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The CAPEX/OPEX Dance

Without the right equipment, the profit margins made producing biomass energy products will erode and eventually disappear.
By Tim Portz | August 15, 2014

The theme of this month’s issue is equipment, which can be easily deduced from reading the stories our team produced. A secondary theme also becomes apparent, one that points to equipment providers as being this industry’s biggest allies in controlling operating expenses. Throughout this issue, the professionals our team interviewed all echoed the same refrain: Without the right equipment, the profit margins made producing biomass energy products will erode and eventually disappear. Ricardo Hamdan, quoted in Keith Loria’s page-36 biogas feature, sums up this month’s edition in seven words, saying, “It is an OPEX versus CAPEX game.”


The trick is finding the right balance. During interviews I conducted for the page-20 feature about pellet presses, CPM’s Scott Anderson shared that in a competitive bidding situation, he doesn’t always find himself the lowest cost option. “If our capital expense is higher, we’ve got to demonstrate our value through a lower overall operating expense,” he says. For Anderson and for many other professionals, paying a premium for a particular piece of equipment will pay dividends down the road in reduced operating expenses.


Articles in this edition highlight operating expense differences that run the gamut from nuanced to stark. Also, while writing my piece on pellet presses, I learned that Bliss Industries has dedicated considerable design time to synchronizing roll wear. The strategy behind that is if rolls wear out in synchronicity, they can all be replaced at once, minimizing downtime and thereby reducing operating expenses.


The OPEX advantages outlined in Katie Fletcher’s page-28 thermal feature emanate from a fuel switch, and are easier to discern. The outdoor wood boilers featured in her piece liberate homes, businesses and livestock operations from fossil fuel dependency and their inevitable price volatility.
I’d like to thank the many industry professionals who worked with our team as we put together this month’s stories. I often apologize to sources and explain that my team and I have to be generalists. This issue, with all of its references to adsorption, catalysts, v-belts and hydronic heaters, required the help, guidance and patience of the OEM community. To their credit, they answered our calls, took our questions, and helped us shape them into stories many in the industry can benefit from reading.

 

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