1OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Development of New Generation Cooperatives in Agriculture for Renewable Energy Research,

Development, and Demonstration Projects

Mark DowningAgricultural Economist

Oak Ridge National Laboratory

OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

2OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Acknowledgements

• A diverse presentation such as this one benefits from years of on-going collaboration with a variety of backgrounds and disciplines and circumstances. I would like to thank:

• Chris Demeter, Janet Cushman, Lynn Wright, Anthony Turhollow, Lynn Kszos, Marie Walsh, Bob Perlack, Rich Bain, Rick Freeman, Gregg Marland, Robin Graham, Ken Campbell, Chris Hanson, Robert Hanson, Bob Hansen, Ralph Overend, Greg Larson, Jerry Tuskan, Tom Kroll, Bill Bergusen, Don Riemenschneider, Dan Langseth, Dan Netzer, Sarah Rensink, Sheila Faber, Michele Bielik, David Cobia, Jim Cooper, C. Philip Baumol, John Ferrell, Steve Hanson, Marvin Duncan, Randall Torgerson, Jerry Nadeau, David Barton, Ralph Groschen.

• Notwithstanding their invaluable contributions, any mistakes or errors within this presentation remain my own responsibility. The views necessarily reflect those of the U.S. Department of Energy, the U.S. Government, Oak Ridge National Laboratory, and UT-Battelle.

3OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Introduction

• New Generation Cooperatives• Bioenergy cooperatives

– Data– Methods– Results

• Discussion

4OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Assumptions

• Closed membership• Initial investment equity level high• Have the right to deliver • Value of delivery rights can

appreciate or depreciate

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Agriculture and Energy

• Commodity production• Co-product or bio-refinery

approach• Biomass Power for Rural

Development Initiative

6OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Agriculture and Energy

• Commodity production– Alfalfa stems for power and leaves for

meal– Hybrid poplar for co-firing and for wood

fiber– Switchgrass for co-firing and as a

perennial crop– Willow on non-CRP land and for co-

firing

7OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Agriculture and Energy

• Biomass Power for Rural Development– Power– Rural development– USDA and DOE joint solicitation– Preceded by 12 paper feasibility

studies

8OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

MnVAP

• Minnesota Valley Alfalfa Producers Cooperative– Duality of alfalfa commodity– Gasification and high-protein leaf-meal– Cooperation with an electric utility –

confounded by a state mandate– Production, processing, and marketing

9OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Prairie Lands Bio-products

• Market grass crops in southern Iowa

• Value-added role for switchgrass• Ethanol, co-firing with electric,

plastics• Deal with production, harvesting,

and storage

10OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Willow Bioenergy Producer’s Cooperative

• Salix Consortium• Co-firing option• Non-CRP land in New York State• Planting, harvesting, storage,

marketing

11OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Minnesota Agro-Forestry Cooperative

• Not a Biomass Power for Rural Development offspring– From DOE Feedstock Development

Program at ORNL– Fiber commodity, co-firing option

second– Compounded issues with electric

location– Historical research was tremendous

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Necessary conditions

• Legislative• Long term corporate strategy

– Business viability– Economic sustainability

• Public sector efforts

13OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Sufficient conditions

• Specify plant and construction oversight goals

• Develop a mutually agreeable and defensible mission statement and vision

• Incorporate planning advisors and consultants

• Leadership development by producers

14OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Sufficiency…

• Commitment by owners• Error recognition by management• Identification and management of

risk• Assumption of options• Sufficiency of capital• Communication in management

15OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Sufficiency…

• Securing an appropriate business location

• Projecting the market(s) accurately• Projecting operating costs

accurately• Assumed reliance on government-

based marketing• Excessive debt/equity ratio

16OAK RIDGE NATIONAL LABORATORYU. S. DEPARTMENT OF ENERGY

Discussion

• How you set up a cooperative• Ability to control production• Stock vs non-stock form of business• Exclusivity in the farming

community• Plant and social science research• Business culture