Will the Lemonade Stand Era End in Renewable Fuels, Sooner, Later, Ever?

by Jim Lane (Biofuels Digest) ... No, Virginia, there isn’t any green premium in renewable fuels, chemicals or materials. Actually, there isn’t any premium available for any product, anywhere, at any time, green or not, if it is distributed as a commodity and into commodity markets. It is the absence of differentiation and uniform pricing that, by definition, makes any market a commodity market. So, it is as foolish to seek green premiums in commodity markets as it is to look for gases in a perfect vacuum.

There are four things you can do to induce adoption of a sustainable product or technology beside the usual commodity inducement of a low price.

1. You can address a scarcity (such as delivering to an island economy).
2. You can deliver a functional advantage.
3. You can change the commodity specification so that it requires a renewable attribute.
4. You can build a brand.

In general, renewable fuels and chemicals companies have taken the opposite tack of the electric vehicle industry — and sometimes gaze in wonder at the inexplicable hold that electric vehicles have achieved in the minds of consumers.

Hard tech, easy adopt vs easy tech, hard adopt

After the failure of the EV-1 and the third wave of electric cars in the 1990s, electric car marketing around the world took a decisive turn (note: the first wave of electrics was in the earliest days of automotive propulsion, when electrics, steam, biofuels as well as petroleum were in vogue — the second wave was a series of niche deployments such as electric golf carts, after World War Two).

No longer did electric car manufacturers tackle the comparatively easy technological hurdles of plug-in electric systems for pioneer products — rather, Toyota tackled the then infinitely-harder technical challenge of developing a hybrid-drive engine. That was the Prius.

It was hard tech, but easy deployment. Consumers could buy at the same dealer, fuel at the same station, and park in the same way at home. They never had to worry about less range, but rather enjoyed more range. With the hybrid electric, Toyota made it easy to buy an electric vehicle and become a potential customer for all-electrics later on, as battery technology improves and charging infrastructure built out, and grids become greener.

In the world of liquids, the renewable fuels industry took the path of the EV-1. They used as a platform for their technology a set of very old and proven ideas — veggie oil transesterification into biodiesel, or corn starch fermentation into alcohols. The plants became ruthlessly efficient — but it was easy tech, hard adopt.

The infrastructure needs have been daunting — new pumps, storage tanks, improved engines, fuels have to be blended with fossil fuels and incumbents balk. There are range issues, cost issues. We’ve had tax credits, tariffs, blend-wall debates, food vs fuel, mandates, grants, and so on — all aimed at pushing the acceptance of an easy tech that’s hard to adopt.

These were some of the very problems that plagued the EV-1. Back then, electric had range issues, cost issues, refuel issues, “convenience of maintenance” issues. There were tax credits, grants, concerns about driving the grid, and so on and so on. Also, consumers simply wondered if the manufacturer would be around in a few years to service the car. Concerns that remain today.

What can renewable fuel producers do?

Sigh. Producers of renewable fuels and their supply-chain almost invariably see anything except making a commodity as cheaply as possible and building political support for renewables as “someone else’s job”. Examples of companies that have built brand, functional or spec premiums for their products are generally dismissed as one-offs, or impossible to replicate in something as gigantic as the energy industry.

Trust me, we’ve heard it. Many renewable fuels executives take the same weird pride in knowing almost nothing about marketing that grandfathers take in knowing almost nothing about social media.

Renewable fuel producers generally see their customers as mandated petroleum refineries which they have controlled access into (to the limited extent they can) through political muscle. Political muscle that is more uncertain and more expensive than ever, these days, we note.

What do renewable fuels have to sell?

Some have the benefits of oxygen and all have the blessings of lower carbon, more or less. There are functional advantages in oxygen that relate to octane, and there are spec advantages in reduced carbon that relate to schemes such as the Renewable Fuel Standard.

But there is the brand opportunity, which goes ignored. After all, what’s so incredibly visible about car insurance? Yet consumers all over the country recognize Geico’s gecko. What’s so incredibly visible to consumers about silicon chips? Yet consumers all over the world recognize Intel Inside.

But renewable fuels remain in the lemonade stand era. Most believe that all they need to do is make their particular biobased brew, haul it to the sidewalk, put up some price signage, and look appealingly youthful and virtuous. READ MORE