This section discusses how to evaluate preliminary financial feasibility and provides an objective planned programming approach for the development of a woody biomass feedstock yard.
Deficiencies in understanding of the basic principles in planning startup and expansion projects are rooted in: (1) planning by subjective opinions instead of informed decision-making; (2) using poorly thought out assumptions; (3) deviation from the accepted wood products business development model; or (4) deficiencies in one or more of several critical factors.
Given the uncertainties of biomass resource supply, forest products market volatility, and financial viability of biomass operations, it is essential that serious consideration be given to the planned programming approach presented here.
A biomass processing facility's viability depends in part on the dynamics of the available biomass supply including biomass cost delivered to the yard, cost of converting the biomass into saleable products (processing cost), and forest products markets (revenue from the sale of biomass products).
Evaluation of product value v. delivered biomass cost and processing cost provides a good starting point for preliminary feasibility of biomass processing facilities projects.
Planned Programming Approach
Rather than basing a feedstock yard's business model on subjective "I think this and I think that"
thinking, a planned programming approach is recommended. Planned programming leads to
strategic, marketing, business, and operational plans to help guide the development and operation of the enterprise (Howe 2005, Dramm 2004).
A planned programming approach to woody biomass feedstock yard development can help guide the development and operation of the biomass enterprise. Project planning based on subjective opinions rather than objective investigation can quickly turn into a deep emotional attachment when extensive effort, time, energy, and money have been expended. It then becomes very difficult to give up on a bad idea once this emotional attachment has been made.
Planned programming involves a step-by-step logical progression through several developmental planning stages: (1) feasibility and business planning; (2) biomass feedstock procurement and market development; (3) permitting, environmental site assessment, and zoning; (4) site selection, plant design and equipment selection; and (5) operations and business management. Planning aspects need to be considered during each phase of the proposed biomass processing facility project and eventual operation.
Project Planning Team
Undertaking a biomass enterprise requires knowledge in several disciplines. Seldom found is the unique individual who knows all there is to know about all of these subjects to put a successful biomass business together. For most, a project planning team approach is the best chance for success. An alternative may be to hire a private consulting firm which performs feasibility studies and provides other professional services and advice.
The project planning team should consist of those individuals who will design, construct, and operate the biomass feedstock yard. The team should be responsible for developing and analyzing potential
options and choosing a workable plan to meet the proposed goals and objectives of the feedstock yard. Project development is led by a project planning team of specialists that may include a biomass procurement forester, marketing specialist, and management consultant. In addition, key personnel who will manage and operate the operation should be part of the team. Professional assistance will be required at various stages of planning including the services of an accountant, lender (banker), and attorney. The facility supervisors should play a critical role on the biomass project planning team.
Govett (2005) recommends that a generalist head the project planning team. Specialists tend to lose interest outside their area of expertise and too often attempt to redefine issues in terms of their expertise. Additional suggestions include the following:
Beware of becoming emotionally attached to a project analysis or of advice from anyone who has become emotionally attached to the analysis.
Beware of project cheerleaders who will not give up on a bad idea.
Beware of placing too much weight on advice from experts on the fringe of their expertise—watch out for phrases like ―I’m not an expert in this area, but…‖
Beware of placing too much weight on the advice of experts who have something to gain or lose as a result of selection of alternative courses of action such as equipment vendors.
Beware of placing too much weight on industry averages, general rules of thumb, or past experience.
Always justify any assumptions that are made; the most important question is to ask
―Why this assumption?‖ and be able to back it up.
Knowledgeable members of the project planning team should be able to handle the preliminary financial feasibility analysis of options, as well as the assessment of initial resource supply and forest product markets. Planning the biomass facility and determining the feasibility of alternatives is a screening process that evaluates the available log or biomass supply, lumber and residue products, markets and product distribution (transportation infrastructure), and financial analysis.
Chip truck off-loading via hydraulic lift at the Mt. Lassen Power plant, Westwood, California. September 18, 2002.
John Stewart
Potentially viable scenarios are constrained by technical, economic, and market limitations. Finding feasible opportunities, then, is an elimination process, filtering through each of several constraints of the several critical factors for success. Technical constraints limit the types of products possible from the available resource supply and will suggest suitable facility design and appropriate
processing equipment. Available markets further refine suitable product options. Financial analysis determines which marketable products will generate sufficient revenue to justify the operation. Also remember that what is not feasible today might be tomorrow. So it is important to keep options open, know what current limitations are and if they change be ready to act (new technology, new markets, new incentives, etc.).
Screened woody biomass feedstock, Carson City, NV. Source:
USDA Forest Service Truck-to-rail wood chip reload facility. Fort Apache Timber
Company, Snowflake, AZ. Source: USDA Forest Service