Bioenergy Critical Success Factors

By B.A. (Ben) Thorp, Harry Seamans and Masood Akhtar (Bioenergy Deployment Consortium/Biofuels Digest) The Bioenergy Deployment Consortium identifies the four deciding factors in a company’s success or failure. Do you have the right stuff for bioenergy?

It’s one of the most objective, case-based, short and effective guides to what it takes to make it from pilot to player, from bench to big.

Although there is room on every mall for the shopping boutique, it is not the case with energy. In this sector, scale is everything, once a materially advantaged fuel-making process has been identified.

But what makes for “the right stuff?” To date, it’s been tough to analyze. For one thing, many of the top players are highly-private companies that share little information about their transformational IP, anord even their business models and contracts. But here is an antidote for that problem.

A look at how identifying target markets, raw materials, horizontal integration and management skill become the deciding factors in a company’s success or failure.---Jim Lane, Editor, Biofuels Digest

...By taking a larger industry-wide view, The BDC has identified four critical success factors (CSF) for the emerging bioenergy industry.

We have determined that projects on the pathway to success seem to employ very well at least three of the four CSF. Projects that do not employ these factors have an uncertain future. The recommended use of the factors will be discussed after their description.

1. Target Markets A project must identify and validate a market in which it can establish a relative competitive position versus the current supply and demand. There must be a clear path and timeframe to establishing a competitive cost and price position. This does not have to be immediate, but it must be real and without subsidy. Further, the market must be large enough to allow the introduction of the bioproducts without causing significant market disruption. Values placed on environmental impact must be compelling...

2. Raw Materials ...It is typical for raw material to represent at least 50% of operating cost. As such it is the single most important operating variable. Security of feedstock supply is critical and needs evaluation. Categories of biomass streams, ranked lowest to highest cost (best first), include:

•    Waste from another business or process
•    Spent crops, which are a special example of a waste stream
•    Forest slash or thinnings
•    Energy crops
•    Whole tree chips
•    White wood chips

The cost of these raw materials varies by geographical regions and can be re-ranked for any particular project. ...

3. Horizontal Integration Horizontal integration means that the project facility is integrated with a sustainable, successful business facility as described below, and is focused on the efficiency and operating cost of the overall process. Integration must be done in a way that provides economic benefit to the biomass facility and ideally for both facilities. ...

4. Business Acumen and Project Execution This is the least objective criteria and the hardest one to define, but you know it when you see it. We are inclined to put publicly traded companies at the top of the list because they tend to over-deliver and under- promise to their board of directors/shareholders. Lower in the list would be those technology companies who overpromise and underperform. ...

Validation ...We will use three unnamed but real projects as illustrative examples of why we have confidence in the utility of the CSFs.

The first project we examined failed to even meet considerably reduced goals from the beginning of the project. ...

The second project is a proposed cellulosic ethanol facility. It has low cost raw materials (spent crops from the same harvest area), appears to have good business acumen, is integrated with common utilities and effluent, and the team has good business acumen...

The third project uses a sugar containing waste stream from an existing facility. The project will have low cost feedstock, will be horizontally integrated, and will produce a high value product. ...

We have applied them to a large number of projects. Projects which rank high seem to be on a successful pathway. Projects which rank low reduced their scope or have failed.

...The criteria are useful to the project owners in consideration of optimizing their project and for potential investors and government agencies for backing the projects that are most likely to be successful. READ MORE