Biomass '09: Developing a biomass feedstock business

Posted July 15, 2009, at 12:21 p.m. CST

A biomass feedstock supply business faces all the same issues and hurdles as any other firm. The venture, however, must develop relationships, metrics and approaches to delivering a product that has unique characteristics and challenges, rapidly expanding demand and an increasing amount of scrutiny and skepticism from many stakeholder groups.

Timothy Baye, a professor of business development at the University of Wisconsin in Madison and a bioenergy and bio-economy specialist, discussed the steps, hurdles and challenges of developing a biomass feedstock supply business at EERC's Biomass '09: Power, Fuels and Chemicals Workshop in Grand Forks, N.D. Like other businesses, feedstock suppliers will have competition and credit-worthy customers and will deal with regulations and technology, have adequate financial, technical and human resources, and develop a business model that enables long-term, sustainable profitability.

"There's a lot of enthusiasm, but a lot of skepticism in the market," he said. "The time has come that almost everyone who is affected by energy has expressed interest in this field."

Location is a vitally important aspect of the business plan, he said, as the biomass supply is unique to every project. Geographic logistics should be considered in obtaining and delivering the supply. "Minimize travel distance from point A to point B," he said. The three major components of a traditional business plan are an analysis of environment, business model strategy and tactics, and operations, he showed in a graphic.

"The buyer's expectations must be met," he emphasized, adding that consistency and willingness to understand what the customer wants are critical. In the beginning, he said, an aggregator will probably have only one anchor customer. He also addressed market structure, external influences, research, estimation of feedstock economics and feasibility, distinctions between aggregators and evaluation of options in implementation, among several other aspects. It's detrimental to "fall in love" with one technological solution, he said. "You must consider all options on the table."

Analysis of the supply potential also is important, as the liability issue in extraction is huge, he told the crowd, along with adhering to sustainability standards. "The conservation community, especially the regulators, are watching this industry," he said.

He briefly discussed the types of biomass and gave some attention to the value-chain issues and pricing approaches necessary to ensure supply sustainability and stability. Keys to capacity success include commitment of existing firms, producers and landowners, cooperation with state and municipal governments, integration of renewable energy credits and carbon into pricing models, and transparency in pricing, he said. "Transparent pricing contracts are what it's all about," he advised, adding that talking to local officials early and often is important. "In order to be successful, you have to have capacity," he said. "You have to be able to deliver."

The workshop was held July 14-15.