Value or Values?

If the debate were about long- or short-term value, the ethanol industry would be a lot farther because ethanol has a compelling value proposition on climate, energy security and green jobs.

By JIM LANE, Editor & Publisher, Biofuels Digest

In advanced biofuels, discussion these days revolves around the value proposition: yields, scale, ROI.

It seems to me that, if the debate was about long-term or short-term value, the cellulosic ethanol industry would be a lot farther along than it is, because ethanol has a compelling value proposition on climate, energy security and green jobs.

So does nuclear energy, and this industry is heading for a similar position in the hearts and minds of the public.

The barrier to nuclear energy is fear — fear of catastrophe, fear of the unknown — and it is the barrier of cellulosic ethanol as well. We are experiencing today the first skirmishes in an all-out war over the replacement of our petroleum and gas resources, over the inequitable distribution of fossil reserves, and the fear that the new world will be a worse one, depending on your particular flavor of priorities.

What is the ultimate role of biomass-based fuel in the future? Too early to say. What we can say is that biomass is where it is today — corn in Nebraska, sugarcane in Brazil, because of the demands of the old world, not the new. Logistic systems must consider not only what is in the ground, but what could be in the ground and will be in the ground when all the producers of fuel, food, power, feed, chemicals and plastics must come to renewables to find their feedstocks. All of them will compete for biomass.

In fact, the more you succeed in your goal to reduce the cost and increase the yields of cellullosic production, the more tempting it will be for the makers of power, chemicals and plastics to come and take your feedstocks away. Everything has higher margins than fuel, excepting perhaps food. Everyone above fuel on the value chain will outbid for biomass, and food will outsquawk you.

So does the near-term future of biofuels lie in addressing value? It seems to me it must address values. What, in fact, are our priorities?

The market cannot always be counted on to solve the tragedy of the commons, and deciding priorities, and values, has a place in our debate right now.

Global petroleum demand is 1.3 trillion gallons and natural gas demand is at around 100 trillion cubic feet. The US Renewable Fuel Standard by 2022 replaces about 1 percent of that. At the global level, it will be a long time before biofuels are considered “critical” in terms of supplying our energy needs, and have first call on feedstocks. You will be heard, and respected, but a 1 percent transformation is not enough to control any near-term debate on climate change or energy security.

The Grocery Manufacturers Association campaign against ethanol, the EPA land use change debate, the Searchinger report — this is not the end, or even the beginning of the end. It is the beginning of the beginning.

And do not think for a second that, because cellulosic ethanol looks good on land use change, that you are “safe.” The debate will shift to freshwater, or something else, until you understand that this is all a proxy war over resource allocation and that titanic forces are at work, because in replacing 250 quadrillion BTUs of fossil petroleum and natural gas — let alone coal — many players will take the attitude that this is a game of musical chairs and play accordingly so that you, not they, are eliminated.

But you can win on the local level. You can mater to a community or to a county or even a state, and you already do. That is your future. You are thinking scale, and I believe that is the wrong direction. That is value economics and fuel will lose on value economics.

At large-scale, you are just another commodity made in some faraway town and few care in the way you want them too. Does anyone really think about the tragedy of Port Harcourt, Nigeria when they pump gasoline in Manhattan? Think about the worker conditions in the cane industry when they pump ethanol in Sao Paulo? All they think about is price, because that is all you have given them, because you are chasing scale, yield and ROI.

Think small. You do not matter in Manhattan very much, but you matter in Manhattan, Kansas a great deal. Why? In the movie “Milk” it was pointed out that, in a battle over civil liberties for gays, people who knew a gay person were 2-to-1 in favor, while those who did not were solidly opposed.

When you brother-in-law is employed at the ethanol plant, he cares. When your sister teaches children from farms raising energy crops, she cares. When your buddy at the 7-11 depends on the truck drivers delivering biomass for those extra sales, he cares.

Manhattan and Manhattan, Kansas are both governed by a national mandate but have vastly different stakes in the outcome in terms of their local economies. Is Manhattan, Kansas interested in biofuels solely because of cheap or cleaner-burning fuel? Are local economic incentives built around creating the value economics that flow from scale – or is this about a more holistic, yet more local, vision of wealth and opportunity creation?

When you are producing fuel of the community, by the community and for the community, you will find the success you deserve and are so close to achieving. You will also find a popularity and a support and understanding far beyond what you are experiencing now. In the community you will find stable supplies of feedstock and stable demand, and the economic case that will sustain you.

The minute you put your fuel on a train for California, you will find your troubles will mount, and mount.

Is your fuel sustainable? That is an important question. But more important: who does it sustain? Whose human dignity does it restore or improve? When you have that answer, you will know your market, and it will be based not only in value, but in values.

You think you are producing a commodity. But it is the community support that will sustain you when the food lobby, the chemicals lobby, the feed lobby and others serve up more and more of the “fear, uncertainty and doubt” that is making your growth difficult and your economic cycles hard to sustain.

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