Forget “policy reform”, “messaging” says industry: Surprises abound in the 2015 Bioeconomy Agenda poll results

Over the past weeks, we’ve asked you in a pair of surveys to help us identify positive steps and strategies to focus on for making industry progress in 2015. You disdained “messaging”, “policy reform”, “focusing on key, motivate customer segments” and “R&D reform”. 

Instead, you pointed to “bolt-ons”, “policy stability”, “financing”, “supply chain” and  “focusing on winners” as the advanced bioeconomy imperatives for 2015.

You’ve told us, in many communications, that the industry needs focus — and needs, specifically, to focus in on key areas for development

Seeking highly-feasible, high-impact strategies

In the first survey, we asked you to suggest areas of focus, and in the second survey we asked you to rate those suggestions in terms of potential impact and feasibility. That is, which ideas were low impact, which had the potential for high impact — and which steps had the greatest chance for success, vs those that were higher risk.

We applied a simple formula to the results — averaging out the ratings you gave for each of “feasibility” and “impact”, then multiplying the averages together – so that the combined average gave the highest scores for high-impact, high-feasibility steps.

Overall

Your top five strategies were:

Settling the controversy around the Renewable Fuel Standard (and comparable mechanisms)
Accelerating the development of sustainable, affordable, reliable, available feedstocks and their supply chains.
Focus on winning technologies
New structures for affordable project finance capital
Shift to bolt ons, incremental add-on

Impact

For impact, your top five were:

1. Settling the controversy around the Renewable Fuel Standard (and comparable mechanisms)
2. Policy reform
3. Delivering on promises
4. Accelerating the development of sustainable, affordable, reliable, available feedstocks and their supply chains.
5. (tie) Focus on winning technologies
5. (tie) New structures for affordable project finance capital

In short, you placed the highest premium around policy in terms of impact — both “settling the RFS controversy” and overall “policy reform” were at the top of the agenda.

“Delivering on promises” was just an inch behind in terms of your list for “impact”, and developing a feedstock supply chain was also high on your agenda.

“Focus” was just behind — that is, generally speaking, spending less time, money and aggravation on developing multiple technologies for a portfolio, but rather focusing on pushing the most promising ones “over the line”.

Feasibility

When it came to feasibility, you were less optimistic — your average rating was almost a full point behind the ratings for “impact” — and there were substantial differences in how you viewed potential strategies in terms of their feasibility, given today’s market conditions.

Your top five were:

1. Settling the controversy around the Renewable Fuel Standard (and comparable mechanisms)
2. Shift to bolt ons, incremental add-on
3. New, improved, or more widely-used tools for assessing technical readiness
4. New technologies or strategies to move past the E10 ethanol saturation point
5. Accelerating the development of sustainable, affordable, reliable, available feedstocks and their supply chains.

In this case, there was a fascinating split over policy. You felt that overall policy reform was probably beyond industry’s reach (rating it at the bottom), but settling the controversy over mandates was do-able (you rated it #1). At the same time, you recognized that shifting to a “bolt-on” vs a “greenfield” project deployment strategy was more feasible, and you also recognized that developing new tools for assessing technical readiness might help with “focus” and “delivering on promises” although you rated those latter as far less feasible.

You felt that blend wall busters were more “feasible”, yet you rated it near the bottom for “impact” — and that may surprise observers inside national capitals who have long felt that moving past the E10 saturation point would have huge impact on the industry’s future, but were less confident that there were feasible strategies for deployong blender pumps, higher ethanol blends, or new high-blend molecules or drop-in substitutes.

Finally, feedstocks was on the list — you felt that sustainable, affordable supply chains were achievable — more so than reforming the financial structures.

Strategies of less importance

Overall, four strategies did not figure anywhere in your top-5s:

Messaging — the dialogue the industry puts out about its mission, and how it talks to stakeholders. Also, infrastructure build-out (excepting the afore-mentioned E10 saturation point) — presumably, vehicles as well as fuel delivery systems posed a concern.

You also were less interested in “finding the ‘now’ customer” – where industry attention would have turned to strategic customers in chemicals, aviation, rural communities that are already “on board” with renewables. Finally, you didn’t show much interest in “closer cooperation between R&D and commercial entities” though paradoxically you were high on “focus on winning technologies”, “delivering on promises” and “accelerating the development of…supply chains”

The Bottom Line

Your views are relentlessly practical — though not always well-aligned with trade associations, lobbyists, and policymakers.

1. You want less emphasis on developing pilots, or marginal technologies that require subsidies or long-term mandates, more on commercializing winners, pushing them “over the line”.

As one reader wrote: “Money is being spent on technologies that will NEVER work – e.g. all the other MSW to liquid fuels (except maybe Methanol). The industry needs to establish some technical credibility by outing these ‘pretend’ technologies and focus on what can actually work. 2nd generation ethanol can work but needs lots of help to get through the ‘valley of death’ for commercialization.”

2. You want to settle the mandates controversy — seeing policy instability as an evil in itself. It is interesting that you placed so much less emphasis on overall “policy reform”, which you see as far less “feasible”. It suggests that you may, as an industry, be open to stability imposed by regulators, as opposed to the reform that generally requires legislation. But you see, for sure, “settling the controversy” as more important than “reform”.

As one reader wrote: “Long-term regulatory stability!!!!” and another added: “Government subsidization over the medium terms will be needed to nurture development of commercial scale biorefineries…There should be a price paid for producing CO2 either through cap-n-trade or taxing carbon. Incentives, such as excise tax credits should be offered…And an increase in the use of government backed grants, loan guarantees and public/private joint ventures should be aggressively pursued to accelerate the growth of renewable fuels industry.”

3. You want to develop supply chains, now. You see developing feedstocks as more important than developing processing technologies, at this stage.

As one reader wrote: “Unstable US government policy has been the biggest visible detractor to the industry over the last year, but feedstock is the elephant in the room. When technologies are developed to take lower cost feed stocks and produce higher value products, there is absolutely no reason for government intervention or fancy project finance capital strategies.

Solutions included the rise of intermediates, with one reader pointing to “technologies such as onsite sugar production near the biomass feedstocks, and biomass sugar concentration and rail transport by tank car. Make nonfood sugars a new commodity, shipped by rail. Creating a fungible, tradable intermediate like concentrated nonfood sugar syrup opens the field to normal commerce as seen in the food industry. Dunkin Donuts does not have wheat fields in their parking lots. They buy a standardized commodity: flour.”

4. You see creative project finance structures as critical to deployment. Having set “policy reforms” such as “master limited partnerships” on the back burner because of “feasibility” concerns, it may be that you see opportunities with loan guarantees and bonds, or direct investment by regional development funds. That could be an opportunity for states and communities, as well — similar to municipal and state bonds for infrastructure projects.

One reader wrote that an imperative was “improving industry wide financial sophistication’ while a third warned that “There is a ton of money sitting on the sidelines waiting for a global investment opportunities in the clean teach sector, but with the volatility in governmental policies and crude oil prices, we are going to be paralyzed for years unless we can change the way this industry is funded.

5. You see an imperative in shifting to more bolt-on, co-located, upgraded technologies, vs greenfield projects.

As one reader wrote: “All current cellulosic plants, for example, are greater than $10 CAPEX/nameplate gallon ethanol. Finance. To meet RFS would require $100 billion. That is 500 plants producing 32 million gal biofuel each for 16 billion gal cellulosic biofuels, and 500 plants x $200 million CAPEX is $100 billion. Getting past ethanol as THE fuel/chemical. Ethanol may really not have a future past E10.”