Golden Gate to Biomass

More than 400 professionals gather to talk biomass in The City by the Bay
By Anna Austin and Erin Voegele | February 21, 2012

The third annual Pacific West Biomass Conference & Trade Show, held in San Francisco, Calif., Jan. 16-18, welcomed more than 400 attendees, exhibitors, and presenters to examine and discuss the region’s most pressing, innovative and challenging bioenergy industry issues and ideas.  

Keynote speaker Mike Hart, CEO of Sierra Energy, emphasized the versatility of synthesis gas, and how the value of biomass—particularly municipal solid waste (MSW)—will drastically increase over the next couple decades.

Hart believes trash will become a valuable commodity as waste conversion technologies become widely implemented.  “As time goes on, we’re going to be buying it and making competitive bids,” he said, adding that feedstock flexibility will become a dominant factor in the biomass energy industry.

Hart sees a game changer on the horizon for feedstock procurement: suppliers paying biomass plants to take feedstock, rather than plants paying for their feedstock. As trash becomes a commodity, companies that designed technologies based on a feedstock that was typically free will realize the economics of their system no longer work. “This is because people with waste products will realize they have another product to sell,” Hart said. “My expectation is that we will see this with garbage.”

He added that landfills will become a thing of the past because of carbon taxes, decreased tip fees, and local governments looking for ways to turn waste into a profit, or reduce the substantial cost of paying somebody to take it.

Following Hart, the event’s opening general session featured current trends in financing mechanisms. The panel, titled “Financing Strategies for Biomass-Derived, Energy, Fuels and Chemicals in a Tight Capital Market,” offered three very different investment perspectives.

Bill Lemon, senior vice president of investment banking at Source Capital Group Inc., opened the discussion by noting that biomass developers are in the big leagues now, and attracting investment will be a challenge. “There is a lot of money at stake, lots of technical complications, political complications, and lots of headaches,” he said. “But, the basics of good projects haven’t changed.”

Different types of investors are attracted to different aspects of a project, Lemon said, and developers need to understand the type of investor they are hoping to attract.

John May, managing director at Stern Brothers and Co., said biomass projects have traditionally trailed behind other types of renewable energy when it comes to access to capital. He also noted that the bond market is wide open. “It’s a trillion dollar market, it’s very liquid…and it’s a market that will look at projects that are trying to get technology commercialized…or trying to scale,” he said.

New biomass conversion and energy projects will seem risky in an investor’s eyes, May continued. “The issue is how can we attack the perception of that risk, and how do we mitigate that risk,” he said. “I think [the reason] we haven’t gotten that many biomass projects financed with non-recourse debt and with traditional institutional equity is we haven’t solved that problem yet.”

Paul Tantillo, managing member of Enervation Advisors LLC, an alternative energy advisor and investor, finished up the general session describing several ways a company can better attract interest from his firm and other potential investors. Most important, he said developers should be bold, but also honest and direct. “Don’t sugarcoat the situation,” he said. “If the pitch seems too good to be true, it probably is.”

—Anna Austin and Erin Voegele