Want to see how not to build an industry? Look at this story found in the
Fairfax Digital edition about
Australia Renewable Fuels.
One of the largest criticisms of
biofuels in the U.S. is its supposed need for subsidy. The fact that the larger
biofuel players build their businesses solely on these subsidies as well doesn't help much either. We need to change this emphasis and replace it with a focus on the unique
emissions and low carbon benefits of
biofuels instead. We should focus our market development on the same approach used by natural gas thirty years ago (the natural gas industry marketed their product as a diversification away from petroleum with better
emissions under the Clean Air Act).
I just thought the PR spin of the article was worth note. A business failing to succeed and blaming government for not offering enough support should be pointed at as an abomination to be avoided. Similar to the dot-com era's promise mounting losses as required to build a market, a successful
biofuels industry should never expect the support of government. You can't build a market on such ethereal hopes.
When a business fails to establish appropriate cash flow, develop the necessary markets for off take, and maintain a long term relationship for feedstock - its not government's fault. Its the fundamental underpinnings of a flawed business model. One expecting a future grant of utility status to
biofuel producers which is extremely unlikely.
Australia's largest
biodiesel producer shuts two plants and lays off 30 people. This in the face of world record petroleum prices. The fact that Australian Renewable Fuels cites expensive tallow (or successful competition for
feedstocks) as the fault of its own shortcomings is an insult. It should not be tolerated and it definitely should not be pitied.
The management of Australia Renewable Fuels blames high tallow prices for the plant closures. Follow the logic of their argument. A.R.F. is complaining about
biodiesel's success with is driving demand for tallow and pushing prices up (they are complaining about the international competition for tallow). High petroleum would also have an economic cross-elastic effect on tallow as a substitute for a whole host of products (so they are complaining about high oil prices which they should be cheering).
Government should be indifferent to a single companies success. The only fault I would accept would be an expectation of a more active government on CO2 emissions (i.e. they bet wrong on a low carbon fuel standard in their business model).
Also worth note. The fact that Australian Renewable Fuels points to U.S. markets (New Mexico in particular) as where to take its imperfect business model on the road shows the importance of
biofuel policy that focuses on developing real markets for the product just not a price sensitive substitute with
petro.
You can build a $1 tax credit into your business model but from what I've seen the market washes it away (leveling prices out leaving the economics nearly the same). The real focus of our policy shouldn't be price but actual benefits.
Biodiesel and ethanol should be the new natural gas type silver bullet for industry. Stable pricing from local domestic suppliers and cleaner
emissions.
We need to break from the guaranteed profit expectations currently pervading our industry. In particular as a justification of a business model at every
biofuel plant's fundraising pitch.
