The next generation cooperative as bioenergy distributor.

This is the first in a three-part blog designed to explore opportunities for cooperatives to thrive in the newly emerging sustainable energy sector. In Part 1, I discuss the basic principles of cooperative formation and outline an initial niche-based value-opportunity for cooperative activities in the sustainable energy sector.

There are inherent difficulties in establishing the place of cooperatives in the bioenergy commodity retail environment.

Historically, regardless of niche or product, cooperatives have operated under the three guiding principals of  user-benefit, user-owner, and user-control.

The user-benefit principle alludes to the concept that a consolidated group can better leverage market access, group pricing, services and supply operational integration, and overall decreased market risk.  The large group can more effectively negotiate pricing and create solutions that serve all of the members utilizing pooled resources, lowering distribution costs and enhancing the ability for members to deliver products that have greater appeal and value to purchasers.

The user-owner principle conceptually marries the idea of maximizing (within the boundaries of law) business proceeds to members. This is foundationally different in philosophy than the tradional corporate  approach of maximizing profits (and consequently shareholder returns). This facet of the cooperative paradigm is often viewed as something of a double-edged sword. Many mature cooperatives have recently privatized in efforts to gain access to investment capital. Several states have adopted changes to state cooperative statutes, allowing cooperatives to take on private equity investments from non-members. These investments can be made legally allowing the investor to assume voting rights and return rates that are appropriate to the level of investment.

This change directly affects the last facet of the triumvirate user approach common to most cooperatives, that of democratic user-control. Cooperatives operate strategically on using a distributed leadership approach that is democratic and focused on member equality. Generally, regardless of differences in stakeholder investment, each member in a cooperative is entitled to one and only one vote. This is one reason why the adoption in some states of statues that create “equity-ready” cooperatives is dramatic.

It is a fact for every business, regardless of entity form, that the global marketplace is fiercely competitive. In response to the rapidly changing environment, many businesses are narrowing their focus and concentrating on creating sustainable niche markets for delivery of their products and services.

I believe the sustainable energy sector is ripe for cooperative participation. Although what I have termed “equity-ready” cooperatives may seem initially ideal, traditional cooperatives can perform well in this sector as long as the membership makes decisions that are consistent with the long term mission of cooperative stability.

In Part 2 of this discussion I will further discuss the core opportunity as well as what sort of approach might be necessary to align the memberships desire to maximize proceeds with maintaing long term cooperative stability.

Todd

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Should we blame oil speculators for high prices of gas?

A recent article in USA Today quoted US Energy Secretary Samuel Bodman as saying that oil production not meeting the growth in recent demand levels was the primary culprit in the current high price of oil. 

Mr. Bodman stated, “There is no evidence that […] speculators are driving future oil prices.”

According to the Energy Secretary the economics of oil are such that every 1% increase in demand currently requires a 20% increase in the price per barrel at current production levels. The growing demand in countries with rapidly expanding economies like China and India colliding with the current lack of spare oil production capacity, in his opinion, has served as the perfect medium to see the price of oil increase rapidly and dramatically.

Many factors contribute to the cost of crude oil, which represents the largest variable in the price of gas. A number of sites discuss the cost of crude oil and its relationship to the price of gas in detail.  One of my favorite explanations can be found at Howstuffworks.com by following this link.

The graph below represents a rough reference of gasoline price components. Speculators aren’t included, but would likely fit into three areas. The first is the most obvious; the price of crude as it relates to the commodity markets. The second and third are less obviouse, but refining as well as distribution are both affected by corporate valuation and cash flows. In part those valuations are affected speculators. 2007 Cost of gas breakdown.

 The debateable component is whether or not exigent speculation, combined with a weakening dollar, has an effect sufficiently profound to affect the nearly two-fold price increase we have seen since August 2007.

OPEC and the representatives of oil producers have agreed to increase production, although they maintain that speculation and a devaluating dollar are the factors to blame, not insufficient supply.

The debate continues. What should be past debate is the fact that we are at the crossroads and a wonderful opportunity lies before us. It is an opportunity to renovate our energy infrastructure. It is the opportunity to innovate, to invest in alternative fuel sources, and also re-construct the energy markets to provide greater transparency to the consumer.

Todd

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New order waste managment solutions are critical for the future.

I had a coversation with Rob Williams today.

Rob works at the University of California Davis in the California Biomass Collaborative. The Collaborative functions as something of a research cooperative between State, Industry, Academia, and Environmental Organizations. One project the Collaborative has been working on since 2003 is a study of alternative conversion technologies for biomass. One focus has been to look at the potential of biomass with mixed constituents (like the kind of biomass found in the municipal waste stream) to serve as viable biofuels feedstock.

I discovered Rob through his research. I have spent the last few weeks researching the feasibility of constructing and commercializing a technology that may have some applications in the aforementioned area, and Rob has written several papers that hold some peripheral relevance.

At any rate, Rob and I spoke for a good while, talking about the potential improvements in this area for the future. One area that still requires a great deal of work is the shaping of public policy around biomass to chemical energy conversions.

One major stakeholder in Calfornia related to the diversion of waste biomass is the California Integrated Waste Management Board (CIWMB). Amongst other duties, the CIWMB sets diversion targets and constructs waste management programs that are required due to legislative mandate. They also commission research organizations, like the Biomass Collaborative, to provide problem statement, project feasibility, and solution readiness assessment studies related to the various diversion opportunities that biomass and other components of the municipal waste stream present.

One reason strategic policy is important in the development of viable waste to biochemical energy markets is that without these policies in place it is difficult to obtain social license at the county or city level to develop viable diversion projects. Traditionally, biomass in the energy space has been used for furnace fodder or the production of natural gas through decomposition or composting.

The new technologies that hold promise for the future need to find homes in the strategic policies of federal and state governments, here in the United States and abroad as well. Appropriate strategic policy will help accelerate private investiture in biochemical energy areas that hold promise, and will also help eliminate non-viable technology sets as well.

 

Thoughts on the recent plague of grease and diesel thefts.

The recent spate of thefts of used cooking oil from the backs of restaurants as well as diesel fuel thefts has many outraged. For members of the small-scale biodiesel production community, the theft of grease is a tantamount to the theft of a precious commodity necessary to maintain the sustainability of their production. There is an intrinsic cost to the community when unexpected loss occurs; lost time, energy, and trust being the most obvious among others.

The recent thefts also serve to highlight how quickly many people are affected by the rising cost of petroleum and other energy sources.

It would be interesting to see if crime in other areas increased as well, although with the current recession drivers we face in the United States I imagine it would be quite difficult to isolate the part that fuel prices may play in any increase (or decrease) in crime in a given area.

Todd

The first post is the hardest!

Welcome to the first post for the cooperative!

My name is Todd Hill. I have been working on creating a thriving energy cooperative in California for the past 14 months. It started with a vision of creating an organization that would serve the community as a local distribution hub for biofuels, with our initial efforts focused on the production of biodiesel.

Promethean Biofuels started from a series of meetings I had with our resident theoretical chemist Ken Craig. Ken and I posited the possibility of creating an organization that focused on converting waste into chemical energy and other products in local communities. I had an extensive background in environmental business and sustainable business solutions, and I was intrigued by the possibility of creating a scalable enterprise that relied on micro-nodal economics and community support to help create a new infrastructure of recycling solutions that provided direct benefits in the form of energy or chemical building blocks to be used in manufacture.

Although our progress has been slow, to paraphrase Louis Pasteur, there is strength in tenacity.

I am not sure what path brought you to this post. Whether it was passion for all things bioenergy, late night boredom, or an accidental click on the wrong search result, I invite you back to read, write, and ruminate with those of us working toward the common goal of making tomorrow better.

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