1. Scope

Keywords

Rationale

One of the key challenges to the rate of growth of the bio-industry is that the risks associated with biomass supply chains are not well understood. While concerns about technology, construction, and offtake have clear paths to resolution, at present there are no established protocols, standards, or recognized industry best practices for developers, investors, commercial lenders, insurance companies, and rating agencies to utilize and rely upon to empirically demonstrate biomass supply chain risk. The absence of a standardized and recognized approach means that the debt and capital markets are independently using inconsistent approaches and evaluation criteria, leading to unreliable assessments of bio-project risks. This results in significant project financing barriers for bio-projects and in millions of dollars of “financial-drag” on the projects that are eventually built. This Standard presents a standardized biomass feedstock risk assessment protocol designed to enable stakeholders (owners, investors, lenders, capital market entities, insurers, contractors, customers, government departments, regulators) to more accurately quantify bio-feedstock risk and reduce the level of uncertainty that is currently a significant driver of low bio-project credit ratings and high capital costs. Development of this Standard supports the goal of a viable, sustainable domestic biomass industry that produces renewable biofuels, biochemicals, bioproducts, and biopower by decreasing project stakeholder risks to investment in bio-economy projects and by increasing the number of projects that pass the crucial financing stage. This Standard represents the current science in terms of quantification of biomass supply chain risk. Development of this Standard is the first of a two-phase process to achieve the ultimate goal of creating efficiencies for mainstream capital markets that help drive capital into bio-economy plant construction more rapidly and at a reduced cost. Phase 2 consists of developing a biomass risk rating framework based on this Standard (i.e., the BSCR rating framework) to enable independent third-party evaluators to carry out quantitative assessments of feedstock risk of bio-project supply chains. Combined with this Standard, an integrated BSCR rating framework will provide capital markets with the tools needed to drive investment at the scale required for delivery of Canadian bio-economy policies. It will do so by enabling investors and capital markets to efficiently quantify biomass feedstock risk, accurately price that risk, and prioritize investments with minimum feedstock risk. The Standard is organized into six risk categories that fully encompass biomass feedstock supply chain risk: supplier risk, competitor risk, supply chain risk, feedstock quality risk, feedstock scale-up risk, and internal organizational risk. Each risk category identifies specific risk factors (i.e., the itemized risk elements within each category), risk indicators (i.e., the markers of risk for each factor), and establishes guidance to point users to best available methods and tools, to measure and mitigate feedstock risks.