Ask the Expert: Kyle Althoff on the Bio-Conversion Industry
In today’s blog we have the unique opportunity to speak with Kyle Althoff, the founder of Equinox, a consultancy providing strategy, planning, and execution services to the bio-conversion and agribusiness industries.
Quarterra: Kyle, thank you so much for taking the time to speak with us today. To get us started could you share a bit about yourself and what inspired you to found Equinox?
Althoff: I enjoy working with clients in the bio-conversion space to develop new projects, technologies, and products every day. I grew up in rural America and have a strong appreciation for the impact that agriculture can have by producing food, feed, fuel and fiber for the world. Prior to founding Equinox, I worked in the biofuels industry developing the supply chains for an emerging technology in cellulosic ethanol as well as in project development for new biofuel facilities.
Businesses in the agriculture and bio-conversion industries work with a diversity of feedstocks that continuously change in terms of price, quality, and supply. Those factors create challenges and opportunities in business which cannot always be addressed by the internal resources. This is an area in which Equinox specializes with its clients. We leverage our expertise and relationships within these industries to help clients develop new projects and products in the agribusiness and bio-conversion sectors.
Quarterra: Can you tell us a bit more about the bio-conversion industry and what you see as the key short and long term trends?
Althoff: The global interest for renewable products has created a compelling demand for biofuels, biochemical, and other bio-products in the US and abroad. The US bio-conversion industry has developed initially around corn ethanol, while the international industry includes several other feedstocks (Brazil – sugarcane, Canada – corn/wheat, Europe – corn, wheat, sugar beets). In the near term, Equinox is working with clients that are improving the production efficiencies, capacities, and adding new technologies. These improvements enhance the return on investment and help to further reduce the greenhouse gas profile relative to petroleum-based products.
Longer term, the same processes and operations used today for ethanol and biodiesel can also be leveraged to create bio-products beyond the traditional biofuels. The next emerging opportunity in bio-conversion is development of specific bio-chemicals and other bio-products. Many of the products created today using petroleum have a renewable comparison for which technology is already in development, and for some, even already in the market.
Another area of growth is increased focus on co-product values within current and future bio-conversion facilities including higher protein feed and food products. Operators and entrepreneurs are discovering that changes in process operations can result in improved co-products which provide higher-value food and animal feed products.
Quarterra: To what extent does government policy influence the bio-conversion industry? I know the next few years will be hard to predict but what do you anticipate from the new administration in the United States?
Althoff: The US biofuels industry has benefited from the vision of the Renewable Fuels Standard (RFS) which is a mandate started in 2005 for different categories of biofuel based on feedstock and greenhouse gas reductions. Today, because of the RFS, there are 200 bio-ethanol facilities which produce over 15 billion gallons of high-octane fuel which is a blend-stock for the domestic and international liquid fuel markets. The US ethanol industry supports 86,000 jobs directly. Consistency in the policy and implementation of the RFS has been important for the industry to reach this level, and will be integral going forward to future profitability and growth.
President Trump campaigned across the US with an emphasis on supporting the biofuels industry and recognizes the impact the industry has on producing a renewable product from locally-grown feedstock which increases jobs and GDP. The new administration will likely have this impact front-of-mind as they consider potential changes to the administration of the RFS.
Quarterra: How do the domestic and international bio-conversion industries compare? What are the key opportunities and challenges abroad? Are there any regions that you believe have particularly compelling fundamentals?
Althoff: Within the biofuel industry, investors are interested in projects with strong fundamentals including sustainable crush margins, feedstock supply, and potential markets. This also requires a skilled operations and management team. Projects around the globe must address how their business will meet these requirements.
Opportunities for bio-conversion projects are driven primarily by product markets and feedstocks. In regions that have strong policy and consumer support for biofuels and bio-products, there tends to be successful projects. Globally, there are several regions which have potential due to the increased sustainability focus on those products from international corporations and consumers. Industries like commercial aviation recognize that they may need to address their emissions profile. Africa, Latin America, and Asia will be major markets to watch for new projects based on the potential for strong market demand and feedstock supplies.
Quarterra: At Quarterra we spend a lot of time thinking about Latin America. What is your perspective about the opportunities for bio-conversion in the region? Do you believe that there is interest in investing in these types of opportunities?
Althoff: The expansion of the bio-conversion industry has resulted in new technologies, new products, and new project structures – each with appeal to certain locations, feedstocks, and markets. The key for developers in this space is to evaluate what opportunities fit best in each location and have a sustainable, competitive advantage. In South America, sugarcane offers a low-cost feedstock for ethanol production, and soybeans are a competitive product for renewable diesel. Bio-power is another area of interest – especially in more remote and stranded locations that cannot easily be served with natural gas or other electricity options. The key for many projects is proving that the market is sustainable for the long-term, which may require long-term contracts for the products or off-takes or other policy support.
Quarterra: In your experience, what are the key hesitations that investors and other professionals have about working in Latin America? Do you share these concerns? How do you think these can best be mitigated?
Althoff: Changes to the exchange rates can directly impact the competitiveness of industries like biofuels if the market is heavily reliant on exports. In the US, over 90% of the ethanol is used domestically, whereas other counties that do not have strong demand locally may be more reliant on exports. To overcome those hurdles, it is important to focus on developing strong end-user contracts or off-takes for the products, and cultivate markets for the products both domestically and abroad. Investors will be well-aware of these risks, so it is important that new projects address these issues upfront and mitigate the impact based on the investor’s risk appetite.
Quarterra: Of course, Equinox doesn’t work exclusively in the bio-conversion industries. What other agricultural sectors do you think hold untapped opportunities?
Althoff: There are advances occurring across almost every sector of agriculture, from the tractors and machinery in fields to agronomic recommendations that improve yield and quality of products. I believe that analytics across the supply chain, such as using new technologies like drones and increased data monitoring, will continue to enhance the value for agricultural products.
Another key in agriculture is going to be connecting to the consumer and understanding their demands for your product – whether directly or through the supply chain. The consumer demands for product options such as non-GMO, organic, grass-fed, and low greenhouse gas (GHG) and other sustainability metrics will fuel opportunities for suppliers that can recognize those demands and address them in a competitive way. We have worked on projects that range from local wineries that provide consumers a chance to learn more about agriculture, to new technologies which can provide higher-quality food for people.
Quarterra: Thank you again for taking the time to speak with us and share your point of view. Any final thoughts before we sign off?
Althoff: I would encourage your readers to think big – be sure they take time regularly to think outside their proverbial box. As the world and consumers change, there will be opportunities for growth and expansion. The key will be having the understanding of where the markets may be headed, and the people engaged that can help you get there. Consulting firms like Quarterra or Equinox have the benefit of seeing across multiple sectors and businesses which can help clients see the changes coming and be prepared to succeed with those opportunities.
Kyle Althoff is the owner and founder of Equinox, a consulting and advisory firms that empowers change for their clients in the bio-conversion and agribusiness industries through expert advice, analysis, and strategic guidance. Kyle can be reached at kalthoff@equinox8.com.