Renewable energy, food and valuable by-products from AgriFuels sweet sorghum
By utilising non-competitive crops such as sweet sorghum, focusing on increasing crop yields per hectare via superior plant genetics and by reducing fertiliser and water input requirements, AgriFuels can exercise tight control over the input costs per unit of renewable energy feedstock materials, while also helping farmers maximise their income on a per hectare, per crop basis.
This business strategy differentiates AgriFuels from virtually all other renewable energy producers who source their biofuel inputs from suppliers at market prices, which have risen steadily over recent years in parallel with the price of fossil fuels.
Besides a focus on the long-term economic viability of the renewable energy aspects of the project, AgriFuels' business strategy ensures that each step in the value chain is also profitable, providing substantial local employment and producing regional economic benefits to the agricultural industry in an area that until recently has experienced prolonged economic hardship.
The following diagram is a simplistic representation of the AgriFuels value chain.
By vertically integrating agribusiness with sustainable farming practices, AgriFuels is able to provide a long term, environmentally friendly and economically stable, CO2-neutral renewable energy solution.
AgriFuels is also focused on environmentally friendly solutions that maximise the use of all by-products and minimise the requirements of water usage and external fertiliser inputs. By utilising superior plant genetics with highest yield per hectare, AgriFuels reduces the land areas required to produce the AgriFuels crops, thereby leaving more land for the production of alternate crops.
AgriFuels' sweet sorghum is also capable of being grown on semi-arid crop lands which are unsuitable for other crops, thus eliminating the criticism of competition for food or other resources. As much of Australian land falls into this category, sweet sorghum holds great promise for converting previously unproductive land into useful cropland.
The biofuel value chain
Our research noted two primary components of focus to renewable energy and biofuel production:
- Firstly, those companies that focuses on agriculture or feedstock production. For example sugar cane, wheat, corn farmers and oil palm plantations;
- Secondly, those that focus on the production of biofuel by purchasing these feedstocks from the market and converting them into biofuels then selling this biofuel for blending to fuel distribution chains such as BP, Chevron, Shell, Petronas.
The value chain can generally be broken into four important stages; however, it is important to note that many external factors within differing political environments can greatly influence the decisions and processes of applications at each stage:
The majority of biofuel and renewable energy companies are primarily focused on Stage 3. They produce biofuels and/or electricity by sourcing feedstock supply agreements (Stage 2 seller) and biofuel/electricity off-take agreements (Stage 4 buyer).
Simple analysis highlights the uncontrollable exposure of this strategy in the operational profitability of a Stage 3 producer being directly linked to the input cost Stage 2 and the output sale price at Stage 4.
The ability to source feedstock at a price and supply level that ensures the operating efficiency and profitability of biofuel and electricity production cannot be controlled when both the source agricultural feedstock such as grain and production product such as ethanol are commodities--both experiencing a fluctuating demand and pricing equation determined by market forces of supply and demand.
Under the AgriFuels business model, the company focuses on control of Stages 1 and 2 by implementing non-competitive crops with a superior energy yield and fixed cost per hectare.
When compared to current alternatives, AgriFuel’s strategy maximises the output feedstock yield at Stage 2 and fixes the input costs for Stage 3.
This approach provides the required operating efficiencies to deliver long-term sustainable profitability of operations across all sectors of the value chain.