OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 1 Development of New Generation Cooperatives in Agriculture for Renewable Energy Research, Development, and Demonstration Projects Mark Downing Agricultural Economist Oak Ridge National Laboratory OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 2 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.

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 3 Introduction New Generation Cooperatives Bioenergy cooperatives –Data –Methods –Results Discussion

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 4 Assumptions Closed membership Initial investment equity level high Have the right to deliver Value of delivery rights can appreciate or depreciate

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 5 Agriculture and Energy Commodity production Co-product or bio-refinery approach Biomass Power for Rural Development Initiative

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 6 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

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 7 Agriculture and Energy Biomass Power for Rural Development –Power –Rural development –USDA and DOE joint solicitation –Preceded by 12 paper feasibility studies

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 8 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

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 9 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

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 10 Willow Bioenergy Producer’s Cooperative Salix Consortium Co-firing option Non-CRP land in New York State Planting, harvesting, storage, marketing

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 11 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

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 12 Necessary conditions Legislative Long term corporate strategy –Business viability –Economic sustainability Public sector efforts

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 13 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

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 14 Sufficiency… Commitment by owners Error recognition by management Identification and management of risk Assumption of options Sufficiency of capital Communication in management

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 15 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

OAK RIDGE NATIONAL LABORATORY U. S. DEPARTMENT OF ENERGY 16 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