By Alison Matthews, Former Executive Director of Renewable Industries Canada, Sole Proprietor of AOM Consulting Special to The Digest
Innovation is at an all-time high, but the pioneers of the North American biofuel industry are seemingly left behind. However, the conditions are right for a biofuels resurgence if we can find a way to bring back our entrepreneurial spirit that once lead us to some big thinking.
After all, it was big thinking that lead to the Canadian Renewable Fuels Standard coming into force in August 2010, which in many ways ushered in a peak for the biofuels industry. While it was not a high water mark as far as litres produced or corn price, it was a clear peak for the energy, buzz and momentum surrounding the industry. We can get there again.
A decade ago, the build-out to reach the biofuels mandate was near completion and governments were applauding the industry for its commitment to supporting farmers across the country as well as reducing pollution.
Facilities in operation were already thinking ahead, investing in research and development and innovation. Efficiencies, new by-products, the circular economy. Everything and anything were on the table.
And government wasn’t much different. Ethanol facilities were not even running at maximum capacity and governments were already doubling down on their success by creating funds to support “next generation” ethanol production.
And why not. For facilities facing the end of incentives and understanding the margins for ethanol are fickle, diversifying and collaborating was a natural next step to ensure long-term stability.
For government, they saw the 4 to 1 return on investment.
The industry was vibrant.
But then things started to change.
First, the conversation shifted. Biofuels evolved from being understood as primarily an agricultural and energy security issue to being considered an environmental issue first. As the public shifted their attention to climate change, so did government. Meaning that while biofuel producers continued to strive for more, faster, cheaper, cleaner, the public appetite – for better or worse – only cared about the cleaner.
Second, the competition got stiff. At the beginning of the decade, biofuels were the only market ready GHG reducing alternative to gasoline, pushing refiners for market share. While this is still true, the desire for more low-carbon transportation alternatives brought hydrogen, natural gas, and electric vehicles into the mainstream. This diversification brought with it more competition for government dollars and private investment.
Third, lightning didn’t strike twice. These great funds established to support the build out of next generation biofuels were met with disappointing results. In a classic case of putting the cart before the horse, technologies were not far enough along at the time to warrant the investment and the cost was far higher than anticipated. Government felt burned.
All these issues have combined to turn the biofuels industry from being the golden child to underdog, in under a decade.
However, this should be a position of strength to grow from. After all, this is how the industry started – passionate, scrappy entrepreneurs with big ideas and the drive to make it happen. However, that motivation and energy seem to have gone dormant and replaced with a defensiveness that’s a product of an industry that’s been made to justify their place at every turn.
As a result, approaching many biofuel producers today with a new idea are no longer met with same enthusiasm of the 2010s, but with a closed door. Despite fantastic new innovations being declared every day, they always seem to be adjacent to the biofuels industry, not part of it. It is becoming clear that this isn’t just a margins issue, but a cultural one.
This isn’t meant to admonish industry leaders or even represent all producers. It has been a slog the last few years. Fighting for every scrap of the market and picking apart pages upon pages of new regulations just to keep current market share is tedious and exhausting. It would be hard for anyone not to become consumed by the process.
What’s more, this exhaustion isn’t just limited to the industry, creating a double-edged sword. Government has become seemingly jaded in their appetite for the new. By edict or design they are unable to ‘pick winners’ and therefore limit their interest to data points – dismissing any project, no matter how innovative, if it doesn’t check their particular boxes.
As we know well, data is important, but so is passion. Passion and big ideas are how the industry grew in the first place.
The industry can once again be at the cusp of something great.
With that in mind, here is a New Year resolution for the industry: bring back that entrepreneurial spirit.
In 2020, dedicate time to think big and innovate. Only an entrepreneur’s mindset can dedicate time to imagine the next evolution. Greet opportunities with enthusiasm instead of skepticism. Open up again to the risk and reward of challenging the status quo.
As the saying goes: “innovate or die.” The story of the biofuels industry does not end here. This is not the peak. Greatness is around the corner, but one thing is for sure, the status quo cannot continue.
Alison Matthews is the Former Executive Director of Renewable Industries Canada and also Former Director of Government Affairs of the Canadian Renewable Fuels Association. She now is the Sole Proprietor of AOM Consulting.