You know your business, but your stakeholders don’t.
Perhaps your core business is not bioenergy… It is certainly not the core business function for the stakeholders to your bioenergy project, such as banks and lenders. Bioenergy systems are complex, but they don’t have to be complicated. The greatest threats to the success of your project are the “unknowns” – real or perceived. The complexity of these systems is nothing to fear, yet it creates fear and doubt in those that you must acquire some level of approval from, such as internal management, lenders, investors, regulators, and even community leaders. Fear and doubt can be project killers, and can significantly add to the costs of developing your project.
Fortunately, there’s a solution to this doubt and fear – education and communication. The education of stakeholders is best accomplished through sharing knowledge, experiences, and expertise of professionals whose core business is bioenergy systems – like Cavanaugh.
The most effective, and generally accepted, manner of communicating the knowledge, experiences, and expertise to overcome the fears and doubt associated with your bioenergy project is through a Feasibility Study. In fact, most banks and lenders require a Feasibility Study, validated by a third-party, prior to committing funds for the project. (More information on validation can be found here)
A Cavanaugh Feasibility Study includes:
- Economic Feasibility – Your project will live or die by the economics. It is not by coincidence that this is the first section that must be addressed in the Feasibility Study. All too often, we get wrapped up in the tech, and focus on the tech driving the success of the project. Recall, bioenergy systems are perceived by stakeholders to be complex, and complexity often means “expensive” especially to those unfamiliar with biotech.
Sustainability initiatives are also often significant drivers of bioenergy projects. Many of our customers come to bioenergy systems because of the economics associated with the disposal of organic wastes; however, others come to bioenergy systems because of needs to satisfy the expectations of their customers and stakeholders relative to renewable energy, emissions control, and natural resource stewardship. No matter the reason, the economic case must be clearly articulated and proven.
- Market Feasibility – Cavanaugh can help you establish realistic market boundaries and understand inputs and offtakes. What are the offtakes of your bioenergy system? What are the uses and values of the energy products created? Is the market for energy offtakes limited by utility regulations specific to your site? Are you selling the energy or displacing existing energy inputs? Most importantly, is the capacity and stability of the markets for all the offtakes, including capitalized environmental attributes, sufficient to ensure success for the term of your project. Cavanaugh can help you prepare a proper market feasibility analysis establishes a realistic boundary for the market and describes the markets that affect inputs and offtakes. Is there a market influence that will affect the value of feedstocks that are viable to your bioenergy system?
- Technical Feasibility – Your stakeholders don’t want to be lost in technical jargon – they want an explanation in terms they can understand to overcome their skepticism. Chances are, you have already invested a great deal of time and effort into the proof of the proposed technology. There is often a great deal of emotion tied to the technology, and thus the technical feasibility of the project. Believe me, it is much more comfortable to find the chinks in the armor at this point rather than when the system is operational. Even in the absence of any weaknesses, you should understand that this will likely be the more uncomfortable and harder-to-understand portion of the Feasibility Study. Your stakeholders don’t want to be lost in technical jargon – they want an explanation in terms they can relate to that builds confidence and reduces fear.
- Operational Feasibility – Unbuilt bioenergy systems don’t fail. Your stakeholders know that the real risk begins when the keys are handed over. When the EPC has fulfilled their start-up and commissioning, and the equipment starts to get a little dusty, will your team have the support it needs to operate the facility long-term. What are the operational risks, and how to you hedge against them? What is the plan for educating the operational team and the redundancies built in. What are the critical operational parameters, and the performance metrics that will aid your management to optimum operations. These questions will help shape an analysis of operational risk, and communicate comfort to your stakeholders that you have a plan.
- Management Feasibility – The steps described above explore the bottom-up risks of your project. This section of the Feasibility Study explains the top-down risks of your project to your stakeholders, and more importantly, what you are doing to mitigate those risks. Is the commitment of the management team sufficient to ensure the necessary funding for staffing, preventative maintenance, and investments in training? Is the management strength tied to an individual or a body? What are the communication pathways that are established with the management team, and are they sufficient? The previous discussions have, to a great degree, explored the bottom-up risks of the project. This section of the Feasibility Study will provide your stakeholders with an understanding of the top-down risks.
Guarantors, such as USDA and EPA, similarly require a third-party validated Feasibility Study prior to providing grants and loan guarantees. In fact, the USDA has developed guidelines and templates for the development of Feasibility Studies for these purposes. The USDA guidelines are often referred to by other State and Federal agencies, as well as banks and lenders. (More information about the USDA guidance can be found here).