Cascadia Capital executives discuss what they've learned from
starch-based ethanol and why they plan to take advantage of the next
wave of biofuel opportunities.
by: Cascadia Capital CEO Michael Butler, Managing Director Ted
Bernhard and Vice President Jamie Boyd
Bullet Arrow April 08, 2008
The following opinion piece is from an independent writer and is not
connected with Greentech Media News. The views expressed here are
those of the author and are not endorsed by Greentech Media. Cascadia
has not invested in any biofuels companies and is not considering
investing in biofuels companies in the near future.
The New Energy Economy is becoming a reality, thanks to solid
financing, strong commitment and bold innovation. But that doesn't
mean there's been an absence of hurdles and setbacks along the way.
Recently, for example, Time magazine, Science magazine and The New
York Times have published stories that called into question the
economic and environmental benefits of alternative fuels. The articles
cited respected mainstream economists, who asserted that alternative
fuels' excessive dependence on land use negatively skews efficiencies
and emissions.
We believe the academics and media make a good point here, and they
have influenced our thinking as we consider the future of alternative
fuels and look to take advantage of the next wave of opportunities in
this market.
The bottom line for us is twofold: First, alternative fuels can
deliver robust returns if investors focus on the right capital and
technology efficiencies; and second, we must absolutely find a way to
unlock alternative fuels' potential, given soaring petroleum prices
and an uncertain economy.
Our view of alternative fuels, which guides us as we consider fresh
investment possibilities in this area, consists of five key insights:
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1. There is no end-all, be-all alternative-fuel solution: Unlike
the Internet revolution, the New Energy Economy won't offer up a
killer app; there will be many small answers this time. We have been
chastened after falling in love with ethanol, thinking it would
single-handedly lead us to alternative-fuel Nirvana. The harsh truth
about this particular fuel was that it didn't work in all vehicles, it
had a hugely negative impact on a gamut of related commodity prices
and it wasn't all that efficient. In fact, biodiesel gets better
mileage per gallon and delivers more output per unit of input than
ethanol.
2. We can't live off the land: The latest econometric models for
alternative fuels show us their negative environmental impact,
particularly with feedstocks that destroy palm farms or the
rainforest. There is also a negative economic impact in the form of
rising food prices. In addition, it's important to remember that even
if we use all the arable land in the United States for
alternative-fuel production, we'll only be able to replace a fraction
of the diesel fuel the nation currently uses.
3. Waste or waste byproducts are the most sensible alternative-fuel
inputs: There's far less pricing pressure associated with sludge or
algae versus corn as long as proven technologies are harnessed. And
we've also seen that efficiencies soar off the charts if the right
waste products are used as feedstock.
4. Biofuels are next-generation recycling: If we use animal tallow
from dead carcasses to generate fuel, for example, we are also
recycling a waste product that too often ends up in land fills or as a
pollutant.
5. The Pacific Northwest has a bright future in alternative-fuel
development: While alternativeenergy players and agri-businesses in
the Midwest have been focused on soil, plants, land and feedstocks in
an effort to till the post-petroleum future, entrepreneurs in Oregon
and Washington have been busy developing both technology solutions and
market innovations that help enhance and enable alternative fuel
processes. This dual emphasis in the Pacific Northwest is largely
because of the region's lack of abundant and traditional feedstocks.
The alternative fuel revolution is about change. In essence, it is
altering consumption patterns and behaviors that have become ingrained
over the past 150 years of petroleum use. And the emphasis is now
about flexibility and experimentation to find the best, most workable
and efficient solutions possible.
Despite several misguided stumbles, we are still believers and look
forward to the revenue and profits that Biofuel 2.0 is certainly
capable of generating.
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