How do you throw your arms around a cloud? How do you assess what’s critical when almost everything is uncertain?
The bioeconomy, despite significant buzz from industry and policymakers, is still a concept without clear boundaries. Its prospective benefits and emerging markets are exciting but not yet fully formed or well understood. The AERTOs initiative is attempting to analyze critical markets and assess the innovation systems related to its technical research on the biorefinery, with the goal of better understanding the conditions under which the technological innovations in the biorefinery must accelerate and attempt to take flight. The intended research demands that a scope is established: what are the boundaries of the innovation system? Which are the markets that matter to the technologies under development? But the nature of the bioeconomy makes any such scoping exercise a slippery one.
From 6-8 October, researchers and analysts from the AERTOs institutes met in Berlin to attempt this task. During the course of the three days a ‘scope’ for a market study and multiple innovation system analyses were described, with rough system diagrammes sketched, in/out decisions made, and important issues prioritized. A ‘Table of Contents’ for each analysis was elaborated, providing a meaningfully detailed guide to the future research and identifying areas of uncertainty that needed to be monitored and clarified.
But it was these areas of uncertainty, and not the clarifying decisions and descriptions, that dominated the group’s thinking. Even if the breadth of the bioeconomy could be tamed – for example, by using the AERTOs technical research packages to guide choices of feedstocks, products, and technologies and processes – the reality of interdependency and uncertainty acted as a countervailing force.
Consider the issue of product selection for the market study: the group looked to structure its analysis around the molecules that resulted from the processes under investigation in the technical research: pre-treatment of biomass to produce sugars; chemical processing of lignin to produce aromatic compounds or functionally altered lignin fractions; processing of algae into various high-value pharma- and nutraceutical products.
Given the work being done by AERTOs to produce ‘cheap sugars’, one obvious scoping decision was to study the market for pentose and hexose sugars, in terms of prices for different purities, volumes, trends, competing products (primarily first generation sugars from agricultural products), buyers and sellers, etc. But this pragmatic choice is plagued by uncertainties and interdependencies. Pentose and hexose sugars may be sold to the sugar industry, where they will carry a certain value based on their purity/suitability for various uses. But their value will be affected by the markets for platform chemicals, bulk chemicals and fuels, and downstream products like bioplastics. Higher values for these products may impact the design of the biorefinery, in return impacting the available sugar streams, and altering the ‘priority markets’ related to the sugar platform. The value of many of the intermediate and downstream products will also be affected by the price of petroleum products; if it feels absurd to consider petroleum a competing product for sugar, it may nonetheless be the single most important price point shaping the relevant markets.
For high value chemicals from lignin and algae the uncertainties around markets are even greater. Some of these products have existing markets into which they can be ‘dropped’ or act as perfect substitutes; for others the existence of the market is somewhat speculative at this point; and for most the economic boundary within the biorefinery is unclear and therefore defining the relevant product market extremely difficult. The team working on scoping considered the choices made somewhat arbitrary based on the technological processes under investigation rather than a coherent view of the economics of different biorefinery designs. Thus it will be extremely important to consider developments at and beyond the edge of this ‘scope’.
It is clear from discussions in the AERTOs group that these examples reflect a wicked challenge in the bioeconomy. Uncertainty about the value of different products creates uncertainty about the optimal technical design of the biorefinery, which hinders experimentation and improved knowledge about product potential. This hesitance to establish designs in turn makes it difficult to determine which product markets need to be studied and emphasized. Several AERTOs researchers have indicated the need for a ‘launch product’ to undo this loop: effectively the need to choose an anchoring product with which a more limited number of co-products could be associated and studied. This remains elusive – bioethanol seems a less attractive choice each day that passes – and there may be a need for a different approach.
The AERTOs work on cheap sugars is taking a modular approach to address the uncertainty surrounding technical designs, pursuing to some extent flexibility over optimization. This is an important development: there are indications that thus far the bioeconomy’s emergence has been restrained by rigidities related to economies of scale, sunk costs into existing assets, and the priorities of large incumbents. If we identify this as a risk already then our research should not amplify that risk by locking into existing conceptual ‘pathways’. While setting an initial scope related to feedstocks, products, and innovation systems is a helpful starting point, the work should be approached in a way that allows important insights to emerge from ‘out of scope’. The group will thus take a modular, iterative approach to the research: using the scope to identify issues of interest, but pursuing these stepwise, elaborating insights in short cycles and reviewing and revising the ‘big picture’ frequently. This ‘insight refinery’ approach prioritizes relevance over comprehensiveness; the project will still result in an overall report, but this report will ideally avoid conceptual ‘lock-in’ based on a rigid scope that does not reflect the bioeconomy’s fluid borders.