A Memorial Day Message for biofuels: 10 Things That Can-Do People Can Do

May 28, 2012 |

Note to readers: We’ve been running the Hot 40 Partners Voting for two weeks now, and here’s the first partner company that has provided, during the voting period, something more than a get-out-the-vote effort – here’s some pretty compelling thought-leader material from Fredrickson & Byron‘s Todd Taylor.

It’s theme, things that companies and individuals in the biofuels community can do now, and do together, to increase their chances for success, in a period marked by rising demand and robust challenges to increasing capacity.

By Todd Taylor, Fredrickson & Byron
special to the Digest

Memorial Day is about remembering the military heroes who fought and died protecting our freedom.  They made the ultimate sacrifice and as a nation, we should do all we can to honor them and find ways to make the lives of our current and future servicemen and women safer.

Unfortunately, politics seems to trump all these days, as seen in the recent bipartisan vote by a US Senate committee to prohibit the US military from buying biofuels that are more expensive than conventional fuels, even for experimentation and from participating in any biorefinery program.  Energy security, especially fuel supply chain protection, has been identified by our military as one of the most critical areas for the military and our national security now and in the future.

Biofuels are expected to play a critical role in providing fuel availability to our fighting forces as they face potential choke points such as the Strait of Hormuz and Strait of Malacca.  If the Senate committee gets its way, the US military will be forced to devote considerable assets to protect those choke points simply so that our military can continue to get the fuel it needs to operate.

Politics is often described as the art of the possible.  But politics right now seems to be about the art of war instead as both parties fight each other in a presidential election year.  But for renewable energy companies looking to develop projects and build their business, this is a difficult time.

We need to adopt the “Can Do” attitude of the military.  As members of the renewable energy industry, we know the value we bring to the country and we must not let this important work be defeated.

Here is a list of ten things you Can Do now:

1.  Remember that the Customer is King -    Find what customers want and deliver that to them.  When you are meeting your customers, ask as many questions as you can about their needs, goals, hopes and aspirations.  If you want to sell, you better know who wants to buy what and why.  Many technology centric companies forget this rule.  Technology is not the King.  Technology is vital, but it is a way to deliver a solution to a customer, it is not the solution itself.

2.  Keep Price Paramount – Your product must be cost competitive with non-renewable equivalents.  Even if you assume RIN in your financial model or other “green” payments, the lessons learned from solar and wind with ITC and PTC credits, as well as from the loss of VTEC and biodiesel credits should be warning enough that you need to build a system that can deliver what the customer wants at a price that is competitive with their alternatives.  This can mean many things and it does not always have to mean a better price, but if you assume eternal “green” pricing, you are already violating rule #3…

3.  “Assume” at your own risk – Do not make an ass out of your partners.  You will be using other people’s time, efforts and money to make your dream a reality, so do your homework.  Too many companies assume that critical pieces of their business plan or technology will work.  It won’t be so simple.  Test even simple assumptions about your business and develop Plans B, C and D just in case.

4.  Build a Strong Supply chain – The military has a saying that “amateurs talk tactics, professionals talk logistics.”  This should be true for renewable energy businesses as well.  To succeed, you need to be aware of and have a plan to ensure that every aspect of your supply chain will work, and not just in ideal circumstances, but under pressure as well.  Remember what happened to the auto industry when Japan got hit by the 2011 disasters?  Keep those lessons in mind as you work map out and assemble all the pieces.

5.   Control inputs – If you need something to make what you sell to other people, you need to have as much control over those assets as you can.  Owning is best, open market purchases are the worst.  If you need sugar for your technology to make biojet, figure out how to ensure your supply.  Long term contract?  Good.  Joint venture with a sugar feedstock company?  Better.  Owing your own sugar production facility?  Best.

6.   Synchronicity – The concept is simple:  A ten year offtake contract needs to be supported by a ten year feedstock contract.  Your customer is relying on you to sell them your product and will likely have penalty clauses if you fail to do so, including damages and a right to cancel the contract.  Your financing will also likely require you to have synchronized input and output contracts to minimize such risks.  If you must purchase through a market, you will need to have multiple options and a very good purchasing manager as part of your team.

7.  Think like a 3 year old – Why?  Well, exactly.  Renewable energy is still a new industry and we are competing in a world with an infrastructure that was developed years before us.  We need to challenge assumptions and break down the tired old arguments about the past.  But, we must also be aware of this tendency amongst ourselves.  Our critics ask tough, and many times unfair questions of us, we must take care to ask ourselves these hard questions if we are to succeed.

8.  Use the Sword and Shield – Intellectual property is mostly used defensively to prevent others from using your ideas, the shield.  But, used wisely, it can be a tool to keep competitors from entering your markets with similar technologies and products.  As a sword, you can develop and protect intellectual property that you may never use, but makes it harder for competitors to design their technology to compete.  Licensing IP is similarly dual use, you can use it for your own needs, or you can license it to keep it out the hands of your competition.

9.  Go big or Go home – Financing is attracted to big ideas with big payoffs.  Venture understands risks, but even a small risk is hardly worth the effort for a small reward.  Can your company be disruptive, does it create something new and will it make a lot of money? Companies often like to say that if they could only capture 1% of the market, they could make money.  But, venture wants you to think big, really big, or go find something else to do.

10.  Profits before Politics – Your goal is to make a profit, not complain about politicians.   Yes, politics can really cause a lot of problems.  Having a strong and supporting national renewable energy strategy…heck, any national energy strategy, would be great, but we do not have one.  Find like-minded partners to work with and convince them that together you can do great things.  Instead of trying to convince people to support a renewable energy idea because if they don’t we will all surely die, try telling them about how much money they save, how your product outperforms conventional products, and how it can be truly sustainable.  Think green, but the right kind of green.

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