Biofuels Digest Publishes 5-part Series on the New Rules for Financing Bioenergy

September 23, 2009

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Biofuels Digest published a 5-part series on where the industry is obtaining financing in the year since the seizure of Freddie Mac and Fannie Mae, and collapse of Lehman Brothers triggered the global financial meltdown.

In Part I of the series, Biofuels Digest looks at the top 10 creative financing sources being used today.
- Cheap sugar, baby; The baby bloomers; Swing your partner; Drop right in; One man's meat is another man's feedstock; It's been so long, Darling; The (Canadian) government is your friend; the Old switcheroo; Jumping Jack Flash, it's a gas, gas, gas; Venture capital as you knew it and loved it: We're not dead yet. READ MORE
In Part II, they look at the role of DOE and USDA in providing liquidity to the bioenergy market as it struggles to finance the construction of advanced biofuels capacity as required in the Renewable Fuel Standard.
- $32.9 billion in total funding announced, including grants and loan guarantees. Impressive! But just $17.44 billion for the private sector, the street – nearly half of that in loan guarantees rather than outright funding. ... Of the $32 billion, $792 million has gone directly to biofuels or biomass — 2.4 percent. That’s 29 percent less than went to coal ... Electric and “clean” vehicle technology received $2.9 billion — that’s $500 million more than the entire support for the solar, biofuels, wind, hydro, and geothermal investments which are supposed to provide the renewable molecules and electrons to power said vehicles. Now, looking at the $792 million for biofuels, let’s ask how much of that is on the street right now. That would be zero. READ MORE
In Part III, Biofuels Digest explored the wealth of passionate responses to Part II.
- A flood of response came in yesterday to part II of the “Benjamins for Biofuels” series on the state of bioenergy finance. Response came in from all over the US and as far away as Poland. Producers, attorneys, and investment bankers confirmed that there is something seriously awry with current efforts to restore liquidity to bioenergy project financing. I even heard from a solar producer who confirmed that the problems are not limited to bioenergy. All agree that goals are sound, but structure and execution have been found wanting. READ MORE
In Part IV, "DOE Awards $529 Million for Company Making an $89K All-Electric Sports Car in Finland, while US Projects Languish," comparison is made between financing for expensive electric cars which are not yet designed with denial of funding for bioenergy projects.
- A bioenergy research project was declined by NSF, in part, because of a “very poor” grade given by a reviewer who wrote: “To base the proposal on the theory that there will be a variety of low-value feed stocks available is, in the opinion of this reviewer and many other industry observers, a faulty premise. Biomass is cheap right now because no one wants it. However, as demand increases, it will become more expensive. Further the laws of supply and demand mean that replacing a significant amount of gasoline with biofuels would drastically lower the demand for gas. This would, in turn, cause the price of gas to plunge, making biofuels less competitive."
- The same argument could be made to reject solar and wind energy research — or any alternative energy — by making the case that massive adoption of solar or wind would cause the price of coal to plunge, making solar and wind less competitive. The same argument could be made, in fact, about guns and butter. Or the impact of the automobile on the price of horses. Or the impact that the invention of the wheel on piggyback service providers.
Part V Focuses on Another Way Forward.
- To increase the investor pool, we must de-risk the investments and simply the investment process — not every investor has a back office filled with bright talent to perform due diligence. In an asset-backed security schematic, “Renewable energy project A” receives a loan from “Bank B”. “Bank B”, in turn sells the loan to a quasi-private corporation, a Renewable Energy Finance Corporation. The corporation issues tax-exempt bonds, backed by government guarantee, and sold in pools of loans as an asset-backed security to global investors. The investors thereby participate in renewable energy finance without having to choose projects, or assume the geographic or technology risk of a single development. READ MORE