Biomass Brokerage Manitoba

Transcription

1 overview of Biomass Brokerage Manitoba as of August, 2012 Bruce Duggan Director Buller Centre for Business Providence University College & Theological Seminary Otterburne, MB e 314

2 Biomass Brokerage Manitoba Summary The Buller Centre for Business, working with students in the Business Administration program from Providence University College, have been developing a new service business Biomass Brokerage Manitoba. This new service is designed to be an essential part of the infrastructure needed for Manitoba to realize its potential as a leader in biomass energy. Biomass Overview Biomass has the potential to be a significant source of energy in Manitoba, particularly for heating. 1 Sourced primarily from waste by-products of current forestry and agricultural industries, biomass has the potential to take its place alongside natural gas, electricity, and geothermal exchange as a viable energy industry in our province. Currently, biomass is the least developed of Manitoba s heating industries. A few commercial facilities, like Vanderveen s Greenhouses in Morden, have been using biomass as a heating source. 2 A significant number of home and cottage owners have been using pellet stoves for at least some of their heating requirements. However, as a viable option for heating on a commercial scale, biomass is roughly a decade behind geothermal exchange, and many decades behind electricity and natural gas. Significant steps have been taken, particularly over the past year, to move biomass from its current development stage into a commercialization stage. To mention only one of these steps, the Government of Manitoba announced a new Manitoba Biomass Energy Support Program in January The Buller Centre for Business has spent the past year developing one of the essential elements of a viable biomass industry in Manitoba a brokerage system to create and sustain a biomass energy infrastructure. A Biomass Energy Infrastructure? Every method of providing energy in Manitoba is built on a complex infrastructure. Natural gas, for example, is delivered through a physical storage and transmission system that took decades and millions of dollars to build, and requires more millions each year to maintain and operate. 4 This system like all energy systems links together five processes: production, transportation, processing, storage, and consumption

3 Biomass Brokerage Manitoba A mature biomass system will also require an infrastructure to link together those processes. However, unlike natural gas, a biomass system will not require a physical infrastructure to link its components together. Instead, a biomass infrastructure will be virtual. Current and potential producers will need to be connected to current and potential consumers. Businesses and other organizations capable of transporting, processing, and storing biomass fuel will need to be connected to each other and to the producers and consumers in that system. One addition to a biomass infrastructure that other energy infrastructures do not include is a method for dealing with the ash that biomass combustion produces. 5 The infrastructure for biomass is, in some ways, more complex that the one for natural gas or electricity. There are multiple source materials. As well, when they are processed, they do not become a single commodity the way electricity or natural gas does. However, shipping and storage is, in some ways, simpler. First, it is a much safer fuel to handle. And, second, there is already a mature agricultural product handling industry, much of which can serve as double duty for biomass. 5 Depending on the biomass material used, the ash residue can range from little more than 1% to upwards of 8% of the initial biomass. Biomass ash is non-toxic and composed almost entirely of nitrogen and phosphorous. As a result, it may be useful as a soil amendment, or an element in fertilizer. This will require more exploration as the industry develops. 2

4 Biomass Brokerage Manitoba Connecting all of these elements together will be simpler for biomass than it was for natural gas or electricity. Rather than pipes or wires, the elements of the biomass system can be connected by personal contact, phone, , and the web. The best way to connect all of these elements together is though a brokerage. A Brokerage? At its most basic, a brokerage makes a market, linking buyers and sellers together. Brokerages are common in our society, although we don t always notice them. The world-wide financial industry and the stock markets it contains are brokerages. Older businesses like Manitoba Buy & Sell, and new businesses like Kijiji and ebay are brokerages. Companies like Canadian Overseas Log & Lumber 6 and Lumber Brokers Worldwide 7 provide brokerage services for lumber producers and customers. Pellet Zone 8 connects international wood pellet buyers and sellers together. The Manitoba Hay Listing Service 9 connects hay and straw growers and consumers together. Brokerages vary in: - How broadly or narrowly they focus. o ebay is very broad, while the Hay Listing is very narrow, for instance. - How much of a particular industry s infrastructure they encompass. o Some serve only buyers and sellers. Others include shippers, storers, processors, and equipment suppliers. - Who convenes them. o Some are privately managed (often under a significant regulatory apparatus), some are publicly managed, while others are public-private hybrids

5 Biomass Brokerage Manitoba - How they generate their revenue. o There are essentially three options a per-transaction fee, a membership fee (often in structured as a member cooperative), or a block-funded grant (often from a government or quasi-government entity). - In some markets, one entity is the sole broker in their industry; in other markets, there are multiple brokers who compete amongst themselves. Despite these variations, all successful brokerages provide a consistent cluster of benefits to their participants: - They reduce search costs and effort as buyers hunt for sellers and sellers hunt for buyers. - They reduce transaction costs incurred by both buyers and sellers as they trade goods (or services). - They reduce risk for participants, helping to increase the likelihood that the buyer will get the goods they desire, and sellers get the payments they depend on. - They enable participants who initially don t know each other to develop trust. - Over time, they usually function to standardize expectations, contracts, products, and delivery processes. - These effects tend to increase the efficiency of the market(s) in which they operate. These efficiencies show up in the market as: o Reduced administrative costs to the sellers. o Reduced goods and services costs to the buyers. o Growth in the scale of the industry. Having a brokerage provide these benefits to Manitoba s biomass industry would: - Speed up the adoption of biomass as a viable energy source because producers would have a simple, reliable way to reach customers, and potential consumers would know they had a reliable supply. - Significantly improve the chances of the industry moving from its current development stage into commercialization. - Drive economic development, particularly in rural Manitoba. - Help Manitoba fulfill its intention to be a leader in biomass energy. 4

6 Developing Biomass Brokerage Manitoba Biomass Brokerage Manitoba For the past year, the Buller Centre for Business and a group of senior students in the Business Administration program at Providence have been developing a brokerage for the biomass industry in Manitoba. This brokerage is: - Narrowly focused on biomass. - Broadly inclusive of all phases of an emerging biomass industry, providing brokerage services to current and potential participants in this industry who may want to participate as: o Producers o Processors (including densification and biochar production) o Shippers o Storers o Consumers (both current and potential) o Equipment manufacturers and suppliers for biomass heating systems o Consultants and installers of biomass heating systems Biomass Brokerage Manitoba will also work to: - Facilitate research and information for those wanting to explore the feasibility of biomass heating for their facilities. - Work to find suitable uses for the ash that biomass heating systems produce. Work Completed to Date Over the past year, we have focused on three primary tasks: 1. Developing a flexible and comprehensive computer database that can detail all the current and potential participants in the biomass system in Manitoba as it develops over the next decades. o This database has been developed on a Microsoft Access platform. This database is not in the research or development phase; it is currently operational. See the Database Appendix at the end of this overview for screenshots of the database in its current form. 5

7 Biomass Brokerage Manitoba 2. Populating that database with the details of as many current and potential participants in this industry as we can find. o This list was expanded from work developed in the Manitoba Bioproducts Strategy. 10 o To date, approximately 200 current and potential participants in a biomass industry in Manitoba are identified. 3. Developing a budget and task list of the steps required in the first three years to develop Biomass Brokerage Manitoba into a viable service. YEAR Income Commissions tonnes sold: 2,000 10,000 20,000 average commission per tonne: $ 5.00 $ 3.00 $ 2.00 Total Sales: $10,000 $30,000 $40,000 Start-up $35,000 $5,000 $0 Total Income: $45,000 $35,000 $40,000 Expenses Startup Computer & software $1,000 Database design $3,000 Website design Incorporation Legal fees to draft standard contracts $2,000 $1,000 $3,000 Startup: $10,000 Operating Accounting $500 $2,000 $2,000 Advertising $2,000 $2,000 $2,000 Maintance of Website $500 $2,000 $2,000 Office Supplies $100 $100 $100 Office (incl phone, internet, photocopying) $3,600 $3,600 $3,600 $ /month Project Manager Salary $18,000 $18,000 $18,000 1/2 $ /hour Project Manager Benefits $2,700 $2,700 $2, Travel $4,000 $4,000 $4,000 10,000 $ 0.40 /km Banking Fees $360 $360 $360 $ /month Online sales transaction fees $500 $1,500 $2, of commissions Operating: $32,260 $36,260 $36,760 Total Expenses: $42,260 $36,260 $36,760 Annual Surplus (-Deficit) $2,740 -$1,260 $3,240 Cumulative Suplus (Deficit) $2,740 $1,480 $4,

8 Biomass Brokerage Manitoba Next Tasks Biomass Brokerage Manitoba is ready to go, but is not yet a functioning company. The required steps to turn this idea into a business are outlined in the PowerPoint presentation as well. The primary steps required are: - Securing start-up funds - Incorporating - Hiring a staff person - Setting up an office 7

9 Biomass Brokerage Manitoba - Putting the database on the internet o It is already fully functional as an offline database on Microsoft Access. To be accessible on the web, the data still needs to be transferred to a server, and a web-based data-management system needs to be built. Once start-up funds are secured, the business can be operating within a month. The database should be online within three months of the start of business operations. Broader Implications Although Biomass Brokerage Manitoba is focused on Manitoba, the database and the software developed for it would be suitable for any biomass system that contained multiple producers and multiple consumers. 8