will dominate the biomass energy industry. Biomass is a regional resource. Transporting raw biomass long distances is simply not economical. Biomass will be converted near the source to the highest value product possible. This will vary with the regional demand for biomass based products. A biomass facility in Southern California may produce synthetic fuels and chemicals while a facility in Wyoming may produce biocoal for export to power production facilities. A facility in Canada near pine beetle infested timber may produce wood pellets. There are so many potential biomass applications and demand for drop in substitutes that economically viable technologies will find success in the appropriate locations.
5. Commercial projects are not easy to finance. If you are going to develop a commercial project you may spend $3-$5 million dollars before you buy any property or equipment. There is a great deal of time and effort involved in just getting ready for project financing. If an investor is going to put down $20+ million equity dollars to help fund the construction they will need to have feedstock and off take controlled for the life of the debt or until their exit. The debt participants will also need these to provide the construction financing. They will all want independent verification of your analysis and information so be prepared to hire good consultants.
6. It takes perseverance but in the end it pays off. If you are going to commercialize biomass based renewable energy you are going to need to first make sure you know what you are talking about. People will spot someone winging it a mile away. If you can't walk into a room and effectively explain your ideas to a group of people who had no idea what you are talking about prior to meeting you are not prepared for the road ahead. I cannot tell you how many presentations we have given and how many questions we have answered about what we are doing but I can tell you that if you have done your homework and you are legitimately bringing good renewable business ideas to the group you are addressing it will generate interest which will generate contacts which will generate funds. When you get calls form people who have "heard about your company" and want to talk it is starting to pay off.
Where are we going?
We have spent the better part of the last 3 years "getting up to speed". We are now ready to execute our plans. We have presented our business plans in front of many local and regional groups. We have met with academic, scientific, governmental, and private stakeholders to understand their objectives so we can try to align their goals with our plans. We have gained the understanding and support of these stakeholders to ensure that our projects will have their support moving forward while helping stakeholders further their goals as well.
EverGreen Renewable has several opportunities in various stages of development which will provide biomass supply and conversion for millions of tons of biomass annually. In future blogs we will detail these plans as they unfold and our thoughts on different aspects affecting the renewable energy industry.
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