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Making Hard-Headed Decisions Pay OffDale
WahlstromCEO, The BioBusiness Alliance of
MinnesotaJanuary 14, 2009

• Legislative Policy Conference

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Strategic Flexibility
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Strategic Flexibility Renewable Energy
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Advanced Scenario Planning

• Scenario planning or scenario thinking is a
  strategic planning method to develop flexible
  long-term plans
• Uncover and anticipate hidden weaknesses
• Minimize the probability of an unintended
  consequence
• Bring together divergent opinions to focus on a
  most probable scenario
• Various Scenario Planning Methods
• Contingency Planning
• Sensitivity Analysis
• Computer Simulations

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Why is it Important to Do This Kind of Modeling?
System Dynamics Modeling

• All planning is based on models mental or
  simulated
• Planning in the business and policy worlds
  relies heavily on the use of mental models
• Mental models are difficult to surface, share
  and test for completeness and accuracy
• Goal integration of various mental models into
  one shared model
• Overall it is a cost-effective way of reducing
  errors and increasing the odds of being
  successful

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Base Case Results Share of Renewables
20.50
8.84
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Thank You!Dale Wahlstromdwahlstrom_at_biobusinessa
lliance.org 952-746-3847651 276
5735www.biobusinessalliance.org
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BACK UP SLIDES
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Finally Review
Linking What-How-Whom

• To be successful, Collaborative Knowledge Teams
  must integrate across lines of experience and
  trends in technical applications around specific
  market, economic and/or societal challenges.
• Clusters of Knowledge Competency are formed
  when the Know-How, Know-What, and Know-Whom are
  linked throughout a region.

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Model Interface
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Model Specifics

• Minnesota Energy Divided into 5 Sectors
• Electricity
• Transportation
• Industrial
• Commercial
• Residential
• Overall Objectives and Measures
• Share of Renewable Fuels by 2025
• Jobs
• GSP
• Carbon Emissions

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Renewable Energy Analysis Team

• Core Team 20 Experts from Across Minnesota
• Feedback Sessions Throughout the State

• Cecil Massie, 6 Solutions LLC
• Mark Willers, MinWind Energy
• MaryJo Zidwick, Cargill
• Rolf Nordstrom and Brendan Jordan, Great Plains
  Institute
• Richard Magnusson, MN Wheat Growers
• Ralph Groschen, MN Dept of Ag
• Shalini Gupta, Izaac Walton League
• Greg Chamberlain, Xcel Energy

• Michael Sparby, AURI
• Bruce Stockman, MN Corn Growers
• Mike Bull and Lise Trudeau, Dept. of Commerce
• Mike Youngerberg, MN Soybean Growers
• Vernon Eidman, UofM
• Kate VandenBosch, UofM
• Elaine Hoffman, Bemidji State
• Bruce Jones and John Frey, MN State U at Mankato
  

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Modeling Process

• To use a model, you need a process
• Discussion to capture the diversity of opinions
• Debate the issues until the team reaches
  agreement on a possible scenario (this becomes
  the base case)
• Input the data and run the scenario
• Analyze outcomes to understand the behavior

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Understanding the Model Results

• Three Reoccurring Options when Reviewing Model
  Results
• Results are true and showing insights or
  unintended consequences that we wouldnt have
  expected to see using traditional analysis tools
• Results are skewed by incorrect data
• Results are skewed by incorrect model structure
• Validation and testing needed - never really ends
• Includes
• Reviewing with experts
• Tracking against historical data
• Sensitivity analysis

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Current, Unconstrained Base Case Assumptions

• The base case developed by the team suspends
  reality and assumes an unconstrained environment
• This means that the challenges in the following
  areas are resolved
• Funding
• Workforce
• Research and Technology
• Construction Materials and Feedstock
  Availability
• Feedstock Storage and Distribution
• Regulatory Requirements, etc.
• Land and Water Use
• An unconstrained model is not reality

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Current, Unconstrained Base Case Assumptions

• All energy units converted to BTUs
• Annual 0.5 growth rate in Minnesota energy
  demand
• Nuclear is not replaced
• Wind turbine capacity doubles during the 25 year
  period
• Percentage of wind generation utilized 37.5
• Corn available for ethanol production 35
• Corn Yield Growth Rate 2
• Cellulosic ethanol technology becomes viable by
  2008
• Available Biomass 300 trillion BTUs

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Current, Unconstrained Base Case Assumptions

• Wind Targets (RPS)
• 2010 11
• 2012 15
• 2016 21
• 2020 22.5
• 2025 25
• Biomass
• Industrial 20 by 2025
• Commercial 20 by 2025
• Residential 5 by 2025
• Electricity 5 by 2025

• Ethanol Targets
• 2000-2010 10
• 2013-2020 20
• 2020-2030 30
• Biodiesel Targets
• 2000 0
• 2005 2
• 2010 5
• 2015-2030 - 20
• Solar Target 0.1 by 2025
• Hydrogen Target 0

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Current, Unconstrained Base Case Assumptions

• Time to Construct Plants
• Ethanol and Biodiesel 3 years
• Cellulosic Ethanol 5 Years
• Wind Lead Time 2 Years
• Solar 1 Year
• Hydrogen 5 Years
• Biomass
• Commercial/Industrial 2 Years
• Residential Biomass 1 Year
• Electricity Biomass 4 Years

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Base Case Results Share of Renewables
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Base Case Results Net Renewable Electricity Jobs
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Base Case Results Wind Turbines
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Base Case Results Transportation Jobs
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Base Case Results Ethanol Jobs
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Base Case Results CO2
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Base Case Results CO2
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Conclusions

• With food and energy demand increasing, even
  with our most optimistic projections, we cant
  keep up with need.
• Doubtful that humans will respond in time with
  conservation methods to avert a crisis
• Energy and food production and consumption will
  be distributed
• We believe the agricultural community is our
  primary hope
• Given the known constraints on workforce,
  construction materials, funding, feedstock
  distribution, etc., we now need discussions with
  our communities on how to resolve the constraints
  in order to achieve our goals for Minnesota
• We believe that each community can benefit if
  they think globally, but act locally start
  with what can be done now.

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• Systems dynamic modeling
•  
• Dales four lessons to keep in mind
•  
• Benchmark
• Look forward
• Make informed decisions, prioritized
• Track if the prioritized decisions are being
  implemented
•  
• KEY AREAS for you to cover 
• -Use tools like System Dynamics Modeling and
  Strategic Flexibility (it is the process and not
  just a tool)
•             -Focus on what you know and dont
  know and make investments where you know and
  explore what you dont know
•  
•             (There was a third point here that I
  missed but think it might be in the few lines
  above under the Dale cover line.)