A Case Study for using the Cooperative business model for Biomass Aggregation

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A Case Study for using the Cooperative business model for Biomass Aggregation

Randy Kyle, CPA, MBT

Kyle Consulting Group, Inc.

Office

– 608-280-7541 [email protected]

We are on a path of discovery to explore the market potential of commercializing the aggregation and densification of fibrous, mostly nonwoody, biomass for use in the commercial generation of electricity using the Cooperative business model.

Where Cooperatives are/have been

• Ethanol investment

• Biodiesel investment

• Soy Crush Plant

• New opportunities with restructured ethanol plants

• Biomass?????

Biomass

• Typically waste wood and wood bi-products

• Likely high in moisture

• Likely average to low in BTU value

• Not products typically handled by

Producer Cooperatives or its members

• Other non-woody sources

Why Consider getting into Biomass?

• Micro economics – local nature

• Access to the material

• Does not compete with food uses

• Producers have the equipment and experience

• Additional source of revenue for producers

• Carbon credit opportunity

Why Consider the Cooperative Model?

• Farmers dealing with farmers

• Profits can be returned as patronage

• Producer control

• Membership/ownership can be tied to supply agreements

• Familiar Structure

• Trust

BCAP is the Starting Point

(Biomass Crop Assistance Program)

• Defines eligible material

• Sets a payment schedule

• Establishes criteria for conversion facilities

• Provides sample agreements

• Administered by FSA

• http://www.fsa.usda.gov/FSA/webapp? area=home&subject=ener&topic=bcap

Fibrous Biomass Characteristics

• 7,500 to 8,000 BTU per pound

• Coal - 13,500 BTU per pound

• When processed, fibrous biomass can be very consistent in energy content

• Control of moisture content

• Renewable – annual crops

Financial Summary

• Need to pay farmer $45 to $60 per ton

• BCAP payment – additional $45 per ton

• Possible patronage

• 5-7 Tons/acre - $100/ton

• Attract acres/aggregation????

Operating Model

• Rural location – accommodates delivery

• Rail – accommodates shipping

• Distributed storage and delivery of raw materials

• Limited on-site storage

• Local support for permitting and construction

Off Take Agreements and Other Uses

• Long-term vs. short-term

• Fixed vs. variable

• Mandates vs. lowest cost producer

• Viability without BCAP

• Carbon trading

• Alternative uses for off take

• It’s time to negotiate

The following material is being used with the permission of Show Me Energy Cooperative

• Show Me Energy Contacts

– Steve Flick, Chairman of the Board

[email protected]

– Kurt Herman, CEO

[email protected]

– Office phone - 660-656-3780

– www.goshowmeenergy.com

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