legislative policy conference

“Making Hard-Headed Decisions Pay Off”

Dale WahlstromCEO, The BioBusiness Alliance of Minnesota

January 14, 2009

Legislative Policy Conference

Strategic Flexibility

Strategic Flexibility: Renewable Energy

Enriching Minnesota’s Future through the Biosciences

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


Why is it Important to Do This Kind of 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

Real World

InformationFeedback

MentalModels ofReal World

Strategy,Structure,Decision

Rules

OrganizationDecisions

1. Problem Articulation(Boundary Selection)

2. DynamicHypothesis

3. ModelFormulation4. Model Testing

& Validation

5. Implementationof Results

System Dynamics Modeling


Base Case Results: Share of Renewables

8.84%

20.50%

We need to work on finding different graphs because those with blue lines are not visible during a presentation. -Mahri

Thank You!Dale Wahlstrom

[email protected]

952-746-3847651 276 5735

www.biobusinessalliance.org

mailto:[email protected]

BACK UP SLIDES


Know Whom

Know What

Know How

Cluster of Knowledge & Competency

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.


Model Interface


Model SpecificsMinnesota Energy Divided into 5 Sectors

• Electricity

• Transportation

• Industrial

• Commercial

• Residential

Overall Objectives and Measures:

• Share of Renewable Fuels by 2025

• Jobs

• GSP

• Carbon Emissions


Renewable Energy Analysis Team

•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

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

•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


Modeling ProcessTo use a model, you need a process

1. Discussion to capture the diversity of opinions

2. Debate the issues until the team reaches agreement on a possible scenario (this becomes the “base case”)

3. Input the data and run the scenario

4. Analyze outcomes to understand the behavior


Understanding the Model Results

Three Reoccurring Options when Reviewing Model Results

1. Results are true and showing insights or unintended consequences that we wouldn’t have expected to see using traditional analysis tools

2. Results are skewed by incorrect data

3. Results are skewed by incorrect model structure» Validation and testing needed - never really ends» Includes

• Reviewing with experts• Tracking against historical data• Sensitivity analysis


Current, Unconstrained Base Case AssumptionsThe 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


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



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%

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



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


Base Case Results: Share of Renewables


Base Case Results: Net Renewable Electricity Jobs


Base Case Results: Wind Turbines


Base Case Results: Transportation Jobs


Base Case Results: Ethanol Jobs


Base Case Results: CO2


Conclusions

• With food and energy demand increasing, even with our most optimistic projections, we can’t 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.

• Systems dynamic modeling• • Dale’s 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 don’t know and make investments where you know and

explore what you don’t 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.)

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