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Could Iowa become the center of the US bio-economy
– By Peter 
Bell

Iowa is the number 1 alternative fuel producing state in America, with 3 billion gallons of biofuel produced each year, yet none of the top “50 Hottest Companies in Bioenergy” (See Appendix) according to the Biofuel Digest list was nurtured at the BECON Center or through the Iowa Energy Center.

One of the challenges for ethanol as a fuel is that its’ well to wheel efficiency is approximately 1 to 1.6 when compared to Biodiesel which is 1 to 3 and sugar cane derived ethanol, which is 1 to 7, gasoline is approx. 1 to 0.85. This means that corn ethanol as a renewable fuel is out of favor as it is only just energy positive and means that Iowa’s ethanol industry is at risk. There is very little fundamental research going on in Iowa to help the Iowa biofuel industry improve, yet if the ethanol industry is eliminated due to its technology becoming obsolete, this will have a devastating effect on Iowa’s economy.  The Iowa ethanol industry is responsible for bringing in 6 billion dollars of inbound revenue into the state each year, representing a value of approximately $2,000 per Iowa resident per year.  

Unfortunately there is also very little technology being brought out of Iowa’s university laboratories and into the market to help Iowa’s ethanol industry improve its efficiency or profitability. Compare that to states like South Dakota for example that have developed an oil recovery technology at SDSU that extracts 8 million gallons per year of corn oil per ethanol facility and is being brought to market by a South Dakota based company.  This single technology could add 1 billion gallons of feedstock to the nation’s biofuel feedstock supply and be worth in the order of 3 billion dollars per year in revenue.

It seems natural that the BECON Center should be the mechanism used to plug that gap. However, the stated goal of the IEC is to “advance Iowa's energy efficiency and renewable energy use through research, education and demonstration”. Energy efficiency and displacement of non-renewable energy is a series of technologies and techniques that are designed to bring about improvements in existing technology or practices so that each unit of GDP created by the Iowa economy is produced by consuming less non-renewable energy.  Compounding the challenge for the IEC is that these two tracks require a set of skills to bring about that are not aligned with what the BECON Center is actually doing.

The BECON Center has successfully nurtured 2 technologies out of the laboratory, scaled these technologies up at the BECON facility and successfully placed these technologies into large corporate ownership to bring to market. These large companies can then deploy these technologies around the world, creating valuable new revenue streams and generating valuable entrepreneurial activity in Iowa.

It appears that the IEC is at a cross roads moment, as the BECON Center seems better suited to provide an environment that can nurture the scale up and demonstration of bio-economy technologies, rather than helping to advance energy efficiency and renewable fuel use in Iowa.  The BECON Center’s unique strengths seem to be at a miss-match with the IEC’s goals and this seems to be producing a set of symptoms that are manifesting themselves in current issues facing the IEC and the BECON Center. For example, the outgoing Director of the IEC was an architect by background and if you ever attended any of his talks on energy efficiency and building design, he was clearly an expert in his field and was responsible for many good energy efficiency and education things coming to fruit at the IEC. However, the IEC Director was also responsible for the BECON Center which is seeking to nurture technologies that are related to bioenergy and these divergent skill sets have unintended consequences for Iowa.

For example, a proposal was excluded for IEC funding consideration because it was 15 minutes late as the science proving the results was finished minutes just before the deadline, resulting in a late submission for the 2011 year IEC grant funding evaluation window. The proposal was for the growth of fungi to be used as an oil and water separator that could have reduced the energy consumption of an ethanol plant by 50%. This technology could have the potential to double the well to wheel ratio of ethanol as a fuel, bringing it on par with biodiesel with a ratio of 1 to 3. This single innovation could transform the future prospects of corn derived ethanol fuel and Iowa’s along with it.  The second half of the proposal potentially could have developed a refining technology for on-site diesel refining at an ethanol plant that potentially was worth 1 billion dollars per year of value add to the nation’s ethanol industry. In addition, this technology could have had more than a 1 billion dollar positive impact on the Iowa economy by displacing 300 million gallons of imported, non-renewable petroleum diesel fuel currently used in the state of Iowa.  

The IEC was correct by omitting this proposal for funding as it was late and the IEC Director was correct sticking to his guns and saying “the rules are the rules”. However, the unintended consequences of applying those rules is that one of the few proposals that came forward to advance the technology of Iowa’s ethanol industry was excluded for funding consideration so its merits cannot even be evaluated by the funding committee.  As a result, the equipment previously funded by the IEC and a private company will now lay abandoned for the year till next year’s funding application window opens back up, all the while the competing South Dakota technology now has a 1 year head start.

Science does not operate on a yearly schedule that is efficient for a bureaucratic management process, discoveries happen when they happen. Fast moving, start-up companies’ need financing when they need it, not on a calendar to suit a bureaucratic timetable.  Facebook, Groupon, Zenga etc, all multi-billion dollar technology start-up companies created in the last 5 years, employing thousands of people, did not have to wait till the next years funding window opened, nor are the Chinese bio-economy companies waiting around either.

To prevent these kinds of un-intended consequences and enable the BECON Center to fulfill its potential, the BECON Center’s goals could be detached from the IEC goals and the BECON Center given its own mission. This would enable the BECON Center to re-orient itself away from focusing on the most efficient use of the administrator’s time managing the funding program and be configured to best fit around the needs of the scientists, engineers and entrepreneurs that bring these inventions alive.  This would enable the BECON Center to have its own discrete set of goals and be oriented towards the scientists and entrepreneurs that can bring fantastic inventions out of Iowa’s universities and into the market place. With a new set of goals, the BECON Center can be re-configured and expanded to help break down the barriers that new inventions face before they get to the market place, rather than create its own set of hurdles that need to be overcome by the scientists and entrepreneurs.

A bioenergy and biomaterials revolution is currently underway creating the opportunity for a whole new industry to be born. The Kaufman Institute says that most of US GDP growth is created by new companies starting up and growing rather than existing, large companies growing to expand output.  A new industry being born is the ideal cultivation ground for new company start-ups. A new industry will be centered somewhere, and Iowa, with its current leadership in biofuel production, can be the heart of this transformation of the world’s energy and materials economy and the center of this new industry.

Starting new companies can be tremendously valuable for Iowa and the US economy as a whole, start-ups are a win win situation for all areas of the country.  The attritional loss of existing companies shrinking or going out of business offsets the growth of existing companies to the point that creates a growth neutral economy. This means that attracting companies from out of state is a zero sum game for the US as a whole even though it creates some wins for the individual states that attract a new plant or some kind corporate of relocation. New company startup and growth is where most GDP growth comes from and high-growth firms create a lot of jobs. Just 1% of high growth companies generate 40% of new jobs in the US economy.  If Iowa were to create an environment that encourages new ventures to start and successfully grow into large organizations, it can organically grow its’ economy from within.

The Silicon Valley and KSU models are excellent ones to look to for guidance. Kansas based KSU incubates a number of new start-ups in a wide range of fields and has a very successful model in the form of NISTAC that might be another suitable structure or operation model to emulate. NISTAC (www.nistac.org) is a not for profit organization that is paired with a for-profit organization to bring inventions created at KSU into the market place and has been very successful so far. NISTAC is now working with other universities and might make a great partner for the BECON Center as part of a mid-western bioenergy coalition.    

In Silicon Valley, the huge pipeline of graduating human talent that comes out of Stanford University each year can go out the main gate and up to Sand Hill road, where in less than a 5 mile stretch, can see nearly one hundred venture capital firms to source the funding they need. Once the funding has been secured, these start-ups are then set loose in the Silicon Valley, where all the talent and infrastructure exists to support the birth of new companies resulting in new company start-up performance that is the envy of the world. The funding of the Silicon Valley start-up culture was largely derived from the cash flow generated by the IPO exit of start-up companies via the “4 horsemen” investment banks of Silicon Valley which were doing an average of 130 IPO’s per year in the dot com era. This created a tremendous number of wealthy individuals in a concentrated area and put a huge amount of money into the Silicon Valley economy, plus helped foster an entrepreneurial culture that is now legendary worldwide.

Similar wealth creation has just occurred in Iowa with the price of corn and soy over the last 2 years which in effect has given mid-western farmers the equivalent of winning the lottery. Some estimates put the bonanza at close to $50 billion dollars in clear profit for these two industries just for 2011. This means that there is a tremendous amount of capital now available in Iowa in the hands of folks that understand the agricultural sector as well as the Silicon Valley mavens know the computer industry.     

Silicon Valley has been very successful in creating a “sticky” environment for the talent that graduates from the likes of Stanford and Berkley each year and making sure those highly educated people stay in the valley for at least the early part of their careers. Currently, a great deal of these kinds of talented people graduating from Iowa’s universities, have the drive to startup companies but move away from Iowa as soon as they graduate as Iowa does not have such a “sticky” entrepreneurial environment.

Combining the huge capital pool now available in Iowa, with the huge fountain head of science, engineering and business talent graduating every year from Iowa’s universities, there is the potential to create a “sticky” environment and create something really special in an I30 bio-economy corridor.

Some of these talented people can be encouraged to start new companies if the right entrepreneurial conditions can be created in Iowa. A bio-economy corridor can create its own “sticky” environment by providing the right environment and encourage these highly educated people to stay in Iowa. The talent graduating from the state’s universities can also go to work for the new bioenergy companies to apply their newly acquired skills or work in the state’s university laboratories to invent all kinds of wealth creating inventions. This would go some way towards ensuring that some of this huge fountain head of the some of the best young talent in the country stays in the Iowa area after graduation.

Iowa does not have the climate or the scenery like the Silicon Valley, but it has the best agricultural land in the country and a fantastic pool of citizens, known around the country as some of the most trustworthy and hardworking citizens in America.  A “bioenergy prairie” corridor can be built on top of those two natural resources along the I30 corridor between Nevada and Boone. At only 1/10 the size of the Silicon Valley but in an equal proportion to the 3 million residents of Iowa compared to the 38 million residents of California, a “bioenergy prairie” I30 corridor could have an equally positive transformational effect on the state of Iowa that the Silicon Valley has had on the economy of California.  

The BECON Center can be the eastern cornerstone of an I30 bioenergy corridor that starts in Nevada and is bookended in the west at the Bio-Century Farm in Boone.  A great place to start fostering such a bioenergy economy is at the BECON Center as it has all the ingredients already in place, good facilities, a track record, a good working relationship with ISU, good relationship with the Fuel Labs at Ft. Dodge and experience bringing in industrial partners. Now is the time to build up the BECON Center so that at least 10 companies nurtured at the BECON Center will appear on the 50 Hottest Companies in Bioenergy list come 2015. 

Appendix

THE 50 HOTTEST COMPANIES IN BIOENERGY - 2011-2012

1. Solazyme
2. Amyris
3. Gevo
4. POET
5. LS9
6. Novozymes
7. Enerkem
8. LanzaTech
9. Honeywell's UOP
10. ZeaChem
11. Codexis
12. Abengoa Bioenergy
13. KiOR
14. Virent
15. Sapphire Energy
16. Ceres
17. Coskata
18. DuPont Cellulosic
19. Terrabon
20. Mascoma
21. Cobalt Technologies
22. Petrobras|
23. Joule Unlimited
24. BP Biofuels
25. Neste Oil
26. Waste Management
27. Rentech
28. Qteros
29. INEOS Bio
30. Genencor
31. Genomatica
32. Shell
33. Synthetic Genomics
34. Chemtex
35. Algenol
36. Elevance Renewable Sciences
37. OriginOil
38. SG Biofuels
39. Cosan
40. HCL Clean Tech
41. Fulcrum Bioenergy
42. Cargill
43. Chevron
44. BlueFire Renewables
45. Dynamic Fuels
46. Mendel Biotechnologies
47. OPX Biotechnologies
48. Inbicon
49. Renmatix
50. Monsanto

 

     
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