Asking the tough questions
When an opportunity presents itself, people respond in different ways. Some will jump at the opportunity and consider the implications later. Others, with a more analytical mindset, will weigh the pros and cons for so long that the opportunity passes them by.
I advocate a middle course: sufficient analysis along with a willingness to take action when the time is right. For Canadian producers, biofuels and wind energy are two such opportunities.
Ethanol and biodiesel present a host of questions that must be carefully weighed. What will the impact be on the grain industry? Will it tighten supplies? Will producers respond by converting more acres into crop production? How will it impact the livestock industry that depends on corn for hog and poultry rations? Will canola production keep pace with the demand for biodiesel? What role will the by-products of biofuel production play? Will distillers’ grain be affordable? How much is advisable for livestock rations?
Today, more producers are exploring wind power as a source of energy. On a conceptual level, it looks attractive. Producers can supply their own energy needs from wind. They may have the option to sell surplus energy to a hydro grid that’s hungry for new capacity.
As with biofuels, it’s important to perform some due diligence before making a commitment. Talk to a number of people in the industry, until you have satisfactory answers to your big questions. Do your research by measuring the wind potential of your site for a 12-month period.
What is the all-in total investment required? Are there any hidden costs? What is the projected return? What is the payback period? Does research show that this quantity of energy can be produced throughout the payback period? Are long-term, fixed-price contracts available for surplus energy?
These questions will take time and considerable expertise to answer. Whatever the opportunity, I urge you to examine it thoroughly with your banker, accountant, lawyer, family partners and industry experts.
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