Is Farm Power working in the right part of the value chain?

Before we founded Farm Power, some people urged us to find a quiet corner of the renewable energy world and start a little service business; this was supposed to let us gain experience with minimal investment before eventually leading to a real energy-producing opportunity. It would also give us time to find the millions of dollars needed to create a project, perfectly reasonable advice given our limited resources.

We didn't take it. From the beginning, we have believed that what the renewable energy industry needs is not more service providers but more actual owners. As long as we count the number of small utility-grade (100kW to 10MW) green power installations in Washington on one hand, we continue to see an implementation problem. So we dived right in and committed ourselves to a business model where we owned and operated multi-million-dollar anaerobic manure digesters.

Our local dairy farmers understand capital-intensive business and took us seriously from the beginning. Their industry draws great numbers of service providers all trying to make money off the actual producers--equipment dealers, seed salesmen, drug companies, feed consultants, milk haulers, processing plants, and many others. All of these depend on a shrinking number of farmers who invest millions of dollars in the daily miracle of primary agricultural production: the sun, the land, green plants, now a baby calf, then milk.

The process of extracting energy from manure has less appeal than caring for animals but it is a miracle in its own right. When bacteria in liquid manure are kept comfortable at about 100 degrees Fahrenheit, they begin to produce methane (the main component of natural gas). We cannot duplicate this amazing process any more than we can synthesize a newborn calf or squeeze grass out of a pile of mulch. The further that society gets from the basic natural transformations that make life possible, the more easily "value creation" forgets the importance of the actual "creation" part and focuses solely on "value-added".

I recently finished Wealth and Democracy by Kevin Phillips; one of his main contentions is that economic superpowers rise with an emphasis on production and commerce but eventually begin to decline with an excessive focus on finance. The author traces this trend with the Dutch in the 17th century, the British in the 19th, and Americans during the past few decades. We have found plenty of companies in our industry that provide funding, market products, and consult. While we don't doubt that these businesses can be both useful and lucrative, they don't actually create value; they simply allow existing value to be realized more quickly and efficiently.

As children of rural America, we share with farmers an affinity for actually creating things. Eventually, courtesy of vast numbers of bacteria, we will produce electricity and a sawdust-like fiber from cow manure. By selling these and other products ourselves, we will control as much of the value chain after the initial creation as possible. But, in our opinion, finding the most profitable part of the value chain is answering the wrong question; until the renewable energy industry gets much closer to saturation, we must focus on starting new chains rather than latching on to existing ones. That is what is needed for farmers, America, and the planet.