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. To determine the project’s cost benefit analysis and analyze the expected return on investment, you may desire an Economic Feasibility Analysis.
- Market Feasibility – Cavanaugh can help you establish realistic market boundaries and understand inputs and offtakes. 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 Assessment
- 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. A Technical Feasibility Analysis should support the financial information supplied in the study by analyzing the processes in a summary format to do long term planning and troubleshooting and confirm the intended inputs, outputs, fields, program and procedures.
- Operational Feasibility – . What are the critical operational parameters, and the performance metrics that will aid your management to optimum operations? These questions will help shape an Operational Feasibility analysis of operational risk, and communicate comfort to your stakeholders that you have a plan.
- Management Feasibility – This process examines the feasibility study to provide an understanding of top-down risks, taking into consideration the project’s pathway, target market, logistics and considers investments and funding for any underlying development, more on Management Feasibility.
To see an example of the scoring system, see this Excerpt from IE Review
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).