The Marketing Of Renewable Energy
Peter Brown
European Marketing Tools
The next big revolution will come when we all realize that there is not enough energy available to ensure that we can all access our fair share.
The definition of fair share varies from country to country and even within countries, it varies widely depending on who is in charge, who is on top and who is most needy. In the United States, there is no restriction on buying gas, electricity and water. There is, according to the equation, enough for all. There is enough so that we can indulge in conspicuous consumption with blatantly oversized vehicles, houses and toys.
The problem is that for every gallon of gas or pound of coal, someone will be going without. Quite simply, there is no longer enough for all to have as much as they want.
Enter the economy of alternate energy sources, enter the radical idea that what one person can save is not for his own benefit but to add to the dwindling pool. There is no equivalent in our society that explains the concept of finding sources energy to ensure that the greedy can remain gluttonous.
Solar power is a rather fragmented example of this idea. Putting extremely expensive technology on the roof that will convert the rays of sun into electricity is easy to understand. But the payback on the investment is almost staggeringly slow, supported by generous and not so generous subsidies and tax breaks, the homeowner may one day pay back the cost of his installation in reduced electricity bills. The catch of the meter running backwards is that most of the time the meter runs forward, and revs up at night.
So why do it? We do it because the cost of not doing “it” is even higher. Solar power on the roof is a bold statement that the owner will become a contributor, not a consumer. The act of buying gas is a simple necessity; the act of making biodiesel fuel and running the car on it is an entirely different statement of non-cooperation.
Face it; hybrids are no-brain substitutes for existing cars. There is no pain in driving a Prius, which gets marginally better mileage than a raft of classic cars from the past; remember that the 1996 Geo Metro gets better mileage than the Prius, the Mini 850 was a fuel sipper. So the point of the Prius is that the owner continues to consume, and will add a stupendous pollution bill to the last owner of his car, fifteen years down the line when the batteries run down forever. But for the time being, he is riding in his unique statement. The challenge of biodiesel is to channel his attitude into buying a diesel powered car and insisting on biofuels. The challenge is huge
The business of renewable energy lies in ensuring that consumption of any form of energy is replaced by a like amount of available energy from a renewable source. Petroleum products are wrenched from the ground at ever increasing depths. The oil wells in Kuwait stretched into Iraq, which started the first oil war. What is pumped from the ground is not replaced; it is shipped, refined and burned. The result is mobility, pollution and less available energy.
A solar panel just sits there; every photon that hits the silicon cell generates a tiny pulse of energy. Although the sun is not an inexhaustible source of energy, by the time it runs out, we will have other, bigger problems to contend with. A river, well-managed and producing electricity through pelton turbines is fed by a renewable cycle of water to rain and back again. It too is a pure form of renewable energy, although we are going to heroic lengths to keep the electrons flowing from such remote areas as the James Bay, or the Chinese Gorges.
In the PR world, we have several ways to describe actions that lead to sales. There is the direct approach, which is an invitation to consume, and the indirect approach, which drives the consumer to want to consume. The alternate energy scene is right now mired in the first approach because the learning curve in America for biofuels has barely been touched. There is a fear of embracing what appear to be radical problems. Biodiesel is a clear case in point; will it damage my car? (no) Is it more expensive? (Not really), Do I need to make costly conversions? (no) and so on. On the other hand buying a hybrid is so much easier, I just pump gas and drive off, right?
So the first step is to educate the consumer, because we are a free society and we cannot just impose our decision on him. But our average consumer is not well educated in energy matters, why should he be? For years he has spent very little per mile for his transportation, very little for all his energy needs in general. Now the equation is changing, now he needs to think about things that Europeans have been debating since before WW II. A Belgian knows to the liter how much gas his car uses. He instinctively knows when it makes sense to take the train, or the car.
But Europeans have clear alternatives, trains that run on time, and can drop a passenger in the heart of the city in many ways faster than the airplane can. In the US there was a clear choice to eliminate that form of public transport to the advantage of the automobile economy. They also have very expensive petroleum products.
With our restricted infrastructure, the only real alternative to the car is… the car. So we are compelled to seek alternate energy sources to keep the individual automobile on the road. At the same time we can expand the use of biofuels into energy production like running generators, heating in home furnaces and other non-transportation situations.
Enter biodiesel, a simple solution to a complex problem. Take available organic materials and convert them to fuel.
Our industry is in transition because our consumers are buying our fuel for the same reasons that they would buy a Prius. The novelty of actually doing something that is not mainstream to enhance his image. Education is a hard road to go down, it entails removing the mystique of the alternate fuel label to appeal to a much greater public, and an increasingly ignorant buyer.
The present campaigns to sell the concept of biodiesel may actually be harming the sale of the product. We have enough buyers to meet our output, but unless we overcome the “special status” effect of our campaigns and our products we may not be able to go to the next level. The ethanol producers are doing a great job in getting the point across that their alternate fuel is the wave of the future. They have become accepted and mainstream, and they have not discussed the pros and cons of the product except to say that it is clean, available and cheap. They have no controversies, no possible negatives. The consumer is buying the argument and the fuel. Plants are being built all over the Midwest and the large petroleum companies are starting to take notice.
In a sense even a Prius owner will not question if his gas comes from Venezuela, Iraq or Nigeria. When Biodiesel reaches the stage when he does not even care what brand of biofuels is going into his tank, that’s when biodiesel will have achieved big dog status in the energy club.
Monday, February 21, 2011
Wednesday, February 16, 2011
Show Me The Money!!
Walking the floor at the NBB last week, speaking with exhibitors, buyers and sellers, and the broad Biodiesel community in general, one topic was raised time and again: the parlous state of project financing.
While the US banking system is sitting on billions of dollars of bailout money, according to this CNN report (http://money.cnn.com/news/specials/storysupplement/bankbailout/), very little of it is flowing into the biodiesel world. Business plans are drawn up, repayment schedules are drafted, blender’s credit calculated, provisions are made for alternative feedstock, and demand for biodiesel is proven with signed offtake agreements. It is all there, and it is all in place. What is missing is the cash.
The NBB, advanced several reasons for biodiesel producers to be bullish in 2011; fulfilling the requirement of RFS2 means soaring sales, and the renewed tax incentive has improved the bottom line. Plus higher oil prices and pipeline access for B5 will help revitalize the industry. All true, but where is the money?
Over the last two years, numerous plants have been mothballed. And many no longer meet EPA and other regulatory requirements. It will cost money to get them restarted. According to the attendees, that money is not available. And they should know. They have tapped into any financial source they could identify, from government grants to offshore lenders, all without success.
Show me the money was the refrain, and, in case after case, the response was, no money is available.
The worst part of this black hole credit void is the bottom feeding predators that it has created. For a modest monthly retainer (ranging from $3,500-$20,000 per month!) financial brokers will peddle a project to present projects to “Russian” petroleum investment groups interested in clean technology, or to “Swiss” groups that supposedly have “Chinese” money to create biopure production companies. Since these brokers are not earning fees on funded loans, obviously they have to make money somewhere! Of course there is no guarantee that any actual funding will result. Biodiesel project developers, who cannot get any traction with conventional banks, and who have already put out hundreds of thousands of dollars in preliminary project costs, are proving to be easy prey. Not only are their wallets much lighter, but they are left, once again, asking “Show me the money?”.
Where is the money? It was reported here that $31.2 billion was put in play to finance 93 renewable energy projects in 2009. That is an impressive number and yet the biodiesel share of that amount was less than $3 billion. Over the next few years, much larger amounts will be required to meet the mandated B5 requirements and that funding appears to be missing. Where is the money going to come from?
We cannot expect venture capital to step into the void. It is funding advanced new technologies, whereas the value of a biodiesel project is not in its technology, which is static, but in the production figures of each facility that starts producing biodiesel, providing jobs and making impressive or not returns on investments.
American regional banks may provide the solution. As a recent Reuters news story pointed out, they are the logical solution for renewable energy projects. They can do private placements for equity, own 5 percent of the companies in voting stock, work with local communities to develop jobs and carry out job creating activities and funding community development (including being a Community Development Entity), and arrange for municipal debt. And they actually could show the money if they knew what it was for. Biodiesel has had its public image tarnished. It has become conventional wisdom that biodiesel will increase the price of food; reduce the jungles of the Amazon , and require more energy to produce than is actually provided.
So faced with a clean ethanol plant costing $100 million and more and an environmentally suspect biodiesel facility, the cash goes to the alcohol.
On the other hand, the development of a biodiesel facility is a fairly small investment compared to an ethanol, nuclear, solar or any other energy producing plant. If the planets align themselves correctly, local financing and government loan guarantees could lead to the development of a large number of new medium sized biodiesel plants over the next few years. But what do we need to do in order to be shown the money now?
One thing everyone agreed with is the need to change perceptions of our industry, products and benefits. We need the NBB and other national Biodiesel Boards worldwide to tell the real story of biodiesel to the world, and the banks. And the story will have to cover all the bases starting from the need for biodiesel through what it is, what it does, where it comes from and why it fits into the real world of business.
Someone once said that there is nothing more skittish than a million dollars. So the answer to show me the money is probably come out come out wherever you are. The president has agreed that renewable energy is worth pursuing, so we ask the President, show us the money! We know that banks have been given trillions of dollars to refloat the economy; we need to go to them and ask them to show us the money. We know that politicians are pushing for biodiesel for a number of reasons, from small projects in the farming communities, to large projects in ports around the world, the politicians gain votes and credibility so they need to show us the money.
The point that was made over and over at the NBB is that we, the biodiesel industry, should not be the only ones to ask for the money, it must become a common refrain to generate the financing to create the facilities the world needs.
Those who show us the money must understand the benefits beyond the ROI.
The local banks can become local heroes. The politicians can bank on being reelected; the diesel driver can make a statement by insisting on biodiesel. The people waiting for local jobs, the improved environment, the better running trucks, the new lubricants, clean heating oil, large ports where neighbors can breathe easier. School buses where children need not fear asthma, all of them must insist that they be shown the money.
We need to be lobbying policy makers, and making alliances with environmental groups like the Sierra Club, every group that supports clean air and clean tech must be shown the money because without the money all of that goes away.
There was an undercurrent of anger and frustration at the NBB conference because with all the optimism expressed at the show, there was little faith in seeing the money any day soon. And that must change before biodiesel becomes as acceptable in the US as it is in Europe.
More than one attendee told us exactly where the money was; in Brazil billions of dollars are coming directly from the Government to support that country’s road to energy independence. Will it come to that in Europe and North America where the refrain remains, show us the money, before it all goes away once again?
While the US banking system is sitting on billions of dollars of bailout money, according to this CNN report (http://money.cnn.com/news/specials/storysupplement/bankbailout/), very little of it is flowing into the biodiesel world. Business plans are drawn up, repayment schedules are drafted, blender’s credit calculated, provisions are made for alternative feedstock, and demand for biodiesel is proven with signed offtake agreements. It is all there, and it is all in place. What is missing is the cash.
The NBB, advanced several reasons for biodiesel producers to be bullish in 2011; fulfilling the requirement of RFS2 means soaring sales, and the renewed tax incentive has improved the bottom line. Plus higher oil prices and pipeline access for B5 will help revitalize the industry. All true, but where is the money?
Over the last two years, numerous plants have been mothballed. And many no longer meet EPA and other regulatory requirements. It will cost money to get them restarted. According to the attendees, that money is not available. And they should know. They have tapped into any financial source they could identify, from government grants to offshore lenders, all without success.
Show me the money was the refrain, and, in case after case, the response was, no money is available.
The worst part of this black hole credit void is the bottom feeding predators that it has created. For a modest monthly retainer (ranging from $3,500-$20,000 per month!) financial brokers will peddle a project to present projects to “Russian” petroleum investment groups interested in clean technology, or to “Swiss” groups that supposedly have “Chinese” money to create biopure production companies. Since these brokers are not earning fees on funded loans, obviously they have to make money somewhere! Of course there is no guarantee that any actual funding will result. Biodiesel project developers, who cannot get any traction with conventional banks, and who have already put out hundreds of thousands of dollars in preliminary project costs, are proving to be easy prey. Not only are their wallets much lighter, but they are left, once again, asking “Show me the money?”.
Where is the money? It was reported here that $31.2 billion was put in play to finance 93 renewable energy projects in 2009. That is an impressive number and yet the biodiesel share of that amount was less than $3 billion. Over the next few years, much larger amounts will be required to meet the mandated B5 requirements and that funding appears to be missing. Where is the money going to come from?
We cannot expect venture capital to step into the void. It is funding advanced new technologies, whereas the value of a biodiesel project is not in its technology, which is static, but in the production figures of each facility that starts producing biodiesel, providing jobs and making impressive or not returns on investments.
American regional banks may provide the solution. As a recent Reuters news story pointed out, they are the logical solution for renewable energy projects. They can do private placements for equity, own 5 percent of the companies in voting stock, work with local communities to develop jobs and carry out job creating activities and funding community development (including being a Community Development Entity), and arrange for municipal debt. And they actually could show the money if they knew what it was for. Biodiesel has had its public image tarnished. It has become conventional wisdom that biodiesel will increase the price of food; reduce the jungles of the Amazon , and require more energy to produce than is actually provided.
So faced with a clean ethanol plant costing $100 million and more and an environmentally suspect biodiesel facility, the cash goes to the alcohol.
On the other hand, the development of a biodiesel facility is a fairly small investment compared to an ethanol, nuclear, solar or any other energy producing plant. If the planets align themselves correctly, local financing and government loan guarantees could lead to the development of a large number of new medium sized biodiesel plants over the next few years. But what do we need to do in order to be shown the money now?
One thing everyone agreed with is the need to change perceptions of our industry, products and benefits. We need the NBB and other national Biodiesel Boards worldwide to tell the real story of biodiesel to the world, and the banks. And the story will have to cover all the bases starting from the need for biodiesel through what it is, what it does, where it comes from and why it fits into the real world of business.
Someone once said that there is nothing more skittish than a million dollars. So the answer to show me the money is probably come out come out wherever you are. The president has agreed that renewable energy is worth pursuing, so we ask the President, show us the money! We know that banks have been given trillions of dollars to refloat the economy; we need to go to them and ask them to show us the money. We know that politicians are pushing for biodiesel for a number of reasons, from small projects in the farming communities, to large projects in ports around the world, the politicians gain votes and credibility so they need to show us the money.
The point that was made over and over at the NBB is that we, the biodiesel industry, should not be the only ones to ask for the money, it must become a common refrain to generate the financing to create the facilities the world needs.
Those who show us the money must understand the benefits beyond the ROI.
The local banks can become local heroes. The politicians can bank on being reelected; the diesel driver can make a statement by insisting on biodiesel. The people waiting for local jobs, the improved environment, the better running trucks, the new lubricants, clean heating oil, large ports where neighbors can breathe easier. School buses where children need not fear asthma, all of them must insist that they be shown the money.
We need to be lobbying policy makers, and making alliances with environmental groups like the Sierra Club, every group that supports clean air and clean tech must be shown the money because without the money all of that goes away.
There was an undercurrent of anger and frustration at the NBB conference because with all the optimism expressed at the show, there was little faith in seeing the money any day soon. And that must change before biodiesel becomes as acceptable in the US as it is in Europe.
More than one attendee told us exactly where the money was; in Brazil billions of dollars are coming directly from the Government to support that country’s road to energy independence. Will it come to that in Europe and North America where the refrain remains, show us the money, before it all goes away once again?
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